The week in review: Holiday shopping storm hits

Online retailers say they are ready to handle the extra business, but even giants Amazon and Dell recently have been hit by outages, prompting skepticism among many analysts and consumers. Security breaches and a recognized shortage in customer service representatives also are a problem.

Nonetheless, during the five weeks between Thanksgiving and New Year's, 8.6 million households will shop for items on the Internet, spending a record $4 billion, Forrester Research estimates.

CNET News.com's special report, "Click or Miss," details why Net retailers are in the eye of the holiday storm.

Worrisome
SGI again changed its strategy for Intel-based workstations, reversing a decision to transfer the division to another company. Having admitted failure to find a buyer, the struggling company plans to keep the product line under its own roof, but will drastically reduce the refinements it puts into high-end desktop systems running the Windows NT operating system. Intel-based workstations had been a key part of departed CEO Rick Belluzzo's turnaround strategy.

Desktop PC makers can't get enough of Intel's latest Pentium III processors, but don't seem to be as excited about the most recent Xeon chips. Hewlett-Packard is dropping the Xeon from its workstation product lines because of tepid demand, while Dell too will not be adopting the more expensive derivative of the Pentium III, although it will pick up later versions. The duo are the leading makers of Intel-based workstations. The cold shoulder is a result of overlap in the Intel product line.

Separately, Dell said it will begin to sell two-way pagers and incorporate wireless technology into its corporate desktops. Made by Canada's Research In Motion, the Blackberry pager allows users to receive and send emails and numerical messages. The deal marks Dell's entry into selling non-PC devices. The announcements underscore both the growing demand for wireless communication as well as the unlikely emergence of the pager as a chic, "must have" item for corporate executives.

Apple's iBook was the best-selling notebook at retail, online and mail-order sales outlets in October, besting offerings from the likes of notebook stalwarts Compaq Computer, Toshiba and IBM (but leaving out sales by "direct" PC makers such as Dell). Including its PowerBook line, Apple last month nearly doubled its overall market share to 11 percent, up from 6.5 percent in the previous month. Despite earlier shortages, the iBook laptop is helping the company expand its retail presence.

Laying tracks?
More than a year after it was formed, a high-profile wireless telecommunications firm backed by Microsoft and Qualcomm is struggling with its strategic direction. Hampered by service delays and the recent departure of its chief executive, Wireless Knowledge has labored to make a name for itself with the corporate customers it hopes will use its mobile data services for cell phones and other handheld devices. Its first product will be available in the first quarter of 2000.

Excite@Home's board approved creating a tracking stock for the company's media assets. The move, planned for as soon as August, caps more than six months of negotiations concerning the sometimes confusing strategic direction of the Redwood City, Calif.-based company, which provides both Internet content and high-speed cable access. "Now when the media side of the company wants to do things that might in any way impact the subscriber side, it has a separate financial vehicle and its own equity. That is the degree of flexibility that we've gained here," chief executive Tom Jermoluk said.

AT&T too may be poised to issue a tracking stock for its wireless phone business. Executives have toyed with the idea of a tracking stock before, originally planning to issue separate shares for AT&T's Internet and wireless divisions shortly after the merger with Tele-Communications Incorporated. The rapid growth of competing wireless companies like Vodafone AirTouch and Nextel, a share price languishing in comparison with MCI Worldcom's rise and investors' cautious attitude toward the company's $110 billion string of cable network buys may finally persuade the company to take the plunge.

US West is poised to launch a package incorporating some of its newest high-speed Net access services. The menu will range from a televison-based Internet service to a "broadband" portal. Looking to tap customers who have yet to embrace the Internet, the company is preparing for stiff competition from AT&T and other cable companies that expect to begin offering their own set-top television, Internet and telephone packages sometime next year.

Changing plans
America Online is again forcing its subscribers to jump through hoops to avoid receiving unsolicited junk email, or spam. AOL recently informed users that their "marketing preferences" are due to expire next month--just 18 months after the company unveiled new privacy and security policies ostensibly aimed at bolstering consumer protections. Marketing preferences give users the option of blocking any direct-marketing pitches (including pop-up ads, direct mail, email and telemarketing) from AOL's partners. The company's direct marketing practices have often been criticized, particularly its "opt out" policy, under which members grant permission to direct marketers to send them email by default until they personally go to the preferences area and turn it off.

Time Warner is expected to launch a much-awaited Web site promoting its entertainment programming. Entertaindom's debut will be the first indication of the giant's push to redefine its online strategy. In April, the company said it was planning to introduce a handful of "vertical hubs" focusing on news, finance, sports, lifestyle and entertainment; shortly afterward the company shut down its sprawling Pathfinder site.

Timing
Court papers show that the federal judge presiding over the Microsoft antitrust case appointed a mediator because of "divergent views" in the government camp. "I think this is probably as propitious a time for any possible negotiated outcome as you have," Jackson surprisingly told lawyers from Microsoft, the Justice Department and 19 states during a meeting in his chambers last week. Last Friday, U.S. appeals court judge Richard Posner was named as mediator.

Firms that offer stock trading on the Internet may sometimes have a legal responsibility to make sure their clients' investments are suitable for their financial goals and experience, according to a member of the Securities and Exchange Commission. Laura Unger's report was released as New York's attorney general said the securities industry would spend $500,000 for an advertising campaign to educate consumers about the benefits and pitfalls of Internet trading.

In its final report card on the government's efforts to combat Y2K, the House Subcommittee on Government Management, Information and Technology gave the government a B+, although a few agencies are still behind in their efforts and some programs weren't issued a grade at all. In a change from previous surveys, the committee decided not to issue grades for more than 40 vital government programs, including Medicaid and Medicare. As the committee sees it, many programs not ready for the transition to 2000 are dependent on the states and private organizations.

Also of note
The Clinton administration released draft rules to relax export restrictions on data scrambling technology, but the proposal was quickly criticized as inadequate by the software industry ... Consumer advocates made a last-ditch effort to hinder the $1 billion merger of Internet advertiser DoubleClick with market researcher Abacus Direct, charging that the deal will be an assault on user privacy ... Two of the biggest contract manufacturers for the computer industry, Flextronics International and DII Group, agreed to merge in a $2.4 billion deal ... AOL and Intuit will create a new service enabling customers to view, track and pay bills online. Separately, Electronic Arts will create and deliver online games and interactive entertainment for the online giant.