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The week's news: Microsoft embarrassed

Microsoft tries to show that separating IE from Windows 98 degrades performance, but prosecutors force Microsoft to disavow the "test."

In a severe anti-trust trial setback, Microsoft presented evidence supposedly demonstrating that separating Internet Explorer from Windows 98 degrades performance, but government prosecutors forced the company to concede the videotape was a "simulation" rather than a demonstration of lab results.

After noticing that the display screen sometimes showed eight and sometimes nine icons, prosecutors correctly charged that the video showed more than one PC, leading Microsoft down an embarrassing path of rationalizations. "It certainly casts doubt on the reliability of the demonstration," U.S. District Judge Thomas Penfield Jackson later said.

Bad to worse
Even after acknowledging the glitch and gaining permission to introduce a different videotape made under government supervision, Microsoft couldn't replicate its supposed findings. Senior vice president James Allchin had been trying to counter testimony from government technical expert witness Edward Felten, who claims to have written a program that disables IE without hurting Windows.

The ability to divorce the two is key to the government's case, which accuses Microsoft of bundling IE with Windows 98 to foil competition from Netscape. Microsoft says it made a single, integrated product to give computer users better technology, not to stifle competition.

Beyond the PC
Gateway and Yahoo struck a deal for the Web portal to become the pre-set home page of Gateway.net's Internet access service, available on the No. 2 direct seller's desktops and portable systems. The agreement is seen as the starting point for providing consumers with personalized information on devices as diverse as cable set-top boxes, handhelds, and cell phones, Yahoo's Jerry Yang and Gateway's Ted Waitt said in an interview.

Compaq veterans will predominate among the management team of newly spun-off AltaVista. The leadership, most from a hardware background, will report to president and chief executive Rod Schrock.

Portal sites

Give us a click and we'll give you the week! CNET Radio newscasts from the week of February 1-5.
are rapidly emerging as a computing alternative to traditional desktop software such as email. Some have wondered if Microsoft is missing the boat, but Redmond may be planning to extend its franchise through partnerships and licensing deals.

As open-source movement standard-bearer as mozilla.org celebrates its first birthday, it's still trying to meet the expectations of parent company Netscape, which has put the future of its Web-browsing software in the hands of a widely dispersed, volunteer corps of coders. The next version of Communicator will be mozilla's creation with Netscape's name on it.

A federal judge blocked the Child Online Protection Act, which aims to curb minors' access to online pornography, but has been deemed to threaten free speech on the Net. The law was set to go into effect last week, but after a six-day hearing, the American Civil Liberties Union, 17 online publishers, and merchants won a preliminary injunction to halt enforcement.

Antiabortion activists were found guilty of inciting violence by Web posting a list of physicians names that reads like a "wanted" poster. The verdict seemed to set free speech and pro-abortion interests at odds; meanwhile hosting ISP MindSpring shut down the controversial antiabortion Nuremberg Files site without prior notice for violation of its "appropriate use" regulation.

E*Trade users couldn't trade or view their accounts during three consecutive days of periodic glitches, prompting members of Congress to ask the Securities and Exchange Commission whether online stock trading companies are able to fulfill promised services. Some have already concluded online traders are more interested in winning customers.

Roll 'em out
Bell Atlantic will expand support for Apple Computer's product line for its high-speed DSL service after an online campaign sparked criticism of the company's iMac-only policy. In its initial rollout, Bell Atlantic had planned to serve most current models of PCs--but ignore most Macintosh systems.

MCI WorldCom introduced a new consumer Internet service, just seven months after MCI Communications and WorldCom won regulatory approval for their merger by selling MCI's Internet business. The new service will use the company's UUNet Internet network to provide local consumer access, and rely on CompuServe as its pre-set home page.

AT&T and Time Warner will cooperate in offering telephone services over cable lines in 33 states, boosting the long distance company's bid to enter local phone markets. AT&T will own 77.5 percent of the joint venture, and pay Time Warner about $300 million for exclusive rights to offer phone service though Time's cable network.

A senior executive with @Home said the door may be open for a deal with Road Runner, a rival in the cable Net access market. It makes more sense for the duo to cooperate in tackling the booming market, rather than remain independent companies, according to Charles Moldow, vice president of sales and marketing for @Media, the company's content unit.

Fourteen states plan to open new parts of their long distance phone market to competition this month, but consumers are already in the middle of the bitter battle. Competition for in-state business has led to legal disputes and bitter public relations wars between the dominant local phone companies and the long distance giants, who want a bigger piece of the $8 billion U.S. local toll call market.

AT&T won't be forced to let rivals have unfettered access to its high-speed cable TV networks to win approval of its $61 billion purchase of Tele-Communications Incorporated, the Federal Communications Commission said. Rivals like America Online have lobbied to force the combined AT&T-TCI to open its cable networks to competitors, as local phone companies must.

A chipmaker's woes
Trading of Advanced Micro Devices shares was halted Thursday after the company said it may suffer an operating loss for the quarter. The Sunnyvale, California, chipmaker fell steadily during the week because of worries that stiff competition from Intel is forcing the company to sell at prices that leave it with too little profit margin.

Right on cue, Intel will cut prices on its low-end Celeron processors on Monday, but some analysts to wonder whether this aggressive strategy might ultimately do more harm than good. Separately, Intel and Analog Devices are joining together to develop an architecture for a new generation of digital signal processors (DSPs), complex but lucrative communications chips often used in cell phones, pagers, and modems.

Some computer resellers and chip dealers are already selling Pentium III processors to consumers although the product's official rollout won't come until the end of the month. Intel's legal department is looking into ways of stopping these sales, but isn't likely to do much about the irksome practice..

Since its launch in November, Diamond Multimedia's Rio portable MP3 player has shipped 100,000 units, a rate of success that could transform the hardware maker's business model, in addition to roiling the already controversial waters of online music downloads.

Sign here
Dell Computer will sell Oracle's Oracle 8I database via its Web page, and the software maker is negotiating similar agreements with Compaq and IBM. HP has already signed on to sell the appliance, which incorporates a database and Java Web server. Formerly known by the code-name Raw Iron, Oracle 8I is an attempt to create a new market for cheaper, more easily administrered databases, and is also intended to blunt Microsoft's push into the enterprise software market.

Pratt & Whitney picked CSC over rivals IBM Global, EDS, and others to negotiate a contract worth as much as $1 billion for outsourcing the majority of its IT systems, including management of an SAP R/3 installation.

EDS and Xerox are embroiled in a contract dispute that EDS says has cost the company millions and dampened its fourth-quarter results. The two disagree over a $3.2 billion, ten-year outsourcing deal, once considered a landmark in the emerging outsourcing market and the largest commercial agreement of its kind.

Hitachi will shut down its PC company in the United States, rolling some operations and personnel into Hitachi Data Systems, which sells large-scale computers. The move is seen as more evidence of the hard times Japanese computer companies are having in the U.S. market.

As Year 2000 fix profits start to dry up, a host of larger services companies are moving toward the next pot of gold: helping companies euro-proof their business and IT systems. Unlike Year 2000 projects, which often entail straight code fixes and a lot of straight technology work, the euro requires service firms to market a two-prong strategy to overhaul IT systems and corporate business plans.

Also of note
A Webcast fashion show by Victoria's Secret attracted more visitors than President Clinton's grand-jury testimony, according to Broadcast.com ? 20-year-old Bennett Haselton launched a program that easily generates a valid password for the prominent Net blocking software Cyber Patrol 4.0 ? A security hole said to afflict all the Web-based email providers permits one to create a piece of incriminating email that can be falsely traced to the victim's computer ? The U.S. Commerce Department will begin publishing figures showing the impact of online shopping on retail activity ? Qwest Communications fourth-quarter revenue surged more than 300 percent, and won a $1 billion contract, its largest ever, to provide phone services to the U.S. Treasury Department ? Wired founders Louis Rossetto and Jane Metcalfe each received a severance package of $1.5 million as a result of the planned buyout of Wired Digital by Lycos ? Microsoft may extend the life of Windows 98 through 2003--two years longer than expected--but still intends to base its next major consumer operating system release on Windows NT ? After a steep decline in liquid crystal display prices in 1998, many of the world's largest display makers are looking to hike prices between 30 and 40 percent in 1999.