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The week's news: Pentium III debuts

Intel unveils a mid-range processor that boosts Internet multimedia, but the chip draws fire for its security features and yawns for seeming to be little more than a speedy successor in the aging Pentium line.

Intel debuted its newest mid-range processor, the Pentium III, a little more than a week before desktops incorporating the chip are to appear on the market. 450-Mhz and 500-Mhz "PIII" systems will be available for under $2,000, the company said at a media event.

The Pentium III is said to boost Internet multimedia--but some observers have wondered if the upgrade is all that important. "It's not like the jump from Pentium MMX to Pentium II," one said.

To offset that perception, Intel is aggressively working with hardware makers, software publishers, and content providers to ensure that applications and services which take advantage of the processor's multimedia enhancements come out sooner rather than later. Intel says it will spend approximately $300 million in PIII promotions this year--the biggest advertising campaign in the company's history--but the promotional onslaught is actually much costlier than that.

Meanwhile, ever-vigilant privacy groups protest that the PIII comes with a serial number feature that could allow companies or law enforcement agencies to track where PC users go on the Internet. The feature, added to improve asset tracking as well as make electronic commerce more secure, will ship "turned off," according to Intel officials.

Free and clear
As expected, the Federal Communications Commission approved the $48 billion merger between AT&T and Tele-Communications Incorporated, agreeing to let the deal progress if TCI divests its ownership in Sprint's wireless phone service, which directly competes with AT&T's mobile phone unit. The company had already agreed to do so.

City and county officials in the Seattle area also signed off, putting

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the brakes on a movement for "cable open access." After several days of negotiations, lawmakers reached an agreement to ensure cable modem users will have a choice of Internet service providers.

In two votes held this week, shareholders gave swift approval for the deal.

But regulatory approval doesn't necessarily mean consumer benefits, analysts say. AT&T's goal is to provide local phone service though TCI's cable network, in direct competition with the Baby Bells, but the merger may not come about as quickly as the company has stated--and might not translate into lower rates at all.

BellSouth plans to widen its DSL rollout using technology from 3Com, allowing the Baby Bell to provide a "one-stop shop" for consumers and small businesses. The company says it plans to introduce high-speed Net access to 30 markets in the southeastern United States, in an effort to reach the estimated 5 million phone lines that can accommodate DSL.

PSINet CEO William Schrader has pursued a kind of stealth strategy over the years, ceding big company contracts to the telco giants while building a business serving the connectivity needs of mid-sized firms worldwide. But after raising $1 billion in bond capital two years ago, the company began acquiring ISPs and fiber optic networks, and now claims a global reach that beats all but a few of the biggest telcos and communications consortiums.

Green light
Responding to increasing demand from Fortune 500 companies and other business clientele, IBM advanced its Linux strategy on several fronts. Big Blue added the "open source" operating system onto two computer lines, incorporated Linux support to its services business, and announced it's porting proprietary software to the relatively new platform. IBM plans to detail its strategy at an early March trade show.

Separately, IBM is looking to introduce its "silicon-on-insulator" technology to its microprocessors for servers and desktops by early next year. SOI adds layers of silicon and silicon oxide to a processor for insulation, enabling faster clock speeds or a reduction in heat, according to IBM. Both Big Blue's 64-bit Power chips (used in server lines) and its 32-bit PowerPC chips (used in Apple computers) will get the technology, potentially boosting Apple's G3 desktops to 540 Mhz.

Motorola inked a deal with giant chipmaker Taiwan Semiconductor Manufacturing Company, signaling a major strategic shift. In the wake of last year's U.S. plant closings and construction delays, the Illinois company is moving to consign R&D costs and chip production to outside producers.

As the largest merger in the history of data networking approaches completion, Ascend Communications continues development on a next-generation routing device that it hopes will make the market forget about the company's past strategic blunders. Ascend intends to rely on its own development teams and possibly technology it gains from Lucent.

Cisco Systems is working as a consultant to companies that sell e-commerce software, in an effort to sell more networking equipment. The San Jose, California, giant is cooperating with BroadVision, InterWorld, and Open Market to tune their applications to run better with Cisco products, in effect giving them a seal of approval.

Coming right up
USWeb/CKS will next month unveil new services geared for customers who want to quickly set up shop on the Web without the headache of building or managing the infrastructure. Using Microsoft software, the firm's initial outsourcing offerings will include business-to-consumer direct marketing, supply chain management, and corporate purchasing services.

The former Silicon Valley start-up has had little trouble integrating some 30 companies, culminating in last year's $540 million merger with CKS, according to chief executive Robert Shaw, and is confident about its expanding Internet services business.

Meanwhile, a raft of Internet services companies have filed to go public in recent weeks, all hoping to become the industry's next success story. "Everyone wants to be the next USWeb," said one analyst. "And then there's the opportunity to become really rich on an IPO. It's as much about cashing out as it is about building a firm."

Lycos' move to buy Wired Digital may be threatened by a Wired shareholder dispute over the terms of the deal, a source close to the companies confirmed.

Who's in charge?
As it promised in December, Sun Microsystems exposed the inner workings of Java for all the world to see, Web posting Java 2's "source code"--the blueprints of its "write once, run anywhere" technology. New licensing terms are more flexible, too, but Sun is still keeping tight control over Java, though it says it has adopted elements of the open source model.

Separately, the judge hearing Sun's dispute with Microsoft clarified that a November preliminary injunction does not prohibit the software giant from developing or distributing independently produced technologies similar to Java. A so-called clean-room implementation is vitally important to Microsoft's goal of blunting Java's cross-platform appeal, and a brief in the case suggests Redmond has been considering independent Java tools for nearly four years.

A Compaq memo shown at Microsoft's federal antitrust trial revealed the leading computer maker's worries about Redmond's "improper use of a monopoly position," while a Compaq executive testified that his company has no "viable alternative" to purchasing Windows for its consumer PC line. Microsoft sought to downplay these developments and deflect earlier allegations made by Apple and Netscape executives, but overall it was a momentous and troublesome week.

Flavor of the month
Apple Computer's older "Bondi Blue" iMacs outsold their newer, fruit-flavored counterparts in January, thanks in part to price cuts. The previous-generation iMac was the fourth-highest selling computer in retail and mail order/online operations (Hewlett-Packard enjoyed the No. 1 and No. 3 most-popular systems, while Compaq took second place). Meanwhile, a pecking order has been established among the new models: Blueberry is tough to find, but there are plenty of strawberries around. Tangerine is big in Denver, home of the NFL champion Broncos and their legion of orange-clad fans.

Sony introduced new desktop and notebook PCs emphasizing slim lines and futuristic looks, even though over the last year Sony computers with more elegant finishing touches steadily lost shelf space to Hewlett-Packard, Compaq Computer, and IBM.

In an attempt to convert community into dollars, a new version of Web-based instant messaging client ICQ will include portal-like features when it launches next week. ICQ99a is a "desktop communication portal," company executives say, a client that combines the chat qualities of the original with search and content features of typical portals. Some 28 million people have registered for ICQ in just over two years.

Dell Computer matched Wall Street's estimates and announced a stock split, but took a tumble on concerns over earnings that fell well short of company estimates. The Round Rock, Texas, PC maker is still growing much faster than the industry, but sales growth appears to be slowing sequentially.

Hewlett-Packard surprised analysts by reportings quarterly earning of 92 cents a share, 9 cents better than expectations, but also watched its stock decline on concerns that cost-cutting, rather than revenue growth, was responsibile for most of the surprise.

Enterprise resource planning (ERP) software maker J.D. Edwards warned it expects to earn 2 to 4 cents per share when it reports next week, a far cry from estimates of 9 cents per share. Shares fell nearly a quarter of their value to a 52-week low. By targeting to small to mid-sized companies, J.D. Edwards had appeared to be among the few survivors of the recent business software market downturn.

Also of note
Excite's kid-safe search engine is supposed to reveal only virtuous Web sites, but has been dishing up hard-core pornography advertisements alongside the squeaky clean queries ... Network Solutions is making moves to curb system abuses by ".com speculators," but a number of domain name registrants say that the changes are anti-competitive ... eBay announced that it is ending user listings of all firearms and ammunitions, and earlier stopped providing live customer service ... Olympus, Toshiba, and Nikon introduced cameras capable of recording images with more than 2 million pixels, a higher resolution than some single-lens reflex equipment ... Intel is cooperating with third parties in the development of so-called software cable modems.