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The week in review: Dot-coms in danger

Never mind the volatility, several publicly traded dot-coms are showing immediate signs of failing.

    Never mind the volatility, several publicly traded dot-coms showed immediate signs of failing.

    Once-heralded start-ups Peapod, Drkoop.com and CDNow each acknowledged they are running short of cash. Meanwhile, this week's IPO landed Artistdirect in hot water with federal regulators and perhaps shareholders, and Silicon Valley icon Seagate bucked the trend to go public by agreeing to be acquired in a $20 billion deal that will again make the company private.

    Running low
    In the aftermath of losing its chief executive and a planned $120 million investment, online grocer Peapod was soliciting takeover offers from several candidates, including rivals. The troubled company is said to be nearly broke.

    Health site Drkoop, named after the former surgeon general, and retailer CDNow also acknowledged being low on funds in regulatory filings. All three companies have seen their stock shares plummet.

    Artistdirect too faces a cash-flow problem: Because it issued too many options to buy shares in the company, it will have to offer a "recission" and could be forced to repay certain investors up to $27 million. The company gained $60 million from this week's public offering.

    Meanwhile, Seagate's decision to return to private ownership reflects the hard drive industry's continued woes. Leading companies have routinely reported quarterly losses for the past several years.

    New outlook
    Benefiting from major Net companies' demand for improved Web site performance, Akamai Technologies said it has already doubled its customer base, to more than 400, since the beginning of this year. Some of the leading Web hosting companies, many of which actually house parts of Akamai's network, are beginning to see the upstart as a threat to their own business.

    Separately, IBM and Qwest Communications formed a multiyear, $5 billion agreement to provide businesses with Web hosting services from 28 new data centers.

    Major online advertising networks are lowering their sights to include small-circulation email newsletters. Several have recently created products and services that allow these ultra-niche publications to sell advertising space for the first time.

    Children's Web sites could dodge the strict new standards of the Children's Online Privacy Protection Act, set to kick in next month, by not asking children under 13 for their name, address or other identifiable information. But despite high costs and other rigors of gaining parental consent, many dot-coms will comply so they can continue collecting valuable consumer information.

    Milestones
    Hewlett-Packard topped Compaq Computer in retail PC sales last month, and industry analysts said the longtime leader may never regain its former status. Compaq's consumer PC division had been a bright spot compared with its money-losing commercial desktop operation. Last year, Compaq ceded the top spot in overall U.S. PC sales to Dell.

    Handspring said it will begin selling its handheld computers in retail stores, a confident move on the part of a company that struggled to meet online demand after debuting in October. The company also filed to go public.

    Motorola and Nokia are working together to standardize a new wireless technology capable of handling voice and high-speed Internet access, opposing a rival technology from Qualcomm. Further division in the already fractured wireless networking market may foster higher consumer prices.

    Change of direction
    AT&T will assume majority control of Excite@Home's board of directors, consolidate the company's financial results with its own, and has offered to buy the stakes of co-partners Comcast and Cox Communications should those cable operators want to back away. Reversing plans for a tracking stock announced in November, the moves are intended both to shore up a wayward Internet strategy and tackle the threat of a proposed merger between America Online and Time Warner.

    Sun Microsystems' willingness to be more flexible in licensing Java software for servers is paying dividends. The company has recently signed five new partners, bringing its total to 12. Sun, which invented Java, designed to shield programmers from the underlying differences among computer hardware and operating systems, has often struggled to balance its control over the software with the desire to spread it as widely as possible.

    Sony announced a corporate restructuring and new deals to bring more online services to consumers as part of an ongoing attempt to reinvent itself as an Internet company. The change includes grouping three of the Japanese concern's U.S. media units under a new company called Sony Broadband Entertainment, to be formed in July. Sony aims to pipe digital content into customer's homes through high-speed Internet connections to Sony hardware.

    OpenTV agreed to buy Internet pioneer Spyglass in a $2.5 billion deal to help the company expand into the burgeoning wireless communications market, and Liberate Technologies said it would acquire closely held MoreCom, a provider of software for interactive video services, for $561 million. OpenTV, Liberate and Microsoft are competing for early position in the market to develop software that allows consumers to purchase goods and services via interactive TV.

    Worrying
    Microsoft made concessions in its ongoing antitrust settlement talks, but fear of the unknown was keeping the sides apart. The software giant tentatively agreed to refrain from charging PC makers higher prices for operating system software if these companies also sell products that compete with other Microsoft applications, and to separate its Web browser from its operating systems. But federal and state negotiators worry that the concessions may seem significant yet prove irrelevant due to the fast-changing nature of the industry as well as Microsoft's contentious history.

    eBay closed some member accounts and called in federal officials after receiving more than 150 complaints about fraudulent auctions, acting on customer complaints. The leading online auctioneer contacted the U.S. Postal Service, which investigates mail fraud, and the Los Angeles Police Department in Van Nuys, Calif., where the alleged perpetrators are believed to have based their operations.

    Also of note
    IBM said it shipped its 10 millionth ThinkPad notebook ? Lernout & Hauspie agreed to acquire Dragon Systems for about $593 million, combining the two leaders in voice recognition software ? Intel invested in two Linux companies, which likely will expand the operating system's inclusion on Intel computers ? AT&T's sale of stock to track performance of its wireless telephone business could raise as much as $11.5 billion, making it the biggest initial public offering in U.S. history ? Cisco Systems surpassed Microsoft as the most valuable company in the world.