The downward spiral began late last week when a bankruptcy judge ruled that Excite@Home could terminate contracts with its cable partners. The ruling was a major victory for bondholders and unsecured creditors, who were desperate to boost Excite@Home's revenue and thereby minimize losses on their investments.
Despite speculation that customers would not immediately be affected, many of Excite@Home's 4.1 million customers awoke Saturday morning to discover that their Net access was disconnected. As cable partners started to jump ship with their valuable subscription lists, one-time suitor AT&T withdrew its $307 million offer for Excite@Home's cable assets, and the Net provider announced it would cease operations in February 2002.
Most of Excite@Home's cable partners arranged transitional service agreements that would provide customers with Net access until replacement networks are brought online. But that was little consolation to frustrated customers who complained of slower Net connections and e-mail woes.
Excite@Home's demise was hastened after its own creditors engaged in a high-stakes game of chicken with AT&T and lost, largely because they had underestimated Ma Bell's resolve and its ability to move customers to its own network. AT&T, which controls a 79 percent voting interest in Excite@Home, had been the only bidder for the Net provider's assets since Excite@Home filed for bankruptcy in September.
HP-Compaq deal threatened
In a blow that could derail Hewlett-Packard's proposed $25 billion takeover of Compaq Computer, the David and Lucile Packard Foundation reached a preliminary decision Friday to oppose the deal.
The foundation holds a roughly 10 percent stake in HP and is seen as a crucial swing vote.
Some analysts said the decision could doom the deal, leading the eventual departure of HP CEO Carly Fiorina.
If the Compaq acquisition founders, it would be the second failed deal for Fiorina. HP had been in talks to acquire the consulting business of PricewaterhouseCoopers, but later abandoned the plan.
Net surfers had plenty to worry about as well. Just opening their e-mail in-boxes involved the risk of unleashing a worm that many experts characterized as among the quickest and most destructive.
Many eyes were on Net security as the Computer Emergency Response Team's Coordination Center, an important national clearinghouse for computer-security information, came under attack, leaving its main Web site only intermittently reachable. The denial-of-service attack didn't affect the group's ability to push security incident information to its members, but it made public access to CERT's sites nearly impossible.
A less-malicious intruder used a security hole in a Web server at Internet backbone provider MCI WorldCom to grant himself access to its administrative network. The hacker poked around WorldCom's system four times in the past two months, eventually telling the company of the hole and helping secure a misconfigured server.
"I was looking for something to do," the sometimes consultant and security researcher said of his desire to probe the infrastructure. MCI WorldCom is the fourth major company to find itself on the wrong end of his security-hole exploits.
In the privacy realm, concern that birth and death records could be used to steal identities prompted California Gov. Gray Davis to suspend the records' sale to private companies, which have published the data online.
"A person's birth and death records should not be bought and traded like baseball cards," Davis said. The move followed a dustup among California legislators after they learned the Department of Health and Human Services sold the records to several companies that published the data online.
Apple in the spotlight
Apple Computer was busy defending its turf, and there were signals about some of the Mac maker's plans for the iMac.
Apple CEO Steve Jobs said Microsoft should give $1 billion in cash to help schools, instead of software and some money, to settle more than 100 consumer lawsuits. Apple has been a vocal opponent of the proposed settlement, which would have Microsoft seed a private educational foundation to aid needy schools and donate an estimated $1 billion in software, services, training and cash over five years.
Analysts and Microsoft critics warn that Apple's stake in the educational market could be jeopardized by Microsoft pouring in millions of dollars of free software. Some critics have even called the giveaway anticompetitive.
Not a big fan of giveaways, Apple turned into an unwitting Santa Claus after some Mac diehards discovered a way to turn a complimentary Mac OS X upgrade CD into a free copy of the operating system. A Mac site posted details that could be used to provide a complete installation of Mac OS X--even for those who did not have a copy of an earlier version--but it later took down the posting after receiving a cease-and-desist letter from Apple.
And it looks as though Apple may finally be poised to unfurl a long-rumored flat-panel iMac. Morgan Stanley analysts said in a report that Apple has placed component orders for producing 100,000 15-inch flat-panel iMacs per month, starting in January.
One of Apple's most important strategies has been a work in progress since before the Net's explosion in popularity. Ten years after Apple released its breakthrough multimedia software QuickTime, the software still has sway in the film and video world, but it has almost no presence in online music, the fastest-growing segment of the digital entertainment market. In a sign of its underdog status, Apple is tying the future of the technology to the acceptance of a new digital video standard known as MPEG-4.
Also of note
AOL Time Warner announced that Chief Executive Gerald Levin will retire in May 2002 and will be succeeded by Richard Parsons, the company's co-chief operating officer...American Express joined the Liberty Alliance Project, boosting Sun Microsystems' effort to counterbalance Microsoft's Passport authentication system..."Star Wars" fans at eBay can bid on related collectibles, including two authentic movie props offered by series creator George Lucas' Lucasfilm...Orbitz, the Web travel agency formed by five major airlines, has started charging a $5 service fee on all electronic airline tickets...RealNetworks launched its much-anticipated subscription service for online music, offering a major test of consumer demand for paid content on the Web.
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