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Christmas Gift Guide
Internet

The week in review: Let's make a deal

Leading high-tech companies remain committed to an aggressive acquisition strategy, despite rising market prices.

Leading high-tech companies showed they remain committed to an aggressive acquisition strategy, despite rising market prices.

Giant America Online purchased a company specializing in text entry for wireless devices, while database maker Sybase bought an Internet financial services firm and rival Informix snapped up a company that distills databases into business intelligence and e-business applications. Meanwhile, Cisco Systems said it would likely buy some 20 to 25 companies next year.

Acquisitive
In a move to further solidify its "AOL Anywhere" strategy, the leading ISP acquired Seattle's Tegic Communications for an undisclosed sum. The move underscores AOL's push to move beyond personal computers and reach users through telephone and other portable devices as well as through television sets. AOL also has been making investments and forming alliances with service firms, satellite companies, mobile telecommunications firms and makers of portable devices to try to remain on top of the consumer Net access market.

Sybase bought the Home Financial Network for $130 million in an effort to expand beyond its role as a supplier of "enterprise" software to a strategic software and services provider for the financial industry. Meanwhile, Informix took over Ardent Software in a stock deal worth about $880 million, looking to add to its package of database software aimed at Internet firms.

Both companies are looking to extend their comeback strategies. The pair were once high-flyers in the database arena, but have watched rivals Oracle and IBM capture the bulk of a market that has matured and consolidated in recent years.

In 1999, Sybase and Informix have each released Internet-based databases aimed at helping businesses create e-commerce Web sites and other software for building "storefronts." Both also can point to a recent string of profitable quarters, while Informix in September bought Cloudscape, a start-up that offers a mobile database built entirely in the Java programming language.

Separately, networking equipment leader Cisco plans to stick to its acquisitive strategy over the next year, though it is wary of the rising valuations of start-ups in the nascent market for Internet-based optical equipment, chief executive John Chambers said. In one example, Redback Networks has agreed to acquire privately held Siara Systems--a company which has not introduced any products nor earned any revenue--for $4.3 billion in stock.

All kinds of computing
Sun Microsystems, nipping at the heels of rival SGI, has put in a bid for a contract to design a supercomputer for Los Alamos National Laboratory that will simulate nuclear explosions. The move highlights Sun's effort to muscle its way into the market for high-performance, number-crunching computers, increasingly in demand from government and businesses.

Elegant, inexpensive computers coming next year will bring a touch of class to business desktops--and also present manufacturers with the same sort of problems they've faced in the consumer PC market in recent years. Systems such as Compaq's iPaq or Hewlett-Packard's ePC will give businesses the computing power they need for $499, according to estimates, far less than the $750 business systems customers are buying today. But if these machines become popular, they could lead to the low-ball pricing that has squeezed the consumer PC market for the past three years.

Further along the spectrum, Dell Computer unveiled a stylized, easy-to-use consumer PC, entering the hazy realm of Internet appliances. The WebPC will come in product bundles ranging in price from $999 to $2,399, and is the first system to emerge from Dell's Web products group, dedicated to developing and marketing consumer products for accessing the Internet.

Microworkz, a controversial discount PC provider being pursued in various consumer-related lawsuits, went out of business. Creditors and customers will likely become the chief victims in the collapse. Also this week, the "free PC" business model took another knock as low-cost manufacturer Emachines agreed to merge with Free-PC, the company that kicked off the craze earlier this year. Despite the popularity of "free" systems, customers have lodged complaints about orders that never get filled or delayed refunds, and analysts remain skeptical whether advertising or Net access services can subsidize the entire cost of a PC.

Just testing
Hoping to put a dent in Amazon.com's dominance, Barnesandnoble.com has been testing a service to deliver books purchased from its Web site quietly within a 24-hour period. With Internet commerce players increasingly focused on issues surrounding distribution, warehousing, inventory and delivery, analysts believe that Barnesandnoble.com's ability to leverage its parent company's stores could be a strong advantage in cutting into Amazon.com's lead.

A federal judge has issued a preliminary injunction barring online bookseller Barnesandnoble.com from using technology that rival Amazon.com claims is patented. Amazon.com filed a suit Oct. 20 claiming Barnesandnoble.com had illegally copied Amazon.com's 1-Click technology, a feature that stores billing and shipping information so that returning customers can purchase selected items by clicking their mouse once, without re-entering or re-confirming any information.

E-tailers reported a strong start to the online holiday shopping season, but investors failed to catch the spirit of the season. AOL said 4 million of its 19 million members made an online purchase last week, spending three times the amount spent during Thanksgiving week last year, while Amazon.com revealed 2.5 times more orders were placed on its site during the past weekend than during the same weekend last year. Macy's, Yahoo, and Borders Online reported similar gains. Similar news last year sent e-commerce stocks flying to record valuations, but this year the reaction was muted largely because expectations have been high for several weeks.

About time
Microsoft banner ad network LinkExchange is struggling under a heavy order backlog, creating long delays for customers seeking to post online pitches just as holiday sales begin to accelerate.

Yahoo will begin using software it has developed to automatically filter unsolicited bulk email, or "spam," from its free email service. The widely hated stuff accounts for about 10 percent of all email traffic--a figure that has remained constant even as Internet usage has spiked--but to date filters haven't been very successful.

A federal judge ruled that Volkswagen of America cannot stop an Internet service provider from using the address VW.net, the latest court decision favoring small businesses in domain name disputes. The trend may cease with new legislation aimed at curtailing so-called cybersquatting.

Also of note
Jan Baan is looking to get closely involved in Canada's fledgling Net Shepherd, a year after resigning from the software giant he co-founded two decades ago ? Amazon invested $10 million in cash for a 16.6 percent stake in Ashford.com, quite a discount but not so great as free watches the luxury goods e-tailers mistakenly offered ? World Trade Organization ministers are in agreement that the current tax moratorium on sales over the Internet should be extended for as long as two years, U.S. Commerce Secretary William Daley said ? In January, California's Riverside County will begin auctioning foreclosed properties on Net.