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The week in review: Trouble for the PC industry?

Dell Computer warns Wall Street its quarterly earnings won't be up to snuff, becoming the latest PC manufacturer to admit to sluggish revenue growth.

Dell Computer warned Wall Street that its quarterly earnings won't be up to snuff, becoming the latest PC manufacturer to admit to sluggish revenue growth.

Like Gateway and IBM before it, the leading U.S. PC maker revealed the last quarter of 1999 wasn't as good as expected. Meanwhile, Compaq reported lackluster earnings, further fueling suspicions of a possible slowdown in the PC industry.

Slowdown
Dell said two events conspired against the company, costing it $800 million in lost sales. The Round Rock, Texas, firm could not deliver on consumer demand during the peak holiday season because of processor and memory shortages, and corporate customers unexpectedly continued to delay purchases because of Y2K concerns.

Though shortages from Intel were also cited by Gateway and memory chip problems have beset the industry at large, Dell's explanation didn't satisfy everyone. "The component shortage is overblown. Dell is a pure-play leading indicator of the commercial PC market," one financial analyst said.

Earlier in the week, Compaq said it will get off to a slow start in 2000, partly because customers may delay purchases until after the February debut of Windows 2000. Leading manufacturers quietly began shipping systems loaded with Windows 2000 earlier this week, however.

Ironically, retail sales of desktop PCs shot up 37 percent in 1999, according to a new study, driven by ISP rebates and bargain-basement prices. But the gains came at a cost, as revenue grew less than one-fourth as fast.

Total PC shipments for 1999 grew by 23 percent. For the first time, Dell moved past Compaq to become the U.S. market share leader; the latter retained its top spot globally. Compaq and IBM saw their global and U.S. market shares shrink, while Dell, Hewlett-Packard, Apple Computer and Gateway climbed.

Retrench
Dot-com bellwether Amazon.com laid off 150 workers, or 2 percent of its workforce, just days before its quarterly earnings report. The cutbacks came as a surprise, and Amazon's stock fell sharply.

Just one year after its launch, Disney decided to revise its Web strategy, narrowing Go.com's focus to play to the company's strengths in entertainment. The move is intended to improve the market position of Go.com, which has struggled to make inroads against portal leaders America Online and Yahoo. Currently, it ranks sixth among the top portal sites, with 22 million monthly visitors.

Separately, a federal appeals court ordered Disney to immediately remove its Go.com logo from TV ads and Web sites until a trademark infringement trial brought by Internet search service GoTo.com is resolved. The U.S. Ninth Circuit Court of Appeals order reinstates an earlier temporary injunction that Disney had sought to overturn.

About a month after buying a direct marketing company, DoubleClick was hit by a lawsuit accusing the Web advertising firm of unlawfully obtaining and selling consumers' private information. Earlier this week, DoubleClick confirmed it is forming alliances with Web sites across the Net to create a network that correlates surfers' personal data and shopping habits. The company plans to build a database that includes consumers' names and addresses, as well as retail, catalog and online purchase histories and demographic data.

New outlook
Time Warner and Britain's EMI Group agreed to combine their music empires to create a $20 billion company. The pact, which comes on the heels of the proposed megamerger between online giant America Online and Time Warner, is likely to establish a Net music giant as the business of offering downloadable music blossoms.

Struggling computer retailer CompUSA received a new lease on life, as Mexican conglomerate Grupo Sanborns said it would buy the chain for approximately $798 million. Grupo Sanborns already has a 14.8 percent interest it acquired last year. Chief investor in the deal Carlos Helu is one of Latin America's more influential business figures, with ties to Bill Gates, among others.

AT&T launched a new campaign aimed at becoming the network infrastructure of choice for the nascent "rent-an-application" industry. Ma Bell is aiming to partner with smaller application service providers (ASPs) in hopes of capturing the lion's share of their network traffic and boosting use of its own network services. AT&T said it would spend $250 million on infrastructure supporting the new companies.

Ariba and Commerce One are in an all-out battle for prime territory in the business-to-business e-commerce market, trying to become the software platform of choice among a massive group of buyers and sellers. The two companies provide complex procurement software that enables companies to automate the buying and selling of goods and services on the Internet. Ariba and Commerce One are also building huge online exchanges where companies can do everything from selling crude oil to buying materials required to make clothing.

Moving ahead?
Sun Microsystems moved its Solaris operating system two steps in the direction of Linux, cutting its effective price to $75 and making it easier to scrutinize the software's blueprints. Designed to increase Solaris' appeal, both initiatives are intended to prevent Linux and Microsoft from making inroads into Sun's strong position in the Internet market.

Java inventor Sun, with its protracted lawsuit against Microsoft, has yet to force the software giant out of that market, but the battle may be eroding Microsoft's ability to compete. Features of the latter's popular Java development tool have been frozen in time and slowly fallen behind rival products, analysts say. Microsoft licensed Java in 1995 and the suit was filed in 1997.

Napster, which lets users see which digital music files other users possess, also exposes the latter's Internet Protocol addresses, according to a security expert. IP addresses, unique strings of numbers that identify users' computers on the Internet, could help copyright owners try to prosecute Napster users who may be illegally swapping music.

Also of note
Webvan signed agreements with Kellogg, Nestle USA, Pillsbury and Quaker Oats and plans to operate in 15 U.S. markets by the end of next year, more than the 11 it originally projected ... Struggling community site TheGlobe.com said that its youthful cofounders plan to resign as chief executives ... Tax issues have put construction of an Intel chip factory in Fort Worth, Texas, on hold ... The ill-fated Global One joint venture between Sprint, Deutsche Telekom and France Telecom finally collapsed, as France's telephone company bought out its two giant partners ... A California court temporarily barred numerous individuals and Web sites from posting online a program, DeCSS, that disables the security on DVD movies ... Earlier, Norwegian police questioned and charged the 16-year-old student who helped create the program.