WSJ article... some AOL comments... good overall article:
AT&T Deal Lights a Fire
Under Other Net Players
By JASON FRY and TIMOTHY HANRAHAN
THE WALL STREET JOURNAL INTERACTIVE EDITION
AT&T Corp.'s deal to acquire cable-TV firm MediaOne Group continued to
cast a shadow over the high-tech landscape this week, as online-service
giant America Online Inc. and software king Microsoft Corp. both struck
agreements that looked like sequels to the drama seen a week ago.
To lock up its $54 billion deal for MediaOne, AT&T moved to mollify
Comcast Corp. (which got additional cable subscribers) and Microsoft
(which got a deal to put Windows CE in at least 2.5 million of the new Ma
Cable's set-top boxes). Conspicuously absent from the love-in, however,
was AOL, which has been left lobbying the government to force AT&T to
open up its network of speedy cable-TV lines to other Internet-service
providers.
This week AOL made some news of its own,
as it and Hughes Electronics Corp. announced
they'll team up to offer a service letting
consumers use Hughes's DirecTV service and
get Internet access from AOL via a single set-top box.
In talking to the press after the deal's announcement, AOL tried to portray
the deal as WebTV 2, taking pains to emphasize set-top boxes and play
down "big pipes" to the Net. But it's hard not to see the agreement as AOL
reassuring investors that while it remains frozen out of cable-TV Net
access, it won't be left behind as high-speed access finally comes to
consumers.
That being said, satellite is definitely the dark horse among candidates to
bring big pipes to homes. Satellite setups remain kludgey: Data may be
beamed down to users at high speeds, but sending data back still demands a
poky telephone connection. (Partly due to these problems, Hughes's current
DirecPC product is hardly flying off the shelves.)
Nothing is forever, of course. Business Week reported that AOL is mulling
ponying up as much as $1 billion to back Hughes's already-announced
development of a two-way system that would go a long way to eliminating
the kinks from Net access via satellite. That investment, if made, could pay
off handsomely sometime in the next decade. But for the near-term, the
smart money is that AOL will do all it can to lock up deals with the
remaining Baby Bells with an eye toward being able to offer its online
service nationwide via DSL. For AOL, satellite access is a bet on a fairly
far-off future that may never arrive, but DSL is a must-have for today.
Microsoft, meanwhile, is further along in the business of turning lemons into
lemonade. The software giant's attempt to join up with Comcast and keep
MediaOne away from AT&T never got off the launch pad, but the software
giant did walk away -- in exchange for a $5 billion investment -- with the
chance to trump the likes of Sony Corp. and Sun Microsystems Inc. and
become the leader in providing the software guts linking consumers to a
higher-speed Net.
It's part of Microsoft's long-running, not-very-successful campaign to get
Windows CE (that's short for "consumer electronics") into a panoply of
devices -- from TVs and video-game consoles to personal organizers and
cell phones -- that it imagines will soon be hooked into the Internet. As the
personal computer becomes a less and less important gateway to the Net,
Microsoft needs to defend its operating-system dominance by expanding
Windows.
This week's effort from the software giant to do that was a $600 million
investment in Nextel Communications Inc., which said it would offer
Microsoft's Web services to its wireless customers early next year. Nextel
will become the first customer for the Microsoft Network's new "wireless
portal," which will deliver Hotmail e-mail, MSNBC news and other features
to Nextel phones. The hope is that Nextel, with Microsoft's help, will get cell
phones that can surf the Web to market before AT&T and Sprint Corp.
The deal could be another coup for Microsoft; it also spotlights a new
strategy out of Redmond that's suited for an age in which new devices are
taking on functions once reserved for the PC.
Microsoft's blue-chip shares remain valuable currency for striking deals with
software companies, but telecommunications and cable-TV firms are much
more interested in getting cash that they can immediately plow into the
infrastructure improvements needed to bring about the broadband world.
That's fine with Microsoft: It's got cash. In fact, at the end of March, it had
$22 billion of it. To offer a little perspective, that much money works out to a
43-mile-high stack of bills -- and not $1 bills, but the ones with Ben Franklin
on them.
In other tech news this week:
Hardware and Software
International Business Machines Corp.'s chairman told analysts the Internet
will play an increasingly large role in the company's future. Louis V.
Gerstner Jr. said a quarter of IBM's revenue -- or about $20 billion -- is
related to "e-business," including sales over the Internet, computer consulting
and installation and software products that manage data and transactions
(see article).
Nintendo Co. said it struck a $1 billion agreement to use IBM's PowerPC
microprocessors in its next-generation video-game system, code-named
Dolphin, scheduled for launch in late 2000. It also tapped Matsushita Electric
Industrial Co. to supply two machines. One, a digital-video-disk player, will
store Nintendo games. The other will combine game functions with DVD
video and music playback as well as Internet connectivity (see article).
Motorola Inc. agreed to sell a division that makes low-cost semiconductors
to financier David Bonderman's investment firm, Texas Pacific Group (see
article).
Compaq Computer Corp. said it will streamline its commercial PC
distribution in North America, reducing the number of resellers authorized to
market its standard models to businesses to four from 39. Tech Data Corp.,
Merisel Inc., Ingram Micro Inc. and Inacom Corp. could see as much as $3
billion a year in new business (see article).
Separately, the head of Compaq's $6.4 billion computer-services unit
resigned suddenly, the third high-level departure since Compaq's chief
executive was ousted three weeks ago. Senior Vice President John J.
Rando, 47 years old, resigned to pursue personal interests, the company said
(see article).
Apple Computer Inc. unveiled two new notebook computers, released some
details of a forthcoming operating system and gave software developers a
preview version of it. Steve Jobs, Apple's interim chief executive officer,
also hinted at the computer maker's return to the market for "ultra-portable"
computing devices (see article).
Intel Corp. and some big customers established a $250 million
venture-capital fund, Intel 64 Fund LLC, to finance software companies that
will create applications to run on the chip concern's coming 64-bit Merced
microprocessor (see article).
Paul Wahl was named president and chief operating officer of Siebel
Systems Inc., ending an eight-month stay at TriStrata Inc., a developer of
software to protect information as it travels across the Internet (see article).
Internet and Online
General Electric Co.'s NBC unit said it will merge its Internet holdings with
Xoom.com Inc. and Snap.com, in a complex three-way deal that will give
the TV network a big stake in a publicly traded Web company that could
help it expand and make acquisitions (see article).
Lycos Inc. and USA Networks Inc., as expected, agreed to scrap their
planned merger agreement. The agreement, announced in February, had
involved plans to merge Lycos into a new company controlled by USA
Networks and its chairman, Barry Diller. But Lycos's stock tumbled, and the
complicated plan faced stiff opposition from Lycos shareholders (see
article).
Gateway Inc. formed a broad alliance with CMGI Inc., a company with
stakes in hot Internet start-ups, to share development ideas, customers and
products (see article). The deal is another in a series of moves by
personal-computer makers to use online services to boost their revenue and
profit.
AOL Europe, a joint venture between America Online Inc. and Bertelsmann
AG, said it will reduce its monthly subscription rate in the United Kingdom
by 45% to 9.99 pounds. The move comes in reaction to the recent popularity
of free U.K. Internet services (see article).
PointCast Inc., a beleaguered pioneer of "push" technology, agreed to merge
with LaunchPad Technologies Inc., a company controlled by venture-capital
firm idealab!. The stock and cash deal values PointCast at about $7 million,
according to people familiar the matter (see article).
U.S.-based Web publisher SportsLine Inc. announced plans to set up a
London-based unit. SportsLine, which publishes the CBS SportsLine site,
will own about 80% of the SportsLine Europe Ltd. venture. Intel, MediaOne
and Reuters Group PLC have acquired minority interests in the new
company (see article). As part of the deal, SportsLine Europe will acquire
Sportsweb.com from Reuters.
The U.S. Securities and Exchange Commission accused 26 companies and
individuals in a civil action of illegally offering securities over the Internet, in
its latest assault against online stock-market fraud (see article). The SEC
alleged that the defendants violated securities laws by offering unregistered
securities, promising outrageously large returns of as much as 2,000% within
two years, and selling investments without being a registered broker.
Telecommunications & Cable
Global Crossing Ltd., the upstart phone concern building fiber optic lines
around the world, is in talks with U S West Inc. about a stock-for-stock
merger valued at more than $30 billion, according to people familiar with the
matter (see article).
Cable & Wireless PLC confirmed that the company is in talks with
Microsoft, but refused to say whether the discussions focus on a possible
sale of the British company's cable-TV unit. People familiar with the
situation say Microsoft, continuing its bold push into the British cable
business, is in talks to buy as much as 30% of the unit (see article).
Cox Communications Inc. plans to acquire TCA Cable TV Inc. for $3.26
billion in cash and stock, plus the assumption of $736 million in debt, stepping
up the pace of consolidation in the cable-television industry (see article).
IPOs
Shares of online financial-news publisher TheStreet.com Inc. soared in their
debut, more than tripling from their initial public offering price to close at $60
(see article).
Copper Mountain Networks Inc. reached a market value of more than $1.5
billion as shares of the Internet-equipment maker more than tripled on their
first day of trading (see article).
Shares of Scient Corp. surged 63% Friday, after the company's initial public
offering was priced above the most optimistic of estimates. Shares of
NextCard Inc. also soared, while Alloy Online Inc. traded modestly higher |
