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Date: Friday, November 03, 2000, 3:21 PM -0500
From: Faulkner Information Services <mailserver@faulknerinfo.com>
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Subject: Faulkner's Cyberscape Digest 11/03/00



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CyberScape Digest

  

CyberScape Digest is a weekly roundup of top internet stories for Faulkner
Subscribers.  This issue covers events from Monday 10/30/00 through Friday
11/03/00. 

  
It's the Merging Time of Year
Whether it's the cooler weather, Halloween shivers, or a sudden burst of
"holiday shopping," this week saw a number of companies reporting mergers
or acquisitions. The biggest deal actually happened at the end of the week,
when Viacom revealed plans to pony up $2.5 billion in stock for BET
Holdings, an entertainment company targeting African-Americans. The deal
includes BET's interest in Web portal BET.com.  Primedia went about its
business by agreeing to merge with search company About.com in an all-stock
deal. About shareholders will receive just over two shares of Primedia
stock for every share of About stock they own, valuing the deal at $690
million. The deal creates a niche content powerhouse which will keep the
Primedia name. In another birds-of-a-feather deal, online music site
Listen.com swooped in to make an offer for the assets of bankrupt
file-swapping company Scour--$5 million and more than half a million shares
of Listen.com stock. Listen could still be outbid; in any case, it made a
wise move in bidding for the assets without the corporate shell. It will
not be financially liable for any judgment against Scour in a pending
copyright infringement case. Also making a purchase out of bankruptcy
court, NetZero completed its acquisition of assets of Freeinternet.com for
$5 million. These assets include the company's domain names and the
transition of Freeinternet users to NetZero's service. Meanwhile, Lycos
Europe sealed its status as Europe's largest Internet portal by paying 222
million euros (US$188.3 million) in shares to purchase France-based
MultiMania. In a "baby boomer" consolidation, MyFamily.com purchased
ThirdAge Media in a stock swap without disclosing the terms of the deal.
The combined company expects to dominate its niche, but still faces strong
competition. Software services company Silverline agreed to purchase
Internet professional services company SeraNova for stock valued at $99
million. The combined company will be able to offer its clients a complete
package of services for e-commerce from strategy through ongoing
maintenance. Ailing healthcare site Drkoop.com purchased DrDrew.com in a
cash-and-stock deal worth $1.5 million. The move raises DrKoop's audience
to two million users and brings the former surgeon general's site an influx
of teens and college-age surfers. Finally, gift and collectibles merchant
network GoCollect.com purchased ByWeb, an ASP with clients in the gifts and
collectibles market. ByWeb enables users to create an electronic catalog of
their wares. The companies plan to combine their services, allowing
retailers to make an online catalog and post it to GoCollect's Web site.
Still hungry, GoCollect reported a day later that it acquired
SimplyCollectible.com, including its trademark, trade name, URLs, and
customer list.

Napster-Bertelsmann Deal Stirs up Controversy
It was a "deal with the devil" that none of the advocates on either side
predicted, for different reasons. Bertelsmann AG, parent of music company
BMG, allied with Napster--yes, Napster--to develop a secure,
membership-based service which will induce members to pay a monthly fee for
their music downloads. BMG invited other music labels into the alliance.
Bertelsmann will pay up to $50 million to develop the new business model
and service; additionally, it now holds a warrant to buy a stake in
Napster. This does not affect the court case against the file-swapping
company, however; though most of the other music firms involved in the
lawsuit hailed the deal as a positive step, they seem inclined to wait and
see what emerges from the transaction. Meanwhile, Napster fans were up in
arms, bemoaning the loss of free music and angrily decrying the company for
"selling out." The American Society of Composers, Authors, and Publishers
(ASCAP), on the other hand, gave the deal its seal of approval by saying
that it was willing and ready to issue a license to Napster for
performances of its copyrighted music. 

Two More Communications Companies Restructure
Last week it was AT&T; this week it's WorldCom and PSINet. WorldCom
reported that it will separate its business data services from its consumer
services, and issue publicly-traded tracking stocks for each. The company's
data, Internet, hosting, and international business services will be
marketed under the WorldCom name, while its consumer, small business,
wholesale long-distance voice and dial-up Internet access operations will
go under the MCI name. Meanwhile, PSINet lost Harold (Pete) Wills, who
resigned as president, COO, and board member. James F. Cragg will take over
as president for North American operations, and Harry G. Hobbs will become
president for international operations. Both men will report to CEO William
Schrader and have full profit and loss responsibility for all assets in
their regions. The restructuring announcement comes on the same day that
the company reported a net loss of $1.4 billion for its third quarter. 

Let the Dealmaking Continue...
It seemed as if all the companies not buying other companies were busy
making deals this week. Adobe paired up with RealNetworks on the
development of streaming media publishing techniques; Nokia, HP,
Interwoven, and Art Technology also got involved in the deal. The point of
the alliance is to create streaming media products that Web publishers can
use to make media content which can be integrated with RealPlayer. Nokia's
agreement with the company naturally involves creating an authoring
technology for content for wireless devices. Speaking of content, Sony
joined up with Japan-based software developer Justsystem to develop online
content and services for Airboard, a portable screen that can be used to
connect to the Internet, send e-mail, and watch TV. The Airboard will be
available in Japan at the beginning of next month. A global alliance of
seven ISPs could bring about some changes. Hong Kong-based Netvigator,
Singapore-based SingNet, Germany's T-Online, South Korea's Unitel, Brazil's
UOL, Japan's Nifty, and US-based EarthLink are working together to foster
collaboration around roaming services, content, and e-commerce. The seven
ISPs together have more than 20 million subscribers. Terra Lycos and
GoTo.com looked for and found common terms for an alliance. The two
companies entered into a three-year agreement adding GoTo's Premium Listing
keyword search service to Lycos.com and Hotbot search results. Intel and
BroadVision cast their lots together in a joint sales, marketing, and
development agreement that has BroadVision optimizing its e-commerce
applications on Intel's processors--and both companies attempting to expand
their reach in the e-commerce market. Finally, Cap Gemini Ernst &Young is
teaming up with Cisco to launch an Internet consulting venture. The
lengthily-named Cap Gemini Ernst &Young Telecom, Media and Networks
business unit will be majority owned by Cap Gemini and employ more than
6000 management and information technology consultants. It will target
telecom service providers and suppliers of Internet access sites. 

America Online Has Problems, Makes Deals
The rollout of America Online's AOL 6.0 client software suffered problems
similar to those experienced when the ISP released AOL 5.0. The latest
version, designed to serve dial-up, cable modem, and DSL subscribers
apparently isn't working as well as advertised. Some non-dial-up users
complained that the software changes or erases network settings, and that
they had to uninstall AOL 6.0 to solve the problem. Other users could not
complete their connection to the Internet after downloading the software.
Attorneys representing plaintiffs in ongoing class action suits against AOL
over nearly identical bugs in AOL 5.0 expect to enlarge their suits to
include AOL 6.0. These problems didn't prevent the company from being
everyone's darling this week. Saudi Arabian billionaire Prince Alwaleed bin
Talal reported plans to double his investment in AOL to $2 billion. Schwab
struck a multi-year deal with the ISP that makes it the main financial
services company and brokerage firm across all of AOL's personal finance
channels. General Mills entered into a marketing alliance that will give
AOL subscribers discounts on food products. Lest one confuse General Mills
with General Motors, the ISP has a deal going with the auto maker as well.
In fact, both General Motors and DaimlerChrysler said they will provide
low-cost Internet access to their 300,000 US employees, thanks to a deal
with AOL. 

Microsoft's Legal Woes, Latest Release
Microsoft's attempt to avoid the consequences of the antitrust judgment
against it by appealing continued this week as it tried to block nine
parties, including America Online, from filing amicus curiae briefs against
it in the case. Failing that, the software giant insisted that all nine
should combine their statements into one 25-page brief. The Justice
Department's stance, which it stated in a two-paragraph brief, is that the
appeals court should accept any brief it feels it would find helpful. AOL
filed a brief anyway, asking the court to find a "forward-looking remedy"
in this case, and also asking permission to file another brief in support
of the case against Microsoft. Fortunately for Microsoft beta testers, the
court activity did not prevent the software giant from releasing the first
test version of "Whistler," a Windows operating system designed to combine
the user-friendliness of the consumer version with the stability of the
corporate version. The operating system is scheduled for final release in
the second half of 2001. 

Meanwhile, in Other Legal Internet Messes...
Vote-buying is illegal is the US, despite a long and venerable
tradition--but what about vote swapping? California closed down a vote
swapping Web site aimed at manipulating the vote such that Gore would win
the presidency, but Nader would win five percent of the popular vote, thus
guaranteeing the Green Party a place on the 2004 presidential ballot. The
American Civil Liberties Union stepped in then, seeking a temporary
restraining order to block the closure and get the Web site reopened. A
lawyer for the ACLU said that the site was intended to encourage political
discourse, not the actual swapping of votes. At the federal level, the
Federal Trade Commission proceeded to educate surfers to beware of  illegal
Internet activity, posting a list of the top 10 global online scams after
collecting thousands of complaints. The FTC has been working with consumer
protection organizations from nine countries on a yearlong crackdown on
"dot-con" operations. Internet auction fraud ranked highest on the list,
followed by ISP scams and "cramming," or billing consumers for services
which they did not actually consent to or use. ICANN has also mentioned
what it describes as scams--in this case, the scammers are companies which
attempt to offer prospective domain name purchasers a jump on the
competition by registering domain names with suffixes that ICANN has not
yet approved. To RegLand.com, those are fighting words--and the Texas-based
company is suing the nonprofit organization for making defamatory and
disparaging statements that have harmed its business. RegLand claims it has
agreements with several ICANN-accredited registrars to register its domain
names first once new generic top level domains become available. It cannot
guarantee that its customers will get the domain names they reserve, but it
says it gives them a better chance at getting the name if ICANN creates the
appropriate gTLDs. In its suit, RegLand claims that several of the
registrars it tried to sign deals with backed off after ICANN told the
registrars that such deals would negatively impact their accredited status.
Meanwhile, the case against online music distributor MP3.com is taking an
interesting turn. When we last visited this story, four out of five music
groups had settled with MP3.com, with Universal Music Group remaining the
lone holdout in the case. In an attempt to avoid a potential $167.5 million
judgment against it, MP3.com is attempting a novel defense: it will argue
that UMG's copyright registrations are invalid. The company won't lose its
rights over the 6700 recordings--but it won't be able to collect damages,
either. MP3.com claims the sound recordings were improperly registered as
works-for-hire; Universal disputes this view. The judge's ruling in this
case could have far-reaching implications. If the recordings are not
works-for-hire, the copyright goes back to the artists 35 years after the
recordings were made. If they are works-for-hire, the recording company can
hold the copyrights indefinitely. If this ruling holds potentially
explosive ramifications, consider a rule issued by the US Copyright Office
clarifying the Digital Millennium Copyright Act of 1998. The rule permits
hacking in certain circumstances--specifically, to break through barriers
that protect lists of blocked Web sites maintained by filtering software.
Essentially, the Copyright Office is permitting what many consider an
illegal act to further the discussion concerning the use of filtering
software. The office stopped short of stating with certainty that
publishing a list of Web sites obtained in such a fashion constitutes fair
use. 

Two Unpleasant Departures
October was said to be a record-breaking month for the departures of top
executives, CEOs in particular. With many companies still bleeding red ink
and the Internet shake-out still making waves, it's no wonder. Broadband
company Covad succumbed, giving up chairman and CEO Robert Knowling after
reporting a wider-than-expected third quarter loss. Frank Marshall will
take over as interim CEO, while founder Charles McMinn will take on the
role of chairman. Meanwhile, name-your-own-price auction site Priceline.com
apparently couldn't name a high enough price to keep Chief Financial
Officer Heidi Miller. Priceline said it will also be cutting 16 percent of
its workforce in an attempt to achieve profitability. The company also
issued warnings about its third-quarter revenues, but eventually met Wall
Street estimates. 

This "Sonic" is a Worm, not a Hedgehog
Antivirus company Kaspersky Lab warned of a new Internet worm discovered in
Europe this week. Dubbed Sonic, it consists of a loader and a main module.
Like many nasty programs, this one arrives via e-mail. The loader portion
penetrates the PC's operating system and connects it to a hacker's site on
Geocities, from which it downloads the main module. The main module grants
a malicious hacker remote control of a user's computer, allowing all of the
user's activities on the machine to be tracked. The most frightening part,
however, is that the loader can return to the hacker site for more
code--thus modifying itself. While it is not the first self-modifying worm,
Sonic seems to be on the leading edge of this very dangerous trend. 

Two Companies Die, One is Resurrected
In addition to Freeinternet.com and Scour (see first story), at least two
other companies went bankrupt. Online textbook seller Bigwords.com closed
up shop and laid off 100 workers. Loan processor Mortgage.com reported
plans to sell its assets and get out of the online lending business. It
laid off 518 of 618 employees. Its shares dropped from $0.44 to $0.09 on
the news. On the other hand, once-dead Boo has returned, albeit in a
somewhat altered form. Rather than attempting to sell items, the site,
which still features Miss Boo, acts as a fashion and lifestyle portal
targeting 18-30 year olds. Purchased by Fashionmall.com, the site displays
styles for men and women and lets users join a  chat area or browse through
a list of online shops.  

  To IPO or Not to IPO? What a Question...
With the stock market experiencing more ups and downs than the elevators at
the World Trade Center, even strong companies have shied away from going
ahead with initial public offerings of stock. Case in point: Metavante, an
application service provider which is reportedly making a profit(!). The
31-year-old company completed the world's first Internet banking
transaction five years ago, and has made money every year since. Likewise,
QUALCOMM chose to delay spinning off its its Spinco semiconductor until
next year due to unfavorable market conditions. The folks in the open
source software industry must have stronger stomachs; Turbolinux filed with
the Securities and Exchange Commission for an initial public offering. The
company provides Linux software and services. Computer chip maker Transmeta
must have a cast iron stomach over all that silicon and software; it raised
the price range of its IPO to $16-$18 per share from $11-$13 per share.  

Outage Ticker: Sprint
Continuing what appears to be work on a general upgrade of its systems,
Sprint reported several periods of maintenance scheduled to take place on
Monday, November 6. In New York City, the sl-gw2 router will be affected
for two hours between midnight and 7:00 AM EST. Roachdale's sl-gw4 router
will experience a network enhancement which will take three hours within
the same window. Likewise, the sl-gw34 router in Pennsauken, NJ, will be
worked on for two hours within the same period of time. Finally, in
Chicago, the sl-gw27 router will be affected for one hour within the same
time slot (even though it is not in the Eastern time zone). Customers
connected to affected routers during the maintenance may experience a loss
of connectivity. 

Cyberscape Delight: Two Classics Join the Internet Era
Most of us remember playing Monopoly while growing up. First created in
1935, it provided millions with the thrill of putting up hotels on
Boardwalk and Park Place, and gleefully bankrupting friends and relatives.
Hasbro has released a number of differently-themed boards for the game, but
the latest release brings the game into the modern era. Monopoly, the
Dot-com Edition replaces real estate with Web sites and allows players to
dominate particular online industries. Players can buy and sell such
well-known Web sites as Yahoo, eBay, and CBS MarketWatch.com. Hasbro hasn't
forgotten the railroads; connectivity companies AT&T, Sprint, WorldCom, and
Nokia take their place. Fast forward 31 years from Monopoly's creation to
England's "invasion" and the creation of another classic: the Beatles.
Thirty years after breaking up, the group finally will go live on November
13 with its own Web site. The content will start out by focusing on the
release of "1," a CD collection of all 27 of the Fab Four's number one
hits. New features will be added over time. The site includes content from
Ringo Starr, George Harrison, Sir Paul McCartney, and John Lennon's widow
Yoko Ono.
   


*** Terri Wells, Faulkner Information Services *** 


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