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Weekly Happenings about & affecting the Computer World

 

Microsoft uses Steve Case e-mail to show AOL's 'go-for-broke' strategy

 WASHINGTON -- Just prior to America Online's purchase of Netscape Communications last year, AOL chief Steve Case considered a go-for-broke strategy. As part of the deal, AOL could drop its use of Microsoft's Internet Explorer and instead switch to Netscape Navigator, wrote Case, in an e-mail introduced Monday by Microsoft at its antitrust trial. Such a move could cost AOL customer sign-ups via its desktop agreement with Microsoft, but it would also reverse Navigator's flagging usage share.

"Suddenly they would have more than two-thirds share again!" wrote Case, AOL's chairman and CEO, in an internal company e-mail dated Sept. 20, 1998. But AOL never went through with the plan, and Monday on the witness stand David Colburn, senior vice president for business affairs at AOL, said AOL never intended to end its use of Internet Explorer. "We really had no plan to leave IE," Colburn said.

Colburn, who had testified as a government witness in the main part of the trial, returned to court today as a "hostile" witness for Microsoft. Colburn's testimony ended Monday, and the court will not meet again until Wednesday, when Gordon Eubanks, president and CEO of Oblix in Mountain View, Calif., will testify as Microsoft's second rebuttal witness. Judge Thomas Penfield Jackson seemed bored and impatient with most of today's testimony, and the long list of new documents Microsoft introduced. At one point, Judge Jackson said of one piece of Microsoft evidence: "A free-floating document doesn't prove anything to me."

Editor Note:  How prejudiced must a Federal Judge show he is before he is admonished by either his peers and/or impeached by the HR? In this reporter's opinion, Penfield Jackson is unfit to be a Law Clerk let alone a Judge!

Microsoft has cited AOL's purchase of Netscape as a major reason why the government's antitrust case is wrongheaded, because, the company argues, the deal offers strong proof of competition in the software industry. Colburn -- who described himself today as AOL's "deal guy" -- was called to testify on the "completeness and candor of prior testimony," concerning the Netscape purchase. Colburn testified in the trial several weeks before the purchase was announced, on Nov. 23, 1998.

But on the witness stand Monday, Colburn answered questions from Microsoft lead trial attorney John Warden in a deep but monotone voice. There was little hostility between the two, and Warden did not attack Colburn's credibility, as might have been expected. Instead, Warden took Colburn through a list of e-mail messages and other memoranda written prior to the Netscape purchase.

But although some of the memoranda, such as Case's Sept. 20 e-mail, discuss the possibility of dumping IE for Netscape, Colburn insisted throughout his testimony that "there was nothing with the acquisition" of Netscape that led AOL to believe that it would change its plan to use IE. That view appeared to be backed up by AOL President Bob Pittman. In response to Case's Sept. 20 memorandum, Pittman wrote that Microsoft "is too strong to throw them out of the tent -- they can hurt us if they think they have no other option."

In January, AOL signed a two-year contract with Microsoft to continue to use IE. Microsoft also introduced documents that showed that AOL has been working on a version of Netscape that will work with its interface, but Colburn continued to insist that the company was not planning changes in the browser it used.

Microsoft also showed in court today that AOL is working with Sun Microsystems to develop Java-based systems that would allow AOL to be accessed anywhere, for example through devices such as pagers and cell phones. But questioned about these developments, Colburn said, "I don't know what the future holds." The PC, he said, will remain the primary computing device "and that will not change in my view."

Colburn is the first of three rebuttal witnesses Microsoft is calling in the rebuttal phase of the trial. The U.S. Department of Justice and 19 states filed a broad antitrust lawsuit against Microsoft last year. Microsoft has denied all allegations of anticompetitive activities, including the charge that it used its power in the PC operating system market to stifle competition in the browser arena.

Microsoft Corp., in Redmond, Wash., can be reached at www.microsoft.com. The U.S. Department of Justice, in Washington, can be reached at www.usdoj.gov. America Online Inc., in Dulles, Va, is at www.aol.com.

 Compaq Flexes
MARKET MUSCLE

Desktops, notebooks, flat-panel monitor, printer, and services debut. Compaq made a truckload of product announcements on Tuesday, from a $599.00 PC, the launch of its Compaq.net Internet service, new notebook computers, and a cheap color printer. Compaq says its latest announcements jive with its strategy to offer the "broadest selection of products at broadest available price points," says Ray Robidoux, vice president of sales and marketing.

The deluge of consumer goods and services is the first of its kind since Eckhard Pfeiffer was unexpectedly ousted in April as Compaq's chief executive officer. Although Compaq offered no official reason for Pfeiffer's sudden departure, a contributing factor was Compaq's need to move faster and to stay competitive with nimble PC makers such as Dell and the growing number of sub-$500.00 computer makers.

Compaq Product Parade
With this week's announcements, Compaq moves its closest yet to the sub-$500.00 price point by rolling out a $599.00 Presario 5000 with an AMD 350-MHz processor, 64MB of memory, a modem, and a 4MB video card. On the fully featured front, Compaq pushes its new Presario 5736 for $1975.00. The Pentium III 550-MHz system is home network ready, loaded with a 1.5MB digital modem, 128MB of memory, a built-in Iomega Zip drive, a DVD-ROM drive, and an 8MB 3D graphics card.

Compaq also announced its new Presario will come preloaded with the new Compaq.net, an Internet service only available to new Presario buyers. Along with its own Internet service, Compaq will preload software for America Online and NetZero, an ad-sponsored no-cost ISP.

Compaq as an ISP
Compaq.net service costs $17.99 a month for unlimited access or $11.99 when you sign a year contract. Compaq officials say they're not interested in getting into the ISP business as other computer makers like Gateway have. Compaq is simply wholesaling access to the Internet from MCI World.com to make it easier for consumers to go online quickly, Compaq officials say. Also on the Internet front, Compaq's Internet keyboard gets three additional Web shortcut buttons, which gives users seven quick access keys to Compaq-related sites.

More Compaq Portables
Compaq also rolled out a range of new notebooks starting at $1299.00 for an AMD 333-MHz-based Presario 1245 and reaching to a high-end Intel Pentium II 366-MHz Presario 1825 with a roomy 15-inch display for $2999.00.

The 1825 Presario notebook comes with a base configuration of a 6.4GB hard drive, a DVD-ROM drive, an ethernet port, and a modem. Compaq's budget notebook, the Presario 1245, comes with a 3.2GB hard drive, 32MB of memory, a CD-ROM drive, a modem, and a 12-inch display.

Compaq's 5700T series desktops and 1600s, 1800T, and 1900T class notebooks, all announced Tuesday, will be available for custom configuration direct from Compaq through its online At Home storefront.

Monitors and More
Along with a bevy of new CRT monitors, Compaq debuted a 15-inch flat-panel LCD priced at $899.00. The new monitor includes built-in speakers and is available at retail channels through Compaq's Built For You in-store kiosks.

Rounding out the raft of product announcements is Compaq's $119.00 IJ300 color printer. It can print resolutions up to 1200 by 1200 dots per inch and comes bundled with software that lets you print two Web pages on a single sheet of paper at the same time.


ANTICIPATED LOSSES BEGIN major restructuring
FOR COMPAQ

As expected, Compaq Computer warned Thursday of an expected loss for its second fiscal quarter, and announced plans for a major restructuring that will result in three distinct business units, each responsible for its own profit and loss.

Compaq blamed pricing pressures in the personal computer segment, inadequate revenue growth, and a noncompetitive cost structure for the expected shortfall.

The company said in a statement issued Thursday that it expects to report a loss of $0.15 per share for the quarter ending July 28, while revenues and gross margins are expected to be flat to down sequentially.

To help the PC manufacturer get back on track, Compaq will undergo a major reorganization that will split the company into three global business groups -- Enterprise Solutions and Services, Personal Computer, and Consumer -- each with a separate, market-driven profit-and-loss accountability.

Benjamin Rosen, acting CEO of Compaq, sent out an all company e-mail Thursday morning alerting employees to the changes. In it he termed the restructuring as "the most extensive realignment of our company since 1991.

It will mean significant changes in how our operations are organized and how we drive our business. But these changes are necessary for us to improve execution, streamline decision-making and accelerate growth and profitability."

The company expects to take a "substantial restructuring charge" in the third quarter of this financial year in connection with the realignment.

Once completed, the realignment plan is designed to eliminate $2 billion in ongoing operating costs, Benjamin Rosen, Compaq's chairman and acting chief executive officer, said in a statement issued Thursday.

"The actions we are taking today are designed to take full advantage of the breadth and depth of Compaq's capabilities to restore the company's growth and financial performance," Rosen said.

Thursday's news follows a spate of departures of high-profile executives at Compaq, starting in April with the surprise resignation of longtime CEO Eckhard Pfeiffer and Chief Financial Officer Earl Mason.

Just Wednesday, Hans Gutsch, senior vice president of human resources, organization and environment, retired from Compaq, effective immediately.

In his 11 years with the vendor, Compaq's payroll grew from 2,000 to 70,000 employees, and Gutsch was credited with playing a major role in orchestrating the company's global infrastructure.

"In the two months since the change of management at the company, we have taken a deep look into the strengths and challenges of Compaq," Rosen said in today's statement.

"We have determined that significant structural changes are required to enable this company to realize its enormous potential and secure its position as the preferred information technology partner for global customers."

Operating issues affecting the computer maker in the first quarter have continued to plague the company, and Compaq has "not nearly performed to [its] potential," Rosen said.

In the internal e-mail, Rosen outlined the five steps Compaq would need to enact in order to turn the ship around.

"We will focus on five key goals;

  • First, we will become a recognized leader in eBusiness solutions. We are building a strong foundation with our NonStop eBusiness strategy, which is a powerful differentiator for our company.

  • Second, we will extend our leadership in personal computing for both the commercial and consumer markets.

  • Third, we will take full accountability for our customer relationships.

  • Fourth, we will build a world-class global supply chain, which will help make us more competitive across all of our businesses.

  • Fifth, we will substantially reduce our infrastructure costs."

The newly formed Enterprise Solutions and Services Group, headed by Enrico Pesatori, senior vice president and group general manager, is being formed through the integration of the company's Enterprise Computing Group and Compaq Services.

The new group will be responsible for the delivery of Compaq's NonStop eBusiness solutions and the products and services that make up those solutions.

The Personal Computer Group will continue to be led by Mike Winkler, senior vice president and group general manager.

The Consumer Group will continue to be headed by Mike Larson, senior vice president and group general manager.

Additional elements of the company's realignment include:

  • the creation of a global sales and marketing group with responsibility for sales processes across all business group lines;

  • the establishment of a dedicated organization to manage all of Compaq's electronic-commerce activities;

  • the creation of a customer advocacy organization, combining Compaq's quality and customer satisfaction organization with its customer advocacy initiatives.

Compaq Computer Corp., in Houston, is at www.compaq.com.

U.S.A. & online voting

WASHINGTON (IDG) -- The information age is still in its infancy and has the potential to have an impact on political systems worldwide, allowing for innovations such as global referenda, IBM Chairman and CEO Lou Gerstner told a U.S. congressional committee Monday.

Gerstner was one of the information technology leaders invited to speak before the Joint Economic Committee (JEC), which Monday morning kicked off three days of hearings meant to educate congressional leaders on high-technology issues and explore the role of public policy on the development of technology.

"Five years ago, using the Net to buy a car or trade stock or earn college credits was revolutionary," Gerstner said. "So why not envision a day when we vote with much greater convenience -- from our home or workplace -- or a day beyond that when issues are presented to all the people of the world and we vote as a global statement of individual preference without regard for conventions like political parties or national borders?"

The world is just at the beginning of this transition, however, Gerstner said. "We're probably about five years into a 30-year cycle of transformation," Gerstner said. "But there is simply no doubt that 25 years from now, when people reflect on the seminal changes of the early days of the century we are about to begin, the impact of networked computing will stand in relief."

Though the United States enjoys leadership now, the rest of the world is catching up, Gerstner said. About 62,000 new users are coming online every day in the United States but even at that rate, most of the growth of the online population is occurring outside of the United States, Gerstner said.

Praising the passage last year of the Internet Tax Freedom Act, Gerstner also called on government to take a "wait-and-see" approach to regulating the Internet, and allow entrepreneurial forces to form and shape the information economy. Gerstner ended his address with an impassioned call for better public education in the United States.

"Unless we arrest the wasting decline of our public schools America is destined to be an also-ran in the emerging digital economy," Gerstner said. The IBM chief also answered a question on whether any of the high-tech leaders at the hearings -- particularly Microsoft CEO and Chairman Bill Gates -- would call for technology industry exemption to antitrust laws.

Gerstner said he saw no reason to request such exemptions. Rumors have been circulating since last week that high-tech leaders would use the hearings to lobby for exemptions to antitrust laws.

Currently, the U.S. Department of Justice and 19 states are in the rebuttal phase of a broad antitrust lawsuit filed against Microsoft last year.

 

Starr Denies Probes Were Politically Motivated

WASHINGTON (Reuters) - Independent counsel Kenneth Starr denied Sunday that his investigation of President Clinton, first lady Hillary Rodham Clinton and the other figures in the Whitewater affair was politically motivated.

The question of whether Starr, a Republican, is a political partisan is being raised anew after the New York Times said Sunday that his office may release a critical report on the first lady's behavior in the Whitewater affair that could coincide with her expected campaign for a U.S. Senate seat from New York. Asked on the "Fox News Sunday" program if he had ''politicized'' the Whitewater investigation, as the president, his close advisers and other Democrats have charged, Starr replied: "I certainly don't think so."

"I know what we have done is to proceed to gather facts, to assess facts, to come to judgments and then ... to present our case in court." He said that whatever success his office has had resulted from carefully weighing which indictments to seek. Starr, who is winding down his investigation of the failed Whitewater real estate venture, "was leaning toward issuing a report that would discuss the Clintons' behavior in some detail," the newspaper said, citing unidentified members of his staff.

The Times said Starr had decided not to seek criminal indictments of the president or Mrs. Clinton. Another debate in Starr's office was whether it was fair for him to release a report on a person who had not been and would not be indicted, the Times said. "The question as it has been framed in the debate has been whether you put up or shut up," one adviser told the paper. ''If you can't indict her, shouldn't you just shut up?"

But the document, if released as the first lady begins her Senate campaign, could be dismissed by her supporters as a partisan political maneuver, the paper said. According to The Times, supporters of Mrs. Clinton have been counting on a kind of "scandal fatigue" to shield her from any more political damage rooted in the previous five years.

Although the report would recite events without any stated judgments, Starr associates told the Times it would raise unanswered questions about Mrs. Clinton's behavior in some Arkansas land transactions and her testimony under oath about her actions as a lawyer in those deals.

Last year, Starr told Congress that he did not have sufficient evidence to indict President Clinton for any misdeed related to his failed investment, as Arkansas governor, in the Whitewater development. But Starr did issue a report of more than 700 pages that detailed Clinton's effort to keep secret his sexual relationship with former White House intern Monica Lewinsky. The report led to Clinton's impeachment by the House of Representatives on charges of obstruction of justice and perjury related to the Lewinsky matter. Clinton was acquitted by the Senate.
 

Netscape shows
it's true colors

While attempting to speed its next-generation browser to market, AOL has dropped support for its proprietary version of an important new browser technology.

America Online's Netscape Communications division has long promised support for the standardized Document Object Model (DOM) in its upcoming version 5.0 of the Communicator browser. The World Wide Web Consortium (W3C) recommended its version of the DOM last year. This will not be the case.

Netscape now says that in the process of implementing support for the W3C DOM, Level 1, it will not make Communicator 5.0 backward-compatible with some of its own proprietary DOM technology.

Version 5.0's "contract is to fully support DOM1/CSS1/HTML 4.0," wrote Communicator senior product manager Eric Krock in a post to the "netscape.public.mozilla.layout" newsgroup last week. "We unfortunately lack the time and resources to do that *and* support either of the two legacy proprietary DOMs (IE4 and Nav4), so we're going to focus on doing the W3C standards right, providing a robust, unchanging, standard platform going forward."

Krock wrote that abandoning so-called backward compatibility was "a difficult decision...The simple truth is that we are facing the iron triangle of time, resources, and features."

What both the proprietary and standardized DOMs do is provide a mechanism for scripting languages like Netscape's JavaScript to manipulate elements of a Web page.

Basic examples include letting Web authors use scripting to verify the contents of entry fields on a page or direct elements to behave a certain way when the user rolls a mouse over them.

Communicator will continue to support these basic functions written to the proprietary DOM. But more advanced techniques that enable Dynamic HTML (DHTML), a term used by Netscape and Microsoft to refer to a number of new interactive Web technologies, will no longer be supported in Communicator 5.0 if they were written to the Netscape proprietary standard. That means developers will have to rewrite those pages using the W3C DOM recommendation if Communicator 5.0 is to be able to read them.

"Sacrificing backwards compatibility does mean that there will be some pain for developers," said George Olsen, project lead for the Web Standards Project, a developer group that has lobbied Netscape successfully in the past to speed the adoption of standards including the W3C DOM.

"On the other hand, the pain may not be that bad because most developers were avoiding extensive use of the DOM because of the existing incompatibilities."

Krock agreed that the difficulties of writing to both Netscape's and Microsoft's incompatible DOMs had prevented most developers from using the technology in the first place.

"The good news is that precisely because it was so painful to write applications that supported both proprietary DOMs, very few people have done it," Krock said.

"Navigator 4 and [Microsoft's] Internet Explorer 4 made DHTML possible but difficult because the DOMs were incompatible." The absence of a widely implemented standard DOM "has been retarding the Web from moving to the next level."

Krock promised developers that Netscape would provide help for Web authors who need to continue to support both the proprietary and standardized versions.

"Incompatible DOMs are a problem the vendors created; the vendors have to solve this problem," Krock wrote to the developers. "Netscape urges all other browser vendors to join us in this effort."

Microsoft said Internet Explorer 5.0 included support for the W3C DOM, but the Web Standards Project has criticized IE's W3C DOM implementation. In related news, Netscape today released version 4.61 of Communicator, with a new security certificate from VeriSign and unspecified bug fixes.

Internal e-mail from Office of the Chief Executive

To: Compaq Worldwide Team

During the past several weeks, the three of us have learned a lot about Compaq -- from you and from our customers. We found that Compaq has many of the essential components of a great company: quality and enthusiastic people, a broad portfolio of products, services and solutions, a sound strategy built around NonStop eBusiness solutions and PC leadership, and a strong culture of success.

But we also found that we have created substantial barriers to success. From customer focus to cost structure to the alignment of our businesses, we need to make significant improvements. As we put it in April, we are not living up to our tremendous potential.

This is reflected in our current financial performance. We told financial analysts this morning that Compaq expects to report a loss for the second quarter of up to 15 cents per share. This is unacceptable to us, and we know it is unacceptable to you.

After several weeks of work, the senior management team has unanimously endorsed a plan that will address our challenges and, most important, position Compaq for sustained growth and industry leadership as we enter a new century. It is the most extensive realignment of our company since 1991. It will mean significant changes in how our operations are organized and how we drive our business. But these changes are necessary for us to improve execution, streamline decision-making and accelerate growth and profitability.

One of the first things we have to do is to answer a question that many of you, as well as many of our customers, have asked: What is Compaq? Compaq is a global information technology company focused on three growing market segments: consumers, personal computers and enterprise solutions. Our goal is to be a leader in each segment. And we will go to market with the most competitive model in each.

We will focus on five key goals:

  • First, we will become a recognized leader in eBusiness solutions. We are building a strong foundation with our NonStop eBusiness strategy, which is a powerful differentiator for our company.

  • Second, we will extend our leadership in personal computing for both the commercial and consumer markets.

  • Third, we will take full accountability for our customer relationships.

  • Fourth, we will build a world-class global supply chain, which will help make us more competitive across all of our businesses.

  • Fifth, we will substantially reduce our infrastructure costs.

The most fundamental change we are making is to create three global business groups -- Consumer, Personal Computer and Enterprise Solutions and Services -- with end-to-end alignment and accountability for meeting customer needs and increasing customer satisfaction.

Each business group will have profit and loss responsibility that is benchmarked against the market, go-to-market models focused on growth and competitive cost structures. This alignment will enable us to compete effectively not only against other diversified companies like IBM and HP but also against single-focus companies like Sun and Dell.

We will integrate the Enterprise Computing Group and Compaq Services into a new Enterprise Solutions and Services Group (ESSG). It will be responsible for the global delivery of NonStop eBusiness solutions and the products and services that make up those solutions. Our technology and global service capabilities are two of Compaq's most important assets, and they must be tightly linked. Enrico Pesatori is the Senior Vice President and Group General Manager, ESSG.

Mike Winkler will continue to serve as Senior Vice President and Group General Manager, Personal Computer, and Mike Larson as Senior Vice President and Group General Manager, Consumer.

To support this alignment, we are taking several other key actions.

We are creating a new role for Sales and Marketing. Although we eliminated the Worldwide Sales and Marketing function several weeks ago, we concluded that there is a need for an organization with an emphasis on global sales processes.

Sales and Marketing will increase our focus on global accounts, present a single face to major customers and increase our account penetration.

We want to assure continuity for customers, so account assignments will not change. The geographies will continue to be the focal point for customer relationships and will report to this organization. Peter Blackmore, previously head of North America, will become Senior Vice President, Sales and Marketing.

Country managers will continue to report through the geography general managers and will be responsible for managing the company's portfolio of businesses. The business model and strategy for these businesses will be defined by the global business groups.

Country managers will be responsible for implementing the go-to-market strategy and for managing the sales force and customer relationships to meet the agreed revenue and profit goals of the business groups. In addition, they will implement eCommerce and call center capabilities and manage shared services for the country.

We are establishing clear accountability for marketing. Corporate Marketing will continue to drive branding, advertising and corporate communications. The business groups will be responsible for product and solutions marketing. And the geographies will drive demand generation.

It is critical that we integrate the Internet into everything we do, so we are establishing a dedicated organization to manage all of Compaq's eCommerce activities. This group will be responsible for Compaq.com, customer relationship management and the necessary information management resources.

It will also deliver global eCommerce capabilities and tools and call center systems. We expect this to become a showcase for our Internet solutions.

We will recruit an experienced eCommerce executive to lead this organization, who will report to the Chief Operating Officer.

We are expanding the responsibilities of our supply chain management organization. This will insure that we have end-to-end alignment from demand management to delivery.

By building the best supply chain in the industry we will reduce costs, improve efficiencies and enhance overall customer satisfaction. Ed Straw continues as Senior Vice President, Supply Chain Management.

We are also creating a new organization dedicated to customer advocacy. It will combine the quality and customer satisfaction organization with our customer advocacy initiatives.

This group will be responsible for Compaq's Quality Leadership Teams, process improvement activities and benchmarking. A Vice President of Customer Advocacy, reporting to the Chief Operating Officer, will be named later.

These actions are focused on our operations. Corporate Marketing, Human Resources, Finance, Legal, Technology and Corporate Development, and The AltaVista Company will continue to report to the Office of the Chief Executive. [See attached organization chart]

As a result of these actions, we will have focused, fully aligned business groups, supported by a large, international sales force and a best-in-class global supply chain.

We will be more responsive to our customers. And we will develop leadership eCommerce capabilities. This will put Compaq in a strong competitive position.

The key, of course, is execution. We have started by naming the senior management team that will drive our implementation plan.

We will establish clear metrics, accountability and rules of engagement. We will deploy market-driven benchmarks for our business groups. And we will define our restructuring and reinvestment plans.

We do expect to take a substantial restructuring charge in the third quarter as a result of our realignment plans. But we also intend to invest in growth and in infrastructure improvements that have been deferred, such as customer call centers and eCommerce capabilities.

These changes will require each of us to think in new ways and to build new and stronger partnerships within Compaq and with our customers.

Based on what we have heard from you during the past nine weeks, we believe that the vast majority of you will welcome these changes and the opportunities they will provide. This is a company of winners, and our goal is to unleash our will to win.

We are counting on each of you to help make these new organizations a success for Compaq and, most important, for our customers.

We will communicate further implementation details to you and your managers over the coming weeks. Together we will build a Compaq that is poised for even greater success in the years to come.

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