Roundup: Last week's markets
Optimism that the Fed will keep obliging with interest rate reductions, and that other governments would act sensibly to solve the problems with the global economy drove the Dow up 2 per cent and Nasdaq up 5 per cent on Friday, compensating somewhat for the 12 per cent fall in the first four days of the week. JP Morgan is now predicting a 1999 recession, with consumer and business expenditure slowing. It's Columbus Day today, partly observed in the US, with the stock markets open but banks and government offices mostly closed. The Nikkei reached a 13-year low on Friday, losing 146 points to 12,880, while the yen was 117 against the dollar. Merrill Lynch has cut its growth forecast for Japan to a 2.5 per cent contraction until March 2000, and predicted 157 yen to the dollar within six months and 170 to the dollar by March 2000. A problem for Japanese financial institutions is that many are unhedged in their currency deals, so worse is probably yet to come. The dollar is not doing to well either: it has fallen 10 percent against the DM, and 17 per cent against the yen in the past six weeks. Steve Case, AOL's CEO sold 250,000 shares and AOL execs generally have sold 1.8 million shares for around $200 million. AOL fell 14 per cent last week. Could there be a message here? PointCast is expected to announce a strategic alliance , according to CEO David Dorman, following its decision to stop its IPO earlier this year. Novell is being tipped as a buy by Jonathan Steinberg, one of the top four investment tippers in the US, because of NetWare 5 and the turnaround being well underway. He forecasts 25 cents/share for FY98, ending 30 November, and 46 cents the following year. Novell disposed of its Corel shares as part of its WordPerfect disposal, it was reported, for a pittance of $14,000. Dell put on 9 per cent (yet fell 16 per cent on the week), Compaq 10 per cent, Gateway 5 per cent, Apple 14 per cent, Microsoft 6 per cent (falling 7 per cent on the week), Intel 7 per cent, Cisco 7 per cent (but 10 per cent down on the week). Yahoo, despite rather good results, fell 17 per cent on the week. SAP said Q3 revenue would be up 43 per cent, pushing it up 13 percent, while JD Edwards steamed up 20 per cent. This is all a bit surprising, with many financial analysts believing that the market has not yet hit the bottom. Forrester Research is painting a gloomy picture of PC sales in the middle term. Although Y2K replacements will help 1999 sales to increase 14 per cent, there will be excess capacity by mid-2000 as corporate buyers shy away from new purchases because of disturbing Y2K arrangements. US 1999 PC revenue is predicted at $55.2 billion, with 1998 revenue at $53.5 billion. However, in 2000 Forrester sees a 14 per cent decline to $47.4 billion, followed by two years of zero growth. ® Click for more stories
Softbank strikes distribution deal with Ingram
Softbank Corp, the Japanese company controlled by Masayoshi Son ("the Bill Gates of Japan") and which owns 71 per cent of Ziff-Davis Inc, 35 per cent of Geocities, and 31 per cent of Yahoo, signed an agreement with Ingram Micro this morning to cooperate on distribution. As part of the arrangement, there will be an exchange of $50 million shares in each company. Softbank shares on the Tokyo exchange rose 4 per cent to yen 5,150. Softbank is the largest software distributor in Japan.
Does Microsoft ‘gibberish’ database run on IBM hardware?
It is interesting to consider why Microsoft claimed that the software for the Microsoft sales database is too large and complex to function on any computers to which the Justice Department has access. Judge Jackson overruled Microsoft on Friday, stating that the data supplied by Microsoft was "gibberish"(earlier story). Microsoft had suggested that the DoJ set up its own database to analyse the printed versions of contracts, knowing very well that even if these months of work were undertaken, it would still be impossible to find a true picture, because of the modification of many agreements, and discount structures that are not clearly spelt out. The DoJ said the information is relevant to get information about Microsoft's pricing and revenue practices. The DoJ had even offered to "conduct that inspection at whatever hour of the day is convenient for Microsoft and to pay any reasonable costs incurred as a result". Perhaps the most outrageous Microspin was from Steve Holley, a Microsoft lawyer, who said that the people running the Microsoft database were integral to Microsoft's business, and that if they were interfered with, the company could shut down. That sounds like an invitation to headhunters to offer the traditional Microsoft signing-on bonus of a million dollars or more, as happened in the case of Microsoft's raid on Borland employees. So what could be of so much concern to Microsoft? Microsoft has had to use reliable systems for its internal business applications, so naturally it used DEC kit with no Microsoft software at one stage of its development. Then it moved to IBM AS/400s, swearing IBM to secrecy about this. Bob Herbold , Microsoft's COO and now reckoned to be number three at Microsoft, claimed at the analysts' meeting in July that the last AS/400 would be out of Microsoft's door shortly - but was economical with the truth about the off-site service company that is running around a dozen AS/400s for Microsoft. What are they running? Certainly Microsoft's world-wide software distribution, and quite possibly Microsoft's sales database. What software? Try SAP. Ergo, Microsoft would be telling the truth that the DoJ could not get an A/400 and SAP software installed quickly. But it would not want the world to know that, would it? ® Click for more stories
Microsoft leaks its own memos
Previous Bill Gates memos have reached the outside world via leaks and subpoenas - so has Microsoft decided to bow to the inevitable by leaking one officially? A 'business as usual' 10,000 word pep talk to the troops has found its way into today's New York Times, the text being given to the paper on condition that it doesn't quote from it directly. According to the NYT the tone is upbeat, and the memo skips the lawsuits entirely, showing Bill blue-skying away in his new role of technologist/visionary. Day-to-day operations at Microsoft are now handled by company president Steve Ballmer and COO Bob Herbold, so the lawsuits are their bag, and Bill's role is looking after its security and growth way, way into the future. The memo names the standard quartet of rival companies Microsoft has to carry on beating off, IBM, Oracle, Netscape and Sun, but there's a new group as well. Nokia, Ericsson, Motorola and Psion can congratulate themselves on having, via their Symbian smart-phone/personal communicator alliance, made it onto Bill's radar screen. To tackle this ever-swelling band of rivals in ever-widening fields, Gates has come up with a number of initiatives: Ease of use He accepts that the addition of features to Windows has made it increasingly awkward to use, but in a classic piece of 'BillVision' he says many of the problems are caused by the products other companies write for the Windows platform. These pesky developers seem not to be doing enough of what Microsoft tells them to do, so they're going to need tougher rules. Microsoft is going to issue more rigid rules and guidelines for outside software developers - ISVs, you have been warned. Owning the dialtone Cast your mind back to some of the things Microsoft was planning for the Microsoft Network (MSN) three years ago. They're back, considerably enhanced, in the shape of a proposed service called Wintone. This seems to be take two of Microsoft's stalled plan to blur the corporate Windows network and its back-up and management techniques into the rest of the world. Wintone will offer users data management services across the Internet, and will include automatic backup and software updates. It's a characteristically Gates idea - it steals concepts wholesale from numerous companies, Oracle's Business Online being one of the more obvious current ones, and maims them before sticking them back together again in a different, Microsoft order. Megaserver This is a relation of Wintone. If Microsoft is looking after everybody's data and allowing them to access it from anywhere in the world (this one swiped from Sun and Novell, among others), it's going to need a lot of storage. We'd presume an unfortunate side-effect of this will be that Microsoft will wind up competing with mega-storage outfits like EMC. More new file systems Gates says the operating system will increasingly control piracy and intellectual property theft by tracking the use of information. Microsoft has been allegedly moving towards common industry file systems of late, but if it's going to track changes, then these are going to have to be 'enhanced.' ® Click for more stories
Sugar urges Viglen shareholders to reject his takeover offer
Alan Sugar, the Amstrad and Tottenham Hotspur and Viglen chairman, is to make a mandatory offer for the outstanding shares in Viglen that he does not own. But in a curious twist, he is urging other shareholders to refuse his offer for the PC builder. The offer at 24p per share values Viglen at £29.3 million, around one third of turnover. Sugar is required by takeover rules to make an offer for the entire share capital of Viglen, after raising his stake in the company on October 8 by 8 per cent to 41.7 per cent. At 24p per share (the price Sugar paid for his new shares), the company is undervalued, he argues. It is also in Viglen's “best interests to maintain its listing the London Stock Exchange," he said in a statement. “As such it is not my wish to take the company private.” It will be interesting to see how many of Viglen’s long suffering shareholders will take him at his word. ® Sugar prepares for Viglen bid Viglen profits "linear at best" Click for more stories
Zenith jobs threatened after Philips pulls out of plant deal
Struggling US TV operation Zenith Electronics says it will close its tube manufacturing plant in December if a buyer can't be found. On Friday it was revealed that Philips Electronics had been in talks to buy the operation, which has 2,000 workers, but has now pulled out. The plant has to go anyway as part of a drastic re-engineering process Zenith is going through. The company, once the leader in US TV production, was hammered by overseas competition, and after the computer side of the business was sold to Bull, the company gained backing from Korean giant LG Electronics. But under current circumstances LG isn't in a position to fund Zenith heavily. Zenith is intended to become a wholly-owned subsidiary of LG in exchange for further backing, but the company is also trying to get out of manufacturing completely, retaining the Zenith brand, and concentrating on interactive TV and set-top box design. ® Click for more stories
Global server sales slump, second division vendors in big trouble
The Asian economic crisis has had a severe effect on the server market, according to recent Dataquest figures. The research outfit reckons that global revenue for Q2 1998 was $9.9 billion, down 11.2 per cent on the previous year. Nmubers were down everywhere but Europe, with Japan (-31.6 per cent) and Asia-Pacific (-34 per cent) the worst performers in the major economic regions. Europe managed 7.7 per cent revenue growth, but 'rest of the world' (i.e., the bits that include Eastern Europe) plummeted 54.3 per cent. So the computer companies' sales operations in new and developing markets have been taking a bath. The fortunes of the individual suppliers varied dramatically. IBM stayed in the lead with revenues of $2.6 billion, but that was down 16.2 per cent on the previous year. HP gained 11.8 per cent to $1.4 billion, while Compaq-Digital lost lost 7.2 per cent to $1.3 billion, and Siemens with a near standstill held fifth place with $456 million. Especially notable is Sun's storming performance of 37 per cent growth, its $1.2 billion revenues taking it within a whisker of Compaq and HP, and the drop of 27.7 per cent in revenues for server companies outside the top five. Take into account a couple of other top tier vendors like Dell, who'll still be holding their ground well, and the picture is of weaker vendors being shaken out of the server market. ® Click for more stories
Apple set to announce first full year of profit since 95
Apple is set to report its first profitable year since 1995 on Wednesday, and will celebrate by announcing the good news, plus new products, while the stock markets are still open. West Coast companies like Apple frequently report after the markets close, usually for timezone reasons, although sometimes this can be convenient. Apple has been in profit for the past three quarters, and is expected to announce the latest version of its operating system, OS 8.5, while crowing loudly about the success of the iMac. Despite being more expensive than bargain basement Wintel machines, the iMac has actually been appearing near the top of sales tables, and has sold something over 150,000 units since it started shipping in August. The real questions Apple's results may go some way towards answering will centre on the extent to which Apple has managed to return to revenue and unit sales growth. Prior to iMac it already had a lid on costs, but it needs volume to help it bounce back harder, and it needs to maintain and build on the iMac's momentum. ® Click for more stories
Embedded Windows CE out first in Sega machine
The first fruits of the Microsoft-Sega alliance announced earlier this year will ship in Japan this November, and although Sega doesn't intend to have the product, the Dreamcast games machine, on sale elsewhere until late next year, it has a couple of key features that may be massively significant for Microsoft, and its CE platform. Dreamcast is the first device to use an embedded version of CE as its operating system, running on a 200 MHz Hitachi SH CPU. Microsoft has major plans for embedded CE and NT (Microsoft tools up for embedded NT), and we at The Register sometimes suspect they're going to wind up being the same thing. The embedded CE used in the Sega machine quite possibly isn't yet something you could call a general purpose embedded OS, but the fact that it exists at all means Microsoft has already moved some distance along this road. The other major aspect of the Dreamcast is that's it's actually a combination games player and WebTV set-top box. It can therefore be used for playing games over modems, and for blurring the boundaries between games consoles, interactive TV and the Web. As yet, take-up of WebTV class devices has been slow or, in the case of some of them, non-existent, because it's been difficult to explain to customers what they're for. So getting interactive TV sales pulled through from the games console market might turn out to be a useful secret weapon for WebTV and Microsoft. ® Click for more stories
Ideal rises on "strong trading"
Storage specialist distributor Ideal Hardware saw its shares rocket by 25p this morning following the release of annual financial results. Ideal, which issued a profit warning back in April and saw its shares nosedive, has reported a £8.71m profit for the year ending 31 July 1998, compared to £9.71m in 1997. Turnover for the period rose £230m from £189.5m the previous year. Earnings per share were 28.13p, giving a final net dividend of 8p per share. Chairman Richard Jewson warned in March this year that profits would be around the £9m mark, well short of the previous market expectations of £12m. He blamed market volatility in the first half of this year for the decline in earnings, a move which prompted Ideal to reshape its salesforce and sales structure. The company has now completed its move to Cox Lane in Chessington and has bought additional sites adjacent to its current building, for further expansion. In the second half of the year, Ideal reported that sales were up by 18.5 per cent and rising, a fact that the City appears to have blessed. Jewson said that "the market is now stabilising" and that "strong trading has continued to date." He cited an IDC report which claimed that corporate data storage requirements are set to increase by 50 per cent over the next year. The company claimed it is also within its 13 to 15 per cent target for gross margin, which now stands at £13.6m, despite "product over-supply" in the market. European sales accounted for £36.5m of turnover, although low margins in Europe have lead the company to establish a foothold on the continent to deal with volume supply on a more local basis. ®
ARM chips with everything
All those ARM licence deals in recent months are beginning to pay off for the Cambridge, UK semiconductor design house. Its £11.3 million revenues to 30 September, 1998 were 68 per cent up on same time last year, and 13 per cent on Q2. Pre-tax profits jumped 75 per cent to £2.5 million.
CDMA will mysteriously catch GSM, says report
Good news and bad news for the CDMA camp. According to a study from Forward Concepts released today, GSM will remain the dominant world standard until at least 2003, but by that point cdmaOne revenues will be real close. The study, Wireless99, was written for Forward Concepts by Micrologic Research, and says the GSM market will grow from $15.5 billion in 1999 to $24.5 billion in 2003, a compound annual growth rate of 12.1 per cent. Over the same period the cdmaOne cellular market will grow from $3.5 billion to $20.4 billion, compound growth of 55.9 per cent. Why this should be is not entirely clear. Nor is it entirely obvious why TDMA revenues, which the report puts at $1.4 billion for 1999, will grow to only $3.5 billion by 2003. Nor indeed why TDMA, whose proponents reasonably place it as the number two world standard, should be producing less than half the revenue of cdmaOne by next year. Damned expensive these CDMA handsets, obviously. Meanwhile a retaliatory strike by the North American GSM Alliance, whose chairman Don Warkentin tells us: "GSM operators were the first to provide all digital wireless data services throughout their entire deployed networks." If this is the best the Alliance can do in terms of achievements, it's in real trouble. GSM networks are digital by definition, right? So it's scarcely a surprise. Don also tells us that GSM has more than 100 million customers in over 110 countries and, way, way down at the bottom of the announcement, the grisly truth. "The GSM Alliance [provides] wireless communications for more than 2 million customers." So we're not really hitting the spot in the US then, are we? ® Click for more stories
Diamond dogged by music law suit
US record companies have re-ignited their attack on Internet music entrepreneurs by planning to file a lawsuit against Diamond Multimedia, maker of the Rio PMP300 portable music player. The Recording Industry Association of America (RIAA) has joined forces with the Alliance of Artists and Recording Companies to charge Diamond with "violating" the Audio Home Recording Act (AHRA). "In doing so, [Diamond] encourages consumers to infringe the rights of artists by trafficking in unlicensed music recordings on the Internet," said an RIAA statement. The RIAA is seeking an injunction to stop Diamond from distributing its Rio player, which supports the MPEG1 Layer 3 (MP3) compression format. Diamond vice president of corporate marketing Ken Wirt has dismissed the claims saying that "the Rio PMP300 is a playback-only device and does not record. Rio simply holds audio content that is already stored on a computer hard drive." The RIAA however claims that there would be no market for Rio is it wasn't for the trade in illegal music on the Internet. "MP3 portable recording devices…capitalise on and are likely to exacerbate the problem of illegal MP3 music files," said the RIAA statement. "It seems doubtful that there would be a market for MP3 recording devices but for the thousands and thousands of illicit songs on the Internet." Wirt claims this is "grossly false" and accuses the RIAA of putting up smoke screens to slow down the digital distribution of music until the major record labels are ready to capitalise on it. ®
Datatec buys Network Si
Datatec UK has splashed out again - - this time on Network SI, the venerable networking equipment reseller . The South African-owned conglomerate is paying £8.5 million upfront for the company. No earn-out is attached to the deal. Network SI, the third UK reseller bought by Datatec in a year, will merge into the group’s Logical business. Network SI turned over £16.5 milllion for FY98. The company was carved out of ACT, long since dissolved into Misys, and Mitsubishi Electric PC Company. Pro forma Logical Networks UK revenues are £85 million per year, following the takeover. Datatec has strengthened its M&A management team, with the appointments of Bob “Sonix”Jones and John “USR”McCartney as deputy chairman, who join executive chairman Jens Montanana. Jones and McCartney joined the Datatec board as NEDs in June. ®
Computer Experts wins US mega-millennium deal
UK-based Computer Experts Ltd struck a blow for the British IT industry today when it announced that the US Treasury had submitted an order for a 150,000-seat licence for its Millennium Bug Toolkit. The UK firm which already has an impressive client list that includes Sony, Shell, Coca-Cola, Smith Kline Beecham and Motorola, has now signed a blanket agreement with the US Government which will see its toolkit deployed on every PC in the US secret service, Internal Revenue Service (IRS) and US Customs. Computer Experts will also provide consultants to help the Government deploy the system in a deal which will earn the firm a fee in the region of £4m. "To say we are pleased is an understatement," said managing director Ian Partingdon. "What could be a better endorsement for our product than a record-breaking order from an organisation as large as the US Government?" ® Click for more stories
Elcom shaves costs in restructure
US-owned reseller Elcom International will embark on a major restructure in an attempt to exorcise the takeover demons of the past few months and make the company more focused and profitable. Its e-commerce subsidiary Elcom Systems will become an e-commerce systems integration arm of the Elcom Services Group (ESG). This will, according to Elcom, help "reduce expenses", although the company has not confirmed whether or not this would entail substantial job losses. According to company chairman and CEO Robert Crowell, merging ESI into ESG was Elcom's only alternative as "ESI cannot support an initial public offering or support itself as a standalone entity if it were spun-off to stockholders." The company has also "restructured and consolidated" its government and educational sales operations and will also take a pre-tax charge of $12m in its Q3 financials relating to the restructure. Valued at around $100m, Elcom has issued a warning that it will report a loss for its Q3 of approximately $2.5m. Revenues for Q3 were, according to Crowell, $195m. The company has also revealed that it will continue its stock buy-back programme.