11th > February > 1999 Archive

A year ago: Fresh Intel price war to hit 3Com

Our friends at Intel confirmed what we all knew anyway and that is they want it all, even in the Gigabit Ethernet arena. Last week Intel cut prices on some of its products but everyone we've met during the last week say that this is just a precursor of an all out war on the Gigabit Ethernet front. At the beginning of last year, Intel put the fear of cost into 3Com's leaders when it unilaterally slashed the price of Ethernet adaptors. That saw 3Com's share price slump rapidly over the next week, prompting rumours that IBM, yet again, was going to snap'm'up. When Intel releases its Gigabit Ethernet adaptor this spring, it will be priced at around the $700/$800 mark and that is going to mean fresh trouble for the Old Man of the Modem Mountain. It also, non-coincidentally, means that a small hillock of other vendors will become non-price competitive with Stan and will also feel the Intel heat. Intel did say last year that it was gonna gopher the networking market. The Register hopes that our friends at the FTC are still readers and will grasp the idea which none of the US papers yet seem to have taken up seriously, which is that Stan wants it all, and we mean all its own way too. There is another, more serious aspect to this, and that is for the channel and is everything to do with 3Com and nothing to do with Intel whatever. One ex-salesman for 3Com we met during the last two weeks said that when he worked for the company, he was told to stuff the channel, despite every protest he made. Intel, on the other hand, might be going to stuff the channel eventually but all the time gives it every impression it loves it. ®
Mike Magee, 11 Feb 1999

MS' $500k sweethearts deal with UK ISP

MS on TrialMicrosoft VP Cameron Myhrvold found himself explaining a $500,000 'bung' to British ISP UUNET Pipex in court yesterday. He had referred to this and other European 'co-marketing' deals in his written testimony, replying to earlier allegation by Jim Barksdale, but was now confronted by one of his own smoking emails. Barksdale had claimed in his testimony that "Microsoft offered free client product and a marketing fund of $400,000 to four major European ISP’s (Planet Internet of Holland, Demon Internet of the UK, British Telecom of the UK, and Indigo/Dome of Ireland,.” and extended this offer "on the understanding that [they] would NOT purchase any [software] from Netscape." Myhrvold's testimony denies that any such offer was made. Myhrvold goes on to explain that "Perhaps Mr. Barksdale’s salesman was confused about the facts and had heard about an agreement that we entered into with an ISP in the United Kingdom known as UUNET Pipex. Microsoft did offer UUNET Pipex a fee of $500,000 as part of a complex transaction. One piece of that transaction was UUNET Pipex’s agreement to participate in the Windows 95 Referral Server. However, another piece of the transaction, which made it unlike any other ISP agreement, is that UUNET Pipex and we agreed that it would set up a separate Web hosting organisation. In exchange for UUNET Pipex setting up that Web hosting organization, we agreed to provide up to $500,000 for marketing, training and consulting relating to the Web hosting organisation." Got that? A sweet deal for UUNET Pipex, but perfectly legitimate. UUNET Pipex is to set up an organisation dedicated to NT support and web hosting, and according to the contract "will commit significant resources to marketing this new business venture." It purchases the training from MS, and the $500k is intended to help with this and the marketing expenses. It's nothing to do with IE, right? Well that's what Myhrvold's testimony says. Yesterday's email was a reply to subordinate Geoff Hughes, who'd suggested that Microsoft not pay UUNET Pipex the $500k because it hadn't started shipping IE to its customers yet. So now it does have linkage to IE, right? But it's only an over-enthusiastic Brit underling, right? Wrong. Myhrvold's reply says: "I actually think tying the payment to their shipping IE is a great idea, though I would not do this formally." Tricky to explain this one in court, isn't it? We have a contract which Myhrvold has already explained has nothing to do with IE, but we have a Microsoft manager trying to make it dependent on IE, and Myhrvold apparently agreeing, while urging caution. What on earth could he mean, if it wasn't 'take them up a dark alley and hint very heavily that shipping IE would expedite payment.'? Myhrvold somewhat lamely said that he felt it important to applaud initiative by overseas employees when he could, but that it was also important to tell them when their suggestions were not appropriate. Yes..? Then he fell off his bike. "My intention is not clear in this email." But it looks pretty clear to us. Complete Register trial coverage
John Lettice, 11 Feb 1999

UK Net dial-up charges among highest in Europe

UK Net users have to pay some of the most expensive call charges in Europe, according to figures from telecoms monitoring firm Phillips Tarifica. The cost of a half-hour local daytime call in the UK is £1.18, compared to just 50p in Italy. In Germany the cost is just 86p; in Spain it is 60p. And contrary to a report in today's Daily Mail, the cost of a half-hour local daytime call in France is not 29p, but 73p, a spokesman for Phillips Tarifica confirmed today. However, British Telecon maintains that the figures don't present an accurate representation of the market and that its clutch of user discount schemes can cut the cost of calls by as much as 43 per cent. ®
Tim Richardson, 11 Feb 1999

JSB post-float results beat expectations

Web access control software specialist JSB Software yesterday reported that its first interim results since the company floated were ahead of budget. For the six months ended November 1998, JSB recorded a pre-tax loss of £373,000, which it described as significant improvement on the predicted £642,000 loss. Interim turnover also exceeded expectations at £1.76 million. This compares with a profit of £6000 for the year ended 31 May 98 on sales of £3.36 million. Since JSB floated on AIM last June it has launched its Surfcontrol range of products that allow businesses to stop their staff accessing sites not relevant to their jobs. JSB forecasted a full-year loss of £1.1 million. George Hayter, JSB chairman, outlined the company's main concerns for the full year: "Market share and brand awareness for Surfcontrol is of primary importance to us." In a separate company statement, JSB said it had further alliances in the pipeline and it would be considering acquisitions. JSB is based in the UK, with offices in Copenhagen and San Jose. ®
Linda Harrison, 11 Feb 1999

Genuine Pentium III systems for sale in UK

A UK company told The Register today it was already selling systems based on the Pentium III processor and the chips are the genuine article. Digital Networks UK is selling 500MHz systems and 450MHz systems, and has verified details of their authenticity with Intel. According to a representative at Digital Networks, the ID strings for the Pentium IIIs show model number 7 and CPU ID 3. The Pentium II is model number 5 and CPU ID 2. The flags on the Pentium III are fpu vme de pse tsc msr pae mce cx8 sep mtrr pge mca cmov pat pse36 mmx osfxsr 18 25. These last two flags refer to the Streaming SIMD (KNI) instructions. He said that when he called Intel and asked them about the BIOS display, the chip giant demanded to know where the Pentium IIIs were bought. "I will need to give your details to my superior," said an Intel technical support rep. "No, I won't do that," the Digital Networks representative said. "It's standard practice here at Intel. One of my superiors will call you back," said Intel. The Digital Networks representative said: "You wouldn't help me last month with a consignment of re-marked Pentium II processors we received." We will write a separate story about the re-marks later today. ®
Mike Magee, 11 Feb 1999

Dissecting Sony's Game

AnalysisWhat is Sony Computer Entertainment up to? On Monday, the company's COO, Kazuo Hirai, told delegates at the American International Toy Fair, being held this week in New York, about the PlayStation's amazing sales -- more than four million units were sold in the last two months, he claimed. In short, a towering success. Yet at the same time, Sony is preparing its case against Connectix for attempting to bring PlayStation software to a wider audience through its Mac-based Virtual GameStation (VGS) PlayStation emulator. The contradiction here is that Connectix, with the best will in the World, will be lucky to sell a fraction of that figure in four years, let alone two months. That may be one of the reason's why the San Fransico Federal District Court last week threw out Sony's preliminary attempt to have sales of VGS banned until its main suit against Connectix is resolved. Sony's action against Connectix is nevertheless a precedent-setting case, and one that will be watched closely by other console vendors --- in particular, Sony's rival, Nintendo. Right now, it's pondering whether to sue two non-professional developers for their PC-based N64 emulator, UltraHLE. The two cases -- one real, one potential -- share some important similarities and some key differences. Sony's beef with Connectix boils down to three basic points: that Connectix hasn't accurately emulated what Sony calls "the PlayStation experience"; that by allowing users to play games without a console, Connectix is effectively allowing them to bypass Sony's anti-piracy measures which will, in turn, encourage games to be copied illegally; and, finally, that Sony and its third-party developers will lose sales to pirated software as a result. The first point isn't without merit. Connectix admits VGS won't play every single PlayStation title. And while the company's demos at MacWorld Expo earlier this year looked slick, they were conducted on top-spec hardware with the developer's pick of games -- owners of other titles run on lesser G3s may not see quite the same level of performance. However, this shouldn't bother Sony too much -- where the power is there, you get a good 'PlayStation experience'; where it isn't, it will surely encourage Mac owners to go out and by a console. They may do that anyway, so they can play the games VGS can't yet handle. Besides, Sony has claimed Connectix approached it for technical help, but that it rejected their advances because the emulator wouldn't offer the experience Sony is so keen on promoting. Connectix refuses to comment on that claim, but the point is, Sony can't complain about poor performance when it refused to help to improve that performance. However, the piracy issue is really what the case is all about, and it's where Nintendo/UltraHLE story comes into play. Like Sony, Nintendo has complained that UltraHLE bypasses its security systems. In reply, one of the emulator's developers said: "What security system?" The fact is, both consoles have fairly rudimentary anti-piracy technologies, geared more toward preventing titles from one market territory -- Japan, the US or Europe -- being imported and sold in another. So, Connectix won't sell VGS outside North America because the emulator can only handle games written for the NTSC US TV standard; games destined for, say, the British market have to be rewritten for the UK TV standard, PAL. Incidentally, like Connectix, the UltraHLE developers have said they only used publicly-available technical details, and no proprietary information was used to create the emulator. Getting proprietary data out of either console manufacturer would be damn near impossible, which probably explains why the issue of intellectual property infringement wasn't part of Sony's preliminary legal action (though it may appear in the main suit). But what about promoting piracy? Again, Sony isn't on steady ground here. Software developers generally accept that a small proportion of sales will be lost to illegal copies, much as stores accept that a percentage of stock will be lost to shoplifters. It happens and they deal with it. The fact is, Sony clearly accepted that too when it made the decision to base the PlayStation on a CD-ROM drive rather than traditional ROM cartridges. Nintendo wanted a more secure approach and stuck with cartridges. The fact Macs and PCs have CD-ROM drives that can be made to read PlayStation CDs isn't Connectix's fault any more than it's Apple's for fitting such drives to its computers. The precendent here is the hi-fi tape deck. Just because you can use one to copy CDs or play back such recordings doesn't mean you will. VGS will be used primarily to play genuine copies of games, but some illegitimate copies will be played too. The same goes for the PlayStation itself. Incidentally, this is where Nintendo does have a point. Unlike VGS, UltraHLE can't be used with legitimate copies of games -- at least, so long as PCs don't sport N64-style cartridge slots. It will only work with games downloaded from N64 cartridges and transferred to a PC. While you can argue that buyers have a right to make one back-up copy of their software, in this case that argument holds no water: ROM cartridge's effectively store data and programs permenently and perfectly. Besides, how do you restore your data to a Read Only device? Hi-fi manufacturers actually pay a small per-unit royalty to the music industry to cover music piracy, but the same US law that enforces this also omits computer equipment. That's why the music business ultimately failed to get Diamond Multimedia's Rio digital music player banned for contravening the law. Precedents like these should give Connectix and, to an extent, the UltraHLE guys heart. They may not prevent legal action, but they should make them easier to win. ®
Tony Smith, 11 Feb 1999

Linux fan releases UltraHLE source code

The Nintendo vs. UltraHLE case took a new twist yesterday when a programmer posted source code for the Windows-based N64 emulator on the Internet. Programmer 'GossiTheDog' admitted the code, a conversion into C++ of the original UltraHLE source, was "nowhere near complete" and "does not compile", but he said he released the code to give fellow programmers an idea of what the finished project might look like. "Why am I converting this? Because I personally would like UltraHLE to finish what it started," said GossiTheDog. "I would also like to see a Linux port," he added. The most recent version of UltraHLE was posted on the Net two weeks ago, but was quickly removed in response to Sony's decision to take legal action against developer Connectix over the latter's Mac-based PlayStation emulator, Virtual Game Station (see N64 emulator vanishes after lawsuit threat and Sony to sue Connectix over PlayStation emulator). Almost immediately after Sony announced its decision, Nintendo said it was considering legal action against the two developers of UltraHLE, which it believed was an "illegal" product. The latest move casts doubt on Nintendo's ability to suppress N64 emulators. With the source code available, it's likely to be widely downloaded by programmers, even those who aren't necessarily interested in playing N64 games -- it will become a point of principle to keep the source open. ® See also Nintendo legal rumblings provoke boycott call Analysis: Dissecting Sony's game The UltraHLE source is available here.
Tony Smith, 11 Feb 1999

Creative Labs endorses MP3

Creative Labs has finally come clean and admitted it will support the MP3 digital music format in the portable music player the company is currently developing. "It's going to be MP3," a Creative spokesman confessed, according to US gaming magazine Maximum PC. However, no ship date other than "this year", pricing, features or technical specifications were forthcoming. Talk of Creative's device, set to compete directly with Diamond Multimedia's Rio PMP300 player, began late last month when its company's European brand manager, Eion Leyden, dropped hints that Creative was working on a multi-format player. However, he was also dismissive of the MP3 format -- "it would not rule the roost," he said, clearly a nod towards the music industry's attempt to define its own digital music standard through the Secure Digital Music Initiative (SDMI). Soon after, Creative spokesmen in the US first claimed the company was not developing a music player, and then, a few days, later admitted that, yes, the company did have a Rio clone in the pipeline (see Creative Labs spins multiple music player plans). However, in all this confusion -- on Creative's part; everyone had figured out by then it was working on a player -- and after, the company has kept quiet on which formats the device will support -- until now. Diamond, of course, was the subject of an aggressive legal action by the Recording Industry Association of America (RIAA), which sought to get the device banned. That action failed, but the RIAA said it would appeal against the decision, so it's no wonder Creative has been so cautious. ®
Tony Smith, 11 Feb 1999

Intel shrugs shoulders over re-marked chips

System integrators and dealers can expect little help from Intel if they buy re-marked processors, it has emerged. That is the conclusion that must be drawn after Digital Networks UK (DNUK) bought a consignment of Pentium II/450 parts that turned out to be re-marked PII/300MHz chips. According to DNUK, when it contacted Intel technical support for assistance, a representative was told: "Call your local police or consumer rights group. If it's an OEM product, we can't give you any support at all." An Intel representative said: "We work closely with Customs and law enforcement agencies. We recommend that people buy products only through authorised channels and we cannot deal with every distributor or dealer in the channel." When we contact the dealer who had sold the re-marks to DNUK, he denied that he had ever done business with the company. ®
Mike Magee, 11 Feb 1999

Net loophole to slash corporate tax receipts

Corporate tax avoidance is set to increase as more and more companies get hooked online. And as government coffers run empty it will be ordinary consumers who'll have to pick up the tab. That's just one of the conclusions published by an esteemed group of companies and consultants that warns that the Net could provide a legal loophole for companies to avoid paying tax. A report in The Guardian newspaper suggests that major e-commerce companies could simply register themselves in those countries that have more "liberal tax laws" to avoid paying higher taxes, warns Andersen Consulting, Ernst & Young, IBM, KPMG et al. And if governments can't get hold of a company to tax it -- or successfully assess what transactions have happened when -- then their only choice is to hit the consumer instead, the report warns. ®
Tim Richardson, 11 Feb 1999

MS contract exec explains Netscape ‘acceptable degradation’

MS on TrialOn the 50th day of the Microsoft trial, Will Poole, senior director of business development for Windows, came across as Microsoft's cheeky chappy. He's in effect Microsoft's negotiator for contracts with Internet content providers (ICPs) and came to Microsoft when eShop, a company he co-founded, was acquired in 1996. He reports to Brad Chase, who will shortly be appearing as a witness. His cross examination by David Boies was preceded by a video narrated by Yusuf Mehdi, a Microsoft marketeer, which dealt with Microsoft's channel bar and Microsoft's view of Netscape's Netcaster. It sought to explain how some content was more dramatic on IE compared to Netscape, because of some non-standard extension to HTML that Microsoft used. It should be noted that Netscape has also indulged in similar practices. Poole did not listen carefully to the questions Boies asked, and appeared to make a poor impression on Judge Jackson for his evasiveness. He was told by the judge to listen to questions and answer 'yes', 'no', or 'I don't know'. At one point, Poole wanted to be asked a question and told Boies it was "his call", but the judge told him to desist. He admitted that Microsoft thought it could get "maybe a hundred million" dollars a year in revenue from its channel bar, but in the event decided not to charge, in order to compete with Netscape. He also admitted that revenue estimates by Microsoft were "not realistic". His testimony showed how poor Microsoft's assessment of the Internet opportunity was. ICPs were offered various flavours of relationships with Microsoft for periods of up to a year. He characterised being on the desktop as having an "invaluable spot". Microsoft's excuse for not trying to get money for its efforts was that it was seeking branding association between the ICP products and IE. The analogy of Coca-Cola was used by Poole, but it is invalid, since Coke does not have a monopoly. Poole claimed that Intuit came to Microsoft and said it would like to use IE. Boies brought up yet again the well-worn email in which Gates, reporting on his conversation with Scott Cook, the CEO of Intuit, says that "I was quite frank with him that if he had a favour we could do for him that would cost us something like $1 million to do that in return for switching browsers in the next few months, I would be open to doing that." Poole claimed not to have seen the email before, which seems very unlikely since he negotiated with Intuit some six to nine months later. Poole squirmed when asked about the meaning of what Gates had written, saying "I'm not maybe an expert in interpreting his words". That was strange, for they seemed all too clear on this occasion. Poole confirmed he was poorly informed when he claimed that the Opera browser did not exist when he signed the browser-switching agreement with Intuit in June 1997. In fact the first public version had been released in Q3 of 1996. Poole regards AOL as the number one competitor today in his area. When Poole's answers conflict with other evidence, he often seems to slip in a "Mr Boies". Asked if the reduction of Netscape's revenue was a business objective of Microsoft, he replied: "No, Mr Boies, that was- that was not my understanding of any general characterization, nor was it the intent of this part of the contract." Of course, Mr Poole. Poole admitted that Microsoft did have contracts that prevented the other party paying anything to a Microsoft competitor-and of course Netscape was the prime reason for such clauses. Paramount, the producer of Star Trek, was one example. The legal wording that Microsoft used about content promotion with Intuit was: "Nothing in this paragraph shall restrict Intuit from ... entering into agreements to authorise or license companies which produce Other Browsers to distribute, transit or market or promote Intuit content or logos, provided that such agreements do not include the exchange of material valuable consideration return for such authorised license." It appears that Poole was largely responsible for some phrasing that obligated Intuit to have some "differentiated content ... available only to IE users" by means of "acceptable degradation". Microsoft had evidently departed from Internet standards, and Poole blurted out what Microsoft was doing was "to introduce some new technologies to the market, get content providers to make use of those technologies to show off their content, to offer something a little bit new or different to users. And what that would mean is they might format the content in a way that looks different, maybe has better animations [sic], maybe has just some user interface features that looked a little better that made use of some of these technologies. And that same content could also be displayed using different technologies from Netscape." Boies clarified that the differentiated content would only be available to IE users, and that all other browsers would receive the degraded output. Boies produced Microsoft's contract with Pointcast and showed that it contained a provision that Pointcast would pay Microsoft a fee of $10 million for being a first-tier ICP. Poole claimed that it was not intended that Pointcast would pay Microsoft any money, and that there were additional clauses whereby Pointcast could gain sufficient marketing credits to cancel the fee. Boies made the point that Microsoft had clearly seen value for ICPs, but had foregone this revenue (claimed to be $100 million or more) in order to gain a better market position. Some content providers agreed not to mention Netscape on their web sites. Three business content providers were named: Reuters, Bloomberg, and Reed Elsevier (which should make readers of the UK's Computer Weekly see the publication in a new light, as a Microsoft business partner). Boies also introduced evidence to show that Microsoft went beyond the terms of its contracts to lean on its partners. An 6 June 1997 email from Lisa Gerhauser of Hotwired reporting a conversation with Suzan Fine, who reported to Poole, said: "Despite the contract, [Fine] is strongly discouraging companies from splitting their content with, eg Netcaster, and she is most concerned about the promotional branding implications of that and would consider it counter to the 'spirit' of the agreement with Microsoft for Wired Digital to have any Wired-branded presence on any Other Browser. . . . she really cared about how much of our network of sites might be slated for further promotion of someone else's Other Browser." Gerhauser also noted that "the net effect is that Microsoft is orally, if not on paper, requiring exclusivity, vis-a-vis the two other browser companies, for companies like ours". Although it had been agreed by Microsoft that the Active desktop feature of IE4 could be switched off by OEMs, the reason was less well-known: "It's a performance issue," admitted the cheeky chappy. "I actually stopped using this feature myself ... because it had a performance impact." The danger of Poole's admission that a couple of hundred thousand lines of code could lurk but be easily disabled was a very close parallel to what could be possible with IE and Windows 98, if Microsoft so desired. It is not certain if the judge grasped this point. Poole squirmed when he was asked why he had not confirmed to AOL in writing that Microsoft had relaxed the terms of its agreement, claiming that he did it only by telephone, as emails "were easily misconstrued". He was at a loss to explain why a telephone call should lessen that risk. The suspicion was that Microsoft could re-impose the terms if it so desired. Towards the end of the first day, Boies was questioning a statistic produced by Poole to the effect that 4.7 per cent of users in a survey became aware of a web site through a pre-configured browser. Poole was asked to pinpoint the place from which the data had been derived in a survey. The following colloquy ensued: Poole: There are, I think, a few hundred pages of survey results here. I'm happy to look through it. Boies: This is my last subject. Poole: Would you like me to do it quickly? Boies: What I will do is I will stop my examination. If Mr Pepperman finishes you today, I will waive that answer. If he doesn't finish you today, you could come back, and we could do this tomorrow. Poole: You sound like a business-development guy. The Court: You are going to get his answer tomorrow because we are going to stop here. Poole: So we're done? The Court: No, you'll be back tomorrow. Poole: I could tell that part. The Court: You'll be back tomorrow morning for Mr Boies' last question with an answer that you will develop over the evening, and Mr Pepperman will conduct your redirect examination beginning tomorrow morning. There was an interesting subtext to all this. Boies was showing the judge he was keen to progress the case quickly, although he was also subtly challenging Pepperman to make his redirect examination very brief. Poole was of course anxious to be released and go home. Judge Jackson was showing that he was peeved at Poole's attitude in court, and so forced him to come back the next day, although it was only 4.15pm and the court has in the past sat beyond 5pm. In the event, Boies cross examination closed on a rather feeble note the next morning. Richard Pepperman for Microsoft in his redirect examination went over the same ground. The main admission from Poole was that Microsoft was "woefully incorrect" in its predictions about the value of the channel bar. Judge Jackson said he would like to know why people didn't like it. Poole's response was quite interesting: "We had a technology that had gained some initial excitement among users- this push idea. And Pointcast, I mentioned, was sort of a pioneer there. And the whole industry kind of jumped on this idea and said, 'Wow, we can build something that will be really compelling and graphical and interesting to consumers.' It turns out that the push idea just doesn't offer enough benefit to the users compared to the cost of adopting the technology. And one reason was performance. "Trying to push a bunch of graphical information over a modem was not all that efficient. And we thought it would be more efficient. It wasn't that efficient. Another reason was just confusion of the user interface. Users were comfortable with the basic model of browsing. And this idea of having-and they had bookmarked favorites, for example, in their browser. A web site they go to frequently would be in their favorites list. They can click on it and go there. So we added a new way-this channel bar thing-for them to go and find frequently-used web sites. And it turns out that they didn't want a new way. It just wasn't all that useful. ... And it may be that we'll do another rendition at some point in the future that we'll figure out that we can make something work for consumers, but this one just didn't." Poole was keen to point out that there were currently over 200,000 'Netscape Now' icons on the Web. Microsoft also wanted it to be known that AOL, Disney, CBS Sportsline and ZDNet were ICPs that were on Netscape's Netcaster as well as IE channels. Pepperman tried to recover from the glaring admission that Microsoft's efforts to create "differentiated content" was not a move against Netscape. The Disney example came up, and it was admitted that Netscape users would not have the advantage of seeing either a dancing mouse or a big green splat on the screen. It really seemed that the future of civilisation, as we know it, was threatened. The truth was of course that content providers were wary of the bad press reports about differentiated content, so Microsoft found itself unable to enforce the provisions in its contracts, lest there be further bad publicity about Microsoft's non-standard displays. with its dynamic HTML. Pepperman's redirect examination was more competent than that of other Microsoft lawyers so far, but he was limited by the problems that exist in his client's case. In Boies' re-cross examination, he introduced an email dated 16 October 1997 from Steve Wadsworth of Disney in which he noted he had "just had a very unpleasant conversation with Bill Spencer [of Microsoft] in which Spencer had threatened to take the Disney icon off Microsoft's Active Desktop and use the dispute resolution path in the termination section of the Disney-Microsoft agreement. Microsoft argue that Disney could only use "pure text" in the Netcaster channel bar, and not a logo of the Disney mouse with ears. Disney disagreed. Wadsworth wondered why Brad Chase, Poole's boss, had not entered the discussions. Chase had apparently said that he didn't want to get involved, and expected Disney to back down. Wadsworth recommended that Disney lawyers became involved; that Chase be forced to become involved; and that a "graceful way" be found to resolve the matter by giving them "what they want even though they are strongarming us". The email continued: "Unfortunately, Microsoft has the upper hand from a business value perspective, even though they don't have it from a contractual perspective. I leave it to Eric, but it seems crystal clear to me, we are in the right on the contract, but even so, it's probably not worth it to take them on. The value of the Netcaster channel is low, and if they take us off the active desktop while this is being resolved in court, we lose substantial value. Plus, getting into litigation over this, even though we are in the right, will clearly undermine any chance of doing more with them. We're being roughed up by the 1,000-pound gorilla of the industry." Poole stated that "we did not enter into any agreements that requested anybody to degrade a presentation" but Boies pointed out that Poole had just said it was in every one of Microsoft's platinum contracts with content providers. Poole agreed to Pepperman's final question about Disney: "So is it fair to say that this was a dispute between the King Kong of content and the 1,000-pound Gorilla over mouse ears?" ® Complete Register trial coverage
Graham Lea, 11 Feb 1999

CEO declares independence for Yahoo!

Tim Koogle, the head honcho at Yahoo! has confirmed that the leading portal has no intention of loosing its status as an independent company. Interviewed in the French newspaper La Tribune today he said: "Yahoo! is an independent and will remain independent." His insistence that Yahoo! will not get caught up in the current frenzy of acquisitions and mergers comes just a few days after the diversified US media company, USA Networks, said it was to acquire the third-largest portal Lycos. That deal happened a week after Lycos' CEO said his company would remain independent and a partership was "not imminent". reg;
Tim Richardson, 11 Feb 1999

Eurocrats back tighter protection for digital copyright

The European Parliament yesterday backed controversial legislation, dubbed the Report on Copyright in the Information Society, that seeks to increase protection of copyright material in digital world. The case has become a tug-of-war between lobbyists. On one side, artists and content providers keen to protect their assets (see Musicians demand EU protect copyright on the Net) -- on the other, consumer and civil liberties organisations determined to ensure the legislation did not limit personal freedoms. The two sides' differences boil down to how much freedom you allow individuals to make copies of copyright material for their personal use. The pro-controls lobby heralded the European Parliament's vote as "absolutely crucial to ensuring the future security of digital content produced by Europe's publishers". On the other hand, the rival faction claimed it has given the media "a blank cheque" by "handing over private copying". As it stands, the legislation will allow individuals to make copies of texts or recordings they bought for their personal use only if rightholders receive "fair compensation". That means the introduction of levies on recording media and equipment. Most European countries already collect such a tax -- only the UK, Ireland and Luxembourg do not -- as does the US (which, incidentally, is why the music industry had a problem with Diamond Multimedia's Rio MP3 player -- as a computer device, it did not qualify for the levy). Governments may allow individuals to make copies of work as teaching aids or for research purposes, but again, the rightholders have to be compensated. Like the personal use clause, this will probably affect only a handful of states that don't already require such compensation. Of greater concern, however, is the clause that bans the private copying of digital material protected by anti-piracy technology. What's worrying here is that it allows content providers to add such technology and bypass the previous two clauses, and might have far reaching affects on other digital industries, such as the software business. Technically, if a software developer issues a program or data in encrypted form, making a persobal back-up of the disc will become illegal in Europe. Quite how this would be policed, is another matter, and one that may see this aspect of the proposed legislation thrown out before it becomes law. The proposed legislation, modified slightly by the European Parliament, will now be submitted to the European Community's 15 member governments, and then back to the Parliament before being finally becoming law. ® See also File caching faces chop from Eurocrats Anti-caching lobby wins round one of Euro vote
Tony Smith, 11 Feb 1999

SiS to support K7, Pentium III

An interview obtained by Jonathan Hou at PC One has revealed SiS future chipset roadmap. (The full interview is here). Hou interviewed SiS executive Sylvia Lin, who claimed that Intel had "copied" her company's approach to integrating graphics. At the same time she confirmed that SiS will support the K7, and will continue to support the Super7 platform. She said that SiS will certainly compete with the Intel Camino chipset and Via's Apollo Pro Plus. Lin also revealed benchmarks for the SiS 300 graphics chip in both 2D and 3D modes. She said that practically all Taiwanese motherboard manufacturers are using its SiS 530 technology. She also said that the licensing deal SiS struck with Intel made no difference to its relationship with AMD, Cyrix or other x.86 manufacturers. ®
Mike Magee, 11 Feb 1999

AMD claims 30 million 3DNow! chips will ship by year end

In a bid to lay down the ground rules for the fight between the K6-III and the Pentium III, AMD has briefed games and hardware Web sites about the future of 3DNow! And, according to a transcript of the discussion, which is posted at JC's site, AMD executives have claimed that 30 million processors using the 3DNow! instructions will ship by the end of the year. Keith Galocy, a senior AMD executive, said that AMD itself will deliver 5.5 million 3DNow! chips this quarter alone, while its sales will represent around 20 million by year end. According to AMD, 3DNow! is a general purpose floating point enhancer, and is better than Intel's Streaming SIMD because it only uses 21 additional instructions. ®
Mike Magee, 11 Feb 1999

UK tax records affected by EDS MCI Systemhouse deal

Electronic Data Systems today agreed to buy MCI WorldCom's IT services arm in an asset and employee swap deal valued at $17 billion. A few years ago, before New Labour was elected, the British government gave EDS permission to manage every tax record off shore. Now MCI Systemhouse will manage that function, posing questions about data privacy. Computer services giant EDS went ahead with a ten-year agreement to acquire MCI's Systemhouse unit and take on more than 12,000 MCI WorldCom employees, mainly in North America. In an exchange of outsourcing agreements, Texas-based EDS will outsource most of its global network to phone giant MCI WorldCom, making MCI responsible for the bulk of its voice and data communications services. EDS will shell out $1.65 billion in cash for the Systemhouse division. In turn, Mississipi-based MCI WorldCom will outsource much of its IT services to EDS. This includes the bulk of the company's applications development, maintenance agreements and infrastructure services. This ten-year deal is valued at between $5 billion and $7 billion. It will take on around 1000 EDS network staff. The two will also jointly work on developing network services. MCI said it is dumping Systemhouse to concentrate on the telecoms business. Tim Sheedy, IDC research analyst for European telecommunications, said this sort of deal was systematic of the current market. "Following the trend of organisations outsourcing their computer services, we've recently seen many of these deals being more of an exchange than a cash payment. This will not be the last of this kind of agreement between phone and computer companies," he said. Systemhouse reported $1.7 billion in sales last year. It has 120 offices and around 9000 staff. MCI WorldCom was formed in September when WorldCom completed its $47 billion purchase of MCI Communications. ®
Linda Harrison, 11 Feb 1999

PlusNet increases customer base 1000 per cent

Sheffield-based Internet Service Provider PlusNet has attracted more than 100,000 customers to its service since it started trading in 1997. Although the company claims to have increased its customer base by 1000 per cent last year, it believes it will double in size before the end of 1999. Around 60 per cent of PlusNet's customers use its subscription-free Net access service, Free-Online, which the company launched in October last year. The company also claims that it is still one of the only mainstream ISPs with its own subscription-free service that isn't sponsored by a third-party or affiliated to a telecoms company. "We attribute our rapid growth to the mass appeal of the Internet combined with the popularity of our main Internet servicesForce9 and Free Online," said MD Lee Strafford. US computer company Insight Enterprises acquired an 85 per cent stake in PlusNet in April last year. ®
Tim Richardson, 11 Feb 1999

Battle of Intel shark and AMD minnow ramps up

A further salvo in the war between AMD and Intel over streaming extensions was fired by the smaller company today. AMD said that Digital Anvil, 3DO and a gaggle of others have already brought thousands of games to the party. But on the 17th, next week, Intel is likely to bring thousands more game companies to the party. Intel refuses to say which games developers, and which PC vendors, exactly, will use its Katmai Pentium III platform. But sources close to Intel said every games vendor and its dog was expected to join its party. Even though the gamesters will have to re-build their apps from the ground up, it is likely they will do so, given Intel's market share. An Intel representative was swift to react. He said: "If ISVs use DirectX they'll get KNI advantages automatically - version 6.1 (out now) has full support for Screaming SIMD." ®
Mike Magee, 11 Feb 1999

BT to resell Inktomi search sytems to Europe

Search engine provider Inktomi yesterday signed a deal with British Telecom that permits the UK telco not only to host Inktomi's first European search cluster, but to resell Inktomi search engine facilities. Financial terms of the "strategic alliance" were not made public. Inktomi said it will deploy one or more search engine clusters at BT's Web hosting facilities and have the system up and running by the summer. The cluster will provide access to up to 40 million European Internet-based documents, and will be linked to the company's 110 million-document US search database. Inktomi will also provide a range of search services to both BT content sources and publishers, and other European and global customers, the company added. Users will be able to carry out country-specific searches and real-time translations as part of the search experience. Meanwhile, Inktomi's chairman, David Peterschmidt told attendees of a Goldman Sachs technology conference that the company will unveil what he dubbed "the first full-blooded approach for online shopping" before the end of June. The company has already licensed the contents of the Consumer's Digest product database to form the basis of a guide for online shoppers keen to find the best deal on the specific products they are looking for. Peterschmidt implied other databases may be licensed before the launch of the service. ®
Team Register, 11 Feb 1999

Compaq could snap up AMD

RumourSpeculation mounted today that the massive drop in Advanced Micro Devices' (AMD) share prices over the last two weeks had made it vulnerable to one of its suppliers, Compaq-Digital. IBM had previously been interested in taking over AMD but has decided that its Microelectronics division is not its top priority. Its top priority is services. Just after Christmas, IBM announced it was doing the outsourcing for genetic engineering company Monsanto. Because of a FTC ruling, Intel is forced to make DEC Alpha chips for Compaq but, at the time, a judge said other fabrication plants had to make the 64-bit chip. AMD and IBM were the obvious choices as alternative fabs to Intel. If Compaq bought AMD, it would square a circle with the FTC and also give Eckhard Pfeiffer's company much needed fabrication plants of its own. The price of AMD's stock currently stands at $17, down from a 52-week high of nearly $34. And Compaq is still liquid. ®
Mike Magee, 11 Feb 1999

Hefner huffed over Excite, Netscape for smut substitutions

Executives at Excite and Netscape are getting a little hot under the collar after they received a writ from Playboy Enterprises alleging they have infringed the smut service's trademarks. The adult entertainment company alleges that when Net users type the words 'Playboy' or 'Playmate' into Excite's search engine, the same search engine that also powers Netscape's Netcenter portal, it displays banner ads for rival hard-core pornographic Web sites. These ads allegedly "lure" Net users away from Playboy sites to other smutty sites, Playboy maintains. It also wants Excite and Netscape to stop directing users to other Excite-created adult entertainment directories, according to a report in USA Today. In effect, Playboy is attacking the practice of selling keywords by search engines. Since there is nothing stopping a company from buying a competitor's brand or product name, companies are now taking legal action to stop what they believe to be a breach of their trademark "Excite has hijacked and usurped [Playboy's] good will and reputation," the lawsuit states. "Excite's advertising activities are not neutral or lawful with respect to its misuse of the goodwill associated with Playboy's trademarks," it maintains. This is the second time in as many weeks that Excite has been issued with writ for alleged trademark infringements. A fortnight ago Estee Lauder, the cosmetics and fragrance giant filed a lawsuit against Excite and online cosmetics dealer, The Fragrance Counter (TFC), alleging infringement of its trademarks over the purchase of certain keywords (see Excite keyword selling practice challenged in court). A number of Estee Lauder subsidiaries also filed similar suits in France and Germany complaining of Excite's and TFC's conduct under the laws of those countries, the company said. The Estee Lauder company claims that Excite -- and TFC, which purchased the keywords -- are responsible for trademark infringement, false advertising and unfair competition. ®
Tim Richardson, 11 Feb 1999

Memsolve calls in receiver

Memsolve today resigned itself to the official appointment of administrative receivers from BDO Stoy Hayward. Dermot Power and Charles Macmillan went into the Widnes, Lancashire-based components distributor after the company admitted it owed around £4 million earlier this week (see earlier story). Power, a BDO Stoy Hayward corporate recovery partner, commented: "It is disappointing that such a forward-looking company should have such problems. Strenuous efforts were made to preserve the company in its entirety. We are currently exploring all possible avenues for the protection of employment and the survival of the economic parts of the business." Last week, the company was forced to lay off around a third of its 65-strong staff. Chris Walmsley, Memsolve's sales and marketing manager, pinned his hopes on a rescue package involving creditors' co-operation. But he commented that the company had been suffering from chronic cashflow problems since a Customs & Excise raid last year. ®
Linda Harrison, 11 Feb 1999

Banks could face run on Y2K money

Worries were surfacing today that banks will not have enough money if people start panicking about the Year 2000 problem. There are also concerns about whether large banks will have their Y2K plans in place by the 31st of December next. Banks, typically, have most of their funds tied up in other investments and at any one time only have five per cent of cash available through retail outlets and automatic teller machines (ATM). Although most UK banks insist that their Y2K programmes are completely up to speed, this type of information is not public knowledge. A representative for Nat West said: "We're over 98 per cent compliant and so we're almost wholly compliant. We think that anyone who puts up their hand and says they are 100 per cent compliant is foolish. She said that Nat West will communicate to its five million customers this year its stance. "Banking on the first of January 2000 will be no different than banking on the 31st of December," she said. The banks are keeping their plans close to their chests and trying to underplay such worries. Earlier this week on ITV's Richard and Judy Show, Richard seemed to be saying he had bought up almost any candle and bit of rice from his local supermarket. ®
Mike Magee, 11 Feb 1999

No Iridium phones shipped in UK yet

An Iridium representative in the UK confirmed today that no single satellite phone has yet shipped in the United Kingdom. We don't know how many have been sold in greater Europe also. And it could be quite a while before the sales ramp up from zero to one. The representative said Iridium hoped to make an announcement next week. The satellite phones are manufactured by Iridium's partners, Motorola and Kyocera, and distributed by Brightpoint throughout the world. Questions still remain about quality, according to source close to both Iridium and Kyocera. He said: "Iridium is doing hardware and software updates at least three times a day. The problem is the equivalent of the Doppler effect." By that he meant that the number of Iridium satellites hanging over our planet could not necessarily pass on the correct messages one way without a similar message bouncing back from the next satellite on. ®
Mike Magee, 11 Feb 1999

Cyrix enlists for Rambus

Cyrix is has signed up for Rambus, joining AMD on the Intel-led memory bandwagon. The NatSemi sub is licensing the Rambus interface for use in future versions of its integrated processor. It will be interesting to see how this squares up with Cyrix’s low pricing model. Is it planning a server on a chip, or what? The company says that Direct Rambus is an "excellent match" for its processor design philosophy, citing the scalability of the technology, chunky memory bandwidth and low latency. Rambus will help Cyrix achieve the "optimum balance of performance and cost", according to Jean-Louis Bories, executive vice-president at Cyrix. But his remarks appear to have more in common with the Rambus spec sheet, as opposed to reality. Right now, Rambus is expensive. Set–up costs are high, yields are not particularly good and there is no guarantee that this will improve by the end of the year. This is why many chipset vendors are gunning for PC 133, a much cheaper and more stable alternative to Rambus. However, PC 133 is not supported by Intel. And where Intel leads, Cyrix and AMD will follow. ® Via puts chipset weight behind 133
Drew Cullen, 11 Feb 1999

MS exec denies knowledge, MS press release defies gravity

According to a Microsoft press release of today, Microsoft VP Cameron Myhrvold yesterday explained "the value of ISP contracts." A particular problem for Microsoft on this front is explaining the contracts that required that 85 per cent of the browsers distributed by participating ISPs should be Internet Explorer. In the press release Myhrvold explains this with flying colours - but in the trial transcript, it's a different matter. According to the release: "As a newcomer to the Internet at the time the contracts were negotiated, Microsoft did not have existing relationships with ISPs, Myhrvold said. His job was to develop such relationships and find ways to distribute Internet Explorer (IE) through the ISP channel." OK, so that means that Myhrvold, if he's doing his job, has an intimate knowledge of relations with individual ISPs, and certainly ought to know the terms and conditions of the contracts signed with the major ones, if not all of them. Now cut to the trial transcript: David Boies for the DoJ: Let me just clarify that because I think that's a helpful clarification. When I asked you on page 74, lines 15 through 19 [of the previous day's transcript] whether you knew perfectly well that AOL and everyone else in the OLS [Online Services - major ISPs] had to commit that 85 per cent of browsers shipped would be IE, and you said, "That's absolutely wrong," what you meant to be saying was that it may be the case that that is true, but it's absolutely wrong that you know it. Myhrvold: Yes sir, that's exactly how I meant to answer the question. That's what I meant when I said this. Now cut to the previous day's transcript Boies was referring to: Myhrvold: I'm sure I have seen the contracts for the online services folder. I certainly have not read them in the past year. I'm not familiar with all the requirements, so I cannot look you in the eye, sir, and say there's an 85 per cent requirement in those contracts. There may be, but I don't know that to be a fact. So did the lad originally try to deny, then retreat to denying knowledge? Not knowing, as we said earlier, would suggest he hadn't been doing his job. As we'll see, it's now a fact that it's not. But that's a fact he should know. Over to the Microsoft release again. It doesn't mention the curious contretemps over whether Myhrvold knew about 85 per cent or not: "Microsoft negotiated standard cross-promotional agreements with a few of the most popular ISPs, in which Microsoft agreed to feature those ISPs in the Windows 95 Referral Server (a feature that helps users sign up for Internet access), and the ISPs agreed to promote and distribute IE as their preferred browser. Those agreements included distribution targets for IE - some as high as 85 percent - but Myhrvold said Microsoft was more interested in its new relationships with the ISPs than in the specific terms of the contracts. He noted that the contracts were never enforced, and no ISP was ever removed from the referral server for failing to hit its targets." Note the inexactitudes in the above, and what a weasel expression "standard cross-promotional agreements" is. One might say that Microsoft ruthlessly targeted the top ISPs, (which Myhrvold, if he was doing his job, certainly ought to have known about), and that the 85 per cent was not a target, it was a contractual obligation. And the contracts were never enforced? Well, next time you're signing a draconian contract with MS, remember the 'only kidding' subtext. But if you're Compaq and you want to take IE off the desktop, don't bother. We'll stick with the release, because it gets better: "Although its ISP contracts were pro-competitive, Microsoft eliminated certain provisions in April 1998 because they were not material to Microsoft's business and were not being enforced." Pro-competitive? You should get danger money for writing releases for MS - but as we understand it, the PR company does get danger money. Regular readers will recall that in early 1998, as part of a 'routine review,' Microsoft's ISP contracts were loosened considerably. By a strange coincidence the European Commission was looking very closely at those very same contracts - Microsoft's amendments came close to assuaging the Commission's worries, but of course the two matters were entirely coincidental. Press release: "Myhrvold said Microsoft also discovered that the Windows Referral Server was not an important source of new users for ISPs. Between 1996 and 1998, only 2.1 per cent of new Internet users signed up for an ISP through the Windows Referral Server." So there you have it - the Windows Referral Server was a flop, therefore couldn't be used as a lever to force IE share commitments on ISPs, therefore the 85 per cent came off. Plus it made Brussels happier, but that was a coincidence. It was a good flop though. Release: "At the time the distribution agreements were waived in 1998, 56 percent of Internet users who got their Internet service from the ten ISPs in the Windows Referral Server used Netscape Navigator as their primary browser." Now over to His Billness: "We have an opportunity to do a lot more with our resources. Information will be disseminated efficiently between us and our customers with less chance that the press miscommunicates our plans. Customers will come to our 'home page' [sic] in unbelievable numbers and find out everything we want them to know." (Our italics) - Bill Gates, The Internet Tidal Wave, May 25 1995. (How Bill Gates discovered the Internet) Presumably, the press releases on Microsoft's site are pumping out everything we want them to know. ® Complete Register trial coverage
John Lettice, 11 Feb 1999

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