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Volume 2, Issue 11: Friday, January 28, 2000
- "Oracle Plays Catch-Up in Business-to-Business Market"
Wall Street Journal (01/27/00) P. B6; Gomes, Lee
Oracle has recently been emphasizing its business-to-business e-commerce efforts, as such companies as Ariba and Commerce One reach huge market capitalizations. Although Oracle's $156 billion market cap is 67 times its revenue, Ariba and Commerce One have market caps that average 730 times current revenue. Ariba and Commerce One say they will lead business-to-business e-commerce by specializing and not carrying unrelated products. Business-to-business firms can profit by selling the software that runs transaction efforts or by managing the online exchanges. Experts say most business-to-business sales so far have been traditional corporate software sales, although investors are mainly looking at transaction revenue a company might eventually earn. Meanwhile, enterprise software is one of Oracle's major offerings, and if enterprises demand procurement software, the company will start providing it. Oracle is concerned that companies such as Siebel, which has pushed its way into the market for sales force management software, will expand their enterprise software offerings. Oracle and SAP both want to position themselves as one-stop providers of enterprise software.
- "IBM Exec Touts Linux as Key to Net Evolution"
CNet (01/26/00); Girard, Kim
IBM has big plans for Linux, says IBM's Irving Wladawsky-Berger, the visionary who shaped IBM's e-business initiative and now leads the firm's Linux push. In an interview with CNet's Kim Girard, Wladawsky-Berger, who heads IBM's new Next Generation Internet initiatives, discussed the future of Linux, an open source, Unix-based operating system. IBM views Linux as having a key role in influencing the next generation of the Internet and e-business, says Wladawsky-Berger. By basing technology on an open source code, developers can create systems that are much more interoperable. Currently, Linux is most suitable for simple applications, yet in the future the operating system will gain greater functionality in managing wireless applications and integrating a variety of user interfaces on a single network, says Wladawsky-Berger. Linux is still in the initial stages of both development and acceptance, a position which Wladawsky-Berger likens to that of the Internet in 1994 or 1995. "In those days people already knew about the Net and a small community was very passionate about the Net but if you went to establish business on the Internet their eyes would glaze over," explains Wladawsky-Berger. Although much development is necessary, Wladawsky-Berger says Linux has great potential in e-business. IBM's own Unix-based operating system, AIX, is an example of a more mature operating system, says Wladawsky-Berger. The 10-year old platform is extremely stable and runs mission-critical applications reliably, says Wladawsky-Berger. IBM plans to use AIX to promote Linux, particularly by porting Linux applications to AIX.
- "AT&T to Invest $250 Million in Application Services Sector"
New York Times (01/27/00) P. C11; Schiesel, Seth
AT&T is set to announce Thursday that it will spend $250 million over the upcoming three years to strengthen its software applications business for business customers. AT&T is set to announce plans for alliances with application service providers that will enable businesses to operate software using AT&T's network. AT&T has already named Sun Microsystems, Cisco Systems, Hewlett-Packard, and IBM among its partners. AT&T says the partnerships will lead to an "ecosystem for ASPs."
- "Security Flaw Discovered at Online Bank"
New York Times (01/28/00) P. C2; Markoff, John
X.com, an online startup bank, recently discovered a major security breach in its system that allowed anyone with knowledge of another person's account and bank routing number to take money from that account, put it in an X.com account, and then withdraw the funds. The company says there were only five or 10 transactions that were "problematic", and that the problem has now been fixed. Computer experts say the case is a textbook example of the dangers of moving banking online too fast, without fully testing Internet banking systems for security holes. Experts say the bank erred when it decided to directly interconnect its online application form with the country's Automated Clearing House network. X.com now requires that customers fax or mail a copy of a canceled check to verify that they actually own an account before they are allowed to transfer any money, and only transfers from accounts with a customer's name on it can be used to open an account with X.com.
- "Report Predicts E-Business Up 86% by 2003"
Financial Times (01/28/00) P. 9; Cane, Alan
The global Internet economy, consisting of e-business and the infrastructure that supports the Internet, will be valued at $2,800 billion and will account for 7 percent of the world's gross domestic product by 2003, according to a study to be released this weekend by Nortel Networks. Communications traffic will grow to such an extent that the global Internet will need to be upgraded by $1,500 billion a year in 2003, the report says. The report finds that e-business will grow fastest in Europe, with an annual growth rate of 118 percent, while e-business worldwide will grow 86 percent and reach $1,300 billion per year in 2003. The study also forecasts that both Europe and the U.S. will experience a shortage of Internet transmission capacity as Internet usage rises. Business-to-consumer e-commerce will not grow as quickly as business-to-business e-commerce, and the latter will show revenues six times as high as the former.
- "Disney Plans to Narrow Portal's Focus"
Wall Street Journal (01/28/00) P. A3; Orwall, Bruce
With Walt Disney's Go.com portal lagging far behind rivals such as Yahoo! and AOL, the company has decided that a change in strategy for Go.com is warranted. The new strategy places an emphasis on entertainment, recreation, and leisure--traditional strongholds in the Disney empire. Disney supported the launch of its Go.com site last January with a massive advertising blitz, but traffic at the site has been stagnant. Disney's strategy change was greeted enthusiastically by both investors and analysts. Areas of the Go.com site such as small business and careers could be eliminated. The recast site will provide a greater degree of information and links on topics such as music, movies, and travel, said Steve Bornstein, head of the Go.com unit. The changes to the site will be gradual and will be initiated in the spring. In related news, Go.com announced an advertising deal with Pets.com.
- "Toyota Is Likely to Offer Online Stock Trading"
Wall Street Journal (01/28/00) P. A14; Shirouzu, Norihiko
Toyota is expanding its Web site, gazoo.com, to provide brokerage
assistance and various consumer products. Toyota wants gazoo.com to eventually become an electronic commerce provider that offers customers many kinds of products and services including insurance and options that do not relate to automobiles. Toyota may develop these new services with a company that specializes in finance or do so independently. Toyota projects that by 2004, gazoo.com may earn $5.68 billion. Companies like GE Capital Corp. and Softbank have made similar moves into the field of financial services in the past.
- "Treading With E-caution"
Austin American-Statesman (01/23/00) P. J1; Pletz, John
All attention turned to the Internet at the National Retail Federation's annual convention last week in New York City. The three largest categories in the convention directory were e-commerce vendors, Internet services, and interactive shopping. Traditional retailers have begun to slowly position themselves on the Web as they realize the potential of sales online. But they are taking great caution. The consensus at this convention is that it is better to not be on the Internet at all than to be on and do it poorly. But everyone understands that, while it is a dangerous endeavor to undertake, the opportunity is too great to ignore. Many also believe that it is these traditional retail stores that have the potential for the best success on the Web, as their storefronts allow for convenient customer returns and exchanges, which is the major weakness in e-commerce. Technology companies are dominating the convention floor, demonstrating various products designed to help companies get on the Internet.
- "Reports Say Europeans Are Lagging in Making Purchases Over the Internet"
Journal of Commerce (01/26/00) P. 19; Atkinson, Helen
Reports from Ernst & Young and United Parcel Service both forecast healthy e-commerce gains in Europe. However, the Ernst & Young report said a top hurdle for online purchasing is shipping costs, with 54 percent of U.S. consumers complaining and 45 percent of those in Britain. Another 45 percent of British respondents cited the need to make sure items fit properly before buying. Credit card security was a big concern only in Australia, where half of those polled were deterred by security issues. Among online retailers, Ernst & Young found that 53 percent have in-house distribution centers, a quarter use third-party distribution, and 11 percent ship directly from suppliers. In the next year online spending will increase threefold in Britain, Canada, Australia, and France. The number of U.S. online consumers increased to 39 million in 1999 from 17 million in 1998, while European online consumers increased to 8.3 million from 5.2 million in the same period. According to the UPS report, technological progress is not far along, with number of daily emails in the single digits for more than half of Germans, Italians, and Spaniards. Business leaders in Britain topped Europe for daily emails, averaging 29 messages a day. Nine out of 10 have a Web site, but 35 percent have e-commerce on their sites and a mere 30 percent think the sites are useful for marketing and advertising.
- "Common Web Code Could Save Banks Money"
TechWeb (01/24/00); Acey, Madeleine
Banks such as Charlotte's First Union National Bank are experimenting with offering HTML-based transactions across various channels to increase the variety and value of services offered to customers and to lower the bank's operating costs. Banks can gain significant advantages by using a standard HTML-based code to run ATMs, Internet-banking systems, telephone-banking systems, and wireless-banking systems. For example, armed with a profile of any customer visiting an ATM, the bank can display personalized advertisements and offers for services likely to be of interest to the customer. High-speed Internet connections will enable the customer to actually buy the advertised services from an ATM or wireless device without adding much time to his or her originally intended task. The HTML-enabled system will "know what services [the customer] can afford--the potential for direct marketing is huge," says Paul Bessant, membership services manager at CommerceNet in London. Security is the main challenge to be overcome before the practice becomes more common.
- "H-P's First Breakdown of Profit Shows Under 25 Percent Is From Computer Business"
Wall Street Journal (01/28/00) P. B8; Hamilton, David P.
Hewlett Packard has issued an annual report that breaks out the profit for each of its major businesses for the first time, showing that its computer business is far less profitable than services or printing. The report divides revenue and profit statistics into the areas of imaging and printing, computer systems, and IT services. In terms of revenue, HP's printing and computer businesses each brought in about 43 percent of the total $42.37 billion for the 1999 fiscal year, while services accounted for nearly all of the remaining revenue. Most of HP's profit comes from sales of inkjet and laser-printer cartridges, with the printing and imaging business contributing $2.3 billion in operating profit, compared with $856 million from the computer business. The services division accounted for $636 million in operating profit. Printing and imaging carried a 12 percent operating margin in 1999, while services had an 11 percent margin, and computers had only a 4.6 percent margin. HP's figures show the comparative difficulty of profiting on computer hardware sales.
- "PC Retail Revenues Lag Way Behind Unit Growth"
CNet (01/27/00); Miles, Stephanie
Although desktop PC sales through the traditional retail channel rose 37 percent in 1999, revenue increased by just 9 percent, according to a recent NPD Intelect survey. Compaq claimed the top spot for unit shipments, with 33 percent of the market, although Hewlett Packard had the most revenue, with 35 percent of the market. The survey did not include direct sellers such as Dell and Gateway. Revenue lagged significantly behind sales, as a result of PC price wars over the past several years. "A lot of it has to do with Emachines--they lowered the bar in terms of how low prices could go," says NPD Intelect's Lisa Schmidt, noting that Emachines forced Compaq and HP to cut prices. The survey notes that PC sales grew significantly in the third quarter of 1999, with retailers offering rebates of up to $400 in exchange for three-year contracts. These rebates led to nearly free PCs from companies such as Compaq, HP, and Emachines that offered computers for under $500.
- "Security Expert: E-Commerce Hacks Happen All the Time"
PC Week (01/24/00) Vol. 17, No. 4, P. 18; Kerstetter, Jim
Corporate Web sites are broken into all the time, but the public does not hear about them, says Mark Fabro, worldwide director of assessment services for Secure Computing. Fabro's job requires that he keep track of underground hacker sites to stay on top of the latest attacks and to discover when security has been breached. Fabro says the recent attack on CD Universe, in which a hacker broke into a database and stole customer credit card numbers, "happens all the time." Fabro contends that people are often unaware of major hacking operations into large companies because those companies keep the attacks hush-hush in order to not to cause further damage to the company. In the case of banks and health care companies, Fabro says that reporting a hacking could lead to an investigation of those companies' operations by the government. Fabro says that most companies have the encryption and firewall technologies to keep hackers out; however, most hackers find a way to bypass this technology by playing upon human errors, such as poor management of employee policies and weak implementations.
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- "Interactive TV and Digital Shopping Are Open for Business"
VNUnet.com (01/24/00); Green, Chris
Digital shopping offered via interactive television could rival online shopping in the years to come. However, the continued development of the technology is likely to determine if that will play out. Already available in the United Kingdom, digital shopping is among the first interactive TV services of Sky Digital. A part of its Open service, the shopping that is made available by Sky Digital is supplemented by access to banking, games, information (updated news, weather, and cinema listings), and email services. With Open, consumer have access to a set of pages that are broadcast in rotation, and their page of choice is captured by a receiver unit. The pages feature color, sound, animation, moving video, and are also similar to the Internet in that the Web-page selection process makes use of menus and color-coded key selections instead of page numbers. So far, Dixons, Argos, Woolworths, Iceland, and Gameplay are among the shops and dot-com retailers that are offering their goods on the Open service. However, although Open is convenient in that consumers can access the service over a conventional TV set, the service is delivered by way of a digital satellite receiver, and that delivery is one way. A 28.8 modem built into the Sky Digital receiver provides the connection. Speed is the glaring problem for both downloads and selection times. Downloading data from Open is much slower than the average time for downloading from the Web using a 56K dial-up connection. Moreover, the receiver units have had their share of crashes. Current hardware and software shortcomings aside, Open has a bright future, particularly with its nice combination of content and ease of navigation. For those with Sky Digital subscriptions, the hardware is free. And although there is no subscription for the Open service, dial-up connection calls are often charged at the local rate.
- "Piracy on the Net: Why it Needs More Policing"
Business Week (01/24/00) No. 3665, P. 28; Kuttner, Robert
MP3 files now allow users to download virtually any music currently on the market through the Internet for free, and various chat rooms where these music file exchanges can be made are proliferating. Software as well as magazine and newspaper articles are also being circulated in a similar manner, and movies will probably soon be as well. The practice of downloading MP3 files is currently legal, and although technically copyrights are being infringed, the courts have recently cleared both customers and MP3 player manufacturers of any legal liability. Conversely, artists, authors, record producers, and some software companies oppose MP3s because they lose out on a lot of money, possibly billions of dollars. Although the entertainment and software lobby was able to persuade Congress to expand copyright protection to cover the Internet in 1998, the pirating technologies currently in use make such laws meaningless. Supporters of greater regulation of Internet piracy say one way to enforce copyright laws would be to tax the end users, similar to the royalties a radio station pays when it plays a record. To accomplish this, computers would have to be installed with a device that could differentiate copyrighted material from other information. Regardless, most analysts believe that the days of a completely unregulated Internet will soon be over.
- "Countdown to a Launch"
Forbes (01/24/00) Vol. 165, No. 2, P. 136; Moukheiber, Zina
The distressing site launch of LetsTalk.com, the newly created Web site for Let's Talk Cellular & Wireless, was representative of many companies' e-commerce plunges. Within minutes of launching the site, which sells cellular phones and service plans, pagers, and related accessories, problems began. AT&T, which handles credit card authorizations for LetsTalk, did not have the proper dealer code, preventing transactions from being finalized for four hours until the glitch was repaired. Meanwhile, a software encryption bug barred American Express cards from being accepted, a problem requiring a few days to fix. Before the launch, the Web team tested the site's pages to ensure that the distribution center had received all the inventory that had been ordered. Some items had failed to arrive, necessitating a $6,500 trip to the local Circuit City. LetsTalk officials also noted the presence of "customers" who had hidden their IP addresses and visited every page of the site on the day of the launch. Most likely the visitors were rivals checking the quality of the competition.
- "Net Technology Connects Data With Marketers"
Advertising Age (01/17/00) Vol. 71, No. 3, P. 2; Mermigas, Diane
DigitalConvergence.com's keystroke automation technology (KAT) can instantly connect TV sets to specific Internet sites, and Sears, Roebuck & Co. and Forbes are already making plans for the technology. KAT gives users direct access to online information when they click on an icon during TV programming or when they scan a printed code. Forbes intends to mail the required software and scanner to over 800,000 subscribers before its September "Best of the Web" supplement, and readers will be able to view Web content pertaining to the products, subjects, or services featured in print. Forbes eventually wants to make all its content interactive. Sears plans to refer consumers to specific sales and product information online by scanning a code printed in newspaper inserts. Advertising executives say the possibilities for KAT are limitless when it comes to strengthening consumer ties, launching new businesses, and increasing sales, and DigitalConvergence.com says it can provide advertisers with general demographic and preference data on its registered users, without names or email addresses. The company expects to have over 100 participating advertisers by KAT's midyear launch. Other big advertisers expressing interest in KAT include CitiBank, AT&T, Colgate-Palmolive, Toys 'R' Us, Warner Bros., and IBM. Warner Bros. intends to use it to provide access to streaming film trailers, contests, and local show data. Advertisers will be able to track consumers directly.
- "Merger Reinforces Construction E-Commerce"
Redherring.com (01/20/00); Raik-Allen, Georgie
Certain General Electric units are involved in funding for Internet businesses, namely those that are competing for domination of business-to-business communications in the construction industry. EBricks.com and Blueline Online's joint company Cephren received an investment round from GE Equity Investments, GE Power Systems, Goldman Sachs, Grupo Picking Pack, and E.M. Warburg Pincus. GE Capital Real Estate, Internet Capital Group, and Oracle Venture Fund contributed to an investment in Bidcom, while Buzzsaw.com received funding from Crosspoint Venture Partners. Experts believe that the business services covered by all three companies will eventually be dominated by one. Cephren, Bidcom, and Buzzsaw.com earned $41.5 million, $46 million, and $15 million, respectively, from backers.