The Digital Financier Update (DFIN.COM Update) provides a weekly commentary on important stories with significant financial, and or Internet implications. The purpose is to provide finance professionals and there staff with a timely brief synopses of recent and historic news events that best illustrates the changing digital economy. The stories will eventually impact all of us. Many of our stories may have received very little popular press coverage. The weekly summary is e-mailed at no cost to participating subscribers for distribution to staff and co-workers.
This publication is designed to be a quick read and the archive is a good resource for financial history.
The most common sources for the DFIN.COM Update include UP, AP, Fast Company, Business Week,The Economist, Forbes, Wired, Federal Reserve Bank Publications. The Wall Street Journal Interactive, MSNBC, L.A. Times, San Jose Mercury News.
Week of May 30, 1999
Market softens for Internet mergers, NEW YORK (AP) - GeoCities Inc. shareholders said yes Friday to merging their company with Yahoo! Inc., but they're getting a lot less than they once thought. Yahoo!, a leading Internet search and directory service, is acquiring GeoCities, a company that helps consumers create their own Web pages, by issuing 27.4 million shares of stock. However, since the deal was announced in January, Internet stocks have plunged. That means the Yahoo! shares that were once worth $5.04 billion are now valued at $4.06 billion, a 19% drop. The bear market in Internet shares has sharply reduced the value of a handful of mergers in the works. Web companies have fallen 29% since mid-April, causing many investors and executives to re-think their options. See
Mercury Center News, June 1, 1999 - Trading up? E+Trade says it's ponying up $1.8 billion in stock to purchase Telebanc Financial Corp. The deal marks the first effort to combine an online broker with an online bank. Probably not the last.
Sears spends millions on MSN, Info Beat , June 1, 1999 - Sears Roebuck (S) and Microsoft (MSFT) announced Tuesday a two-year, multimillion-dollar agreement for the retailer to advertise across the MSN network. As part of the deal, Sears becomes the largest advertiser on the MSN online real estate service (http://www.homeadvisor.com). The companies also will co-develop editorial content for a section of MSN HomeAdvisor, catering to do-it-yourselfers. The general manager of Sears Online (http://www.sears.com) said the MSN deal is part of an "aggressive expansion" of the company's online presence.
Appetite seen for online banking, InfoBeat, June 1, 1999 - A 500 percent increase in the number of households using online banking by the year 2003 is projected by researchers at
Framingham, Mass.'s International Data Corp. IDC estimates there were 6.6 million households banking online in the United States alone in 1998. Factors encouraging online banking's growth are lower-cost PCs, less concern about security online, and an increasing number of banks offering Web-based services. IDC estimates the number of banks offering online banking services will increase from 1,150 in 1998 to 15,845 by 2003. "Banks are beginning to realize that online banking offers competitive advantages, operational efficiencies, and direct marketing capabilities," said IDC analyst Paul Johnson.
Week of May 23, 1999
In a surprising announcement on Thursday Autobytel.com reported that purchase requests to its Accredited Dealer Network are being processed at the rate of $24 million per day. This exceeds Dell's daily online PC sales. Web TV reported 800,000 subscribers as the founder, Steve Perlman resigned from the operation. No doubt that it has not been as much fun since his sale of Web TV to Microsoft. Web TV is making good penetration which may surprise most observers. We expect Web TV to soon be included in all new TV's.
Internet stocks were hammered during the week but regained some of the lost ground on Friday. The biggest talking point was that Internet stocks will drop if interest rates increase. The most unusual aspect of this debate during the week is that there was a debate at all. The relationship between stock prices and interest rates is inverse. Always has been and always will be. Simply stated, a $10 dividend paying stock in a 5% world is valued the same as a $20 dividend paying stock in a 10% world. When interest rates increase we should expects stocks to drop in price.
Seldom in history have we faced a shortage of CEO's as we do today. What effect will the shortage in experienced executive have in the technology community? We expect an exciting transition period with greater risk taking by the less experienced CEO's. In this regard, Chairman and a founder of Intel, Andrew Grove says that there will be no Internet companies in 5 years - They will all be Internet companies. How does your company stack up? Are you ready to compete? e-tail is everywhere!
NASD Approves Late Trading, But Timetable Remains Vague, By GREG IP and TERZAH EWING , May 28, 1999, Staff Reporters of THE WALL STREET JOURNAL - "The parent of the Nasdaq Stock Market Thursday approved a push for extended trading hours, but pulled back from setting a timetable and called for a coordinated move with the New York Stock Exchange."
"The National Association of Securities Dealers said its board approved "preparation" for a night trading session in its 100 largest non-financial stocks that would run from 5:30 p.m. Eastern time to 9 or 10 p.m., with voluntary participation by market makers, alternative trading systems and order-entry firms. But it didn't set an implementation date. Earlier this week, NASD officials had said the session could come as early as September."
""September would be viable but we're not going to be driven by that," said NASD Chairman and Chief Executive Frank Zarb. "We're not going to be driven by another party doing this before we do. We should be getting things lined up first.""
"But he strongly hinted he didn't think private systems should go ahead before Nasdaq and the Big Board. "This business of extended hours is a serious market-quality question. It's not the type of issue that you hot dog into. It requires thought and intensive coordination. For a fragment of the industry to go forward without unified coordination is not good for investors.""
"Earlier the same day, New York Stock Exchange Chairman and CEO Richard Grasso, who has said he could extend hours as early as mid-July, reiterated his concerns about the speed with which markets are moving to extend hours."
""Free markets should be encouraged to innovate and compete, but free markets should not become free-for-all markets," said Mr. Grasso in a speech in Vancouver, British Columbia. "Free-for-all markets will test the public's confidence.""
"The go-slow approach was enough to turn a former opponent on the NASD board into a supporter. "Basically, I got what I wanted," said Alan Davidson, president of the Independent Broker-Dealer Association, adding everyone on the board felt a more cautious approach was necessary. "It's a watered-down proposal and it gives a way out. There's a chance this won't happen at all.""
"Earlier proposals "were shoot first and then aim. We've had both the NASD and the New York Stock Exchange fighting to get into a 'me first' position [on night trading] while their members have opposed it," he said."
To the Dubious Few: Look Again - We're Ahead, not Behind, Gates' Prediction Written by Dave Tremblay, May 24, 1999, InfoBeads Senior Industry Analyst - Unlike many predictions that routinely come up short, the Internet predictions have generally exceeded expectations.
"Some were dubious when Bill Gates said that US household PC penetration would reach 65% by the end of 2001. Well, it appears that they should rethink their doubts. The latest results from InfoBeads' Technology User Profile Study show that we are ahead of the pace needed to reach that once-considered-impossible milestone. (See Bill Gates Sees a PC in (Nearly) Everyone's Future -The Question is: How do we get there from here?, for our last comment on Bill's 65% prediction.)"
"Those of you who visit InfoBeads regularly will recognize our semi-annual Technology Users Profile (TUP) Study. We have just released the TUP99 results to our clients. The findings from the study are based on over 11,000 interviews completed earlier this year. And as always, we plan on featuring the most interesting and relevant snippets on InfoBeads for the next several weeks, leading off today with a look at the most recent household PC penetration figures."
"Home PC penetration in the US has been climbing sharply the last few years, reaching 50.3% earlier this year! This is up 5.5 point from early last year and a full 10 points from 1997. It is amazing to note that now, more than 52 million US households have at least one PC. This is an increase of 6.4 million households in just the last year."
"So, who are these new PC households? And do they differ from the "usual suspects" the consumer PC industry has targeted for the last several years? Home PC use has long been closely linked with income - the higher the household income, the more likely the household is to have a PC. But as the chart below shows, there are some changes afoot."
"The chart shows the distribution of three household groups by annual income - all US households, US households with at least one PC, and US households that acquired a PC sometime during 1998. Nearly 40% of all US households have annual income under $30,000, but they represent only 23% of households with a PC. In contrast, households with annual income of $75,000 or more are the minority, accounting for only 19% of all US households, but this smaller group makes up 27% of households with a PC."
"The most interesting set of bars is that showing the income distribution of households that acquired a PC in 1998 (in green above). The under $30K households accounted for 28% of PCs acquired during 1998 - this acquisition rate is well above their overall share of PC households (23%). The $75K+ households accounted for 23% PCs acquired last year, below their share of PC households, but above their share of all households."
"As with most market research, there are two ways to look at these results. First, the middle- and upper-income households continue to account for more than their share of PC purchases, just as they always have. The industry is continuing to sell to the types of households it has always sold to. But the flip side is also true - lower income households are accounting for a higher share of PC purchases than ever, making the sales to upper-income households relatively less important to the whole mix, and thus broadening the demographic profile of PC households."
"So what's going on here? The TUP99 results are the latest evidence that there is still a lot of life in the consumer PC business, despite what the nay-sayers have been saying about it. Household PC penetration has reached record levels. The increase in the number of households with PCs in 1998 was the highest that we've ever seen. In a larger context, the presence of PCs in more and more households, especially as more and more of the PCs are connected to the Internet, will inevitably change how all types of consumer products companies communicate to their customers. We are only just starting to see those changes..."
"``In five years, there won't be any Internet companies because they will all be Internet companies,'' Andrew Grove, head of the world's largest maker of computer chips, said Saturday. ``Otherwise they will die.'' Intel, which Grove helped found in 1968, has seen its Internet business grow from zero percent in 1997 to a projected 42 percent this year, he said. Even junkyards have gone online, acquiring cars, stripping them of parts, cataloguing them, and then filling Internet orders from all over the country, he said. Buyers and sellers don't even have to talk to each other at the same time to conduct business online. Thanks to e-mail and other devices, they can communicate regardless of time or place, extending the business day. But simply being online isn't enough, Grove said, as he cautioned investors that many Internet companies that are getting a lot of publicity now won't be around for the long haul. Those that survive will employ traditional business tenets, like being customer oriented, he said. Grove spoke at the third annual Los Angeles Times Investment Strategies Conference at the Los Angeles Convention Center."
Tech firms in a bind searching for CEOs , May 22, 1999,
"But there's an enormous difference between then and now. Both companies filled their early 1990s vacancies almost instantly with high-powered internal candidates -- Platt and Pfeiffer, as it happens. Today, Compaq and HP are embarked on massive, months-long manhunts, searching for prospects with strong management experience and the drive to transform a company for a new millennium."
"In the best of times, finding even one candidate -- let alone two -- with those credentials would be tough enough. In 1999 it may be almost impossible."
"The reasons say much about the leadership of the tech industry today, and where it may be headed in the Internet era."
"Demand for CEOs has exploded in recent years, touched off by start-up mania. Many small but incredibly well-funded Web-based companies are snapping up the best prospects."
"The bizarre result is that the industry's leading jobs -- running companies with thousands of employees and billions in sales -- are going begging. And it's happening at a time when these top-tier companies are confronting almost unparalleled challenges, fueled by -- you guessed it -- the Internet."
"``It's not a scarcity of talent,'' said Jeff Christian, president and CEO of Christian & Timbers, the executive search firm retained by HP. ``It's the availability and the interest that are less.''"
"The short list of ``proven'' prospects is really short -- and almost identical for both companies. It includes top execs Sam Palmisano of IBM, Paul Otellini of Intel Corp., Ed Zander of Sun Microsystems Inc. and Ray Lane of Oracle Corp. Even adding in dark-horse contenders such as Eric Schmidt of Novell Inc., Rick Belluzzo of SGI, Greg Maffei of Microsoft Corp. and in-house candidates Ann Livermore of HP and John Rose of Compaq leaves the CEO cupboard largely bare."
"``I myself don't think there's a lot of qualified candidates out there,'' said Platt on HP's search for his successor. ``There's probably a handful, but I don't think the number is in the dozens.''"
" And the competition for those candidates is fierce. ``Last year, just in the United States, there was a need for between 750 and 800 CEOs,'' said John Thompson, vice chairman of Heidrick & Struggles, the search firm retained by Compaq. ``There was probably a shortage of about 150 CEOs last year.''"
"The result -- for the most attractive candidates -- is an almost unprecedented ability to pick their own future. Many of them are opting for the online world, lured by the promise of being able to create a business from scratch -- and the rewards that can come with that." Why struggle for 30 years to put yourself in line to run an HP, when with a little luck you can build your own HP?"
"Priceline.com measures its sales in the millions, and profits are non-existent, but the company was able to lure former Citicorp President Richard Braddock as its CEO. How? On paper, Braddock made more than $2 billion when Priceline went public. That's a financial windfall neither Compaq nor HP could match."
"But even if they could come close, there's virtually no chance that Braddock or similarly placed executives would jump ship. Most Internet wealth is tied to long-term stock options -- and even executives who might want to trade the reins of a start-up for control of a multibillion-dollar company would find it financially prohibitive to do so."
"The new CEO calculus affects more than just the industry elite. Increasingly, promising managers considered a step below the top ranks are also being roped in by start-ups."
"One is Roger Siboni, CEO of Web start-up Epiphany Inc. of Palo Alto. Until last year, Siboni had been deputy chairman and chief operating officer for KPMG Peat Marwick LLP, running the firm's technical consulting business. That gave him responsibility for billions of dollars of revenues and more than 5,000 employees."
"Siboni was the sort of candidate who comes in at the second or third tier of a large company and is groomed to move up. In the Internet age, there was no need for him to wait."
"``Certainly the potential financial rewards played a part in my decision,'' Siboni said of why he opted for Epiphany. But there were other attractions."
"``There's some people who are better suited to coming into an established situation and don't want the headache of starting something from scratch,'' he said, ``and then there's people who want the opportunity to build something. That's what interested me, and what has helped Epiphany build a strong executive team.''"
"The Internet isn't just a direct competitor for CEOs. It has changed the dynamics of executive searches in more subtle ways, as well."
"When Platt and Pfeiffer took charge of their companies, it was after decades of working up the management ladder, the traditional path to the top ranks of a Fortune 500 company. Both were closely associated with their company's direction -- Platt, for example, was seen by many as the logical choice among a handful of peers because he most closely resembled his predecessor, John Young."
"But today, the companies' boards are searching for leaders who can revamp operations for a world where online sales models are transforming distribution, and a company's ability to help customers use complex technology is as important as its products. HP has already chosen to spin off its test and measurement division and may be in for more changes; Compaq Chairman Ben Rosen is anxious for an executive to revamp his $31 billion-a-year company so that it can operate ``in Internet time.''"
"Taking the same approach as your predecessor not only won't help, it might hurt. ``I think one of the things that the search committee is looking for is a new approach, a different energy level,'' said Livermore, president and CEO of HP's $15 billion-a-year Enterprise Computing Services division and an avowed candidate for the company's top job. ``They want someone who will have a different approach from Lew Platt.''"
"That's likely to be a combination of a desire for change and a recognition of reality. There just aren't many Platts around anymore. Now 57, Platt had been an HP employee for 26 years before claiming the CEO post in 1992, and had put in his time with virtually all of HP's business units."
"By contrast, Livermore -- widely seen as the most likely internal candidate to succeed Platt -- is 40 and a 17-year veteran of HP, a relative youngster. She's also the only woman thought to be on the short list at HP or Compaq."
"``Employees are far less likely to put in 20 or 30 years learning the job like they once were,'' noted Thompson. ``As a result they don't really have the breadth or depth of experience that would prepare them to manage companies the size of HP and Compaq.''"
"Realistically, that means companies like Compaq and HP will have to cast a wider net. And it's possible that one or both companies will have to look outside the industry for the first time in their history, as IBM did in 1993 when it recruited Lou Gerstner from RJR Reynolds."
"``You don't necessarily need to know technology to run a Compaq or an HP,'' said Scott A. Scanlon, chairman and CEO of Hunt-Scanlon Advisors, an executive search advisory firm. ``If you go back to 1984, when (Apple founder) Steve Jobs said he wanted someone who could market computers like they were tubes of toothpaste and they went out and got (PepsiCo executive) John Sculley.''"
"While Sculley was eventually forced out of Apple Computer Inc., it's not as if the experiment was a failure. By the time he left, Sculley had presided over Apple's growth from $1 billion in sales to an $11 billion company, and helped solidify Apple's reputation as a technological innovator -- despite his background as a purveyor of ``colored sugar water.''"
"That same strategy could work for a Compaq or an HP, Sculley himself noted. ``When I was recruited to Apple, we thought that innovation was one of the defining traits of a technology company,'' Sculley said. ``Then Michael Dell showed that a different distribution model could also be used to successfully differentiate your company. In the age of the Internet, every company has to define its business starting with the customer, so the likely place to look for top CEO candidates are companies that are customer-focused, even if they aren't high-technology companies.''"
"But the challenge is far greater today, Sculley suggested. ``Companies like Compaq and HP are much more complex and larger then they were in the 1980s,'' he said. ``But I think the big challenge is that so many of the people who would be obvious candidates already have a good job, or they want to go run start-ups.''"
"That's a far cry from the old days. Traditionally, companies like HP, IBM and AT&T were the tech industry's training grounds, providing the entire industry with talented executives. And there were still legions of executives in gray -- or blue -- flannel suits happy to stay in the corporate family."
"Besides founders Bill Hewlett and David Packard, HP has had only two other CEOs, and both Young and Platt spent their entire careers with the company. Rod Canion left Texas Instruments to become a founder of Compaq and its first CEO; Pfeiffer, his successor, was one of the Texas-based company's first recruits."
"It isn't just that Internet start-ups are stealing future Platts and Pfeiffers from the arms of the companies that raised them, however. It's also true that in today's turbulent world, even the big companies don't offer cradle-to-grave security any more."
"``I think for many that point was bought home by Gerstner's initial actions as CEO of IBM,'' said Bob Frankenberg, CEO of Santa Clara-based Encanto Inc. and a veteran of more than 25 years at HP. Very quickly, Frankenberg recalls, Gerstner laid off tens of thousands of people."
"``People aren't willing to offer employers the same loyalty they once did, because they realize they can do everything right and still not have a job the next morning.''"
Week of May 16, 1999
Weaker Internet players are getting decreasing returns on marketing dollars. Onsale has one of the best returns on marketing dollars (approx. 8 to 1) while being one of the most out of favor stars of yesterday. Is this the first step toward profit expectations in Internet stocks?
The lack of regulation is the power of the Internet. Paraphrasing Adam Smith, this "invisible mouse" allowed the net to grow into the dominant economic force in the economy today. An Internet founding pundit warns us that intellectual patent proliferation poses a danger to the Nets continued growth. IBM, the hands down leader in patent registrations disagrees. Funny, the Internet did fine without IBM's support. The lawyers involvement in the Internet is incapable of doing anything but slowing growth. Some people want to stop freedom every chance they get. Thomas Jefferson would be disappointed if he were here today.
As an example of the power of the legal profession, during this week a bill to prevent an outbreak of lawsuits resulting from year-2000 computer problems is stalled in the Senate.
From the software world, Microsoft's Internet Explorer has passed Netscape's as the browser of choice. Zona Research reports that "59 percent of respondents are using Microsoft's Internet Explorer as their primary browser".
The important news of the week is that a new free email service like Hotmail or Yahoo mail will bring the power of high-strength cryptography to anyone with a Web browser. This technology is 1024-bit encryption is much stronger than the strongest crypto that the US government allows to leave the country under export control regulations. The product was created outside the USA and is now available for our use. The digital financier will adopt this technology.
Bulletproof Email for the Masses, by Lindsey Arent, Wired, 21.May.99 - "A new free email service aims to bring the power of high-strength cryptography to anyone with a Web browser." The DFIN staff will be adopting this and will report back to our readers.
"Hushmail, a Hotmail-style service, offers members the promise of near total privacy in their correspondence." "We have a basic belief that everyone has the right to have a private conversation," said Cliff Baltzley, the 28-year-old president of Hush Communications." "Strong encryption has existed for many, many years. We're trying to give this to every person on the Internet."
"The site, which launched in a public beta just under two weeks ago, will likely feed fresh kindling to the ongoing debate in Washington over the widespread availability of strong encryption tools." "Hushmail appeared mere hours after a US Ninth Circuit Court of Appeals ruled that the US government's restrictions on encryption were unconstitutional." Not that that matters in the case of Hushmail. The site uses 1024-bit encryption -- much stronger than the strongest crypto that the US government allows to leave the country under export control regulations."
"The United States prevents American citizens from exporting encryption of a quality that the government cannot break, on the basis that it might be used by hostile nations to communicate in total secrecy. But the site's patent-pending crypto process was developed abroad, so it is not subject to US export regulations. Non-US citizens wrote the code in the crypto-free tax haven of Anguilla -- a small UK protectorate in the Caribbean."
"That code is freely available on the company's Web site, where it can be scrutinized by cryptographers. "We want people to be able to look at the code to know that it's secure," Baltzley said. Hushmail will no doubt raise flags at intelligence agencies such as the National Security Agency and the FBI. "Law enforcement supports the use of strong encryption for legitimate purposes," said FBI spokesman Barry Smith. "Our concern is when advanced technologies are used by criminals and terrorists to the detriment of public safety." Many people stand to benefit from Hushmail's privacy, including dissidents, whistle-blowers, and human rights workers. The FBI argues that such a system might also be used by criminals and terrorists to communicate beyond the reach of wiretaps."
"Hushmail users can access an account from any computer that has a Web browser and Internet access. The encryption and decryption takes place inside a Java applet that Hushmail sends down to the member's Web browser. Privacy advocates have for years blamed backstage lobbying by the FBI and NSA for upholding the export regulations. Further, the US software industry says that the rules have led to the development of a robust overseas crypto marketplace. "
"Inside the US we don't care about the bit length or the algorithm used," Smith said. "We're concerned about immediate plain-text access to encrypted criminal-related texts or files pursuant to a court order." "Criminal terrorists take advantage of all kinds of innovative technologies to enforce their criminal acts." But the terrorist threat is largely unrelated to the Web-privacy issue, said Austin Hill, president of Zero-Knowledge Systems, a Canadian developer of Internet privacy solutions."
"This is no different than the privacy offered by an envelope on a piece of mail," Hill said." "Law enforcement agencies like to be able to listen in on Internet traffic in general, and [Hushmail] is one of the things that will make that more difficult. Anything that improves privacy for users has to be considered a win-win situation."
"Still, just to be safe, Hushmail's service agreement included a clause that requires users to keep their noses clean. "You agree to comply with all applicable local, state, national, and international laws and regulations," reads the agreement. "You also agree to not use Hushmail for illegal purposes ...."
"But Hushmail's founders aren't as concerned with criminals as they are with securing funding for their venture -- which will be supported by advertising. "Terrorism is one of the major issues of privacy," said Baltzley. "But terrorists use sidewalks, too. We all use sidewalks. Humans should be able to have private conversations."
Online campaign donations ready to take center stage, BY JIM PUZZANGHERA ,
"The move, stemming from a request by former Sen. Bill Bradley's campaign, could help underdogs like him compete in the increasingly big-bucks world of presidential politics, experts said. It also would signal the Internet's arrival as a political fundraising tool that soon could rival direct-mail and glitzy dinners."
"It's a very powerful symbol that online fundraising is an important and expected part of American campaigns,'' said Phil Noble, president of PoliticsOnline, a company that provides Internet and fundraising tools for politicians. It hasn't come of age yet, but it's just been born.''
"The Federal Election Commission is expected to approve the disbursement of matching funds for online credit-card contributions at a meeting in Washington this morning. It comes as the FEC begins grappling with issues involving the Internet and politics, including how to regulate banner ads for candidates on Web sites and links to candidate pages from other Web sites."
"Under the draft proposal, credit-card donations made since Jan. 1 would be eligible for matching funds. FEC commissioners today may consider making credit-card donations that are not made online also eligible for matching funds, said FEC official Ian Stirton. The request by Bradley, a Democrat, only involved online contributions."
"Federal funds match up to $250 of each contribution with public campaign money. Each candidate can receive up to about $16.75 million in matching funds for the 2000 election. Matching funds are only available for presidential races."
"Several candidates or their exploratory committees are soliciting credit-card contributions on their Web sites using secure servers, including Bradley and such Republican candidates as Texas Gov. George W. Bush, Sen. John McCain of Arizona and publisher Steve Forbes. But Bush's Web site, for example, specifically warns contributors that credit-card donations are not eligible for matching funds."
"Federal election rules are more stringent on the disbursement of matching funds because they involve the use of taxpayer money, Stirton said. One concern with credit-card donations is that it could be hard to determine the true identity of the contributor, allowing people to skirt rules that cap individual donations at $1,000 and prohibit contributions from foreign nationals."
"But the Bradley campaign has proposed a series of warnings on its Web site and blanks that contributors must fill out properly in order for the contribution to be accepted. A contribution would be kicked back, for example, if the credit-card billing address were different from the person's home address. A credit-card processing company also would screen the information to make sure it was correct."
"Paul Gronke, a Duke University political scientist who has studied the Internet's impact on politics, said it was inevitable that federal elections officials would have to deal with online contributions. Still, he warned that such contributions could be open to fraud. A foreign national, he said, could get somebody in the United States to open a credit-card account and use that to funnel contributions."
"I can within five minutes show you how to (make anonymous) who you are on the Internet,'' said Gronke. But he said fraud using online contributions would probably be no easier than it would be using the current system."
"The FEC also is working with Congress to require candidates to file fundraising reports electronically, to be posted immediately online. As legislation advances, Bradley and Vice President Al Gore last month became the first major presidential candidates to voluntarily file campaign disclosures electronically, said Kim Alexander, president of the California Voter Foundation."
"Should the FEC approve online matching funds, underdogs would have another weapon to battle the more organized and better-financed campaigns of big-name rivals such as Gore, she said."
"We live in a capitalist democracy where people speak with their dollars. My feeling is the electoral process needs to adapt as times change in order to make it as possible for as many people as possible to speak with their dollars,'' said Alexander, whose Sacramento-based non-partisan group advocates using new technologies to give voters more information. ``The Internet is a tremendous tool for grass-roots political organizing, and if you can make it more convenient for people to support your cause, more people are likely to support your cause.''
"The Internet is one of the best tools to reach out to new voters or people who have left the process. That applies to organizing and volunteers and money,'' Hauser said. Bradley's campaign has raised slightly more than $100,000 through the Internet so far, he said, though he did not know how much came from credit cards and how much came from checks. The campaign had raised a total of $4.3 million through the end of March, the most recent filing period."
"Though no figures were available, McCain's campaign has seen a ``steady stream'' of credit-card donations made on its Web site, said campaign representative Howard Opinsky. The campaign would welcome the ability to match those donations with federal funds, he said."
"We don't foresee the Internet fundraising component is going to make up a large portion of our donations, but like so much with the Internet, who knows what it's going to be six months from now or a year from now?'' Opinsky said. ``It could end up being important.'"
The Net: Who's Getting More Bang for the Marketing Buck, By Debra Sparks, New York - "BUSINESS WEEK's ranking of Net players shows that smart spending is the key to success.""U.S. stocks fell Tuesday after time Federal Reserve adopted a formal bias toward tighter monetary policy, a move that signaled the Central Bank's willingness to raise interest rates in the future. The Dow Jones Industrial Average closed unofficially off16.52 points, or 0.15 percent, at 10836.95. The Dow had been higher for most of the day until the Federal Reserve announced its new bias after its policy-setting meeting ended at 1400 EDT/1800 GMT. The news sent the Dow tumbling some 113 points, but then it quickly pared its losses as Wall Street digested the news that had been widely anticipated for days. "The initial drop may have been a knee-jerk reaction, but most people expected this," said Mara Glassel, vice president of Prudential Securities Equity Focus Group. The Fed in the past has gone to a tightening bias and never wound up raising rates so this could be a non-event." Softening the blow of the Fed announcement for the Dow was a big gain in shares of Hewlett-Packard Corp.
Berners-Lee warns against Net patents, By Mel Duvall, Inter@ctive Week, ZDNet, May 17, 1999 - "Father of the Web says patent proliferation poses a danger to its universality."
"Storm clouds are gathering around the issue of Internet patents, and at least one influential voice is calling on the industry to halt or closely guard their proliferation."
"Tim Berners-Lee, inventor of the World Wide Web, spoke out on the issue during a keynote address to the Eighth International World Wide Web Conference in Toronto last week, saying the unchecked awarding of Internet-related patents poses a danger to the universality of the Web."
""I appreciate the reasons why the patent system was set up, but there is a really big problem here," Berners-Lee told the congregation. "The bar for innovation seems too low. You are able to take an existing social practice and write software to do it and get a patent.""
"Berners-Lee said lawyers are rushing to patent technologies without adequate research for prior art, or they are attempting to apply patents beyond their original intent."
""The challenge is to prevent us from becoming completely paralyzed by fear, uncertainty and doubt," he added. "I don't think it's very conducive to people working together to create a universal Web." "
"Berners-Lee stressed that he was speaking as an individual, and not as a director of the World Wide Web Consortium. However, his statements were in line with a W3C effort launched a week earlier to try to quash an Internet patent."
"The W3C called on its members to bring forward examples of prior art, or technologies that predate a push-related patent Intermind received in January."
"Intermind's patent, 5,862,325, covers the way information is automatically sent from a server to a client. The W3C fears it may impede efforts to establish a Platform for Privacy Preferences standard, which lets clients and servers negotiate how a client's personal information can be used and distributed."
"It is the first time the W3C has attempted to have a patent ruled invalid."
"Intermind President Brian McManus said the W3C's move is "troubling to say the least," but he defended his company's right to patent technology it has spent years developing and benefit from its research. "They've dropped the ball on this one," he said. "We're pretty confident we've exhausted the research for prior art.""
"John Patrick, vice president of Internet technology at IBM (NYSE:IBM), also defended the right of a company to patent and license Internet-related technologies."
"IBM regularly wins the contest for filing the most patents with the U.S. Patent Office each year."
"There's a myth that patents aren't always good and that, if there's something that will be helpful to society, it should be free," Patrick said. "I don't buy it. I think the glass is half-full, not half-empty."
"Berners-Lee said one solution could involve companies' creating a code of ethics, where they would not patent or restrict the use of technologies that could expand the use and universality of the Internet."
Week of May 9, 1999
Treasury Secretary Resigns and the markets pays tribute by weakening. On the banking front, Inteco Research, predicts that more than 24 million U.S. households will be banking online by 2003. This is an increase from the 10.5 million that are banking online in 1999. Of greater interest, Wells Fargo has reported that they have over 1,000,000 Internet banking customers on there own.
TV and Internet took a step closer together when AOL negotiated a deal to allow AOL access through TV's. We now have strong efforts by AOL and Microsoft in the Internet TV delivery channel.
AOL, Five big U.S. banks sign online banking deal DULLES, Va., May 10 (Reuters) - The rapid growth in Internet Banking will be fueled by strategic alliances between banks and Internet firms such as AOL.
"America Online Inc.
IPOs Available on Internet By EILEEN GLANTON, AP Business Writer, NEW YORK (AP), May 8, 1999 - The highly exclusionary IPO market is opening up to Internet direct purchases.
"A few brokerages are turning to the Internet to find those investors who wouldn't normally buy stock in an initial public offering. It's not easy to get a piece of an IPO. The shares are usually off-limits because brokerages sock them away for their wealthiest clients and large institutional investors. Not anymore. William Hambrecht, one of the pioneers in the field, said his company's Web-based system helps ensure that ``a bid from an individual has the same standing as a bid from the largest institutional investor in the world.'' W.R. Hambrecht & Co. solicits offers over the Internet and awards shares to the highest bidders. Donaldson, Lufkin & Jenrette allocates some of the IPOs it is sponsoring to its online customers. And several companies offer portions of other brokerages' IPOs to their online clients. That's how Suresh Reginald, an investor in Malden, Mass., has made $15,000, by his own estimate, from newly issued stocks. He checks a list of upcoming IPOs every couple of days with brokerage Charles Schwab, and when a company strikes his fancy, puts in a request with a Schwab representative. Since January, he estimates he's gotten in on at least 60 percent of the deals he's requested. ``For non-Internet IPOs, I get in 100 percent of the times I request them,'' he said, calling the offerings ``a gold mine.'' In recent months, it's been hard to miss the big first-day payoffs of initial public offerings, especially for any company with a ``dot com'' in its name. In January, the business news Web site MarketWatch.com was offered as an IPO for $17. At the end of its first day of trading, investors were paying $97.50 _ a stunning 474 percent gain. High-tech issues aren't the only market darlings. This past week, investment bank Goldman Sachs sold 69 million shares at $53 a piece, raising $3.66 billion. In the days leading up to Goldman's market debut, clients placed orders for an incredible 800 million shares. So who got the 69 million that were available? Goldman won't specify, but estimates are that 70 percent of the shares went to institutions like pension funds. The remainder went to rich individuals. ``The majority of owners of this deal were either insiders or Goldman's best clients,'' said Charles White, portfolio manager at the brokerage Avatar Associates. ``It's a wonderful kiss for those people who wound up getting stock in the deal.'' Even so, many IPO payoffs are modest. And the coveted Internet stocks can be highly volatile. ``This is high-risk gambling,'' said Gail Bronson, a Palo Alto, Calif.-based analyst for IPO Monitor.com. ``No one knows when the roulette wheel is going to come to a screeching halt.''"
AOL launches satellite TV program, New service will combine digital satellite TV programming with AOL TV's Internet package., ZDNET and Reuters, May 11, 1999, AMSTERDAM - "America Online said on Tuesday it had entered four partnerships to develop its AOL TV product."
"They are DirecTV, Hughes Network Systems, Philips Electronics and Network Computer Inc, AOL said in statement released in Amsterdam."
"The AOL TV product will extend connected interactivity to the television," it added. Digital television service provider DirecTV will collaborate with AOL (NYSE:AOL) on a new service that will combine digital satellite television programming from DirecTV with AOL TV's television Internet service. Hughes Network Systems will design and build a dual purpose AOL TV/DirecTV set-top receiver, the statement said. "
"DirecTV and Hughes Network Systems are units of Hughes Electronics Corp, which itself is owned by General Motors Corp."
"Philips Electronics of the Netherlands will produce an advanced set-top box enabled for AOL TV and Network Computer Inc will provide the software platform for the product, the statement said."
"Network Computer is a privately held company based in Redwood Shores, California, that builds Internet software."
"AOL said its TV product will give members the ability to connect to the Internet service through their television."
"The set top boxes will use built-in 56 K modems over standard telephone lines and will also be able to use digital subscriber line (DSL) connectivity."
"No financial details of the partnerships were disclosed."
"Earlier Philips declined to confirm Dutch media reports that its order was worth 600 million guilders."
Formation of Net fraud council to be announced, Mercury News,
"The council, created at President Clinton's request, is to devise new ways to fight crimes in cyberspace, from credit card fraud to stock manipulation to get-rich-quick schemes."
"The council and complaint center will be the law enforcement equivalent of the Centers for Disease Control and Prevention in that ``a central response center will collect data, track the problem and do intervention,'' says William Boni, a director in the cybercrimes investigative practice of consulting firm PricewaterhouseCoopers, which is not associated with the project. "
"This is significant,'' says Boni, a former Army counterintelligence officer."
"The council is being created by the FBI; the National White Collar Crime Center, a federally funded training and research operation; and the National Fraud Center, a Horsham, Pa., fraud and risk management consulting firm."
"Council memberships will be offered to corporations, colleges and universities, government agencies and the media for annual fees ranging from $5,000 to $25,000. "
"For that, members can use the council's ``best practices'' seal on their Web sites, get up-to-date legal and legislative information relating to the Internet and access to education and training."
"Because the Justice Department has not tracked Internet crimes specifically, data collected by the complaint center is seen as an important step in tracking cybercrime trends. "
"This initiative will not only respond to consumers' needs for information but will be a tremendous help in learning about the scope of these crimes,'' says Richard Johnston, director of the White Collar Crime Center, which will manage the complaint center with the FBI. "
"An e-mail address has not yet been established for consumers to contact the center, which will open by late summer."
"The center, based in West Virginia, initially will be staffed with 10 analysts, but funding requests have been made for an additional 130, Johnston says."
"Announcement of the council's formation is to be made at a press conference at the Economic Crime Summit in Orlando."
"As the typical types of fraud reach into this new medium, somebody has got to begin to understand what the impact is,'' says Norman Willox, CEO of the National Fraud Center. "
"The government can't do that by itself, and industry certainly can't do that by itself.''
Week of May 2, 1999
While many companies continue to question if the Internet is real, on May 7, 1999 Mr. Jack Welch President/CEO of GE announced that GE has over 1000 "Internet fanatics". These "fanatics" are directed to find ways of working outside the normal channels. GE has committed to this costly basic research in the Internet Economy and we estimate their expense at over $100,000,000 annually. Based upon the premise that "we can only recognize that which we know" many companies better become familiar with the Internet before they are left behind. For those readers whose business is dedicated to the digital economy, congratulations!
We have focused upon the power of productivity gains and the benefits to the economy for years. We have also compared and contrasted the mid 1970’s deteriorating productivity and subsequent high inflation that we experienced because of the deterioration. In hindsight, we make the argument that the technology of the 1970 or lack thereof, was causing the US economy to peak out. The result was the high interest rates and declining productivity. The last remnant of the old economy is the Y2K problem. Once this is resolved we can refocus upon technological progress and the benefits derived.
I ask all readers to reflect upon the technological changes in their industry and ask yourself what staff level would be required to support current sales without the technological changes. Remember that we didn’t have electronic calculators until the early 1970’s and PC’s were an early 1980’s phenomenon (with the exception of Apple).
Greenspan Credits Technology , By John M. Berry Washington Post Staff Writer , May 7, 1999; Page A1 - "Federal Reserve Chairman Alan Greenspan said yesterday that an unexpected leap in technology is primarily responsible for the nation's "phenomenal" economic performance and the current extraordinary combination of strong growth, low unemployment, low inflation, high corporate profits and soaring stock prices."
"Previously, Greenspan had emphasized some temporary factors, such as falling oil prices and a strong dollar, that had benefited the economy. But he had only speculated about whether more long-term forces were at work. "
"But yesterday, in a speech in Chicago, he declared that the economy's performance "is not just a cyclical phenomenon or a statistical aberration" and instead "reflects -- at least in part -- a more deep-seated, still developing shift in our economic landscape.""
"The Fed chairman's sweeping assessment indicated that he believes the U.S. economy can continue to grow, within some limits, more rapidly than in the past without causing inflation to increase. That assessment, which is shared by many but not all of his Fed colleagues, also suggests that the central bank is unlikely to raise short-term interest rates as a result of the strong economic growth so far this year."
"Greenspan built his case around technological innovations, most of which involve computers and other information-processing equipment. This technology has helped businesses operate more efficiently, allowing them to control their costs and increase profits without raising prices."
"For example, new technology has enabled firms to keep better track of product orders, supplies, deliveries and all aspects of their businesses, allowing them to meet customers' needs more quickly and at lower cost while trimming expensive inventories. Greenspan also cited the way business use of the Internet is changing the way companies operate."
"In general, the effect has been to increase gains in labor productivity -- the amount of goods and services produced for each hour worked. And companies expect to see productivity gains continue to accelerate, Greenspan said."
"Meanwhile, most employees' pay increases have been well above the rate of inflation, he said. That means that workers' buying power has grown, even if wage gains appear small."
"Despite the Fed chairman's positive message, financial markets reacted negatively to the speech. Bond and stock prices fell. The yield on a 30-year U.S. Treasury bond rose to 5.78 percent, from 5.70 percent at Wednesday's close. The Dow Jones industrial average was down 8.59 points, or 0.08 percent, at 10,946.82. The technology-heavy Nasdaq composite index plunged 62.17 points, or 2.45 percent, to 2472.28."
"Many financial analysts and traders focused not on Greenspan's remarks about a fundamental improvement in productivity but on a caution, which he has given before, that if the nation's jobless rate -- 4.2 percent in March -- continues to decline, at some point wages will begin to rise in an inflationary manner."
"At some point, labor market conditions can become so tight that the rise in nominal wages will start increasingly outpacing the gains in labor productivity, and prices inevitably will then eventually begin to accelerate," he warned."
"The analysts and traders took that comment as a sign Greenspan may be leaning toward increasing short-term interest rates, perhaps as early as the Fed's next policymaking session May 18."
"A few analysts, including Bill Dudley, chief economist at Goldman Sachs & Co. in New York, had a more sanguine view."
"I thought the speech was balanced, even friendly, for the market," Dudley said. "The magnitude of his discussion about productivity and the conclusion that it was not a statistical aberration . . . and his comments about a shift in the economic landscape stuck me as very positive."
"I didn't see anything in the speech that suggested that the Fed is contemplating a rapid shift in monetary policy," Dudley said. "
"Greenspan did caution that "the rate of growth of productivity cannot increase indefinitely." If it falters, it could come as a shock to Wall Street, where the technology-based gains have generated what Greenspan called "a major upward revaluation of business assets, both real and intangible." "
"And as he has suggested many times before, he believes, "that revaluation has induced a spectacular rise in equity prices that to many has reached well beyond the justifiable.""
"Greenspan said the unexpected jump in productivity is the major reason that for the past three years so many forecasters, including those at the Fed, have underestimated economic growth while overestimating inflation."
""The evidence appears to be mounting that, even if productivity does not continue to accelerate, the pickup already observed does seem to explain much of the extraordinary containment of inflation despite the ever-tightening labor markets of recent years," he said."
"The new technology has enabled businesses to increase production without hiring more workers. And some old production and distribution processes, "so essential when information and quality control were poor, are being bypassed and eventually eliminated. The increasing ubiquitousness of Internet Web sites is promising to significantly alter the way large parts of our distribution system are managed," he said."
"Purchases of equipment using the new technology has also increased production capacity faster than businesses have increased production, Greenspan said. This "has put greater competitive pressure on businesses to hold down prices, despite taut labor markets.""
"At the same time, the improved flow of information combined with reduced trade barriers has increased competitive forces globally, restraining prices in all countries, he continued."
Electronic ink makes real-world debut,
"E Ink of Cambridge, Mass, will announce that a handful of J.C. Penney stores will use its signs for displays - the first time electronic ink will make it out of the lab."
"E Ink was spun-off in 1997 from discoveries made at the Massachusetts Institute of Technology."
"Electronic ink is real ink on paper or a similarly thin display. But the ink can be changed just like letters on a computer screen. One ultimate goal is to make a book that looks and feels exactly like today's books, except its contents could be changed by downloading a new book onto the paper."
"The concept seemed far-fetched just a year ago. ``It's come from an experiment in a chemistry lab to a clearly defined product,'' said Dennis Wong of McCann Erickson Venture Group, an E Ink investor."
"The first sign, in the sports clothing department of a Marlborough, Mass., Penney store, is about as thick as the brim of a baseball cap and consumes less energy than a light bulb."
"To a shopper, it looks like a large printed sign. But every few seconds, the sign changes. Unlike a typical electronic display, E Ink's looks the same from any angle and in any light, said J.C. Penney technology manager Ed Sample."
"The retailer also plans signs in Dallas and Chicago stores."
"E Ink, still a private company, continues to drive toward books and newspapers. For instance, E Ink could eventually make it possible to buy one copy of a newspaper, then have it updated via radio signals each morning."
Worker auctions catch on at eBay,
"New auctions are popping up so fast on eBay that the online trading community may one day have to create a whole new category: high-tech workers for hire."
"
"The original team of 16 high-tech engineers auctioning themselves off on eBay for $3.14 million halted bidding on Thursday, but plenty of others have already taken their place, starting bids at anywhere from 1 cent to $800,000. They range from Internet development teams to ``Computer Geek: Extremely Dedicated + Personable.'' "
"High-tech recruiters beware: These guys say they can sell themselves person to person. If this e-bidding trend continues, you could be out of a job."
"One group of four systems engineers and administrators, who hail from a major Internet media company in the Bay Area, opened bidding at $400,000. ``Forget those other guys,'' eBay Item No. 97672679 reads, ``we're better, cheaper and FASTER. We can bring you from ground zero to massive in as low as two months. No lame management overhead, we work as a team to work at lightning speed. We will make your start an Internet star!''"
"The copycat auction is supposed to be a joke, two of the four high-tech workers told The Times -- but say they would entertain serious bids."
"``We saw the original posting and we just proceeded to laugh our heads off,'' said Benjamin, 21, who asked that we not use his last name. ``We're not disgruntled workers or anything but if someone came up with $400,000, we wouldn't have any qualms about leaving.'' "
"The $400,000 is a signing bonus, by the way. A high bidder would then have to negotiate salaries with the foursome."
"So far, no one has bid for the group, but several recruiters have sent e-mails, Benjamin said."
"``Feel free to put up a bid for us,'' said Tom, a senior systems administrator who posted the listing. ``We're worth every penny.'' "
"Wade Olson, 26, and Aaron Gaalswyk, two of four workers who make up an Internet development team for hire out of Minneapolis, are very serious. They posted Item No. 98063416 on Friday, opening bidding at $780,000 for one project manager, one database manager and two software engineers. The $780,000 figure is one year's salary for the team. Relocation and travel expenses are extra."
"``We're just cutting out the middle man and advertising ourselves,'' Olson said. ``In all industries, everyone is trying to streamline to get the biggest piece of the pie they can. You're starting to hear about athletes avoiding agents and signing contracts themselves. I don't think technical professionals are any different. Workers with strong technical skills can demand top dollar and cut their own deals, too, Olson said."
"So far there have been no takers for any of the auctions. eBay is taking a wait-and-see attitude. ``We'll just have to watch it and see what develops and what kind of feedback we get from users before we create a special category,'' said eBay spokesman Kevin Pursglove."
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