December 23, 1998 6:10 PM PST

Compaq to license digital cash technology

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Compaq will license the technology for MilliCent, its digital cash product, to an outside partner.

Compaq has posted that decision on its Web site, along with the results of its trial run of MilliCent.

"Compaq?plans to license MilliCent to extend its payment product portfolio and leverage hardware and service with target accounts," the Web posting reads.

Digital cash has been touted as a way for Internet users to purchase small bits of content for small bits of cash. So far, it has failed to live up to its early promise.

Compaq will license the product to "a technology partner," said MilliCent business manager Russ Jones. He declined to give more detail. "It would be premature to talk about who we are talking with," he said.

According to Jones, the decision has little to do with the digital cash industry's troubles. Rather, he said, it has to do with Compaq's acquisition earlier this year of Digital Equipment, which developed the technology.

"Compaq, in spite of it's enormous size, is incredibly focused," he said. "It's more focused on selling systems and platforms using third party software and on providing service. So the general consensus here is that MilliCent should come from an outside technology partner."

In the meantime, Jones said MilliCent's trial run went "extremely well." The trial had 10,000 users buying small pieces of content from more than 45 vendors, including the Oxford University Press, which sold dictionary lookups; and the University of California at Berkeley, which sold individual book chapters.

About 84 percent of the transactions were for less than 25 cents, and 73 percent were for less than 5 cents. The median transaction was for 2 cents, but, thanks to a few people who spent a few dollars at a time, the mean average was 30 cents. "This trial showed there is a market for very small transactions," Jones said, noting that for most other products, such as CyberCash's CyberCoin, minimum transaction amounts are for 25 cents or more.

The digital-cash industry has been sinking fast. In November, DigiCash announced it was filing for Chapter 11 bankruptcy protection after having reduced its payroll from 50 to just six in the preceding seven months. First Virtual Holdings left the business entirely in July.

The reason for all the trouble, said industry analyst Vernon Keenan. of Keenan Vision, is that consumers aren't disposed to downloading the necessary wallet software to take part.

"Digital cash is dead as a doornail," he declared. "This is a crypto-technology that will continue to sit on the shelf until smart cards [which electronically store money and can be swiped into PCs and other devices] become pervasive."

Reporter Dawn Kawamoto contributed to this story.

 

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