January 1, 2000 6:00 AM PST

The week in review: Waiting for Y2K

The high-tech world prepared for Y2K, and waited with the rest of humanity for what has become the planet's first truly international event.

After a year of giant mergers, high-profile lawsuits and exponentially expanding Internet usage that brought e-commerce into the mainstream and sent Net stock shares climbing, governments officials and executives alike spent the week bracing themselves for the millennium bug. The much-talked about programming glitch could cause computer systems that read only the last two digits of a year to misinterpret 2000 as 1900, potentially disrupting countless daily activities.

Y2K
In the final days and hours leading up to the beginning of 2000 A.D., experts and observers pronounced themselves confident no major disasters would ensue, but warned smaller problems were likely.

The world's first wired nations to reach the milestone reported so far so good. In the United States, one of the last countries to reach the new century, Americans showed no signs of hoarding cash, food or other supplies.

But system failures could be spread out over the coming year, after the world's vigilance has dropped.

Regardless the outcome, the price has been steep. One research firm estimated the total cost of the Year 2000 bug to be from $300 billion to $600 billion. By comparison, the worldwide information technology industry is worth an estimated $2 trillion. A majority of large organizations have spent at least 10 percent of their IT budgets in 1998 and 1999 on Y2K compliance efforts and testing.

Other problems
Computers with the newest version of Apple's Macintosh operating system software could be used as unwitting aides to Internet attacks in which target computers are flooded with messages from third-party systems, causing the target to crash. Mac OS 9 is susceptible if a computer is hooked up to the Internet via "always on" DSL or cable modem connections. Apple issued a fix and suggested that at least some reported problems could be a case of simple misunderstanding. Security experts have warned of the possibility of attacks coinciding with New Year's Eve and Y2K.

Customers have been complaining that some of Compaq's consumer PCs have been repeatedly freezing up. Too many software programs, including Windows 98, are competing for limited memory resources, causing the systems to slow to a crawl. Compaq's problem may represent a much bigger issue: Almost all PC makers are struggling to balance the demands of Windows 98 and other programs intended to provide increased functionality.

Microsoft's popular Hotmail email network was partially paralyzed over the Christmas holiday when it failed to pay a $35 registration fee for the domain name Passport.com. The oversight was remedied by a Linux programmer, who covered the payment with his personal credit card. Within hours, Hotmail was back online.

Happy returns
Online sales slowed shortly before Christmas Day as the likelihood of on-time deliveries decreased. Home users spent just under an estimated $900 million in the week of Dec. 13-19, a 25 percent drop compared to the holiday shopping peak of about $1.2 billion for the previous week, according to a survey. E-tailers' generally untested ability to handle returns also frightened investors, who sold shares after the holiday.

DVD players were in such demand in 1999 that the Consumer Electronics Association twice revised its sales estimates to match current growth. Sales will likely more than double original projections. The high-capacity storage technology's time seems to have arrived. DVD was once considered too pricey for computers and too risky as a replacement for VHS tapes, but both PC makers and entertainment companies have now embraced the medium.

Crossroads
RealNetworks and Yahoo arrived at a crossroads in their relationship as a major contract involving streaming media services on the portal's Broadcast site was set to expire. Sources close to renewal negotiations said Yahoo Broadcast, which aggregates live media events, is seriously weighing at least three scenarios that would result in a reduced role for RealNetworks, which currently has preferred status. The alternative would be Microsoft's Windows Media.

Microsoft exercised warrants for a $20 million (and 4.7 percent) equity stake in Commtouch Software, a provider of outsourced email and messaging services. The giant appears to be hedging its bets against Web offerings that could eat into its core software business. Such services compete with Microsoft's Hotmail and Outlook and Exchange email suites.

Upstart Net appliance maker Qubit teamed with software developer Be for use of its Stinger operating system in a new line of wireless devices. Qubit's forthcoming $400 Web surfing and email device, a large-screen device featuring the ability to connect to the Internet wirelessly, is one of many products vying for attention in the emerging market for easy-to-use, home appliances.

In court
Acting on a suit filed this week, a Santa Clara County, Calif., judge rejected the movie industry's request for a temporary restraining order against 72 named and anonymous individuals who stand accused of trade secrets violations for helping distribute a program that can thwart encryption on DVDs. The industry faces a tough legal battle in its attempts to stop the Web distribution of DeCSS, legal experts say.

eToys extended an olive branch toward ending a bitter domain name dispute with a Swiss-based art group that owns the name etoy.com. The online toy retailer offered to drop its lawsuit if etoy withdraws its countersuit. eToys executives said overwhelming support for the artist group prompted the move, but an etoy attorney said the settlement proposal indicates eToys also wants control over the content of the group's site, which eToys believes is unsuitable for children.

Also of note
The tech-dominated Nasdaq composite index closed above 4,000 Wednesday, capping an astounding year in which it gained a record-breaking 84 percent ... Shares of Qualcomm jumped significantly after an analyst initiated coverage of the wireless technology firm with a 12-month price target of $1,000 per share. Qualcomm also split 4-to-1 ... Cox Communications topped 100,000 subscribers for its residential local phone service, signaling a milestone for the emerging cable telephony market ... Competing digital formats, piracy and technical woes helped put a damper of digital music sales during the holiday season.

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Y2K, Week in review, PC company, MSN Hotmail, Compaq Computer Corp.

 

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