June 2000

Contents

  • Industry Focus
    Microsoft Plans To Unveil New Patch To Make Outlook E-mail More Secure

 

 

IPO Market Wakes Up with 3 New Hotshots

Three new offerings stand to inject some energy into an otherwise deflated IPO market as a total of seven deals look to raise $611 million in proceeds. Regardless, a pending Federal Reserve meeting could keep any real enthusiasm at bay. At the end of April, the unemployment rate came in at 3.9%, a 30-year low, suggesting that wage pressures are mounting due to a tight labor market. The decline marked the first decrease since August of 1998. In addition, Producer Price Index dropped for the first time in more than a year, indicating that inflation is in check. Regardless, the IPO market should remain relatively quiet as investors wait for the market to stabilize.

New Focus designs fiber-optic products for optical networks. The company's products include fiber amplifier products, wavelength management products, high-speed opto-electronics, tunable laser modules and advanced photonics tools. New Focus' products are designed to be more compact and use less power than traditional fiber-optic products. New Focus hopes to raise $75 million in a 5 million-share offering, expected to be priced between $14 to $16.

IBeam uses satellites to broadcast streaming media over the Internet in order to avoid traffic congestion. Morgan Stanley is underwriting the 11 million share offering deal, which plans to raise $110 million by issuing shares in a price range of $9 to $11.

Pixelworks is a semiconductor company that delivers broadband, enabling people to access any information in real time over any network from any place. Salomon Smith Barney and Deutsche Banc Alex Brown are underwriting the deal which plans to raise $74.5 million by issuing 5.75 million shares in a price range of $12 to $14.

NTT Unit To Buy Verio For $5.5 Billion

The Japanese telecom group’s cell-phone and long-distance units have unveiled back-to-back plans for a pair of acquisitions -- KPN Mobile in Europe and Verio in the U.S. -- totaling $10 billion in cash.

NTT Communications would pay $5.5 billion to acquire all of Colorado-based Verio, a leading Web hosting company. The NTT group’s long-distance and international arm already owned 10 percent of Verio.

In announcing the biggest overseas telecom acquisition by a Japanese company, NTT Communications emphasized the importance of developing an Internet services business in the U.S. market with a partner that would also add value to its activities and investments in Asia. The deal would also mark the largest acquisition abroad by a Japanese telecom company. More overseas transactions by the NTT group may be on the way, however. NTT DoCoMo Inc., the mobile-phone unit, has had its name linked in talks about a possible an investment in Dutch carrier Royal KPN NV.

NTT Communications already owns 10 percent of Verio, a stake it bought last May that is worth about $500 million. A tender offer of $60 per share for the rest of Verio's outstanding stock will begin in May.

The proposed all-cash deal, expected to close during the third quarter of this year, stands out against the many stock-swap transactions by large companies eager to embrace fast-growing Web-savvy technology upstarts. The acquisition of Verio gives an important leverage for expanding NTT business as a full- service global player.

The combined company would integrate NTT Communications' Internet protocol network in Asia and Verio's Web-hosting and e-business platforms in the U.S.

Both deals, Verio and KPN Mobile, make strategic sense in terms of business development and geography. But looking at the industry's merger map they are trailing rather than trailblazing moves.

For Silicon Alley, The Good Old Days Are Now

In Silicon Alley the surest sign of nostalgia craze was the recent New York Magazine cover story about the class of 1995 — the "original" Silicon Alley crew. Back in 1995, only NewYork.com ("@NY") was covering Silicon Alley, publishing a biweekly e-mail newsletter. Back in the day Silicon Alley was a derisive joke, an ongoing gag.

Those days did have much to recommend them. There was a sense of revolutionary conspiracy in the air, a spirit of creativity, a sense of adventure. Of course, it was a kind of exclusive place as well. Today the sense of revolutionnary conspiracy is gone while the exclusiveness and posturing remain, but despite that, the reality is that Silicon Alley circa 2000 is not only a vastly different place than Silicon Alley 1995 — it’s also a vastly better place.

The new face of Silicon Alley is more entrepreneurial, more technically sophisticated, more experienced, more diverse, less naïve, and in some ways more creative than we were five years ago. First of all, business models are smarter, because the entire industry is more mature. But also the next generation Silicon Alley entrepreneurs are thinking of new ways of improving on the old ideas of targeted advertising and data mining.

Second, the companies are developing their own platforms for content delivery, not just relying on being handed a platform by technologists from the West Coast. Thanks to the technology expertise, they are developing their own platforms for new media like wireless devices and broadband to desktop and set top. Third, we’re importing talent, money, and companies now and it’s vastly expanding our resource pool. There’s a new kind of New York City immigrant — the technoimmigrant.

Finally, the naivete is gone. People now know what it takes to launch and grow an entrepreneurial business. Now entrepreneurs who have learned lessons are plowing their knowledge and their money back into new start-up in town, giving the new Silicon Alley an backbone the old Silicon Alley never had.

Microsoft Plans To Unveil New Patch To Make Outlook E-mail More Secure

Microsoft Corp., scrambling to make its popular Outlook e-mail program more secure in the wake of the disastrous "love bug" computer virus, will introduce a new "patch" for the program that blocks users from ever opening the type of electronic attachment that carried the bug.

The patch, which should be available at no cost on Microsoft’s Web site early next week, is even more restrictive than an earlier, attachment-related security update Microsoft made available last year. The decision to take the precautions was made after the rapid spread of the "love bug" virus, which crippled computers around the globe and was spread primarily though Outlook.

Though the security change will likely be included in future versions of Outlook, users who want the added security have to take the step of downloading the update themselves.

Still, the move is a major philosophical shift for the Redmond, Wash., software company, which until now has erred on the side of offering as many features as possible-even thought it might make a computer more vulnerable-when designing computer programs such as Outlook.

In the past, Microsoft was "aggressive" about security, but also "reactive", as the company tried to strike a balance between protecting customers from viruses and giving them flexibility to use all the features of Microsoft’s popular e-mail, word processing and spreadsheet applications. Those features included the ability to open certain types of attachments that run new computer code, such as the Visual Basic Script code that triggered the "love bug".

Of course, there is a trade-off. If users download the new patch, they won’t be able to open even benign running VBScript or some other types of code. Now, most Outlook users have the options of saving attachments to their computer hard drive to open later. Still, using the new patch, the attachments aren’t completely lost.

Network Solutions, AOL Ink Marketing Deal

In a bid to remain the top player in the domain name registration business,

Network Solutions Inc. inked a multi-year, multi-million dollar marketing agreement with America Online Inc., which lets visitors to AOL's properties register domain names through its sites.

It's not a new strategy for Network Solutions, which, in March, agreed to be acquired by Verisign Inc. The company has long believed in top-tier portal deals, while rivals like Register.com have forged second-tier and vertical portal agreements. Network Solutions in March inked a two-year deal with Microsoft; in February it signed with Alta Vista and in November it expanded its relationship with Yahoo!

NSI and AOL are global leaders, and together, will help countless small businesses and individuals make a name for themselves on the Internet. When the Internet Corporation for assigned Names and Numbers (ICANN) opened up domain registration to companies other than Network Solutions, AOL was one of the early players accredited to register domains. But the company has never emerged as a major player in the space.

The new deal will make Network Solutions' services available through co-branded sites across AOL's properties -- AOL, AOL.com, CompuServe, Netscape Netcenter, Digital City, ICQ and Spinner/Winamp, including the international services.

Members of, and visitors to, AOL's properties will be able to register domains, and access Network Solutions' other services like Web site design. The company's pending acquisition by VeriSign hasn't been forgotten in the deal. VeriSign's security services will be promoted across AOL's business channel. The AOL/Network Solutions co-branded sites will also promote AOL's business services, including the Netscape Business Directory, which will include data from NSI. NSI has also agreed to distribute a co-branded version of Netscape Instant Messenger.

Japanese Business in the United States

u Toshiba Corp. and SanDisk Corp. have agreed to set up a joint venture in the U.S. state of Virginia to manufacture flash-memory chips. The new company is scheduled to begin production in July 2001. It will start out making 512-megabit chips before moving into 1-gigabit and 2-gigbit models. By 2002, the venture is expected to produce the equivalent of 17,500 8-inch wafers a month, and to generate some 1billion-yen in sales of memory media for digital cameras and next generation of cellular phone. v

u Sanyo Electric Co. plans in July to begin sales in the U.S. and South Korea of portable audio playback gear equipped with memory chips. Although the market for devices is expected to grow in Japan as record companies begin distributing music over the Internet, Sanyo sees even greater demand in the U.S. and South Korea, where personal computer are more prevalent.

The company will roll out the new headphone-style player, which is expected to sell for the equivalent of about 40,000 yen; Sanyo is targeting fiscal 2000 sales in the two countries of 250,000 to 300,000 units. v

u Fujitsu Ltd. plans to strengthen development of software for data-storage system to meet the growing need for efficient storage management and operation solutions. As part of its strategy, the company has begun working with major U.S. switch manufacturer Brocade communication Systems Inc. to develop software that integrates management of storage-area networks (SANs) The partners will develop software for monitoring hardware devices as well as package that enable remote system management and data backup. v

u Honda Motor Co. will team up with General Motors Corp. in the field of broadcasting, taking a stake later this year in XM Satellite Radio Inc., a digital satellite broadcaster in which GM has invested. This will be the first time that a Japanese automaker participates in a U.S. satellite-radio broadcaster offering services targeted at motorists. Honda is also looking into working with the U.S. automaker in the field of intelligent transport systems. Honda is putting the finishing touches on a deal centered around its investing $50 million in XM Satellite Radio, which is expected to give it about a 5% stake. XM Satellite Radio is developing a service that will beam up to 100 channels of news, music and other entertainment throughout the U.S. v

u Yorozu Corp., a press-parts maker affiliated with Nissan Motor Co., plans to construct a second North American plant in 2001 from which it will supply suspension parts to General Motor Corp. GM has ordered suspension parts from Yoruzu for a new passenger car that will debut in 2003. To get ready for the start of the order, Yoruzu as early as this year will establish a local production subsidiary in the suburbs of Detroit. Yoruzu will also double the annual suspension production capacity at its Tennessee factory to 600,000 units. v

Contact Information: Morgen, Evan & Company, Inc. Copyright 1999