From the Ether

SAN MATEO (01/21/2000) - Microsoft, Internet stocks, residential broadband, Y2K, and AOL-Time WarnerNO, I WASN'T entirely wrong in 1999 about Microsoft Corp., the year-2000 problem, Internet stocks, residential broadband, and America Online-Time Warner. But who's keeping score?

Microsoft

Since 1991 I've been saying Microsoft is guilty of illegal anti-competitive practices. In 1999, Federal Judge Jackson agreed, finally.

So Microsoft will be enjoined from anti-competitive behaviors, such as exclusive distribution agreements. It will be restructured into two or three companies. And it will be punished with big fines -- Bill Gates thumbed Microsoft's nose at Anne Bingamen's antitrust consent decree, and it's not nice to fool with Mother Nature.

On December 14, 1999, I predicted Gates would be replaced as Microsoft CEO during 2000. Microsoft needs a levelheaded CEO, and I suggested Steve Ballmer (ha). Many of you scoffed. Gotcha! on January 13. OK, had I named a date, it would have been later. I hadn't realized Gates would act in anticipation of a breakup -- Microsoft to be headed by Ballmer and the spinout by Gates himself.

Meanwhile, Microsoft goes through the motions of fighting the breakup, saying, "Please don't throw me into that briar patch." I guess they now secretly prefer a breakup to any serious behavior modification and big fines. They see big breakup benefits for shareholders.

They see that AOL-Time Warner is wrong to be merging right now. Microsoft has outsmarted AOL by understanding first that smaller is better.

Y2K

At midnight Dec. 31, 1999, many computers incorrectly updated their internal calendars and produced erroneous results. Having never before experienced a computer malfunction, we were all totally surprised by year 2000 and civilization ended. Not.

So now we have five kinds of Y2K people.

1. Those like me who always thought Y2K was mostly hysterical fear-mongering.

2. Those now congratulating themselves for investing billions to get Y2K-compliant. This is OK if they finally replaced critical software still running under 1401 emulation.

3. Those who are now calling malfunctions of anything a Y2K glitch just to get interviewed on CNN, which is part of AOL-Time Warner.

4. Those who warn that Y2K bugs could still bite, so don't return your extra ammunition just yet. For example, there is Feb. 29, 2000, which will surprise those people who recall correctly that 1900 was not a leap year.

5. And then there are those Y2K people who tell us that the third millennium doesn't start until January 1, 2001. So we can keep up our Y2K preparations for at least another year.

Internet stocks

Throughout 1999, I predicted the Internet stock bubble would burst on November 8. A few people think I was right and are buying in after the correction. But it will get much worse. Even strong Internet companies such as AOL, valued at 200 times earnings, are grabbing chairs, such as Time Warner, valued at only 100 times earnings. Only.

Residential broadband

During 1999, I was upbeat about cable television modems (CTMs) and less so about Digital Subscriber Lines (DSLs).

According to International Data Corp., a market research company in Framingham, Mass., on the board of which I serve (www.idc.com), 36 million of the 102 million U.S. households were online in 1999. Some 1.34 million had CTMs, and 330,000 had DSLs. And 4.5 million of 7.67 million companies were online -- 150,000 with CTMs and 150,000 with DSLs. IDC projects 65 million online households by 2003, 9 million with CTMs and 9 million with DSLs.

America Online, Time Warner

Time Warner is the largest cable television operator in the United States, with 65 million TV subscribers. And you thought AOL was buying Time Warner for Looney Tunes.

Technology pundit Bob Metcalfe and his columns are at www.infoworld.com/metcalfe.

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