Broadband Week Direct - Daily News 10/5/00

Today's report from Web Editor Susan Rush

• TW Withdraws EMI, Focuses On AOL
• Microsoft Investment Slips
• Harmonic Slightly Off Key
• Broadband Briefs

TW Withdraws EMI, Focuses On AOL

Time Warner is being forced to change its tune. Despite TW's last minute concessions to the European Union to win approval for its merger with EMI, the EU was not going to bite. To avoid a negative ruling TW has withdrawn its clearance application (for now), and will focus on getting the EU's consent for its $135 billion deal with AOL.

The EU's concerns that AOL-TW-EMI triangle would stamp out online music distribution were simply too great to approve the EMI deal, according to industry analysts. The EU was reportedly using its approval of an AOL-TW union as a bargaining chip to get concessions on the music transaction.

Both EMI and Time Warner concede that they are shelving the merger, but will continue discussions with the each other and EU. TW would not comment on how this new development would affect its status with the EU on AOL, but remains upbeat. "Our conversations with the European Union [regarding the AOL deal] are proceeding well. We are confident that we will successfully address all of the issues raised in our review. We are on track to close in the fall," says Scott Miller, a spokesperson for Time Warner. The EU is expected to rule on the AOL-TW deal on October 24.

Microsoft Investment Slips

Last month, Microsoft suffered a blow when AT&T announced plans to move forward with interactive television tests with the software provider's rival Liberate Technologies. Well, the hits just keep on coming. Its investment in AT&T of nearly $5 billion in March 1999 has dropped in value by almost $1 billion during the last fiscal year, according to a report filed with the Securities and Exchange Commission.

When Microsoft announced its investment about a year and a half ago, AT&T was trading at nearly $62 a share; the stock has since fallen drastically to below $30.
Investors, including Microsoft, may be getting antsy for positive stock results, but the company is not ready to sever its ties with the communications giant. Microsoft knows that AT&T will provide a vehicle to deliver its interactive software to the broadband industry. "Having a broadband infrastructure in place is really the core piece of what is needed to make this whole new generation of interactive services available to people," says a Microsoft spokesperson.

Harmonic Slightly Off Key

Broadband service provider Harmonic is singing the blues over its third quarter sales projections. The company expects to take a hit for the second consecutive quarter, bringing in a pro forma net loss of 6 to 9 cents a share for the quarter ending September 29, 2000. Following the news, Harmonic stocks fell 39 percent to 13.88 in today's trading, as of 1:12 EST. The stock is well below the company's 52-week high of 157.50.

The broadband access networks division, which includes fiber-optic products, expects revenue of $43.5 to $44.5 million, compared to $53.2 million in the previous quarter. One bright spot for Harmonic is its convergent systems division. CS should report an increase in revenue for the quarter thanks to a few contract wins, including a deal to provide headend technology for BellSouth's digital satellite direct-to-home deployment. Revenues of $27.5 million to $28.5 million are expected for the unit, up from $26.8 million in the previous quarter.

These results are preliminary, definitive numbers for the quarter will be released on October 18.

Broadband Briefs:

U.S. Online inks a deal to supply high-speed Internet and related data services to three Frankel Family Trust properties. The service provider will bring high-speed access to 1,282 apartments units in California and Texas.
Hughes Electronics Corp. is expected to meet analysts' forecasts for the third quarter. The satellite company projects cash flow from operations for the quarter will be between $90 and $110 million.
SBC Communications tabs Lucent Technologies as its primary provider of data, voice and access infrastructure technology. The $1 billion agreement spans the next five years.
To expand its network in Florida, 360networks (www.360.net) is selling EPIK Communications almost 4,000 miles of dark fiber in its national network in exchange for 375 miles of EPIK's dark fiber between Jacksonville and Miami.
Ameritech officials are denying media reports that the company is taking down its DSL service regularly, despite claims from the company's tech support representatives that the DSL provider is "taking down" service regularly because its infrastructure can't handle the usage load.
OpenTV has filed an application with the U.S. Patent and Trademark Office to expand the scope of one of its patents to include single interaction "one click" shopping and set-top box storage of personal information.
mPhase Technologies releases mPhase Test Access Shelf, a system developed for telcos to determine whether or not "last mile" local loops are adequate for supporting DSL services.