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Technology / AI and automation

MONTGOMERY EXTRA

You make a grown man cry – actually Microsoft Corp is laughing all the way to the bank and shared its delight with the money managers at the Montgomery investment conference, telling them that sales of Windows95 are where it expected they would be, four weeks after the much-trumpeted operating system first hit retail shelves: however, chief operating officer, Robert Herbold, would not give details beyond repeating that Microsoft sold 1m copies of Windows95 in the first week and he dismissed recent comments by analysts that the pace of sales had slowed since that first, heady week; No, no, he said, things are going well, with Fortune 1000 companies upgrading tens of thousands of desktops.

Broderbund Software Inc’s planned acquisition of Learning Co (CI No 2,696) will offer it easier market penetration, faster revenue growth and added clout in the educational market, the company’s chief financial officer, Michael Shannahan, said: Learning Co, as the leading US educational software company, will push Broderbund to the number one spot in that market and give it better access to direct sales to schools, as well as giving it better access to international markets; also Learning Co has seen its revenues grow in the 40% range annually; Broderbund’s sales grew some 54% in its fiscal 1995 year but normally grow more slowly than that and analysts expect them to grow about 36% in 1996; the deal is a $440m share exchange and it is expected to close in late October.

Looks likes the pace of acquisition and consolidation in the networking industry is not slowing down: 3Com Corp chief financial officer Christopher Paisley said he would not be surprised if there were more acquisitions before the end of the year, by 3Com, which is already acquiring Chipcom Corp, and in the industry generally, he told Reuters; the Chipcom deal will likely be dilutive to 3Com results in the first half of this fiscal year, become neutral in the second half and become accretive by next year, the fiscal 1997 year; 3Com’s market share in desktop adaptors is growing and is now greater than 40%; the systems business, which makes up most of its revenues and was the significant factor in the company’s recently reported strong first quarter results, is growing faster than its competitors’, at 23%, although the company is ranked fourth in market share in systems; 3Com’s gross margin, which improved to 53.6% in first the quarter, is likely to trend downward as the company absorbs its acquisition of Chipcom, Paisley said, after which margins will rebound, he predicted.

There’s been no escaping the rise of the on-line services at this year’s Montgomery Securities investment conference and new kid on the block Microsoft Corp said the pace of subscriptions to its newly launched Microsoft Network is on target, although Robert Herbold, chief operating officer, did not give any figures: he added that market research showed that nine out of 10 buyers of Windows95 were satisfied with the software and would recommend or buy it again.

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One company that is particularly unhappy about Microsoft’s on-line ambitions is America Online Inc whose chief executive, Stephen Case, has publicly complained that the Redmonder, with its 80% dominance of the personal computer operating system market, should not have been allowed to package an on-line service with Windows95, and he even lobbied the US Justice Department to forbid bundling on antitrust grounds: the Department is still investigating; he told the conference that battling over market share among the 7% of US households that subscribe to on-line services was futile – the real opportunity is going after the 93% who don’t; America Online is currently the fastest-growing on-line service, with membership more than tripling in each of the past two years and it expects to exceed Compuserve Inc’s target of 5m by next summer; Case said he saw commercial on-line services co-existing with the Internet and even thriving if they provide value-added services; he dismissed the notion that on-line servi

ces, which all charge fees, will die out as more people learn to use the Internet, which is generally free, because of these value-added services, which his company has just started, and the fact that on-line services are organised, while the Internet is chaotic; next month, the company will launch a service called Global Network Navigator for users that want applications with Internet access.

America Online Inc chief financial officer Lennert Leader said the Securities & Exchange Commission has decided not to review the company’s filing, issued last Tuesday, for a public offering of 3.5m shares of common stock; the firm’s stock has soared in the past several months, from $41.50 in mid-April to a high of $79.5 in August; but Leader declined to comment on analysts’ estimates for the current first fiscal quarter of an average, $0.15 per share, with a range of $0.11 to $0.18; for the full year ending June 1996, analysts offered a consensus estimate of $0.81 a share, against actual income of $0.52 a share, minus various charges; charges and expenses relating to six acquisitions during the year resulted in a net loss of $33.6m, or $0.99 a share 1995; revenues were $394.3m in the same period.


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CBR Staff Writer

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