Neowin.net

StreamCast Networks' Morpheus -- a file-swapping service that many have said would be impossible for courts to shut down -- shut out most of its users Tuesday, citing "technical problems."

Computer users trying to log on to the service were greeted with a message telling them to upgrade their software to connect, although no newer version of the software was available. The outage immediately sparked a huge increase in traffic on alternative file-swapping services, such as Gnutella.

In a statement, StreamCast blamed Kazaa, another file-swapping company that had provided the basic software that served as the foundation of the Morpheus program. Kazaa, along with fellow software licensee Grokster, have recently issued upgraded their software, while StreamCast has not.

"Unfortunately, Kazaa's recent upgrade has made Kazaa's and Grokster's new versions incompatible with Morpheus," the company said in its statement, which is posted on it's web site. "As a result, we are accelerating the release of our new Morpheus software and within days expect Morpheus users to enjoy the Morpheus Preview Edition."

That new software, the company said, would operate using an "open protocol" network. That typically means that different software companies can write pieces of software that talk to each other. The network used by Kazaa, Grokster and until now by Morpheus, is a "closed protocol" network in which each company has to license the software from the owners.

News source: CNet News
View: MusicCity.com, home of Morpheus User Network

Raising questions

``In the wake of the Enron scandal, we have the responsibility, and the media has the responsibility, to look at questions. But also we have the responsibility not to overreact before we have the facts,'' Macht said.

CalPERS -- the California Public Employees' Retirement System -- which has been a watchdog on corporate governance issues, owns 31.8 million Cisco shares, or 0.43 percent of the company.

With the exception of Cisco vice chairman Valentine, a general partner in the venture capital firm of Sequoia Capital, one of Cisco's early backers, all the executives made their investments as ``limited partners'' in the venture funds and so had no control over the funds' investment decisions.

Cisco policy allows such investments. Board members may vote on transactions in which they have a stake unless the stake is ``material,'' which Cisco policy defines simply as ``when it would affect their decision,'' Langdon said.

According to Langdon, Chambers owned stock through two venture partnerships in five companies Cisco acquired. He received a total of 127,625 shares of Cisco stock worth approximately $5.1 million when the acquisitions closed, but had donated all the shares to charity by August 2000, Langdon said. Chambers voted on four of the five acquisitions because his stake was very small, Langdon added.

Stake in Cerent

The other four deals in which Chambers held a stake stem from his 1996 investment of $50,000 in a venture capital partnership called Sequoia Technology Partners VII, created by Valentine's venture capital company. That partnership later invested in four companies Cisco acquired: Monterey Networks, StratumOne Communications, Ardent Communications and Pipelinks. Chambers received and later donated a total of 1,382 Cisco shares worth about $68,000 in those deals.

In all, Cisco bought 12 companies that various Sequoia funds had invested in. Eight other Cisco officers who invested in Sequoia funds include chief financial officer Larry Carter, chairman John Morgridge and Mike Volpi, who oversaw Cisco's acquisition strategy at the time.

Chambers' donation of the Cisco stock reflected a personal decision rather than a corporate one. Carter also gave away all shares he received in such deals, but Langdon said he did not know whether others kept their shares. ``If you look at the relative size of the distributions received as a result of Cisco acquisitions, they are inconsequential to their overall holdings of Cisco shares,'' he said.

Carter, for instance, received shares worth less than 0.1 percent of his total holdings in Cisco; stock Volpi received represented less than 0.4 percent of his Cisco holdings.

Venture capitalists give executives and board members the opportunity to invest in partnership funds partly to cement relationships; for instance, so that executives might refer deals to the financiers in the future.

`Culture of sloppiness'

``Your lawyer, your consultant, your venture capitalists and others tend to wear many hats and get involved in many relationships that in other industries or from other points of view clearly look complicated,'' said Randy Komisar, a former Apple Computer executive and prominent Silicon Valley financier.

``In the private company arena, this valley operates on trust and integrity. That's how we move quickly, that's how we find deals. . . . I can understand how it would look different from a public company than a private company,'' he said.

And that is where advocates for shareholders say problems could arise.

``I don't mean to suggest that these very distinguished people can be bought off for the kinds of sums we're talking about here. It does create a culture of sloppiness and cutting corners that can send a wrong message to the corporate managers and the investment community.'' Minow said.