Network: Bytes

APPLE COMPUTER last week announced higher than expected profits for its third quarter. Sales of iMac computers were primarily responsible for the strong performance.

Profits went from $101m a year ago to $114m with revenue rising 11 per cent from $1.4bn to $1.56bn. Gross margins went from 25.7 per cent to 27.4 per cent when Apple had said it would either remain the same or decrease. After its seventh successive profitable quarter, the company said that it would buy back $500m of its shares to demonstrate its optimism.

Last year, Steve Jobs, Apple's co-founder and interim chief executive, said that the company would streamline into four main areas: consumer, business, business portable, and consumer portable. So far, only the consumer portable line is missing. Although Apple refuses to comment, the consumer portable is expected to be based on the iMac and many believe it will be demonstrated this week at the MacWorld trade show in New York.

INTEL LAST week announced that it had finished the design work on its Merced processor. It also said its second quarter earnings were slightly lower than analysts had forecast.

Profits were $1.7bn on revenue of $6.7bn for the quarter, compared with $1.2bn on $5.9bn in the corresponding quarter last year. The predicted an earnings rise in the third quarter. It said that lower-than-expected earnings were the results of seasonal slowness in the market and its aggressive price war with AMD.

More significant for future revenue streams was the news that the design for its new processor, Merced, was completed. It is the first in a family of high-performance 64-bit chips built around an entirely new architecture, called IA-64. Intel has been working on the project with Hewlett-Packard since 1994. The chip is aimed at widening Intel's market away from PCs and servers to minicomputers that use chips such as Sun's UltraSparc and Compaq's Alpha.

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THE PLETHORA of deals offering "free PCs" as an enticement for subscribing to Internet service providers continued in the United States last week when Microsoft entered the fray. Customers who sign up to MSN for three years at $17.99 per month will receive a PC with a 400Mhz AMD processor, 4Gb hard drive and modem. Other companies, such as AOL and CompuServe, are doing deals in the US involving rebates to bring down the cost of hardware and Internet access.

In the UK, Tiny is giving away free budget PCs to BT phoneline owners who commit to a certain level of spending on phone charges. Meanwhile, Freeserve is in talks with Microworkz to distribute its low-cost iToaster computer, a 266MHz machine using the BeOS operating system, which retails in the US at $199.

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VIRGIN MEGASTORES last week began to sell customised CDs using music downloaded over the Internet. The in-store service started at the opening of a megastore in Columbus, Ohio. Customers chose tracks from sources such as Liquid Audio, MP3.com, Songs.com and Noisebox. Ten tracks for $10 can be burnt on to a CD at a kiosk.

The service opens up the prospects of little-known independent labels and artists picking up sales. "The emphasis here is on stuff you can't get in stores," Ravi Ahuja, the company's vice-president of business development, said.