Can Nike Thrive as an E-Tailer?

Plus, Prodigy discontinues its Classic service, Netscape's co-founder finds a home at the new AOL, and Intel raises eyebrows with a controversial chip feature.
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Heads-ups from around the technology world:

Smells Funny to Me

Prodigy

has begun telling subscribers to its Prodigy Classic online service that it faces unsolvable Y2K-related problems with the service's software and will be shutting Classic down in October. The 208,000 Prodigy Classic customers are invited to transfer to the company's newer Prodigy Internet service.

Prodigy has been trying to get its Classic customers to migrate to its newer version for a long time, without much luck. Though no doubt there are problems with the old software on which Classic runs, it's hard to imagine they're really unfixable.

Sounds instead like Prodigy finally found a way to force those customers to make the change -- or get lost.

It's hard to imagine the company telling almost a third of its paying customers to take a hike -- especially when that company lost $47 million in the nine months ended September 1998 -- and Prodigy's message boards are full of Classic subscribers' screams about dark conspiracies.

Founded in 1990, long before the Internet boom, Prodigy was once a joint venture between

IBM

(

IBM

:NYSE) and

Sears

(

S

:NYSE). Now it looks as if it may have begun an unexpected trend we'll see more of elsewhere during 1999: cleaning up the books on unwanted and maybe unprofitable customers by telling them that bad ol' bugbear Y2K means they simply must upgrade.

Pick, Click, Lace 'Em Up

E-commerce magazine

The Industry Standard

reported yesterday that

Nike

(NKE) - Get Report

may be gearing up for a major push into selling online.

A Nike spokesman denied concrete plans, but acknowledged that the Swoosh company is "in the laboratory right now" on the notion of e-commerce. Visitors to the existing, oddly minimalist Nike.com site will note a tentative toe in the water, dating from the Christmas selling season: selling posters online, through nikeposters.com.

Foot Locker

, a division of troubled

Venator

(Z) - Get Report

, has been king of the hill in online sneaker sales through its footlocker.com, which boasts 20,000 available products. A long-standing strong Foot Locker relationship with Nike may be tested by Nike's action.

Nike has always protected its distribution channels -- for example, refusing to allow even its authorized resellers to peddle Nike sneakers through their online stores without permission. Looks like Nike may have been saving that slot for itself -- and making this move not a moment too soon, after a 12% drop in revenue for the six months ended Nov. 30.

Sports-shoe sales have sagged across the board lately for the name-brand, endorsement-driven brands -- partly because of the

NBA

lockout, no doubt. But sales have also been hurt by consumers' shift to high-fashion offerings from the likes of

Donna Karan

(DK) - Get Report

and

Tommy Hilfiger

(TOM)

.

An inevitably high-profile e-commerce site would also be the perfect launch platform for Nike's new high-end, margin-boosting Project Alpha line. You can click on "Participate" at Nike.com today, then fill out a questionnaire and get on an emailing list for Alpha information -- but the site won't tell you anything about the much-rumored high-tech shoes, expected on the market later this year. Better hold on to those beat-up Air Jordans in the back of your closet a little longer.

Other major athletic-footwear firms, including

Reebok

(RBK)

,

Adidas

and

Converse

(CVE) - Get Report

-- each of which claims a sub-20% share of the U.S. market compared to Nike's commanding 45% chunk, and none of which are serious e-tailers -- are late to the online game as well.

Though it's probably too early for Net-driven investors to jump into Nike as a .com play, Nike looks as if it may be another candidate for my growing list of Non-Obvious Web Winners. Check out next week's column for some NOWWs recommended by readers.

But Hold Your Tongue...

America Online

(AOL)

has persuaded

Netscape

(NSCP)

co-founder Marc Andreessen to stay on as the merged company's chief technical officer. This has more symbolic importance than real importance: Andreessen won't have any operational responsibilities. But keeping the guy who used to mock AOL on board will be seen as a change for the better at America On Hold and may give the company a little more credibility among technically savvy computer users. Maybe.

Privacy Yes, but...

So

Intel

(INTC) - Get Report

backed away from its earlier plan to ship its new Pentium III (a.k.a. "Katmai") processors with the chip's new serial-number feature turned on. Privacy advocates had argued that the feature -- which would allow identification of a specific user's PC over the Web -- was a shameless invitation to privacy invasions. Users will have to manually turn the feature on -- a simple, software-controlled switch -- if they want to use what Intel says is a major leap forward in security: for example, for online transactions.

Intel is obviously still shell-shocked from the ugly episode five years ago, when it shipped the first 60MHz Pentium CPUs with a microcode math error, then denied for way too long the validity of customers' worries that the flaw would produce widespread calculation errors.

Intel's handling of that gaffe was appalling, and it's good to see that the company has internalized a faster reaction to customer worries.

At the same time, sometimes you have to be willing to separate appearances from substance, and in both cases, the reality is far less important than the protestors claim. The new random-number-generating feature has real, if still only potential, benefits for users and e-commerce vendors, who with the new system should be able to conduct e-commerce transactions much more securely, allowing sites to "know" someone really is who he or she claims to be.

It will be interesting to see, after this blast of bad publicity, how many -- if any -- e-commerce sites choose to implement the improved security provisions for their PIII-using customers. "We don't need that kind of bad press" is likely to be a common, if not universal, reaction among e-tailers.

Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At the time of publication, Seymour had no positions in stocks mentioned in this column, though positions can change at any time.