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DEC rings up e-cash
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March 11, 1997: 10:46 p.m. ET
Firm says new product will make small Internet transactions profitable
From Correspondent Fred Katayama
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NEW YORK (CNNfn) - Digital Equipment Corp., which is in the midst of a challenging turnaround, unveiled technology Tuesday that it hopes will return it to the prominence it knew only a year ago.
The company is jumping into the electronic cash business with a system called Millicent. The technology will allow Internet vendors to perform small transactions for the first time.
"This is a new technology that enables microtransactions over the Internet, commercial transactions that heretofore we have not been able to execute," DEC Chairman and CEO Robert Palmer said Tuesday on CNN's Moneyline with Lou Dobbs. "It's a technology that allows a person to buy a single recipe rather than an entire cookbook."
Internet companies have been trying to figure out a way to make money ever since they began dumping huge amounts of cash in the network, and Digital thinks it has the answer.
Palmer said Millicent can process transactions for a little as a tenth of a cent, up to $5.
Despite the availability of alternative payment systems such as CyberCash, plastic remains the currency of choice for 90 percent of the goods bought on the Internet today.
In introducing its new system, Digital is trying to convince businesses and consumers that credit cards aren't efficient enough for very small transactions.
The market for online purchases of less than $10 right now is as small as the payments. But it's expected to mushroom from $12 million last year to $1.7 billion by the year 2000.
What can you buy for less than the price of a gumball? In the future, such items as news articles, computer games and software will be priced cheaply on an a la carte basis.
However, Digital will face a crowded field as it tries to make a dent in the online payment business. Already, about a dozen companies offer online wallets. And so far, no one is making a profit.
Millicent is the latest attempt by Digital to turn around its recent misfortunes. The company's earnings are down 70 percent from a year ago and its stock is down 50 percent. But Palmer is not retreating from the challenge of returning the company to its once lofty level.
"Certainly we would like to see the stock perform better," Palmer said. "I think it's up to management to do a better job of (achieving) consistent earnings and consistent improvement in earnings."
The company is making a huge investment in the Internet, and Palmer said he sees real growth potential in the new technology. (119K WAV) or (119K AIFF)
Palmer also noted that Digital is strong in the server market, and said the company's arrangement with Microsoft to use its Windows NT has attracted a great amount of business.
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