The layoff announcement, made prior to the quarterly results, seemed another example of "layering" the bad news on the part of Dell management. Only last week Dell had announced the shut-down of its online Marketplace, a venture launched only four months ago. Excluding charges, Dell reported earnings of $508 million, or 18 cents a share. Expectations had been for earnings of 19 cents a share according to a poll of analysts by First Call.

Dell management said the layoffs -- the first in the sixteen year history of America's largest PC seller -- would staunch the revenue slide brought on by a softening of PC sales due to a weakening US economy. The layoffs, the company said, would be concentrated at its Round Rock headquarters and in nearby Austin, Texas. The people being axed, the company continued in its statement last week, would take care of "redundancies" in their administration, marketing and product support areas.

[ASIDE: Wait a minute! "Product Support?" Oh! I get it! Support from vendors isn't bad enough already.]

Now if you're Michael Dell, who only last year had your face gracing magazine covers and who was heralded as a marketing genius, you plan to put the best face on all of this. You will weather the storm and Dell will maintain its competitive position.

But if you are an employee of Dell Computers in Round Rock or Austin, Texas, it is crying time. You won't be lonely at the local watering hole, though. Lots of Motorola Austin layoffees are crying in their beers a few stools down.

You see, the much-vaunted "convergence" shift touted a couple of years back is starting to take place. AOL Time Warner, Microsoft, DirectTV(a subsidiary of Rupert Murdoch's NewsCorp,) Sun Microsystems and Hewlett Packard are now all in a race for dominance of the "Home Gateway."

Home Gateway is the newest buzzword for the system that will link all of your appliances (at the home for consumers, but in the office, too, for everybody) into a network --- ultimately a wireless network. And even though Microsoft's .Net hype says it will still be centered around a PC, lots of other folks believe the focal point will be a set-top box (like your current cable television box) because everybody with any disposal income has cable television.

THE SHAPE OF THING TO COME

Which brings up issues of data compression so that all this information can be handled efficiently. Bandwidth issues.

But there are server issues, as well. And most of the operating systems we're most familiar with can't address these bandwidth issues efficiently or dole out bells and whistles like Video-on-Demand to multiplicitous users (Thanks for the hype in Newsweek, AOL Time Warner.) without OUTRAGEOUS server capacity.

There will be a new OS for these set-top boxes. But it's not on the market today. Talk to anybody in the industry. If this convergence goes cable, one server will max out at approximately 15,000 clients. If we're talking the millions of clients that just AOL Time Warner has, think about the server capacity involved. That's why the new OS is needed.

Is it in development? Yes, all over the place.

The question is who will produce it and get it to market first. Hughes and NewsCorp, meanwhile, are only talking because they want to try to shift emphasis from the set-top box to the satellite dish. From our viewpoint, that's a dubious proposition.

In this transitional stage, one company worth looking at right now (with technology targetted to address this convergence) is Compression Science, out of Campbell, California. There's not a lot of hype about what they're doing outside of the industry, but their presence is rapidly becoming significant.

Bottom Line: whether it's Microsoft's .Net or Sun's Sun ONE, or some initiative based on Hewlett Packard's Bluestone Software acquisition, the way we are all wired is about to change. And the PC may or may not be the center of the equation.

That provides another good reason for crying time in Round Rock.

The Smart Money

My heresy is that you'll see a segment that did well on the current version of the Internet lead the way: gaming. And I mean gaming in both senses. Think Off-Track-Betting as well as Quake.

For the latter, once the set-top box technology is in place, buying game consoles will be an historical footnote.

For the former, the revenues involved in bringing sports gaming, like horse racing, into the living room will push all political reservations aside.

You read it here first.