BIZ WATCH

By BERNARD BAUMOHL, JOHN GREENWALD AND JOSHUA COOPER RAMO

TAKING A FLYER ON THE 2000 BUG

Trust Wall Street to spot a hot investment play in what threatens to become the computer glitch of the century. The snafu--a.k.a. the Millennium Bug--arises because corporate and government computers recognize years by their last two digits, and thus will be unable to tell the year 2000 from 1900. Fixing the problem could cost $600 billion.

Will the bug industry succeed? Last month the American Stock Exchange let investors hedge their hunches. It began trading futures options based on the 18-stock De Jager Year 2000 Index, made up of companies such as giant Dun & Bradstreet and smaller outfits like Data Dimensions and Viasoft that are racing to devise solutions. The options represent bundles of stocks in the index, named after the computer consulting firm De Jager & Co., which took a lead in addressing the 2000 issue. If these companies can't find a solution before the millennium, a new breed of speculators--call them bugbears--could get mighty rich.

PC CALL HOME: A DIME FROM ANYWHERE

For all the hype and glory surrounding the Net these days, occasional great ideas do make it to market nearly unnoticed. For instance, Homegate, an Internet connection service that quietly launched last week in 760 cities around the globe. Homegate's new software lets travelers connect their PCs to the Net from anywhere with a local phone call. An executive from Anchorage can jack in from Jakarta for about 10[cents] a minute, instead of the $20 a minute it would cost to dial Alaska.

This seems like a pretty mundane revolution, but founder Pierre Schwob has his eyes on a bigger prize: telephone service. As it gets easier to make phone calls over the Internet (something Schwob expects within the next 12 months), Homegate will become a realistic alternative to long-distance phone service. That Alaskan businessman will be able to connect to the Jakarta Net gateway and "call up" any number around the world at the 10[cents] a minute rate. A laptop and a modem will allow anyone to bypass the expensive (and difficult) international phone system, offering millions in savings. Homegate has already signed up one corporate customer for 25,000 copies of the software. The year 2000 target: a million users. Cost: $15 a month.

YOUR KIDS HAVE TO HAVE THIS. TODAY!

What do you get when you combine the nation's largest fast-food chain with the hottest toy critters around? Lunchtime chaos, if kids and parents rush the Golden Arches the way they have stormed toy stores in search of Beanie Babies, the gotta-have-it-or-I'm going-to-hold-my-breath-until-I-turn-blue toy of the moment. Order a Happy Meal, and you'll get either Patti the Platypus or Pinky the Flamingo, the first two of a series of miniature Beanie Babies McD's is giving away. Get there soon. The cuddly Beanie Babies have been wildly popular since they were introduced in 1994 by Ty Inc., a toymaker based in Oak Brook, Illinois, also home to McDonald's. The privately held Ty has been so inundated by frantic parents looking for Beanies that earlier this year it decided to unlist its local number.

BILL GATES' NEW HARDWARE AGENDA

Bill Gates' drive to dominate the world of consumer electronics took another step forward last week when Microsoft agreed to shell out $425 million to buy WebTV, a struggling manufacturer of Net-surfing set-top boxes. Despite a glitzy $50 million holiday advertising campaign, WebTV sales were abysmal, reportedly just 50,000 units. So why did the colossus of Redmond, Washington, bite at such a dog?

Two theories: the first points to Microsoft's much ignored hardware division, which builds keyboards, mice and other accessories. The division is Microsoft's richest on a per-employee basis, with revenues about $350 million. Gates, with $9 billion in cash available, spent some to help fuel the hardware group's growth with WebTV.

The second theory points to HDTV. Last week the fcc approved HDTV guidelines that will make today's TV obsolete by 2006, forcing some 100 million consumers to upgrade to digital idiot boxes. Since each TV will include a Web browser and E-mail, the PC industry is worried about a slide in demand. Microsoft wants to make dead certain that if HDTV dominates the market for operating systems, the system you will be using is its--even if that means using Windows to watch Seinfeld instead of MS Word 7.0.