The New Nation - Internet Edition

HP moves for EDS acquisition

Internet

Having seized the lead in personal computer sales worldwide, Hewlett-Packard Co. is stalking the technology services market for its next conquest.

In what could turn into its biggest deal in six years, HP hopes to buy Electronic Data Systems Corp., which pioneered the concept of running data centers and providing other high-tech help for large companies and government agencies.

Palo Alto-based HP and Plano, Texas-based EDS confirmed Monday that they are in "advanced discussions" about a possible combination without providing additional details.

Citing unnamed people familiar with the matter, The Wall Street Journal reported Monday that HP is willing to pay $12 billion to $13 billion - a price that translates to $24 to $26 per share.

EDS shares soared $5.27, or nearly 28 percent, to finish Monday at $24.13. HP shares dropped $2.49, more than 5 percent, to close at $46.64 as investors fretted over the deal's logistics.

HP ended January with nearly $10 billion in cash. With a market value of about $115 billion, HP could easily use its own stock to finance the purchase.

If the deal is completed, it would be HP's biggest acquisition since it bought Compaq Computer Corp. for $19 billion in 2002. That acquisition paved the way for HP to supplant Dell Inc. as the world's largest PC maker.

Buying EDS would give HP more tools to challenge IBM Corp. in the lucrative technology services field. HP already has replaced IBM as the world's largest technology company, based on revenue.

The demand for data management and technology consulting services has steadily grown during the past two decades as the automation of corporate America and the rise of the Internet prompted more businesses to hire contractors to help run their computer software and hardware.

IBM's technology services division brought in $54 billion in revenue last year, accounting for half of the company's total sales. Combined, EDS and HP's technology services division had about $39 billion in revenue last year.

In one of its biggest previous attempts to expand its technology services, HP attempted to buy PricewaterhouseCoopers' consulting division in 2000. IBM wound up buying the unit instead.

HP has been on a roll since it hired Mark Hurd as chief executive three years ago. Propelled by earnings growth that has consistently exceeded analyst expectations, the company's stock price has more than doubled since Hurd's arrival.

Acquiring EDS could yield more government work for HP, which had about $500 million in prime federal contracts in fiscal 2007. EDS is far better connected, with deals worth about $2.5 billion - putting it among the top 10 among government technology contractors.

Combined, HP and EDS still would lag significantly behind government contractors like Lockheed Martin Corp. and Boeing Co.

As in many corporate marriages, cultural clashes between HP and EDS could ruin the union, said AMR Research analyst Dana Stiffler. "Palo Alto versus Plano wrangling will destroy any short-medium term benefit unless there's a strong integration roadmap," she predicted.

HP earned $7.3 billion on $104 billion in revenue last year while EDS made $716 million on $22.1 billion in revenue.

EDS has been linked with possible deals previously, including a reported interest by Deutsche Telekom late last year and Dell before that. No suitors ever confirmed reports that they were talking.

Former IBM salesman H. Ross Perot started EDS in 1962 to help run other companies' computer systems - a specialty generally known as information-technology or IT services.

Perot sold EDS to General Motors Corp. for $2.5 billion in 1984 and eventually became so disillusioned with how that deal worked out that he sold his remaining EDS shares to the automaker so he could start a new rival service bearing his name.

An outspoken billionaire, Perot became even more famous for running for U.S. president in 1992 and 1996. GM spun off EDS as an independent company in 1996 and remained its largest customer.

EDS was riding high at the start of the decade, despite the dot-com bubble's bursting. But in late 2002, earnings shortfalls led to investor lawsuits, a Securities and Exchange Commission investigation, the ouster of the chief executive, and a sharp drop in the stock price.

The company lost $1.7 billion in 2003 but gradually righted itself under CEO Michael Jordan, a retired CBS and Westinghouse CEO.

He fixed some money-losing contracts, including a multibillion-dollar deal to build a communications network for the Navy and Marine Corps, and began cutting costs by sending thousands of jobs to low-cost countries such as India.

Although he hasn't seen any signs to suggest EDS has been looking for a buyer, Jefferies & Co. analyst Joseph Vafi said the company's board might have decided a sale would create a quicker payoff for shareholders than continuing to try to grow the company in the highly competitive technology services industry.

Under Hurd's leadership, HP bought business software maker Mercury Interactive Corp. for $4.9 billion in 2006 and last year paid $1.7 billion for data management service Opsware Inc., which had sold a large chunk of its operations to EDS in 2002.

Apple to launch iPhone in four Asian regions

Reuters, San Francisco

Apple Inc has signed deals to bring the iPhone to four Asian countries later this year, which should help the company surpass its sales goal of 10 million units by the end of 2008.

Agreements with Singapore's Singapore Telecommunications Ltd and three of its affiliates will bring the iPhone to Singapore, India, the Philippines and Australia, SingTel and Apple said.

Bharti Airtel Ltd, India's top mobile operator, will carry the iPhone in the world's fastest-growing wireless market, which already has more than 260 million mobile users. SingTel owns more than 30 percent of Bharti Airtel.

SingTel unit Optus will offer the iPhone in Australia, and Globe Telecom will be the Philippine partner. Globe Telecom is owned by SingTel and domestic conglomerate Ayala Corp.

An Apple spokeswoman said the iPhone would make its debut in those countries "later this year," and declined to comment on plans to bring the iPhone to Japan and China.

In its quarter ended March 31, the company sold 1.7 million of the devices, which combine a mobile phone, iPod media player and Web surfing; Apple's goal is to sell 10 million iPhones by year's end.

A flurry of deals with European partners last week prompted American Technology Research analyst Shaw Wu to raise his profit estimates for Apple on Monday, saying he expected 2008 iPhone sales of 11 million units, up from his previous forecast of 7 million units.

"IPhone is a relatively minor contributor today at only 2-3 percent of revenue, but we believe it has the potential to become a very significant driver over the next 2-5 years," Wu wrote.

Apple shares rose 2.6 percent to $188.22 by mid-afternoon on the Nasdaq. The stock has soared 50 percent over the past three months as investors regain confidence that Apple can sustain growth even amid a weakening economy.

(Reporting by Scott Hillis in San Francisco and Jennifer Tan in Singapore, editing by Phil Berlowitz)

Microsoft's WorldWide Telescope blasts off

AP, Seattle

Launched its WorldWide Telescope late Monday, bringing the free Web-based program for zooming around the universe to a broad audience.

WorldWide Telescope, developed by Microsoft's research arm, knits together images from the Hubble Space Telescope, the Chandra X-Ray Observatory Center, the Sloan Digital Sky Survey and others.

Computer users can browse through the galaxy on their own or take guided tours of different outer-space destinations developed by astronomers and academics.

The site lets users choose from a number of different telescopes and switch between different light wavelengths.

"The WorldWide Telescope is a powerful tool for science and education that makes it possible for everyone to explore the universe," said Bill Gates, Microsoft's chairman, in a statement.

Web start-up unveils semantic Wikipedia search tool

Reuters, San Francisco

Powerset on Sunday unveiled tools for searching Wikipedia that use conversational phrasing instead of keywords, marking the first step of its challenge to established Web search services such as Google. Powerset's technology breaks down the meaning of words and sentences into related concepts, freeing users from always needing to type the exact words they want to find.

The closely watched Silicon Valley start-up is offering a way of searching millions of entries in Wikipedia's online encyclopedia, helping users find detailed answers to questions rather than isolated links that require further research. For example, a user who wants to know how many wives King Henry VIII had (six, or two, depending on your definition of marriage) can find an answer via Powerset's service at tinyurl.com/5qpcr9/.

San Francisco-based Powerset is looking to leapfrog the current generation of services that rely on keyword searches such as Google Inc, Yahoo Inc, Microsoft Corp and IAC InterActiveCorp's Ask.com. "The Wikipedia is becoming a microcosm of the most useful parts of the Web," said Greg Sterling, an Internet analyst with Sterling Market Intelligence. "This offers a powerful way to find what you are looking for against this subset of the Web."

While still a far cry from letting users search the World Wide Web, Powerset is using Wikipedia as a trial showcase for how its technology can be used to search a vast number of other websites using natural language phrases or questions.

Over time, it aims to partner with other high-quality data sites where information can be organized in a question and answer form that lends itself to Powerset search techniques. Examples might include financial or patent filings, the CIA Factbook or Wikipedia-inspired clones, company officials said.

Powerset, which can be found at www.powerset.com/, looks beyond words to try to understand conceptual relationships that get closer to what a user may be searching for. It analyzes each sentence and whole documents to do so.

Powerset plans eventually to make money selling advertising alongside its search services. But for now, the 60-employee company consists almost entirely of computer scientists and linguists. It has no advertising staff and only a handful of marketing and support staff.

Sterling said it is likely to take years for Powerset to be able to search the Web on the scale Google now does using statistical ranking techniques to find relevant Web links.

"What I don't know is how Powerset will perform on the wide open Web. In a sense, this is a massive prototype using the relatively structured information of Wikipedia. It is difficult to compare to what Google has built," Sterling said.

Sterling said a bigger danger to Google would be if rival Microsoft were to acquire Powerset and incorporate it into other search technologies it has. Recently, Microsoft backed off a $44 billion bid for Yahoo to create a formidable rival to Google in Web search and online advertising.

"This could become the basis of a Google-killer," Sterling said. "Someone like Microsoft might want to buy Powerset."

Spokesmen for Microsoft and Powerset declined to comment on rumors of a potential tie-up between the two companies.

FUN WITH 'FACTZ'

Powerset offers richly annotated ways for searching inside Wikipedia entries to find related concepts. Called "Factz", these related ideas generate outlines, summaries and automated answers to users' questions.

"Our system is a little more forgiving," Scott Prevost, general manager of Powerset, said in an interview on Sunday. "It is not looking for hard-word matches. We are not searching for exact words, but concepts," he said.

The 2-1/2-year-old start-up licensed natural language processing technology and related machine processing methods developed over three decades at the Xerox PARC research centre in Silicon Valley to create new consumer Web search services.

With tacit approval of the non-profit Wikimedia Foundation, the organization behind the Wikipedia, Powerset officials said they are hosting a copy of Wikipedia's 2.5 million English-language entries on its own computers. This lets Powerset make links across the breadth of Wikipedia data.

"What Powerset is doing is offering readers a natural-language search interface, and we think that is an interesting experiment," Mike Godwin, Wikimedia Foundation's general counsel, said in response to an emailed question about how the two organizations would work together.

In addition to Wikipedia, Powerset's new service also searches a related database called Freebase created by MetaWeb, another Web search start-up.

After decades of research and debate, natural language processing is finally poised to go mainstream, predicted Barney Pell, co-founder and chief technology officer.

"2008 is the year that semantic and linguistic technologies cross over into widespread consumer use," he said.