MCI to reopen merger talks with Qwest, again

MCI has just announced that it would reopen merger talks with Qwest Communications International, which bid US$8.9 billion for the company on Thursday.

The New York Times reports (2 Apr.) that MCI's board agreed this week to be bought by Verizon Communications for $US7.6 billion, and has started making the necessary filings with regulators. But Qwest continues to lobby for its higher bid, which it has revised three times and which is now 19 percent higher than Verizon's.

The paper says MCI has said it received permission from Verizon to talk with Qwest "until the date of the MCI shareholder vote on the proposed Verizon transaction."

Qwest, meanwhile, has asked MCI to decide by 5April whether its bid is "superior" to Verizon's offer. If MCI determines that Qwest's bid is superior, Verizon could raise its own offer or take its case directly to shareholders for a vote. MCI would have to pay Verizon US$240 million if it scrapped its current deal and sided with Qwest, says the paper.

Despite having a deal in place, Verizon has allowed MCI to continue talks with Qwest to minimise any potential legal challenges.

MCI has chosen Verizon because it believes that the company, the nation's largest telecommunications carrier, has better long-term prospects, the NYT reports.

Qwest, however, is willing to pay US$1.3 billion more than Verizon for MCI. On Thursday, the company offered US$27.50 a share, with US$13.50 in cash and the rest in stock. Verizon has offered US$23.10 a share, US$8.35 in cash and US$14.75 in stock.

The NYT says that though Qwest's offer is higher, investors remain skeptical about the company's prospects and its financial health. Qwest's current bid is 35 percent more than its market capitalisation and it is far more debt-laden than Verizon.

Google doubling storage on free email service

Google, the internet search engine company, is doubling the amount of storage offered on its e-mail service and plans to remove limits on message capacity as it competes for users with Yahoo Inc.

The New York Times rerports (2 April) that users of Google's service will be able to store two gigabytes of e-mail messages, double the storage previously offered, the director of the company bhas said. One gigabyte, or 1,024 megabytes, is roughly equivalent to the content in 32 feet of shelves filled with books.

The paper says Google will continue to increase e-mail storage in the next few weeks. It introduced its service, Gmail, a year ago and it has become the fourth-most-visited e-mail service on the web. Gmail allows users to search through messages using keywords and links advertisements to the contents of e-mail messages.

Yahoo said last week that it would quadruple the amount of e-mail storage it offers, to one gigabyte. Yahoo's e-mail service was the web's most popular in February, with 40.5 million visitors, according to New York-based NetRatings, which tracks web use. America Online e-mail was second, with 34.6 million, and MSN from Microsoft was third, with 28.4 million.

Intel: US high taxes could send plant overseas

The president of Intel, Paul S. Otellini, has warned a federal panel in the US that because of high tax rates in the United States, his company may build its next US$3 billion semiconductor factory overseas.

The New York Times reports (1 April) that Mr. Otellini, who will become Intel's chief executive in May, testified Thursday at a hearing of the President's Advisory Panel on Federal Tax Reform that over the 10-year life of a modern chip factory, the company would save US$1 billion byplacing the factory in Asia or Europe rather than in the United States.

The Intel chief said that there would be some advantages to building in the US, near Intel's other factories, but while trade barriers and wage factors were significant issues in earlier decisions, taxes are now an important consideration.

"The problem that we have and which the industry has is that it costs us US$1 billion more to operate inside the US than outside of the country," he said. "It's not wages and capital; its almost all attributed to tax benefits - or the lack thereof - in the United States compared to what is offered elsewhere," the paper reported.

The NYT says that while 12 of Intel's 16 factories are in the United States, 75 percent of its sales are outside the country.

An industry analyst said Intel's decision was being closely watched by its competitors.

Mr. Otellini said that while there are some state-level incentives for locating factories in the United States, they are insignificant when compared to the 35 percent federal tax rate the company faces.

In contrast, Mr. Otellini pointed to Israel, which offers a 20 percent capital grant, a 10 percent tax rate and a two-year tax deferral. Malaysia offers a 10-year tax deferral and Ireland offers a 12.5 percent tax rate. Two-thirds of the most advanced factories being built, those producing 300-millimeter chip wafers, are in Asia, Mr. Otellini said, reports the NYT.

HP's new chief: no plans but says all is on the table

Several Wall Street analysts upgraded the stock of Hewlett-Packard last Wednesday even as the new chief executive, Mark V. Hurd, told employees and investors that it would take time to decide what needed to be done to turn around the company.

The New York Times reports (1 April) that Mr. Hurd, whose selection as chief executive was announced on Tuesday, said on Wednesday that it was too soon to tell whether a turnaround plan would include a strategy shift, a breakup of the company or layoffs.

Mr. Hurd, said it would take time to acquaint himself with the challenges facing the company's five divisions, but he would not rule out anything that might be necessary to put the company back on track.

Mr. Hurd said the board had given him license to put in place whatever changes he saw fit. "There are no preconditions from the board that I have to do this or do that," he said.

Mr. Hurd, who until Tuesday was chief executive of NCR Ohio, arrives at Hewlett less than two months after the board ousted Carleton S. Fiorina in the face of declining profit, says the NYT.

Wall Street analysts generally applauded Mr. Hurd's appointment, some responding with upgrades. Analysts have speculated that Hewlett may decide to break up the company to make it more profitable.

PC makers offer full Windows version in Europe

The world's two largest PC makers said on Friday that they expect mostly to sell machines with full version of Windows in Europe despite a European antitrust order forcing Microsoft to offer a stripped-down version of its flagship operating system.

The New York Times/Reuters report (1 April) that after weeks of legal wrangling, the world's largest software maker had agreed to sell a version of its operating system called "Windows XP Home Edition N" without software for playing music and videos. Microsoft's Windows runs on more than 9 out 10 PCs in the world.

The paper and Reuters reports that the European Union's top regulatory body ruled last year that Microsoft had abused its monopoly status and ordered the company to pay a US$650 million fine and offer an alternate version of Windows in order to encourage more competition from audiovisual software programs from RealNetworks and Apple.

But Dell, the world's largest PC maker, said on Friday that it had no plans to sell PCs in Europe without Microsoft's audiovisual software, called Windows Media Player, the NYT reported.

Hewlett-Packard Co's vice president for Europe, Ingo Juraske, told The Wall Street Journal Europe that the world's No. 2 PC maker will offer both versions of Windows in Europe, but doesn't expect many customers to opt for Windows XP Home Edition N," reports the NYT.

The paper/Reuters say the vast majority of Windows sales are made when hardware makers sell a PC running the operating system, rather than directly from retail store shelves.

Microsoft has said that it will offer the alternative version of Windows for the same price, which could become a major sticking point with the European Commission if they find that it goes against the spirit of competition, analysts said, reports the NYT.

Microsoft sues alleged ID thieves

Microsoft last Thursday filed 117 US federal lawsuits against unnamed defendants, accusing them of a high-tech form of identity theft known as "phishing."

The New York Times/Associated Press repprt (1 April) that the lawsuits, filed in US District Court for the Western District of Washington, accuses the "John Doe" defendants of using mass e-mail or pop-up ads to coerce consumers into revealing personal information such as bank account information, passwords or social security numbers.

The company said it filed the lawsuits in hopes of uncovering some of the largest operators, report the NYT & AP., saying that in phishing scams, the internet-based communications often purport to be from legitimate organisations, such as banks, and use that perception of a trusted relationship to get people to reveal personal information.

The paper and AP say that to avoid such identity theft, experts warn that users should be wary of giving out any personal information via e-mail or pop-up ads, especially if someone contacts them unexpectedly. Users also should be wary of clicking on e-mail links, which could divert a user to a malicious site that will then steal personal information.

Mobile carriers want cheaper anti-piracy software

A powerful group of mobile telecoms operators has called for lower prices for essential anti-piracy systems, warning that high royalty payments may stifle the markets for digital music and video.

The New York Times/Reuters report (1 April) that the mobile phone industry's Open Mobile Alliance (OMA) has developed an open standard for anti-piracy software, but the technology used by the standard is too expensive, said the GSM Association of mobile operators.

According to the paper and AP., the association threatened to abandon the open standard and called for new, cheaper digital rightsmanagement systems, although this could mean fragmentation that would prove frustrating for consumers.

The paper says that the operators' complaints follow similar grumbling by manufacturers of mobile phones and consumer electronics, who told Reuters in late February that a US$1 royalty per mobile device was too high a price just to protect digital music and video against illegal copying.

If handset makers had put anti-piracy protection software in all 684 million mobile phones sold last year, the US$684 million in royalties would have exceeded total digital music sales on the web for the year, according to the NYT.

Industry players said the complaint from the GSM Association, which groups the world's biggest mobile operators such as Vodafone, adds significant pressure on the patent holders, the paper and APreport.

The paper says that the Open Mobile Alliance's anti-piracy technology is the first open standard that can be used by all electronics goods makers.
Other technologies are owned and controlled by individual companies such as Apple Computer, for its iTunes Music Store, and Microsoft.

Scammers fined £1.3m

Sixteen premium rate services have been fined a total of £1.3m following a crackdown on rogue operators over the Easter weekend.

The Register reports (1 April) that last week ICSTIS warned users to be on their guard against dodgy operators using illegal Automated Calling Equipment (ACE) after receiving credible market intelligence that scamsters were to step up their operations over the long weekend.

After, it announced that it used an "unprecedented level of sanctions" to deal with 16 services using ACE to tell people they had won a cash prize or holiday. Those who fell for the scam ended up phoning expensive phone numbers but received nothing, says The Register.

The Register says that using emergency powers the watchdog shut down the offending services and in some cases managed to freeze the income of some of the operators. ICSTIS had also notified monster regulator Ofcom over the role of one telephone company - Allied Telecommunications - because it was involved in all 16 rogue services.

Red Hat Q4 sales soar

Red Hat is to buy back more shares after reporting a record fourth quarter. The Linux distro pulled in revenues of US$57.5m for the three months to 28 February 2005, 56 per cent up on last year, and net income of US$11.8m, 200 per cent up on Q4 04, reports The Register (1 April)

The Register reports (1 April) that Enterprise subscription revenue was US$45.4m, 92 per cent higher year on year. According to Red Hat this vindicates the firm's recurring revenue model, which generates six times more turnover than that of the number two Linux provider (presumably Novell/SUSE). It bases this estimate on "publicly available information".

Revenues for the full year, FY05, were US$196.5m, up 58 per cent on FY04, and net income was US$45.4m.

Accordsing to The Register, the company ended the year with cash and investments of US$928m, and that was after spending US$54.8m to repurchase stock. Deferred revenues looks good too, with the company owed US$137.3m at the end of the year. This is 86 per cent higher than the end of FY '04.

For the full year, Red Hat reports cash flow from operations of US$122.2m, 100 per cent more than FY04. The company is to buy up to another US$150m in shares and retire US50m in debentures, to offset dilution caused by employee stock options and convertible debt, says The Register.

Pentagon redirects research dollars

In the US., the Defense Advanced Research Projects Agency at the Pentagon which has long underwritten open-ended "blue sky" research by the America's best computer scientists - is sharply cutting such spending at universities, researchers say, in favor of financing more classified work and narrowly defined projects that promise a more immediate payoff.

The New York Times says (2 Apr.) that hundreds of research projects supported by the agency, known as Darpa, have paid off handsomely in recent decades, leading not only to new weapons, but to commercial technologies from the personal computer to the internet. The agency has devoted hundreds of millions of dollars to basic software research, too, including work that led to such recent advances as the web search technologies that Google and others have introduced.

According to the paper, the shift away from basic research is alarming many leading computer scientists and electrical engineers, who warn that there will be long-term consequences for the nation's economy. They are accusing the Pentagon of reining in an agency that has played a crucial role in fostering America's lead in computer and communications technologies.

University researchers, usually reluctant to speak out, have started quietly challenging the agency's new approach, says the NYT., with the researchers asserting that Darpa has shifted a lot more work in recent years to military contractors, adopted a focus on short-term projects while cutting support for basic research, classified formerly open projects as secret and placed new restrictions on sharing information.

The paper reports that Darpa officials have acknowledged for the first time a shift in focus. They revealed that within a relatively steady budget for computer science research that rose slightly from US$546 million in 2001 to US$583 million last year, the portion going to university researchers has fallen from US$214 million to US$123 million.

University scientists assert that the changes go even further than what Darpa has disclosed. As financing has dipped, the remaining research grants come with yet more restrictions, they say, often tightly linked to specific "deliverables" that discourage exploration and serendipitous discoveries, the NYT reports.

The NYT says the concerns are highlighted in a report on the state of the nation's cybersecurity that was released with little fanfare in March by the President's Information Technology Advisory Committee. Darpa has long focused on long-term basic research projects with time horizons that exceed five years, the report notes, but by last year, very little of Darpa's financing was being directed toward fundamental research in the field.

Mobile service in Turkey gets another bidder

Alfa Telecom, a Russian mobile phone investment company, has said that it has outbid its Swedish rival, TeliaSonera, for a stake in Turkey's largest cell network, Turkcell. But TeliaSonera said it believed that its bid would prevail.

The New York Times rerports on a report by The Herald Tribnune (2 April) in which the paper said TeliaSonera has said it has agreed to pay US$3.1 billion for a 27 percent stake in Turkcell, which would raise the Swedish company's stake to a controlling 64.3 percent.

Last wseek,however, Alfa said it had topped that offer, without elaborating.

A spokesman for TeliaSonera, said his company believed that its bid would prevail because as a major investor in Turkcell it has the right of first refusal on all new shares, says the paper.

According to the Herald Tribnune and the New York Times, because TeliaSonera is bidding to raise its stake to 64.3 percent of Turkcell's shares, not the entire company, the bid needs approval from Turkey's capital markets board regulator, which usually requires companies acquiring majority control to buy out all minority shareholders.

The dispute over Turkcell comes three weeks after TeliaSonera, which is based in Stockholm, and Alfa Telecom, part of Russia's Alfa finance group, intensified their scuffling over ownership in MegaFon, Russia's No. 3 mobile network operator, report the papers.

LG & Matsushita reportedly settling plasma dispute

The world's No. 1 and 3 suppliers of plasma panels, the key component in flat-screen televisions, have agreed to settle their dispute over plasma display technology, a newspaper said on Saturday.

The New York Times/Reuters report (1 April) that South Korea's LG Electronics and Japan's Matsushita Electric filed lawsuits against each other last year, claiming infringements on patents related to plasma technology. The suits have led to a halt of imports of LG panels into Japan and Matsushita panels to South Korea.

The paper and Reuters say that the tussle has been just one of a number of legal disputes over panel technology among Japanese firms and rivals from South Korea and Taiwan, underscoring a fierce fight for position in the potentially lucrative market for flat panel TVs.

According to the paper and Reuters,the two companies have been holding talks and are expected to agree on a settlement that would require LG to pay royalties to Matsushita while allowing each firm access to some of the other's patents.

The paper and Reuters further report that Research firm DisplaySearch said LG was the world's top supplier of plasma panels in the October-December quarter with a market share of 23.6 percent in revenue terms. Samsung SDI Co. Ltd. was second with a 22.8 percent share and Matsushita was third with 21.7 percent of the market.

Plasma panels are the key component in plasma televisions, a market which DisplaySearch expects to more than quadruple in size to 12.3 million sets globally by 2008 as consumers trade in bulky cathode-ray tube models for sexier flat screen TVs, the NYT reports.

After five months of fighting, LG has shown a willingness to pay some royalties and Matsushita believes it can settle the case without compromising its tough stance on protecting its intellectual property, the Nihon Keizai said, reports the NYT and Reuters.

LG, for its part, feels it is best to settle now before the dispute escalates. The South Korean maker is concerned about the damage it might incur if Matsushita decided to file a suit against it in the US market, the newspaper said.

BT faces fading market share

BT should see its dominance of the UK's residential fixed line market evaporate over the next ten years according to boffins at Research Analysis and Knowledge Management,says the register 1 April

The register says the research group predict that BT Retail's share of the UK's fixed line market will fall from 82 per cent to 45 per cent over the next decade as increased competition begins to bite.

At the moment, around 93 per cent of UK households have a fixed line, with eight in ten supplied by BT. But as more and more punters switch providers - and increasing numbers of telcos bundle line rental with their tariffs - BT's share of the market is predicted to slide, says the Register.

According to The Register, the development of wholesale line rental (WLR) should accelerate BT's declining market share. In essence, WLR means consumers who opt for other phone providers can pay for their calls and line rental in one single bill as opposed to having to pay for calls (to a telco such as Tele2, Carphone Warehouse or One.Tel, for example) and line rental (to BT) separately.