Qwest revises and sweetens MCI offer

Qwest Communications made a sweetened US$8 billion bid for MCI yesterday, potentially igniting a bidding war with rival Verizon Communications.

The New York Times reports (25 Feb.) that the latest offer from Qwest came a week after the board of MCI voted to accept a US$6.75 billion takeover proposal from Verizon, despite receiving a higher offer from Qwest that was worth about US$8 billion in cash and stock.

The board of MCI chose Verizon's bid over Qwest's because it said that it was not comfortable with the financial stability of Qwest and the long-term value of its stock, according to people involved in the discussions.

The NYT says Qwest's modified bid, released in a public filing on Thursday, was aimed at winning over MCI shareholders, who have been concerned that Qwest's enormous debt and relative financial weakness would present a risk.

The bid is still worth US$8 billion, but it is structured in a way to protect MCI shareholders against a decline of up to 10 percent in Qwest's share price. Assuming Qwest's share price does not fall by more than 10 percent, Qwest would pay MCI shareholders US$24.60 a share, compared with an offer by Verizon of US$20.75 a share.

The Qwest bid would be US$15.50 in stock for each MCI share and US$9.10 in cash, US$3.10 paid when the deal is approved and the rest in other dividend payments.

Verizon's offer includes US$14.42 in stock, US$1.50 in cash and US$4.50 in MCI dividends.

The NYT reports that MCI said it planned to convene its board to assess the offer and determine if it was sufficiently superior to Verizon's to merit full consideration according to the terms of its agreement with Verizon.

Some investors suggest the board of MCI would probably reconsider Qwest's offer if only to push Verizon to raise its bid. Still, it is unlikely that the company will come to a different conclusion about which partner to choose, says the paper.

Ovitz being sued over internet investment

Michael S. Ovitz, the former president of the Walt Disney Company, has been sued by US billionaire Ronald Burkle, who claims Mr. Ovitz owes him millions of dollars for failing to pay his promised share of two internet investments made in the late 1990's.

The New York Times/Bloombergs report (25 Feb.) that Mr. Burkle, who runs the private equity firm Yucaipa Companies, claims that Mr. Ovitz promised to pay half of their joint investments in Checkout.com and Talkcity.com and has "never even invested one cent," according to the suit, which was filed yesterday in Los Angeles Superior Court.

James Ellis, a lawyer for Mr. Ovitz, called the claims "baseless and false."

It appears that Mr. Burkle "is trying to wage this battle in the court of public opinion, doing so in a vehicle where false and otherwise defamatory statements might be protected by privilege," Mr. Ellis said.

Mr. Ovitz, 58, has denied the accusations in the Disney shareholder suit.

IBM regains No. 1 spot in Unix computer servers

IBM regained the top spot in servers that run the heavy-duty Unix operating system in the fourth quarter, market research firm IDC said on Thursday.

The New York Times/Reuters report (25 Feb.) that IBM, which continues to hold the No. 1 spot overall, ended the quarter with 38.2 percent share of the overall server market revenues and a 36.3 percent share of overall Unix server revenues, IDC said.

IBM's version of Unix, called AIX, competes with Sun Microsystems Solaris and Hewlett-Packard's HP-UX Unix operating systems.

The NYT/Bloombergs say that HP ended the fourth quarter at No. 2 in both overall servers as measured by revenue and also No. 2 in the Unix market, according to data released by IDC.

Sun Microsystems was the third largest server vendor, but its market share declined to 9.4 percent in the fourth quarter from 10.3 percent in the year-ago quarter, IDC said. Sun's unit shipments, however, rose 7.9 percent. IBM widened its total share from 37.7 percent a year ago and HP's share of server revenue inched up to 25.9 percent from 25.7 percent.

The paper also reports that in the x86 server market, or those that use microprocessors made by either Intel or AMD, HP led the market with 32.6 percent share due to strong revenue growth of 13.8 percent year over year, IDC said.

A horse race between IBM and Dell Inc., the fourth-largest computer server maker with 9.0 percent share, ended in a statistical tie with IBM and Dell each holding about 21 percent revenue share in the fourth quarter in the x86 server market, IDC said.

The NYT reported that IBM had the largest year-over-year sales growth among the top five vendors with 26.1 percent, IDC said.

Fujitsu/Siemens rounds out the top five server makers with 4.7 percent share of total server revenues.

Sales of servers that use the freely available Linux operating system generated US$1.3 billion in revenue in the fourth quarter and accounted for 9 percent of worldwide server revenue, IDC said.

Overall server sales rose 5.1 percent in the fourth quarter to US$14.4 billion, marking the seventh consecutive quarter of rising server sales, according to the IDC report.

'Digital divide' narrowing fast: World Bank

The "digital divide" between rich and poor nations is narrowing fast, the World Bank said on Thursday, calling into question a costly United Nations campaign to bring hi-tech telecommunications to the developing world, reports The New York Times/Reuters (24 Feb.).

As some 1,700 international experts gathered in Geneva to prepare for the UN's World Summit on the Information Society (WSIS), the World Bank said in a report that telecommunications services to poor countries were growing at an explosive rate.

"The digital divide is rapidly closing," the report said, with the bank adding that people in the developing world are getting more access at an incredible rate -- far faster than they got access to new technologies in the past.

The NYT says the World Bank reported that half the world's population now enjoys access to a fixed-line telephone, and 77 percent to a mobile network -- surpassing a WSIS campaign goal that calls for 50 percent access by 2015.

The UN hopes that widening access within the developing world to technology such as mobile phones and the internet will help eradicate poverty and build stable democracies.

'Final Fantasy' Creator to Make Xbox Games

The creator of the ``Final Fantasy'' series of video games will work exclusively on making two games for the next version of Microsoft's Xbox game console in a bid to help the company gain more popularity in Japan.

The New York Times/Reuters report (24 Feb.) that Hironobu Sakaguchi, president of the Mistwalker game studio, will work with Microsoft Game Studios to create two role-playing games for the new console, accrdsing to a spokesman for Microsoft's home and entertainment division.

Microsoft has not said when the new console will be released, but the games will be available first in Japan, but eventually the company plans to translate them for the United States and other markets.

Intel Buys Israeli Firm to Push Into Living Room

Intel has agreed to acquire Oplus Technologies, an Israeli semiconductor maker, to bolster its offerings for digital televisions and set-top boxes, the world's largest chip maker said on Thursday.

The New York Times/Reuters report that terms of the deal were not disclosed, though Israeli media reported that the company paid US$100 million for Oplus.

Intel, based in California, has long tried to introduce its PC chips into the living room, where it sees a lucrative consumer market. But the company has a mixed track record with video technology.

The paper says that in October, Intel scrapped plans to enter the digital television chip business just a year after it announced a plan to compete head-on with Texas Instruments in the rear-projection TV chip business.

The company also tried to make a big splash with a design for a $700 living-room PC, although it remains too early to tell whether consumers are willing to exchange separate components for DVD players and video recording for a single PC-like device, the paper comments.

Oplus's chips process and enhance video signals before they are displayed on a TV screen. Such products, which are also made by US rivals Pixelworks and Genesis Microchip, are especially important in high-definition TVs, reports the NYT.