VentureBeat

The services sector has proven to be one of the hottest in information technology. You need trained people to manage the ebb and flow of computing in a massive, air-conditioned data center that handles the life blood of a corporation such as its e-commerce transactions or internal business operations.

IBM has been the primary beneficiary of the services boom, but now it will face more determined competition with Hewlett-Packard’s $13.9 billion acquisition of Electronic Data Systems. Together, they can create what one analyst (at IDC) called a “super plumber” for corporate data centers.

The deal is the biggest for HP since it bought Compaq six years ago for $20 billion and it will put HP at a strong No. 2 behind IBM in IT services.

HP will buy Plano, Texas-based EDS for $25 a share, about 32.5 percent higher than the data center outsourcing company’s closing price on Friday. Both boards have approved the deal and the transaction is expected to close in the second half.

HP’s CEO Mark Hurd said that EDS would remain a separate business group in Texas with current CEO Ronald Rittenmeyer as its chief. Rittenmeyer will also join HP’s executive council. The deal is likely to be far less controversial than the Compaq merger, which led to negative employee perceptions of then-CEO Carly Fiorina. The poor execution following the merger led to Fiorina’s ouster and Hurd’s hiring in 2005.

Hurd has been executing well, but you could argue that he is just continuing the strategy that Fiorina spelled out: that size and scale matter in the information technology industry. If the deal goes through, you can expect to see a lot of layoffs.

“It’s another step in the consolidation of the traditional IT infrastructure players and gets HP deeper into the enterprise segment,” said Jason Green, a partner at Emergence Capital. “Good for start-ups as the larger and less nimble the big guys are, the better.”

Jeff Nolan, author of the Venture Chronicles blog, said the deal makes sense because EDS has been under pressure to perform and an acquisition could spur it forward. EDS, meanwhile, could help HP with not only its services revenue but hardware sales as well. Lastly, he said that the deal could give HP the resources to initiate a cloud-computing operation, similar to what IBM is starting to do. Read the rest of this entry »

Here’s the latest action:
Hewlett-Packard confirmed today that it is in advanced talks to buy EDS — It wants to acquire the data center outsourcing service company for $12 billion to $13 billion, well above the company’s current value of $9.5 billion, according to the Wall Street Journal, which first reported the story. If the deal is consummated, HP would have a lot more legs to compete with IBM’s global services division. HP’s services division brought in $16. 6 billion of the company’s $104 billion in revenue last year. EDS had revenue of $22 billion last year, so don’t expect the new company to be call HPEDS. The big fish can swallow this one whole.

Google extends its lead in online video in March, according to new figures from comScore — People watched about 11.5 billion videos in March, with Google accounting for 38 percent of the entire tally. YouTube, in turn, accounted for 98 percent of Google’s results.

Jeff Raikes has been named CEO of the Bill & Melinda Gates Foundation, which is committed to improving health in the developing world –Raikes is retiring as the president of Microsoft’s business division and will work as a full-time philanthropist along side Bill Gates, who is also joining the foundation full-time in June. Raikes will start in September. Reporters asked on a phone call if the foundation will take on the same culture as Microsoft as a result. Will we see the Gates Foundation, which has an endowment of $37.3 billion, make a hostile takeover bid for the Ford Foundation — and then give up?

XM Satellite Radio posted a wider loss than Wall Street estimated, as Silicon Alley Insider reports. But the CEO Nate Davis said he expected that the merger with Sirius Satellite Radio will be approved in the second quarter. Clearly, running a business on its own isn’t going so well, with a loss of $129.3 million and rising costs for acquiring new subscribers.

Apple is reportedly in talks with Time Warner’s HBO division to sell popular HBO programs — Update: The deal’s just been announced. Programs will include “Entourage,” for Apple’s iTunes service. Apple may charge a higher price of $1.99 for HBO videos. This may be the first time that Apple has created a separate price structure with a content provider, signaling the importance of the HBO content. I guess it shows there is life after the Bada bing.

Knowledge Adventure, the maker of kids’ educational-game software JumpStart, will begin selling virtual-world software aimed at three-year-olds to five-year-olds. The JumpStart Advanced Preschool World will encourage kids to learn their ABCs by playing games in a 3-D version of a beach or a jungle.

Hackers managed to steal the identities of six million Chileans — This included the daughter of the country’s president. The data included identity cards numbers, addressses, phone numbers, e-mails and academic backgrounds. The data was taken early Friday from servers at the Education Ministry, as first reported by the daily newspaper El Mercurio. You can read more about it CNN.com.

Picitup launches a test version of its search engine for finding matching images — It can be used for celebrity face matching and a variety of other image related functions. It reminds me of the combination image-text search engine under research at the Palo Alto Research Center.

Advanced Micro Devices shuffles management — Randy Allen, former head of the company’s server chip business, will be the senior vice president of the computing solutions group. He replaces Mario Rivas, an apparent victim of Intel’s spectacular success against AMD. AMD has had a tough time competing because of delays in launching its Barcelona products. AMD has more details on the reshuffle on its web site.