HP’s Glad Fourth-Quarter Tidings

Hewlett-Packard gave Wall Street some much needed cheer by revealing that its next results will exceed analysts’ estimates

Hewlett-Packard CEO Mark Hurd has a simple credo: Follow the numbers. His insistence that employees focus on the bottom line is beginning to pay off.

On Nov. 18, the tech giant countered a spate of recent dour warnings from tech bellwethers, saying fiscal fourth-quarter results would beat analysts’ forecasts. HP also issued a surprisingly upbeat outlook for fiscal 2009. “It’s surprising, and not,” says John Madden, a research director at Ovum in Boston. “This is a company with great financial discipline, and that certainly helps when the economy takes a tumble.”

Palo Alto (Calif.)-based HP (HPQ) said profit for the quarter ended Oct. 31 was $1.03 a share, excluding items such as restructuring and acquisition charges related to its recent takeover of tech outsourcing firm Electronic Data Systems. Wall Street was expecting earnings of $1.00 a share, excluding items. “HP delivered another solid quarter as it continues to benefit from its global reach, diverse customer base, broad portfolio, and numerous cost initiatives,” Hurd said in a statement. “Our ability to execute in a challenging marketplace differentiates HP, enabling it to increase share, expand earnings, and emerge from the current economic environment as a stronger force.”
Cost-Cutting Pays Off

HP didn’t elaborate which areas of its sprawling tech empire, ranging from PCs and printers to services and software, were doing well. The company is due to report full results on Nov. 24. Yet the preliminary results stood in stark contrast to announcements from tech giants Intel (INTC) and Cisco Systems (CSCO), which earlier this month pointed to a sharp slowdown (BusinessWeek.com, 11/12/08) in virtually all sectors of the PC and server markets. Retailers Best Buy (BBY), Circuit City, and Target (TGT) also have indicated consumers are conserving cash amid credit market turmoil. “There is just enough demand out there to feed some of the vendors who positioned themselves well ahead of time,” says Roger Kay, president of tech analyst firm Endpoint Technologies Associates.

While tech stocks surged on Nov. 18, led by HP’s 14.5% gain, much of the rest of the industry isn’t faring nearly as well. HP is benefiting from Hurd’s near-obsessive cost-cutting and what analysts consider world-class management of sales and supply chain. In what Hurd calls “data-driven decision-making,” every segment of the company now uses metrics regularly to determine which hardware, software, and services merit the most attention. Research and development has been aligned closely with product planning, while a revamped sales organization has been given greater incentive to succeed, with “specialists” bearing responsibility for growth in their particular area of interest. HP also attributed some of its performance to global reach. About 70% of revenue comes from outside the U.S.

Looking ahead, analysts say HP stands to benefit from Hurd’s strategic investments in areas such as managing corporate computer networks, which offer new sources of recurring revenue. The company in September completed its purchase of EDS, which specializes in providing IT services to corporations.

Source: Businessweek

Yahoo CEO Yang to step down

Posted by Stephen Shankland

Yahoo, under fierce financial pressure, has begun a search to replace company co-founder Jerry Yang as chief executive, the company said Monday.

“Jerry and the board have had an ongoing dialogue about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level,” Chairman Roy Bostock said in a statement. “We are deeply grateful to Jerry for his many contributions as CEO over the past 18 months, and we are pleased that he plans to stay actively involved at Yahoo as a key executive and member of the Board.”

Yang will resume his position as chief Yahoo, the company said, the role he had before taking over in 2007 after former CEO Terry Semel departed.

After reporting a 64 percent drop in net income and warning that the advertising market is softening, Yahoo announced a layoff of at least 1,430 by the end of 2008 in October. The cut follows another in which about 1,000 Yahoo employees lost their jobs in February.

All Things D’s Kara Swisher reported the move earlier Monday.

Hitting the reset button
“I think it’s the right move for the company,” said Eric Jackson, an activist Yahoo shareholder who has pressured the company for big changes. However, he added, “It’s really too little too late. This is a board failure more than it is Jerry’s failure. These problems have been around at Yahoo for well over two years now.”

It’s unclear at this stage what changes will come with a new CEO, but one possibility is another shot at a deal with Microsoft. “I would expect Microsoft to come back within the next three or four months,” Jackson said.

Yang needed to step aside to give Yahoo a chance to start fresh, said David Wertheimer, the former president of Paramount Digital Entertainment and now the chief of the Entertainment Technology Center at the University of Southern California.

“The problem Yahoo has now is they’ve got to redefine themselves in a different landscape than they were when Jerry built the company,” Wertheimer said. “As much as I like Jerry personally, I think employees, and Wall Street are looking for something revolutionary, a sign that the company is reinventing itself.”

Yang patted himself on the back for moving the company in a new direction during his recent CEO tenure. His full statement:

From founding this company to guiding its growth into a trusted global brand that is indispensible to millions of people, I have always sought to do what is best for our franchise. When the board asked me to become CEO and lead the transformation of the company, I did so because it was important to re-envision the business for a different era to drive more effective growth. Having set Yahoo on a new, more open path, the time is right for me to transition the CEO role and our global talent to a new leader. I will continue to focus on global strategy and to do everything I can to help Yahoo realize its full potential and enhance its leading culture of technology and product excellence and innovation.

Yahoo said the search will include internal and external candidates. One leading contender no doubt is President Sue Decker, who has been a close Yang ally. The New York Times reported that other candidates include Dan Rosensweig, Yahoo’s former chief operating officer and now with Quadrangle Group, and former AOL CEO Jon Miller.

Struggling for a fix
Yahoo has been struggling for months to improve its financial performance, but things have gone from bad to worse for the company this year, and its stock has sunk to a closing price of $10.63 on Monday. First, the company thwarted Microsoft’s unfriendly attempt to acquire Yahoo outright, and later just its search business, though Yahoo appeared to grow more interested in a deal even as Microsoft grew cooler. At one point, Microsoft offered to acquire the company at $33 per share.

The next blow was the economic collapse, which is hurting the advertising market on which Yahoo depends. Even though many expect online ads to fare better than those on TV or in print, Yahoo relies more on graphical “display” ads that are expected to be hit harder than the search-related text ads that supply the vast majority of Google’s profits.

Finally, a search-ad partnership with Google fell apart in November when Google decided it didn’t have the stomach to fight the Justice Department’s threatened antitrust lawsuit.

Is the fix in?
Yang can’t claim credit for righting the company, but he has certainly changed it.

One major component, just now launching is the Yahoo Open Strategy, which is designed to rewire Yahoo’s computing infrastructure. The goal is to link Yahoo users with social networking elements, enable others to energize Yahoo properties with new applications, and build Yahoo activities into other sites on the Internet. Ultimately, the company hopes for new users and more activity from existing users.

The company also is trying to overhaul its advertising business. Part of that effort involves improving the profitability of its search ads, but a higher-profile element is the Amp technology for display ads. With Amp, Yahoo hopes to make it easier for advertisers to find places to run ads, easier for publishers to find advertisers, and easier for all parties to track just how well ads are doing.

Source:

France one step closer to kicking file sharers off the Internet

Posted By Nicholas Deleon

French pirates may want to think twice about downloading that episode Entourage off the Pirate Bay. A new law just passed the Sénat that would cut file-sharers off the Internet. Those caught illegally sharing material, be it music, movies, software, or whatever else, will be warned, both by e-mail and regular mail. After two such warnings your connection is shut off.

Under the law, a new government body would be created to help patrol the France’s Internet use.

The law now has to be approved by the lower house of Parliament, the Assemblée nationale, which is directly elected by citizens.

There’s only one small problem with the proposed law: it directly conflicts with the wishes of all mighty Brussels, which has called such a measure—kicking people off the Internet for file-sharing—to be a violation of “civil liberties and human rights.”

Don’t mess with Brussels is the new Don’t mess with Texas.

Google tries brinksmanship with DOJ in fight over Yahoo deal

Google’s ad deal with Yahoo probably couldn’t start soon enough for either company. Spending on ads is likely to be dropping in line with the economic contraction, and Yahoo could certainly use any cash it can get in order to avoid another round of layoffs. All that is likely to make the companies’ ongoing negotiations with the US Department of Justice over the antitrust implications of the deal that much more frustrating. Now, it appears that Google is trying to push things along by suggesting that it’s ready to walk away from the deal.

The potential partnership between the two companies would see Google place ads among those appearing with search results at Yahoo. According to the potential partners, Google ads would only appear when Yahoo had nothing relevant it could place on that page. Yahoo, for its part, claims that the deal would mean millions of dollars in annual revenue, which it would pump into improving its own ad-serving system. Both say that, since ad rates are controlled by auctions, the deal won’t allow either company to manipulate pricing.

Advertisers, for their part, have been concerned that any major changes of this sort will necessarily change what they pay, even if neither company directly intervenes. Perhaps more significantly, Microsoft has been publicly telling anyone who will listen that the deal represents a dangerously large market consolidation. Thus, it isn’t much of a surprise that the DOJ is looking into the deal’s antitrust implications. Although the general consensus is that the DOJ would be unlikely to prevail in court, the mere threat of delays, injunctions, and legal fees has brought all three parties to the negotiating table.

It now appears that the talks haven’t been going as quickly as Google would have liked them to. The search giant probably recognizes that, given recent economic events, it is very unlikely to ever again have a DOJ staff that’s this predisposed to letting market forces deal with concerns like antitrust. It is also watching the clock tick down to the election, after which the staff will start focusing on bringing its replacements up to speed and applying for new jobs. Google probably figures it’s now or not any time soon for the deal.

That’s almost certainly what’s behind a report in The Wall Street Journal that suggests that Google is ready to walk away and abandon the deal. This sent countless other news sources scurrying to ping their inside sources (we have none, so you’re spared that) and get responses from official spokespeople. The general consensus: both internally and publicly, Yahoo still wants the deal; Google spokespeople do too, and nobody knows what’s going on behind the search giant’s public facade.

Probably the most astute take on matters came from The Journal’s own blog site, where Kara Swisher referred to the rumors as Google “playing chicken” with the DOJ. She correctly notes that the original story more or less said that Google could walk away from the deal—unless it doesn’t, and lists a whole host of reasons that having the deal fall through would be a disaster for Yahoo. Although, on the plus side, she notes that it might finally kill off any Yahoo/AOL deal.

So, chances are very good that the rumors are simply Google’s way of nudging negotiations along, lest everyone get distracted and wind up focusing on voting for the country’s future direction instead.

Source: Arstechnica

Hacker faces 10 years for taking down Scientology

Posted by Martin

An 18-year-old New Jersey man will plead guilty to the January online attacks that took down the Church of Scientology’s Web site, federal prosecutors said Friday. Dmitriy Guzner of Verona, New Jersey, was part of an underground hacking group called Anonymous that has made the church a target of several attacks. He was charged Friday but has agreed to plead guilty sometime in the next few weeks, the U.S. Department of Justice said in a statement. He faces 10 years in prison on computer hacking charges.

The attacks began Jan. 19 and managed to knock the Scientology.org Web site offline by hitting it with several bursts of unwanted Internet traffic. The attack, known as a distributed denial of service (DDOS) attack, flooded the site with as much as 220M bps of traffic, according to computer security firm Arbor Networks. That’s considered to be a decent-sized DDOS attack and was enough to disable the Web site temporarily. Anonymous quickly followed its attacks with a series of YouTube videos, claiming its actions were a response to what it said were efforts by the Church to suppress a video of movie star Tom Cruise professing his admiration for the religion.

FCC reluctantly considers delaying white-spaces vote

Posted by Marguerite Reardon

The Federal Communications Commission is considering delaying its November 4 vote on using unlicensed white-space spectrum after broadcasters filed an emergency petition, according to Web site Ars Technica.

The article quotes FCC spokesman Rob Kenny as saying the agency is reviewing the broadcasters’ request. But the article also made it sound like the FCC wasn’t crazy about the idea of delaying the vote. Kenny notes in his comments that the white-space proceeding has been open for several years and there have already been several rounds of testing, which were open to the public for comment.

Big technology companies, such as Motorola, Microsoft, and Google, have been lobbying the FCC for more than a year to open up these channels known as white spaces. These slivers of spectrum have been used as buffers between TV stations. But if used, they could provide between 300MHz and 400MHz of unlicensed spectral capacity throughout the country that could be used by anyone.

The National Association of Broadcasters has opposed using the buffer spectrum, saying that the use of white spaces will interfere with licensed broadcast channels.

Last week, the FCC’s Office of Engineering and Technology released a report in which it concluded that detection technology along with geo-location technology worked well enough in proof-of-concept devices to avoid interference issues. FCC Chairman Kevin Martin also announced his support in favor of opening up white spaces for unlicensed use and said the issue will be voted on at the November 4 FCC meeting.

But the NAB and the nation’s three major TV broadcasters argue that the report’s findings indicate there are interference issues. On Friday, they filed an emergency petition asking the FCC to launch a 70-day public comment cycle on the report.

“The widespread WSD (white-space device) sensing failures, all documented in the report, rebut the report’s conclusion that there has been a ‘proof of concept’,” the NAB said in its filing. “There is no basis for concluding that devices that rely on spectrum sensing only, without geo-location, are feasible.”

The NAB also argues that the FCC has sought comment after other technical reports were issued in the past. For example, the group noted that the agency asked for public comment about a study on 3G, or third-generation, wireless use in the 2,500MHz to 2,690MHz band in 2001. It also asked for comment after issuing studies on media ownership in 2007.

Of course, it should come as little surprise that the broadcasters are unhappy with the FCC’s support for white spaces. They have been fighting the proceeding tooth and nail from the beginning. While broadcasters say they oppose the use of white spaces because of interference issues, I wonder if they are also afraid that opening up this spectrum might hurt their business models years into the future.

The companies pushing hardest for white spaces are companies like Microsoft and Google. Today these companies don’t compete directly with broadcasters. But as more video is distributed via the Internet, there’s a chance that they could become competitors in the future. Google already competes in a minor way with its YouTube site. The white-space spectrum, which penetrates easily through walls and provides high capacity, could be used to extend broadband services wirelessly.

Perhaps a bigger threat to broadcasters are the companies that haven’t been created yet. Opening up the white-space spectrum for free use could help spur the creation of new companies that could eventually compete with them. In many ways this is exactly what Chairman Martin hopes will happen.

Verizon CEO optimistic despite economic crisis

NEW YORK–Verizon Communications CEO Ivan Seidenberg is confident that his company and much of the communications industry will make it out of the current economic crisis unscathed.

Speaking Tuesday at the Media & Money Conference, a joint production of Dow Jones and Nielsen, Seidenberg brushed aside concerns that the credit crisis and an impending recession will have a big effect on Verizon’s bottom line. So far, the company hasn’t seen a significant drop in subscriptions or revenue, he said.

“We expect some impact,” he said. “But our view is that we will weather this.”

Seidenberg’s confidence is bold considering that most technology companies, even his own, have taken a beating in the stock market over the past few weeks as banks hoard cash and refuse lending to each other. But he said that the credit issues happening today will have little effect on his company or the communications industry in general. As for the broader economy, which also looks to be heading toward a recession, he is also optimistic.

The reason is simple. He believes that Verizon is in two core businesses that people will spend money on regardless of whether they are down and out financially: wireless and broadband services.

With more than 84 percent of Americans already owning a cell phone today, Verizon is still managing to sign up new customers. During the second quarter of 2008, Verizon Wireless, which is jointly owned by Vodafone and Verizon Communications, the company added 1.5 million new wireless customers for a total of 68.7 million subscribers. And because most of these customers are under a contract, Seidenberg said he doesn’t anticipate heavy losses due to economic hard times. That said, he admitted that Verizon and other wireless carriers could see a slowdown in the adoption of new data services.

“(Consumers) may pull back and not buy as many premium services,” he said. “But the question is will they pull back their spending on what we sell? Our view is that we will weather this. We sell the most indispensible device that consumers have, the mobile phone.”

Seidenberg’s upbeat outlook in the telecom market is shared by other phone company CEOs. Last week at an event in Baltimore, Sprint Nextel’s CEO Dan Hesse said he also expected his company and the wireless industry in general to weather the economic storm.

“On the consumer side, wireless has become a staple,” he said. “People would rather give up their TV or Internet access before they give up their cell phone. We believe we are more insulated.”

Hesse said if anyone in the telecommunications market should be worried, it should be traditional phone companies like Verizon and AT&T which also sell landline phone service. He explained that as customers look at their bills, they’re more likely to cut the phone cord than cancel wireless service.

But Seidenberg argued that the trend toward eliminating traditional phone lines has been occurring for the past 10 years. And because Verizon has other services that replace landlines, the company will continue to grow.

“We’re already losing landlines,” he said. “But as we do, we pick up wireless and broadband customers.”

In fact, Seidenberg is also bullish about the prospects for Verizon’s broadband business even as the economy takes a hit. He pointed out that people actually spend more time at home using their computers and watching TV during economic hard times than they do in prosperous times, which should work to Verizon’s advantage.

“If people travel less, they are home more,” he said. “And if they are going out to eat less, they are home more. And that’s likely to mean they will spend more time on their computers or using other applications.”

This reasoning makes sense in terms of helping Verizon retain the customers it has. But what about the company’s future? Will customers be willing to upgrade to faster broadband speeds or more high-definition TV channels when they’re losing their jobs? Or will they cut back on those services to conserve cash? Seidenberg seemed to realize the challenge.

“If the economy takes a big dip, we will see slightly lower level of growth.” he said. “We don’t want to be naïve about this. We think there will be some impact. But we will be OK.”

But he said even in the deepest of economic downturns, American industry will be turning to companies such as his to get the economy back on track. Companies will need to retool workers and create jobs. And he believes that Verizon could play an important role in providing the communications infrastructure to get the economy started again.

“This credit crisis will create some dislocation,” he said. “But the fundamental issue for American industry is to create new jobs. If we do that, I can’t imagine a company like ours won’t have a role in that process.”

Source: Cnet