Hewlett-Packard will acquire Electronic Data Systems (EDS) for $25 a share, doubling the size of HP's services unit and making it the second largest company in the space after IBM. Both company boards have unanimously approved the deal, which should close in the second half of next year. [WSJ]

Illinois-based iPCS, a wireless affiliate of Sprint Nextel, has sued the number-three wireless carrier in Illinois Superior Court. Its claim that the new company Clearwire, with a majority stake held by Sprint, infringes on that exclusivity agreement signed in 1999. The affiliate successfully sued Sprint over the Nextel merger, with Illinois courts awarding iPCS a victory in March. Meanwhile, Sprint Nextel (as it is officially known) reported $505 million in net losses for the first quarter on an eight percent drop in revenue, thanks mostly to attrition in the number of long-term contract customers. That the company can't get these issues worked out behind the scenes, or at least settle these lawsuits before a punitive verdict is reached, doesn't speak well of the management at Clearwire's new parent company. (Photo by AP/Reed Saxon)

The Wall Street Journal is reporting that Hewlett-Packard is nearing a deal to buy EDS for $12 billion to $13 billion. Having set Dell back on its heels in PC sales, HP is now moving to challenge IBM. As computers become commodities, the money is in installing and maintaining them, not marking up Intel's microprocessors and Microsoft's operating system for a thin margin. One wonders if Michael Dell is gutsy enough to launch a rival bid — or, with HP now worth three times as much as Dell, if he can really afford to.

Blinkx's technology is good. (And really, when have you ever heard Valleywag praise someone's technology?) But Chandratillake has never been able to make Blinkx a destination site. Google already has YouTube, and CEO Eric Schmidt has put the heat on YouTube's management to start making money. Merely applying Google's text-search techniques hasn't cut it. Perhaps Blinkx's technology, which better matches video viewers' interests to ads, could prove YouTube's Holy Grail.

Helio backer SK Telecom, the Korean wireless giant, is in negotiations to purchase Virgin Mobile USA. The plan: combine the two properties and then invest enough in Sprint Nextel to get all three companies working together. Sprint already runs the network over which Helio and Virgin run their cell-phone services. Complicating the deal: T-Mobile's rumored interest in buying Sprint. "Part of something is better than all of nothing," a source close to Helio tells us.

Microsoft's chief strategy officer Craig Munde told reporters yesterday that the Yahoo merger is off for good — he "assumed", before putting the ball back in Yahoo's court:

In a letter from software giant Microsoft's lawyers at Sullivan & Cromwell to proxy board members, the company rescinded the agreements it had struck in case of a hostile take-over bid for Web search pioneer Yahoo. But hey, with Yahoo CEO Jerry Yang now begging for deal with tail tucked and head down, the companies may still agree to a friendly take-over bid. [WSJ]

Yahoo CEO Jerry Yang has not been replaced by chairman Roy Bostock, Kara Swisher reports. Yang's reputation, however, has taken a severe tarnishing. How far has his reputation fallen?

Clearwire, the wireless data company started by Seattle-area cell-phone billionaire Craig McCaw, will be recontsituted as a new company valued at $12 billion backed by primarily by Sprint, but also by cable providers Time Warner, Comcast and Bright House, chipmaker Intel and Web search behemoth Google. McCaw will continue as chairman of the board at Clearwire and Ben Wolff as CEO. Sprint CEO Dan Hesse agreed to give control to the pair as part of the deal, to ease concerns that Sprint's core wireless business would conflict as the new company's services began to compete for voice and data customers. Sprint has encountered numerous problems with deploying Intel-developed WiMax, and there's still the issue of whether the company will sell Nextel after a $35 billion acquisition in 2005 went south.

Yahoo chairman Roy Bostock told reporters that shareholders supported Jerry Yang's decision to refuse Microsoft's bid for the company, even when it reached $33 per share. But yesterday, major shareholders Bill Miller and Gordon Crawford — who combined control about 13 percent of the company — said they did not agree with the way Yang handled negotiations. In this excerpt from Yahoo's own Tech Ticker, Sarah Lacy asks Yahoo president Sue Decker, "Who are these institutional shareholders who are supporting $37, $38 per share? Can you shed any light on that?" Watch as Decker explains that what Bostock really meant is that Yahoo's board supports Yahoo's board, which only really ever told shareholders about Microsoft's $31 per share offer. "And that's the end of the story."

What is Yahoo really worth? That's the $44.6 billion question, the one that ultimately split Steve Ballmer and Jerry Yang. Most pundits predicted Yahoo's shares would drop precipitously today, perhaps as low as $19, where they were trading before Microsoft's offer. Instead, they're trading around $24.60 — a 14 percent drop, but a 30 percent premium to the pre-Microsoft price. The shares could drop further over the course of the day, but it's worth asking what's sustaining Yahoo's shares at this level right now.

Sources familiar with Microsoft tell the WSJ they expect CEO Steve Ballmer to target another large Internet company for acquisition soon. Noting that few companies have the size to boost Microsoft's business, Ballmer himself listed Facebook and News Corp.'s MySpace as properties that could help Microsoft control the Internet as it did the personal computer. Others want Ballmer to buy AOL for its massive and cheap inventory. (What, are they pulling for a Nsync reunion tour as well?) Microsoft could easily better Yahoo's $10 billion offer for AOL, says SAI's Henry Blodget. But there's a reason AOL is cheap, people.

Early trading in Frankfurt, Germany dropped Yahoo shares 22.04 percent to $22.35 per share as of 4:38 a.m. Analysts expect the sell-off to drop the company's value to $30 billion by the end of the day, returning its share price near to where it stood before Microsoft made it's $47.5 billion bid for the company on February 1. "There's frustration," Jacob Internet Fund manager and Yahoo shareholder Darren Chervitz told the AP. "I am not even sure if Yahoo cares about its shareholders because they didn't show much regard for shareholders' best interests in this process."

Netscape cofounder Marc Andreessen, left bored by running a social-networking startup, has much time on his hands to write excellent analyses of the tech industry. His blog post on why Microsoft-Yahoo might fall apart seems prescient in the wake of that deal's failure. But there's one odd thing about his writeup. Read this passage:

Even when Microsoft CEO Steve Ballmer tries to sound polite, he manages to be rude. His thank-you-very-much letter to Yahoo's Jerry Yang declining to make an offer for Yahoo is no exception. In particular, Ballmer rails against Yang for considering outsourcing search advertising to Google, saying it will cause Yahoo's engineers to flee and raise prices for advertisers. "By failing to reach an agreement with us, you and your stockholders have left significant value on the table," Ballmer concludes. If I were Yang, I would read this and wonder why I ever even contemplated getting into business with this guy. The full letter:

A Valleywag tipster spotted Microsoft CEO Steve Ballmer and fellow executive Kevin Johnson in Palo Alto on Wednesday. Kara Swisher now confirms they were in California for a meeting with Yahoo. [BoomTown]

Microsoft CEO Steve Ballmer heeded our advice and walked away from a bid for Yahoo. Did he dodge a potentially career-ending bullet? "The talks broke down this afternoon after a face to face meeting in the Seattle area that included Microsoft CEO Steve ballmer, Microsoft exec. kevin johnson, and Yahoo co-founders Jerry Yang and David Filo." [All Things Digital] (Photo by Yodel Anecdotal)

While we wait on Microsoft-Yahoo, things that have actually happened since Saturday's deadline include: 1.21 billion Google searches, 441 million Yahoo searches, 197 million MSN/Windows Live searches, 4 announcements that news was imminent, and 0 actual announcements. [Beyond Binary]

Netscape and Ning cofounder Marc Andreessen needs 1,800 words to say that what's really holding up the Microsoft-Yahoo merger: fears that they could strike a deal, but then see it collapse. Here's the 100-word version.