Wired: Tech Biz

News from Portfolio.com

Also on Portfolio

The HP Way: A Big Deal

Turning a Radio Deal Back On

The Dirtiest Major League Ballparks

Subscribe to Portfolio magazine

Five years ago, if Hewlett-Packard bought EDS, everyone would've thought it was pretty much like when IBM bought PwC -- a play to create a powerful data processing consulting business that could coexist with a computer hardware business. In fact, that's been a great model for IBM.

But with HP today buying EDS for $12 billion, the smart thinking goes in a different direction. It's looking like a red-hot area going forward for IBM, Amazon and Google will be so-called cloud computing -- a.k.a. hardware as a service.

If you're a startup or a corporate IT manager, you increasingly won't have to buy computers to run your business. You just rent capabilities from some computing giant and move the information there and back over the internet. If something crashes, the data is always backed up and stored somewhere out there in the cloud. This is the ubiquitous computing idea IBM has pushed for a decade -- making computer power something like electric power.

If you tack together some of HP's other purchases under CEO Mark Hurd -- as Om Malik did -- it seems even more obvious that HP is at least as interested in cloud computing as consulting. And EDS is a solid cloud-computing play because a core business is owning and running giant data centers.

As part of the interview I did with Amazon CEO Jeff Bezos (the video is now on Portfolio.com), we discussed Amazon's push into cloud computing.

"We've been working on our Infrastructure Web Services for four years," Bezos said. "We launched our first one two years ago, the Simple Storage Service, and I am astonished -- I rarely meet a startup company these days who isn't using our web services and now we're starting to get, you know, deployment inside Enterprise level data centers as well. So it's a very exciting."

Asked about Google's plans to get into a similar business, Bezos said: "Well ... we really do have a practice of not talking about other companies. But this, like our retail business, (there) is not going to be one winner. I think there are going to be multiple winners pursuing different flavors or strategies, different kinds of products.... I think our web services business is going to be part of what becomes an important industry. And ... important industries are rarely made by single companies."

So maybe there is room for HP, Amazon, IBM, Google and others to play in the cloud computing space. The HP deal is telling us that the concept is ready for prime time.

News from Portfolio.com

Also on Portfolio

The Confessions of Barry Diller

Facebook's Growing Pains

What Are the Dolans Up To?

Subscribe to Portfolio magazine

Apple is close to announcing it has signed a deal to sell HBO programs and movies on the iTunes website, according to HBO employees involved in executing the agreement.

The deal marks the first time that Apple has agreed to a separate price structure for a content provider, one of the employees said.

The HBO insiders said that the new service would be launched and announced simultaneously, most likely in a week or two.

Details of the agreement are not yet known, but it is clear that HBO was able to secure better terms from Apple than other content providers, they said.

One possibility is that HBO programming will have a higher retail price than the flat $1.99 fee Apple currently charges for video content; another is that HBO will receive a larger cut of the same flat rate than other iTunes content providers receive.

Apple and HBO spokespeople did not return calls for comment on the deal.

NBC pulled its programming from iTunes last summer after Apple refused to charge more than $1.99 for that network's shows. In May, NBC struck a deal with Microsoft to sell its shows on the Zune website.

The HBO-Apple agreement is a strategic coup for both companies. Apple is trying to increase sales and awareness of its new Apple TV, a device that allows viewers to rent movies and buy content from your television. HBO wants to profit from its archive by letting fans buy old episodes of shows like Deadwood and The Larry Sanders Show.

The terms of this new deal could open a Pandora's box for iTunes. With the advent of pricing variation, movie studios and musicians will want to charge more for their big hits. Apple could be pressured to accept variable pricing for other content, a change it has resisted in the past.

HBO started an online download service earlier this year. It lets HBO subscribers watch 400 hours of programming a month and stream HBO's main channel. The service, called HBO on Broadband, is currently being tested in Wisconsin and will soon spread to other markets.

The deal with Apple is a more dramatic move for HBO, since the broadband service only allows current HBO subscribers to access the content. Selling through iTunes would let HBO tap everyone else.

In the past, HBO has been notoriously slow to offer content through new media, and the deal with Apple is a result of pressure from HBO's parent company, Time Warner, according to HBO employees.

Jeff Bewkes took over as Time Warner C.E.O. from Dick Parsons late last year.

"We should have done this a long time ago," said an HBO insider.