Hewlett-Packard (NYSE: HPQ) is closed down $2.48 to $46.65.

The WSJ reported HPQ is in advanced talks to acquire Electronic Data Systems (NYSE: EDS) for between $12 billion and $13 billion according to sources.

HPQ call option volume of 59,863 contracts compares to put volume of 21,209 contracts. HPQ June option implied volatility of 35 is near its 26-week average of 33 according to Track Data, suggesting slightly larger price risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Amazon.com Inc. (NASDAQ: AMZN) profits rose 30%, easily beating analysts' expectations.
• AMETEK Inc. (NYSE: AME) beat Q1 estimates on global strength and recent acquisitions.
• Apple Inc. (NASDAQ: AAPL) easily beat Q2 expectations but offered a weak outlook.
• AT&T Inc. (NYSE: T) posted strong Q1 results thanks to the popularity of the iPhone.
• Baidu.com Inc. (NASDAQ: BIDU) beat earnings and saw an upgrade from Citigroup Inc. (NYSE: C).
• Broadcom Corp. (NASDAQ: BRCM) Q1 profit soared, and it raised its guidance.
• Cymer Inc. (NASDAQ: CYMI) beat Q1 estimates and announced a share million buyback program.
• Electronic Data Systems Inc. (NYSE: EDS) posted Q1 profits on cost cutting and new contracts.
• EMC Corp. (NYSE: EMC) Q1 earnings fell on on acquisition-related charges.
• Hexcel Corp. (NYSE: HXL) beat Q1 estimates on increased commercial aerospace sales.
• Huaneng Power ADS (NYSE: HNP) earnings plunged on coal prices, but the stock went higher.
• Level 3 Communications Inc. (NASDAQ: LVLT) narrowed its loss on higher sales of networking services.
• McAfee Inc. (NYSE: MFE) Q1 profit plunged on product development and marketing costs.
• MEMC Electronic Materials Inc. (NYSE: WFR) missed analysts' estimates for the first quarter.
• Microsoft Corp. (NASDAQ: MSFT) beat earnings expectations and raised its full-year guidance.
• Netflix Inc. (NASDAQ: NFLX) profit soared in the first quarter on increase in subscriptions.
• Nintendo Co. (OTC: NTDOY) posted record results due to the popularity of the Wii system.

International Business Machines Corporation (NYSE: IBM) is a top provider of information technologies, including computer systems, networking systems and storage devices. It is also one of the largest providers of software and semiconductors and its service arm is the largest in the world. Competitors include Hewlett-Packard (NYSE: HPQ), Microsoft (NASDAQ: MSFT) and Electronic Data Systems (NYSE: EDS).

The company pleased investors late last month, when it authorized $15 billion in additional funds for use in the IBM stock repurchase program. That amount was in addition to about $400 million remaining from a prior authorization. Management said that the anticipated repurchase activity could add five cents per share to FY08 earnings and that led to declaration of FY08 EPS guidance of at least $8.25 ($8.22 consensus).

Perot Systems Corporation (NYSE: PER) offers information technology, business process outsourcing and strategic consulting services through its operations in the US, Mexico, Europe and India. Offerings include applications development, systems integration, claims processing, call center operations, enterprise analysis and research. The company serves clients in banking, insurance, healthcare, manufacturing, telecommunications, travel, energy and defense. Electronic Data Systems (NYSE: EDS) and IBM (NYSE: IBM) are major competitors.

The firm pleased investors earlier in the month, when it reported Q4 EPS of 35 cents and revenues of $732 million. Analysts had been looking for 30 cents and $707.9 million. The CEO attributed the solid results to new business, globally-delivered projects and existing client expansion. Management also guided Q1 EPS to 21-23 cents (21 cent consensus) and Q1 revenues to $665-$680 million ($673.52M consensus).

The earnings crunch rolls on, and here are a few of the highlights of this past week's earnings coverage from BloggingStocks:

• Activision Inc. (NASDAQ: ATVI) earnings soared on popularity of Guitar Hero and other game franchises.
• Arch Coal Inc. (NYSE: ACI) beat earnings expectations and offered revised guidance.
• Avon Products Inc. (NYSE: AVP) beat estimates despite lower profits due to restructuring costs.
• Chattem Inc. (NASDAQ: CHTT) beat estimates and raised its guidance.
• Cisco Systems Inc. (NASDAQ: CSCO) met estimates but a weak forecast raised concerns.
• Dionex Corp. (NASDAQ: DNEX) beat estimates on strength in petrochemical and food/beverage markets.
• Electronic Data Systems Corp. (NYSE: EDS) earnings fell, helping to raise concerns about tech stocks.
• Flextronics International Ltd. (NASDAQ: FLEX) beat estimates and affirmed its outlook.
• Gannett Inc. (NYSE: GCI) missed fourth-quarter earnings estimates on lower ad revenue.
• Las Vegas Sands Corp. (NYSE: LVS) missed expectations due to rising construction costs.
• MGM Mirage (NYSE: MGM) forecast it would beat earnings expectations by as much as 10 cents a share.
• Old Dominion Freight Line Inc. (NASDAQ: ODFL) beat revenue estimates and raised its guidance.
• RealNetworks Inc. (NASDAQ: RNWK) warned it would miss first-quarter and full-year expectations.
• Silicon Laboratories (NASDAQ: SLAB) beat expectations and raised its guidance.
• THQ Inc. (NASDAQ: THQI) posted disappointing results that included cancelled game franchises.
• Time Warner Inc. (NYSE: TWX) met estimates and announced restructuring plans (see transcript).
• Unilever (NYSE: UL) fourth-quarter net income tanked on a sell-off of its European frozen food business.
• Walt Disney Co. (NYSE: DIS) posted better-than-expected results on gains in TV and theme parks.

Cisco's (NASDAQ: CSCO) numbers were OK. The company reported net income of $2.1 billion, or 33 cents per share, compared with $1.9 billion, or 31 cents, for the same period a year earlier. But the forecast was soft by Wall Street standards, and shares fell 8% after hours.

Over at big tech out-sourcing company EDS (NYSE: EDS), earnings fell 13% to 36 cents a shares, according to MarketWatch.

The message to the markets was clear. Both in enterprise tech consulting and enterprise tech sales the road ahead is filled with pot holes. The first half of 2008 is a period when a slowing economy is going to swallow up almost the entire technology sector. After that, no one knows.

There was some optimism on Wall Street that tech might escape a downturn because large corporations would not cut capital expenditures on large projects in their advanced data centers. Telecoms and cable companies would not slow build-outs of routers to improve their broadband capacity.

All of that thinking was a victory of hope over reason. Big tech is in for trouble.

Douglas A. McIntyre is an editor at 247wallst.com.

Wal-Mart (NYSE: WMT) is trading down almost 4% on weak January same-store sales.

Cisco (NASDAQ: CSCO) is off over 8.5% on weak guidance.

EDS (NYSE: EDS) is down over 6.5% due to poor earnings.

Akamai (NASDAQ: AKAM) is up over 3.6% on numbers that beat forecasts.

Level 3 (NASDAQ: LVLT) is trading up almost 3% on strong earnings.

Douglas A. McIntyre is an editor at 247wallst.com.

You know that an economic issue has jumped the shark when the New York Times's op-editoraliste Maureen Dowd (MoDo) devotes her Sunday column to it. What's unleashed MoDo's moxie is how Sovereign Wealth Funds (SWFs) -- those government investment funds estimated to control between $2 trillion and $15 trillion -- are buying up chunks of the U.S. banking system.

The problem against which MoDo rails is that thanks to the policies of George W. Bush, the price of oil has quadrupled and the dollar has plummeted -- thus putting the U.S. at the mercy of those Arabian SWFs whose owners he groveled to this week to lower the price of oil. And while W. was grovelling, so were the CEOs of Citigroup Inc. (NYSE: C) and Merrill Lynch & Co. (NYSE: MER) -- seeking capital to shore up their Collateralized Debt Obligation (CDO)-tarnished balance sheets. MoDo is right that with Bush's $2.4 trillion worth of wars and $1.3 trillion worth of tax cuts, the U.S. has gone from being the world's creditor to its debtor.

But another New York Times article sheds more light on the phenomenon of foreign investment in the U.S. -- suggesting that with their $414 billion worth of 2007 purchases in the U.S., foreign investors, including SWFs, spent a record amount of money buying up the U.S. last year -- up 90% from 2006. The Times suggests that this foreign investment comes in different forms -- some of which are beneficial. How so?

When your information technology needs extend beyond off-the-shelf software, it's usually best to go with an experienced consultant. There is an Austin, Texas outfit that's well thought of that way. It works for some of the biggest corporations in America.

Perficient, Inc. (NASDAQ: PRFT) is an information technology consulting firm, with clients throughout the United States. Company services include software development, systems integration, consulting and support. Its specializes in solutions involving portals and collaboration, eCommerce, online customer relationship management, enterprise content management, business integration, mobile technology solutions and service-oriented architectures. Clients include Anheuser-Busch (NYSE: BUD), IBM (NYSE: IBM) and Wells Fargo (NYSE: WFC). Electronic Data Systems (NYSE: EDS) is a major competitor.

The firm pleased investors last week, when it raised its Q4 services and software revenue guidance from $56.3-$62.1 million to $61.2-62.7 million. Analysts had been expecting $59.97 million. The CEO noted that the strong revenues were bolstered by a reacceleration of organic growth. Northland Securities subsequently reiterated its "outperform" rating on the stock and declared a $25 price target.

Just in time for the season, I found a fabulous British gift to put on my Christmas list from Iwantoneofthose.com, the Paintball Panzer. These made-to-order miniature versions of the WWII German mainstay tank fires paintballs from its cannon. At least twice a day, I think to myself, "If I only had a paintball tank..."

While we're on the subject of tanks, I SO wish I lived in the U.K., just so I could rent a real freakin' Chieftain battle tank to drive to a prom, business meeting or film premiere. Better yet, for only £375, Tanks A Lot will set me up to run over a complete car with it! I wonder how much extra they would charge to allow me to pick out the car of my choice from the freeway, with its text-messaging, cigarette-butt tossing driver still inside.
via Boing Boing

Another item in our "If this isn't the end of civilization, I bet we can see it from here" collection is the smart shopping cart concept recently unveiled by Electronic Data Systems (NYSE: EDS). According to Reuters, the carts will keep track of what we place in the basket and warn us if we're buying too much junk food. As if, when I top off my cart full of Pepsi, Ho-Ho's, and frozen chicken wings with a bag of pork rinds, I don't recognize a disaster in the making. I predict a healthy business in replacing the interface on these after I beat them into submission with the business end of a Pringles can.

Finally, if you enjoy smart advertising, check out this photo from Dancewithshadows.

ATM Surcharges Set to Soar
In a move that's expected to prompt higher fees industrywide, Bank of America has raised, to $3, the amount it charges non-customers to withdraw cash from most of its ATMs.
Bank of America raises ATM surcharge - USATODAY.com


Mortgage Help on the Way - Refi Rescue
Hundreds of thousands of homeowners who may struggle to make mortgage payments are likely to get some relief in coming months, including more options to refinance into lower-cost, fixed-rate loans and tax relief if they do face foreclosure.
Refi rescue for some facing ARM resets -
Also: Fed Could Ease Mortgage Reset Shock
Also: A Home Loan Trap - High fees for early payment can prevent escape for homeowners trying to escape from ARMs.


Road Map to a Rich Life
It's Money Magazine's 35th anniversary. In its honor, here are 47 smart ways to get on track to a rich life.
Road map to a rich life | Money Magazine
Also: 5 Money Dreams - For baby boomers, five cherished lifetime goals. And five smart game plans for making them come true.


The Dark Secrets of Debit Cards
Why do banks push debit cards for every purchase you make? Because they stand to make millions--largely at your expense. Quietly but surely, a revolution is under way in how we pay for everything from a cup of coffee to our monthly electric bill. Continuing a climb that started a decade ago, debit cards are now preferred over credit cards by those American consumers who use plastic for their in-store purchases.
ConsumerReports.org - The dark secrets of debit


The High Tax Cost of Winning
What happens when you win an expected high-value prize or cash? Here is one person's story and the tax implications.
Unexpected prize carries high tax cost

Is Canada for Sale?
Many of Canada's best-known companies have been bought by foreigners. Even easygoing Canadians are wondering what can be done about it.
Canada's largest companies feel squeeze of the buyout boom - FORTUNE

The New York Times [registration] suggests that Dell Inc. (NASDAQ: DELL) plans a big push into computer services as part of its makeover. Its big scoop? Dell hopes to go from $5 billion to $20 billion in services revenue by 2015.

This is actually more of a change than it might appear. That's because CEO Michael Dell recruited Stephen F. Schuckenbrock last December from Electronic Data Systems Inc. (NYSE: EDS) to lead its services business, which currently gets most of its revenue from technical support and maintenance on Dell machines.

But to reach the $20 billion target, Schuckenbrock will need to build Dell into more of a computer services powerhouse. If Dell hits its target, that $20 billion will still represent 40% of International Business Machine's (NYSE: IBM) $50 billion in estimated 2007 services revenue. And the gross margins on services business, at 30% for IBM, could add a significant amount to Dell which earns a relatively paltry 18% gross margin.

If Dell can pull off this big rise in services revenue, it could make me want to look at something I have not thought about in years -- buying Dell stock.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the stocks mentioned.

There's been lots of buzz that Wipro (NYSE: WIT) was going to do a sizable M&A deal. Ranked #3 among India's large outsourcers, the firm has a frothy valuation, $1.8 billion in the bank, and a need to find ways to keep the growth revving against rivals like IBM (NYSE: IBM), EDS (NYSE: EDS), and other biggies.

Well, this week, Wipro did pull the trigger – and has agreed to pay $600 million for Infocrossing (NASDAQ: IFOX). But the premium was only about 5.5%.

Funny enough, Infocrossing is based in New Jersey. But this is important because Wipro wants to snag US customers. What's more, Infocrossing has particular expertise in the health care sector, which should continue to grow.

Does this mean we'll see jobs flee the US? Not necessarily. In fact, it looks like Wipro wants to increase its hiring in the US. The main reason is that US customers prefer having critical assets remain local.

While the deal is not cheap – at 46 times earnings – it is likely to have more potential within a larger organization like Wipro.

Also, if you want to check out more recent M&A deals, click here.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

MOST NOTEWORTHY: Getty Images (GYI), Jackson Hewitt (JTX), Electronic Data (EDS), RC2 Corp (RCRC) and Chipotle Mexican Grill (CMG) were today's noteworthy downgrades:

• Deutsche Bank cut Getty Images (NYSE: GYI) to Sell from Hold citing deterioration in its core business. Gabelli downgraded Getty Images to Hold from Buy after the company lowered guidance to reflect the changing industry dynamics.

• Goldman cut Jackson Hewitt (NYSE: JTX) to Sell from Neutral citing near-term risks that include the renegotiation of the HSBC (HBC)/RAL contract, the DoJ/IRS investigation, and decreasing performance in tax.

• Jefferies downgraded Electronic Data Systems (NYSE: EDS) to Hold from Buy to reflect the company's slowing cash flow improvement.

• Wedbush downgraded RC2 Corp (NASDAQ: RCRC) to Buy from Strong Buy on the lower sales forecast for 2007. Soleil cut shares to Hold from Gradually Accumulate to reflect uncertainty over the Thomas recall and increased competition.

• Chipotle Mexican Grill (NYSE: CMG) was downgraded to Market Perform from Outperform based on valuation...

OTHER DOWNGRADES:

• Lazard downgraded Kyphon (NASDAQ: KYPH) to Hold from Buy.

• SMH Capital cut Aventine Renewable Energy (NYSE: AVR) to Sell from Neutral.

• Credit Suisse downgraded AutoDesk (NASDAQ: ADSK) to Neutral from Buy.

• UBS cut SABMiller (OTC SBMRY) to Reduce from Neutral.

• CIBC downgraded Marvell Tech (NASDAQ: MRVL) to Sector Performer from Outperformer.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

With the market being propelled upward due to private equity and corporate acquisitions, investors should not stay on the sidelines. Rather, they should target private equity's next frontier -- IT services. Of the companies in this sector, Unisys Corp. (NYSE: UIS), Perot Systems Corp. (NYSE: PER) and Ingram Micro, Inc. (NYSE: IM) may be worth examining.

A few months ago, I suggested several sectors and companies that private equity could target next. On Friday, TheStreet.com reiterated one of those sectors -- IT services. Here's how much seven such companies have gone up or down since my March 29th post along with their market capitalizations ranked by their Price/Earnings to Earnings Growth (PEG) ratios: