Hewlett-Packard Corp. (NYSE: HPQ) will purchase about 24 data centers in Europe from BT Group (formerly British Telecom) for $2.9 billion, the Sunday Times in London reported Sunday, with an official announcement likely to come within weeks. However, BT Group will likely sign a 10-year contract to continue using the data centers with HP; BT Group just won't own them any longer.

But this isn't just a deal for HP to own more data centers as it beefs up its service provider portfolio in addition to its manufacturing prowess. BT Group is also going to manage the remainder of HP's voice and data networks worldwide. The London-based telecom company already handles HP's European voice and data networks, so this transaction is like trading a global service contract for a bunch of server farms. Or at least that's what is sounds like.

HP will continue to ramp up its portfolio of service offerings to better compete with IBM Corp. (NYSE: IBM), a company that left the hardware business to focus on service contracts with corporate customers and that has done well at it under former CEO Lou Gerstner and current CEO Sam Palmisano. HP is already a larger company by revenues than IBM, but it doesn't have the service provider clout yet -- it's still first and foremost a manufacturing company.

There is some news out of the U.K. that Sony Corp. (NYSE: SNE)'s PSP, the PlayStation Portable, may actually get turned into a phone with BT Group (NYSE: BT), formally known as British Telecom. There is already a clip-on mini-camera available for it, and the advanced communications just takes it that much further into a PC and total communications device with video, voice, and wi-fi.

One small problem. Last weekend I was at GameStop looking for a gift for my nephew and when I asked the people working about the PSP, they told me that it was a disaster. They said the Nintendo DS was far better, and this was a bit surprising considering the sleekness of the PSP. Even a buyer at the register that owned a PSP said he wished he didn't buy it.

So maybe as a phone and full-on communications center it may be better, but if the people selling it are going to directly discourage this, then how successful can it be? Sounds like they'll need to convince at least some more of the sellers of the PSP that improvements have been made.

Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in the companies he covers.

Ciena Corporation (NASDAQ: CIEN), the optical components maker, has gotten hit pretty hard during this correction. The stock has dropped from $32 in late February and is trading around $26 today, almost a 20% drop.

This morning, RBC Capital Markets upgraded the stock to Outperform and set a $33 target price. The reasoning for the upgrade is expected stronger demand for its products due to high video and data traffic. The RBC report cited industry growth is expected to jump to $14.5 billion by 2009 up from $10.9 billion in 2006. If Ciena continues to grow faster than the market, that is good news for Ciena and its shareholders.

At Verizon Communications Inc (NYSE: VZ), a large customer, business is expected to be down, but growth from British Telecom, AT&T Inc (NYSE: T) and MCI may offset the decline, the report suggested.

Ciena's sell off is too much too fast. I'd suggest using the stock weakness to pick up some shares.

Microsoft Copr (NASDAQ: MSFT) is trying to redeem itself in the IPTV software market. After delivering broken software to telecoms, it is hoping to get things right for deployments next year.

Aside from some sales success with Deutsche Telekom, BT and AT&T, the software has not been rolled out extensively. Verizon also plans to use the product in its fiber-to-the home TV initiative.

But, that's the problem. Telecom TV is already decades behind the cable companies. And, big cable offers VoIP and fast broadband now. Even if the AT&T and Verizon fiber operations are built on time, any further delays or programming issues in the Microsoft IPTV software could delay an initiative in which the telecoms are trying to break the cable deadlock.

Research firm Gartner says that IPTV could be a a $13 billion business by 2010.

Not if the software doesn't work.

Douglas McIntyre is a partner at 24/7 Wall St.