DealBook: To Cover New York, Zillow Buys a Rival Site

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Bits Blog: Google Close to Acquiring Waze, a Rival in Maps

Nir Elias/Reuters Waze, an Israeli mobile satellite navigation application, seen on a smartphone.

Google, which dominates the market for online maps, is close to a deal to acquire Waze, a largely Israeli company that has developed a social mapping service that is popular with drivers seeking to find the best route given actual traffic conditions.

The proposed acquisition, for a price of more than $1 billion, could be announced early this week, according to three people with knowledge of the discussions who spoke on the condition of anonymity because the deal was not final.

Waze, which was previously in discussions to sell itself to Facebook, attracted the interest of the bigger technology companies because of the social nature of its maps. Waze’s technology, which is available only on mobile devices, uses voluntary GPS tracking of its users and their live reports about accidents and other road hazards to dynamically adjust routing to get users from point A to point B in the shortest possible time.

Waze is officially based in Palo Alto, Calif., but has extensive operations in Israel. It is particularly strong outside the United States, claiming to have about 47 million users globally. In Israel, nearly 9 in 10 registered drivers have used the service, according to the company.

Many of Waze’s maps have been created by passively tracing the routes of its users via GPS, but about 70,000 volunteers also submit edits to improve its maps, much the way volunteer editors contribute to the online encyclopedia Wikipedia.

Google also uses volunteers to improve its maps, but real-time traffic and route adjustments have been a weakness. At Google’s annual developers conference last month, the search giant unveiled a new version of Maps that includes more real-time traffic information.

Still, Google is far and away the leader in online mapping, and its interest in Waze could be a defensive move, to keep mapping expertise to itself. Facebook, for example, already has an extensive partnership with Waze, and had been interested in the company’s technology and rabid fan base as a way to extend its mobile presence.

It’s unclear whether the deal would face antitrust problems, given Google’s already strong presence in online maps.

Waze, a tiny company with about 100 employees, has struggled to generate revenue from its maps. It has experimented with ads for gas stations and fast-food restaurants that are along the route, but has found no reliable source of income.

“Their biggest issue is to grow their active user base,” Marc Prioleau, a strategic consultant in the navigation industry, said in an interview last week as rumors of a potential sale of Waze were swirling. “The technology could really be leveraged inside Google, or Facebook’s one billion users, or Apple’s iPhone.”

News that a Google deal was close was first reported by Globes, an Israeli business news publication.

Waze had recently signaled that it needed to raise capital in some fashion to expand its operations, either through another round of venture financing or a sale of the company.

Waze’s previous venture investors included Kleiner Perkins Caufield & Byers, BlueRun Ventures, Magma Venture Partners and Vertex Venture Capital.

DealBook: Icahn and Southeastern Ready a Rival Bid for Dell

Chip East/ReutersCarl Icahn, the billionaire activist investor, in 2007.

6:28 a.m. | Updated

The billionaire Carl C. Icahn and Southeastern Asset Management, two of Dell’s biggest shareholders, plan to bid for the struggling computer maker, seeking to challenge a $24.4 billion takeover that they have criticized as “the great giveaway.”

The effort by Mr. Icahn and Southeastern, disclosed in a letter to Dell’s board Thursday night, is intended as a last-ditch effort to fight the management buyout led by Michael S. Dell, the company’s founder and chief executive, and the private equity firm Silver Lake.

Unlike that bid, which would pay shareholders $13.65 a share in cash, Mr. Icahn and Southeastern are offering to pay shareholders about $12 a share either in cash or in additional shares in the company. The offer would still leave a portion of Dell publicly traded.

And if a special committee of Dell’s board refuses to budge from Mr. Dell’s offer, the two investors have threatened to wage war in the courts.

In the letter to Dell’s board, Mr. Icahn and Southeastern savagely criticize the deliberations that led to Mr. Dell’s offer, calling it inadequate and having the effect of shortchanging other investors.

“We are often cynical about corporate boards, but this board has brought that cynicism to new heights,” the letter said. “This company has suffered long enough from very wrongheaded decisions made by the board and its management.”

In a securities filing on Friday, Mr. Icahn disclosed that he and affiliates own 4.52 percent of Dell’s shares as of March 25. With Southeastern, they together own a 11.47 percent stake. (The filing includes the letter to the board.)

By offering to give shareholders a chance to remain investors in Dell, the two shareholders argue that their bid is worth far more than the current offer on the table. Both shareholders have consistently argued that the company is poised for a rebound in its fortunes, one that they fear would be enjoyed only by Mr. Dell and Silver Lake if their bid were to succeed.

Yet Mr. Icahn and Southeastern’s position runs counter to the apparent views of an investor consortium led by the Blackstone Group, which withdrew from bidding for Dell last month amid concerns that the computer maker’s business was deteriorating faster and more badly than expected. Many investors had hoped that the Blackstone-led group, which proposed paying more than $14.25 a share and would have let investors keep a portion of their holdings, would have succeeded in driving up the price of any deal.

After Blackstone walked away, Dell’s share price — which had traded as high as $14.50 a share in anticipation of a bidding war — tumbled below Mr. Dell’s offer. The company’s stock closed on Thursday at $13.32.

Two months ago, Mr. Icahn outlined a potential offer of about $15 a share for about 58 percent of the computer company, gaining a 24.1 percent stake.

To Mr. Icahn and Southeastern, one of the primary attractions of Blackstone’s offer was that it would keep a portion of Dell publicly traded, in what is known as a stub. Southeastern, the company’s biggest shareholder outside of Mr. Dell himself, has argued loudly that investors should be given the chance to share in what it expects is a resurgence of the computer maker’s fortunes.

But advisers to a special committee of Dell directors have argued that a transaction with a stub would seriously limit the company’s financial flexibility, essentially piling on debt in full view of public shareholders.

Critics of Southeastern have argued that the investment firm is trying to make up for the high average price it paid in amassing its Dell stake. (A person briefed on the matter has estimated that the firm paid about $16.90 a share on average.)

In their letter Thursday night, both Mr. Icahn and Southeastern argued that a number of shareholders already shared their view that Mr. Dell’s offer was insufficient, and threatened a lengthy fight to derail that bid. Such an effort would be likely to include both a challenge in the courts and a potential campaign to oust members of the board.

“Either give shareholders the real choice they are entitled to or face the legal liability for your failures,” the two investors wrote.

DealBook: Alfa Group to Offer Rival Bid for Russian Cellphone Operator

LONDON — A bidding war has broken out for the cell phone operator Tele2 Russia.

The Russian investment firm Alfa Group said on Thursday that it would offer up to $4 billion to buy the cell phone operator, the Russian unit of the Swedish telecommunications company Tele2. The Alfa Group announced the bid after Tele2 agreed to sell the unit to the VTB Group, a Russian bank, for $2.4 billion, plus debt.

The Alfa Group, whose chairman is the Russian billionaire Mikhail Fridman, said VTB’s offer for Tele2 Russia undervalued the cellphone operator, adding that it was also considering an offer to buy the rest of Tele2’s operations.

The Alfa Group “is interested and willing to agree to a purchase price for the remaining assets of Tele2 over a very short period of time,” it said in a statement on Thursday. The Alfa Group also holds a majority stake in the Russian cellphone company VimpelCom.

Shares in Tele2 rose 3.5 percent in morning trading in Stockholm on Thursday.

Special Report: Technology and Innovation: Ericsson Finds a Chinese Rival Hot on Its Heels

BARCELONA — As long as there have been mobile phones, Ericsson has dominated the global market for equipment for wireless telecom networks, selling the biggest share of gear to mobile phone operators around the world. But last year something happened that even the longtime market leader, based in Stockholm, had never faced.

A competitor, Huawei of China, pulled even in overall sales.

The rivals have different business mixes — Ericsson makes 43 percent of its sales by managing wireless networks, while Huawei also sells smartphones and corporate communication grids. And excluding those side businesses, Huawei’s sold $25 billion of equipment to operators last year, 29 percent less than Ericsson, which remains the biggest seller of key components like data and voice lines and routers, according to Dell’Oro, a research firm in Redwood City, California.

But Huawei, an upstart founded in 1987 initially to resell telephone switches in rural China, has become a global peer of equal scale, matching Ericsson with $35.7 billion in total sales.

Momentum for the time being appears to be with Huawei, whose profit rose 33 percent last year, to 15.4 billion renminbi, or $2.5 billion, as sales rose 8 percent to 220.2 billion renminbi, according to preliminary, unaudited figures from the company, based in Shenzhen. In the same period, Ericsson’s profit fell 53 percent, to 5.9 billion Swedish kronor, or $919 million, as network equipment sales dropped 11 percent, to 117.3 billion kronor.

Hans Vestberg, an Ericsson employee for 25 years who has been chief executive since January 2010, led the company’s diversification into network management, an outsourcing business that has helped Ericsson offset its equipment rivalry with Huawei. During an interview, Mr. Vestberg declined to discuss Huawei directly but noted that Ericsson had hundreds of competitors, depending on the type of equipment, the type of customer and geography.

Even so, remaining the overall market leader is important, he said.

“Ericsson has been the market leader throughout its 136-year history, and my job I guess is to make sure we hold on to that for another 130,” Mr. Vestberg said.

Product innovations, like antenna-integrated radio, or AIR, an antenna for a cellphone base station that has the radio transmitter built directly into the aerial to save space, electricity and cost for network operators, will keep Ericsson on top, he said.

But the rivalry, because of the increasingly strategic value of global communication networks, also has a significant geopolitical dimension. Amid national security concerns, the U.S. market for operator equipment has been essentially closed to Huawei, which was founded by Ren Zhengfei, a former engineer with the People’s Liberation Army.

The largest U.S. operators have not bought from Huawei, and, last October, the U.S. House of Representatives Select Committee on Intelligence recommended that they continue to avoid purchases from Huawei and another Chinese vendor, ZTE.

The House report, which followed hearings with Chinese company executives, concluded that Huawei had not supplied the requested information on its relationship with the Chinese government and a group of 10 state-owned Chinese banks that were among Huawei’s commercial lenders. The bipartisan panel, in its public report, concluded that Huawei was an extension of the Chinese government, using public subsidies to underbid and win business.

“Based on available information, the committee finds that Huawei receives substantial support from the Chinese government and Chinese state-owned banks, which is at least partially responsible for its position in the global marketplace,” according to the report.

A senior executive at an American maker of network equipment said he believed Huawei to be a de facto arm of the Chinese government, receiving preferential subsidies and support that had allowed it to undercut Ericsson and the other suppliers of equipment, Alcatel-Lucent and Nokia Siemens Networks, to build its market share.

DealBook: Softbank of Japan to Buy Rival eAccess for $2.3 Billion

Yoshikazu Tsuno/Agence France-Presse — Getty ImagesMasayoshi Son, right, president of Softbank, the cellphone service provider that brought Apple’s iPhone to Japan.

Softbank, the cellphone service provider that brought Apple’s iPhone to Japan, said on Monday that it would buy a smaller rival, eAccess, for about $2.3 billion in stock, in the face of intensifying competition.

Under the terms of the deal, Softbank will pay 52,000 yen a share, more than three times the eAccess closing price of 15,070 yen on Friday.

The large premium reflects Softbank’s desire to bolster its mobile broadband capacity as it looks to attract more smartphone users. After the deal, Softbank would have more than 39 million subscribers, making it the second-biggest network operator in Japan, behind NTT DoCoMo.

“We do not think our shareholders will view this as a bad tie-up,” Softbank’s chief executive, Masayoshi Son, said in a statement. “I never liked third place. We fought for No. 2, and someday, we will be No. 1.”

Shares in eAccess rose 26 percent on Monday, to 19,000 yen, while those in Softbank slumped 1.7 percent, to 3,105 yen.

The deal underscores Japan’s changing mobile phone industry.

Softbank brought the iPhone to Japan, winning an exclusive contract with Apple in what some analysts described as a coup. While Softbank trailed KDDI by over 10 million subscribers at the time, Softbank has rapidly expanded its user base on the back of the explosive popularity of the iPhone.

But Softbank is now dealing with a more crowded field. Last year, KDDI began offering the popular Apple smartphone as well.

Since then, Softbank, whose networks are under pressure from the surge in smartphone users, has experienced a steady trickle of customers switching to KDDI, where users reported faster network speeds.

With the eAccess acquisition, Softbank will extend its Long Term Evolution services, a next-generation high-speed wireless network that is compatible with the iPhone 5. The deal will give Softbank 50 percent more LTE base stations, increasing them to an expected 30,000 by March.

“There is a severe battle going on,” Mr. Son said. “It’s all about who can expand the network fastest.”

State of the Art: Samsung’s Rival for the iPad Loads on the Features

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