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Week in review: A virtual gold mine

VMware offering stands out during a rocky week, tech issues land in court, and Wi-Fi, everywhere, for free.

While the rest of the stock market was taking a wild roller-coaster ride this week, a tech public offering got a warm welcome from investors.

Investors in VMware's initial public offering got a rocket ride as the highly anticipated IPO launched out of the gate with an initial trade of $52 a share. VMware investors who snapped up shares at $29 a pop as part of the IPO offering reaped a profit of 79 percent on that first trade.

VMware's stellar stock offering shows that virtual machines are starting to add up to real dollars. Virtual machines, the technology that VMware helped pioneer, allow one computer to act as many, whether it's a Mac running Windows and the Mac operating system at the same time or a massive server running multiple instances of Windows and Linux simultaneously. Once a niche technology, virtualization is expanding rapidly as businesses try to get more bang for their server buck.

Both open-source rivals and commercial software makers see a chance to win business customers by offering similar features to VMware, but at a far lower price.

One day after the spectacular public offering of virtualization company VMware, Citrix Systems said that it intends to acquire open-source virtualization company XenSource for about $500 million. Citrix makes so-called thin client software that delivers business applications from servers to desktop computers.

By acquiring XenSource, the company intends to move into the adjacent server and desktop virtualization market. The company's open-source "hypervisor" software, called Xen, lets a single computer run multiple operating systems simultaneously, which is a useful way to replace servers with one, more efficiently used computer.

Tech in court
A federal appeals court appeared unwilling to end a pair of lawsuits that claim the Bush administration engaged in widespread illegal surveillance of Americans. The 9th U.S. Circuit Court of Appeals repeatedly pressed Gregory Garre, the Bush administration's deputy solicitor general, to justify his requests to toss out the suits on grounds they could endanger national security by possibly revealing "state secrets."

At the heart of both cases is the U.S. Justice Department's argument that any lawsuit claiming illegal activity on behalf of AT&T and the National Security Agency--even if the eavesdropping is known to have taken place--cannot proceed because it could let enemies and terrorists know how the government's surveillance apparatus works. While no decision was announced Wednesday, and a final ruling might not be reached for months, a three-judge panel of the 9th Circuit pressed prosecutors to justify asking that the case be dismissed based on declarations submitted by senior Bush administration officials.

In another spying case, three CNET reporters sued computer maker Hewlett-Packard, alleging that its investigation tactics amounted to an invasion of privacy and a violation of state rules on business practices. Complaints were filed on behalf of reporters Dawn Kawamoto, Stephen Shankland and Tom Krazit in California Superior Court for the County of San Francisco. Kawamoto's husband, plus Shankland's wife and parents also filed their own suits Wednesday, according to court documents. All seek unspecified damages.

The suits come nearly a year after HP's investigation methods came under scrutiny from law enforcement officials and the federal government. The company acknowledged in September that investigators it hired spied on the three reporters, as well as on journalists from BusinessWeek, The New York Times, The Wall Street Journal and Associated Press. The covert operation was an attempt to expose a media leak from the company's board.

In a case with a slightly comical twist, Jon Stewart and Stephen Colbert are apparently being dragged into the copyright fight between their employer and Google. Entertainment conglomerate Viacom, the company behind The Colbert Report and Stewart's The Daily Show, filed a $1 billion lawsuit against Google last year, accusing Google and YouTube of "massive intentional copyright infringement."

The two companies entered the names of people they each wish to depose in court, according to documents filed in U.S. District Court for the Southern District of New York. Google, which acquired YouTube in October, wants to depose at least 30 people in addition to Colbert and Stewart. However, Viacom could argue that interviewing Stewart and Colbert is irrelevant to the case and could try to persuade the judge that deposing them is unnecessary.

Access for all
For some companies, it's all about making a connection.

While EarthLink and Google are still hammering out details of their citywide Wi-Fi contract with San Francisco officials, a company called Meraki plans on blanketing the city with free Wi-Fi using volunteers who will deploy and manage the equipment themselves. The company, which sells indoor and outdoor Wi-Fi routers, will expand its free Wi-Fi router giveaway in San Francisco starting Wednesday in an effort to create a free community-based citywide Wi-Fi network throughout the entire city.

Meraki's indoor and outdoor routers typically cost $50 and $100, respectively. The company sells its routers to individuals or businesses who want to set up community Wi-Fi hot spots. The routers come with software that allows people to either charge for the service or offer it for free.

Meraki's routers are already being used to provide free Wi-Fi to 6,500 residents and businesses in San Francisco's Mission, Haight and Alamo Square neighborhoods. But now the company wants to expand this network to as many neighborhoods in San Francisco as it can.

Rail passengers on the London-to-Scotland east coast main line will get free Wi-Fi as part of National Express' winning bid to run the franchise. The company completed the approximately $6.5 million installation of Wi-Fi broadband connectivity on all 41 of its east coast trains last year, and although the service has been free for first-class passengers, those in standard (coach) are charged either $5.96 per half hour or $20.11 for a full day's use.

But in addition to faster journey times, National Express has also promised to extend free Wi-Fi to passengers in standard class as part of its seven-year contract.

Meanwhile, a Silicon Valley start-up is pressing federal regulators to rule on its long-standing request to build a free, ad-supported wireless broadband network that could reach most Americans within a decade. More than 15 months have passed since M2Z Networks first petitioned the Federal Communications Commission for a 15-year exclusive, nationwide license to build and operate in the 2155MHz-to-2175MHz spectrum band, which currently lies fallow.

The wireless industry strongly opposes the idea, arguing that the law requires unused airwaves to be opened up for auction and that M2Z's proposed service would provide "limited" consumer benefits.

M2Z, based in Menlo Park, Calif., claims that under federal law, a decision about whether the proposal satisfies the "public interest" should have been issued within a year of its first petition, or by May 6. The company said it plans to ask the U.S. Court of Appeals for the District of Columbia to force the FCC to make that determination.

Also of note
Dell's finance department was apparently willing to fudge numbers to ensure it would hit or surpass its quarterly earnings forecasts...Businesses that had been thinking of a quick move to Windows Vista may be rethinking things a bit, according to a new study by Forrester Research...Microsoft has completed the largest purchase in its history, sealing its $6 billion takeover of Internet advertising firm Aquantive.