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Microsoft is apparently serious about this whole “not buying Yahoo” thing. Today the software giant’s law firm sent out letters to each of the proxy board members it had lined up, releasing them from their obligation, according to The Wall Street Journal. The proxy board is the group of executives and industry leaders that Microsoft had lined up to nominate to replace Yahoo’s current board of directors had Microsoft decided to go hostile in its bid to takeover Yahoo.

What this means is that Microsoft will not be attempting a hostile takeover of Yahoo again anytime soon. This is a strong gesture to refute speculation by just about everyone since Microsoft pulled its bid five days ago that it could turn right back around with another offer — especially considering that many prominent Yahoo shareholders are said to want such a move, and with some potential new trouble brewing with Yahoo given the news that Google is wavering on a long term search advertising deal with the company.

Interestingly enough, The Wall Street Journal is also reporting that members of this proxy board have already been approached by some Yahoo shareholders, who themselves are thinking about nominating their own alternative board. They only have until May 15th to do so for the shareholder meeting which will take place in July.

While Microsoft is moving on for now, it’s probably still foolish to believe it is moving on for good. We’ll see how several factors, namely Yahoo’s financial situation and Microsoft Internet market share, play out over the next several months. At that point we may hear the talk start about getting the old band (the proxy board members) back together.

[photo: Universal Pictures]

In confirming earlier reports of Microsoft approaching Facebook about a potential sale following the Yahoo fall out, The Wall Street Journal has a very interesting tidbit: Google is now divided over whether or not to go forward with the search advertising deal it is trying out with Yahoo. Ouch, that knife in Yahoo’s back must hurt.

While it was trying to convince everyone that it was a viable company without selling to Microsoft, Yahoo made no secret that its trial search advertising deal with Google could bring in significant money to the company. Some had pegged this number to be as high as an additional billion dollars plus in cash flow. Under the agreement, Google was in charge of placing some advertisements on Yahoo search result pages.

The promise of this deal was also thought to be one of the reasons why the bottom didn’t completely fall out of Yahoo’s stock after Microsoft pulled its bid, and in fact, why it may have rallied a little bit after hitting a low of around $22-a-share (the stock is right now in the mid $25-a-share region).

Google and Yahoo were previously discussing extending the trial while Microsoft was still in hot pursuit of Yahoo. We called it a “charade” at the time, as it seemed clear what Google was doing: anything it could to stop Microsoft from acquiring Yahoo. That certainly rings true today if Google does in fact now walk away from the deal with the Microsoft threat gone (at least for now).

One question that will undoubtedly come up if Google walks away is if this will hasten Microsoft’s return with another bid? A decision by Google not to help Yahoo with its search advertising will leave Yahoo looking very vulnerable once again, even if such a deal was probably not in Yahoo’s best interest in the long term.

The Wall Street Journal report also says that talks between Yahoo and Time Warner continue about a possible AOL/Yahoo merger. However, these talks also have less urgency now that Microsoft has back away.

[photo: flickr/yashima]

With Yahoo in Microsoft’s rearview (for at least a couple months until it doubles back), the acquisition gaze shifts forward. We laid out a few names over the weekend. One of them: Facebook. Now word is already coming in that the social networking site may be bubbling to the top of Microsoft’s list, according to BoomTown’s Kara Swisher.

There isn’t too much to go on yet. In fact, Swisher only mentions this possibility briefly in her larger post about Microsoft’s “Project Granola” (the nickname for Microsoft’s online strategy post-Yahoo), which may be the most bland nickname ever (both in name and in taste). Swisher reports that Microsoft’s bankers are putting out subtle signals at this point that the software giant would perhaps like to buy a larger stake in the company (Microsoft already owns 1.6 percent) — like all of it.

Some Microsoft execs are also said to be tossing out the idea to Facebook execs. “We just want to gauge their interest, more than any real effort,” a source tells Swisher. This sounds a lot like, “we don’t want to get publicly burned again if we’re barking up the wrong tree.”

Rumors swirled last year about Microsoft buying Facebook prior to what ended up being a $240 million investment. Naturally, Google was said to be the other party in pursuit of a stake in the social networking company, but lost out when Microsoft’s deal put Facebook’s total value at $15 billion. Microsoft does have significantly more than that laying around now thanks to the failed Yahoo bid. It would probably use it, but Facebook is still thought to have its loftier IPO goals. As such, these rumors are likely to stay rumors, but don’t expect them to go away until Microsoft makes that next big purchase we all know is coming.

[photo: flickr/Zesmerelda]

Remember Lycos? Of course you do. Remember when you last used the site? Of course you don’t. Perhaps that’s exactly why the company’s taking the site in a new direction: video on demand (VOD) rentals.

Started as a Carnegie Mellon University research project in 1994, Lycos was one of the first web search engines. By 1999 it was one of the most visited sites in the world, then Yahoo and Google happened. While it still maintains respectable traffic worldwide, Lycos, now owned by Daum Communications Corp. (the second largest portal in Korea), is more than an after-thought in the web 2.0 world.

In 2005 the company decided to shift its strategy away from search to online communities and broadband entertainment. That transition continues today with the launch of Lycos Cinema.

An online video on demand service, Lycos offers both free and premium content. The free content is ad-supported, while the premium content takes a new approach: fees based on the number of “seats” — that is, how many people you want to watch the film with.

That’s the key component Lycos Cinema feels will set itself apart from the competition: social interaction. When you load up a movie, a chat room appears on the left hand side. Here, you can invite and interact with friends about the content you’re all watching. It’s a cute idea — in theory at least.

In reality there are problems. First, the content. To be frank, it’s awful. It’s not that I haven’t heard of all of the films (only most I hadn’t heard of…), it’s that there’s no way I would pay to watch most of them.

The second problem Lycos Cinema has is the competition it faces. In the growing field of VOD you have Apple’s iTunes movie rentals, Amazon’s Unbox rentals and Netflix’s Watch-It-Now, among others. All of them offer much better content at similar prices with a much better experience. Even the free stuff on Lycos can’t begin to compare with what the NBC and Fox-backed online video site Hulu offers.

The third problem, unfortunately, is that the site throws errors left and right. About half of the time most pages don’t load at all and instead spit out a code error. Even if I wanted to rent a movie, I might not be able to — it’s a total crap shoot.

If you are able to get to the featured rentals promo page, you’ll notice a top section that looks quite a bit like iTunes movie rentals’ CoverFlow view. It’s really kind of pathetic.

Lycos sold to Spain’s Terra Networks in 2000 for $5.4 billion. It was resold in 2004 to the aforementioned Daum Communications Corp. for $95.4 million. At that rate it’s due for another sale this year, priced to own.

As was universally expected, Yahoo’s stock price took a huge hit when trading resumed on Monday following Microsoft pulling its bid for the company over the weekend. The stock, which had ended the after-hours session on Friday (when it was meeting with Microsoft and a deal seemed possible) at $29.70-a-share, opened in pre-session trading today at $22.67.

The stock had sunk as low as $21.95, a drop of just over 26 percent from its after-hours high, and near its $19 level when Microsoft made its bid in the beginning of February. Worse, this represents a decrease of over 33 percent from Microsoft’s final offer of $33-per-share.

But now the stock is rallying.

Since opening the trading session around $23-a-share, the stock has steadily climbed back up and now finds itself in the upper $24-a-share range. Why? Well, the initial sell-off was no doubt thanks to many who assumed a Microsoft takeover would help the company and bought the stock for short-term gain, Now a new group of investors may be buying up the stock assuming the companies will go back to the table at some point. Some may also like the prospects of Yahoo continuing its search advertising deal with Google.

It’s certainly not a pretty day for Yahoo, but the company is still significantly better off than where it was when Microsoft made its initial bid in February. This, of course, could change, depending on how the company actually performs without the Microsoft offer to fall back on.

After a crazy 13 weeks, Yahoo hopes life will start to calm down — That’s the gist of this message to company employees from Yahoo chief executive Jerry Yang, after he and its board of directors rejected Microsoft’s purchase offer. Yahoo may get punished in the stock market today, but still, “I’m so proud of how this company has come together, put the noise aside, and showed the world that we have the resolve and determination to thrive in challenging times,” Yang says. Read our most recent coverage of the move, plus some more analysis. One clear winner this past weekend: Friendfeed, the so-called “life aggregation” service that lets you track blog posts, Twitter messages and other activities from your friends around the web. Frederic of The Last Podcast, Robert Scoble and many other bloggers used it to have freewheeling discussions with readers about the possible results of Yahoo’s rejection. [Photo via The Huffington Post.]

Grand Theft Auto IV on the hunt to break records — The release of violent, crime-oriented video game GTA IV last Tuesday is proving to be “the cultural, business and technological milestone” that VentureBeat’s resident video game expert Dean Takahashi and others predicted. While creator Rockstar Games hasn’t released official sales numbers yet for the United States, here’s some anecdotal evidence of its impact. The game is apparently driving a strong increase in sales of the two game consoles that it’s currently available for: Microsoft’s Xbox and Sony’s PlayStation 3. GTA IV also set a first-day video game sales record in the UK. It appears to have kept quite a few people home this weekend, hurting box office sales for newly released action movie Iron Man [Update: Actually, it appears that many people took a break from GTA IV to go watch Iron Man, which grossed $100 million this past weekend.]. And, inevitably, the extreme violence of the game is causing a backlash among people who find it offensive.

Related: Top game publishers drop out of their own trade association — Activision, Vivendi and other top publishers have been quitting the Entertainment Software Association, in part — it seems — out of displeasure with the ESA’s new president failing to respond appropriately to critics of games like GTA IV. Kotaku has the story.

Verbal war continues between Craigslist and eBay — Online marketplace eBay is suing online classifieds site Craigslist, which it partially owns, for allegedly attempting to water down eBay’s control of the company. In a post titled “Kettles and Pots,” Craigslist chief executive Jim Buckmaster responds that “eBay is suing us for implementing protections for Craigslist that it clearly believes are perfectly appropriate for protecting itself” — then dives into some messy eBay history.

Forbes release list of top-paid tech CEOs — And Oracle chief executive Larry Ellison is number one. More here.

This is what you call a serial entrepreneur — Gurbaksch Chahal, founder of Blue Lithium, the online ad company that sold to Yahoo for around $300 million last year, is back. He’s starting another company, according to a report in VentureWire, called gWallet. While it’s still in stealth (and closing a $10 million round), it apparently wants to be an online platform that helps shoppers find the best deals on the web.

Is this news? Many, many Facebook apps in the “just for fun” category — See graph put together by FlowingData, below. A number of pundits saw this graph and made the logical error of assuming that since most applications are pointless, they must be worthless. In fact, companies like Watercooler are making money from applications that tap into passionate fan bases of sports teams and TV shows. Also, the metric that should matter here, as one commenter on AllFacebook points out, is how many active users there are in each category. Still, as one Facebook application developer notes, it’s very hard for more complex, less “fun” applications to grow significantly large these days: “It’s not that users or application developers don’t want to use or build useful apps. It’s that Facebook’s current structure is heavily biased against them.” More on that here.

Microsoft is pulling its offer to buy Yahoo and walking away, a source tells CNET [it is now confirmed, update below]. The two sides, which had been in negotiations this weekend hoping for a deal, possibly as early as next week, were apparently still too far away on a compromised purchase price. Microsoft was willing to go as high as $33-a-share, but Yahoo was holding strong for something more along the lines of $37-a-share.

While this difference may not seem like a huge gap, consider that this would represent something along the lines of $5 billion more Microsoft would have to spend. That would be on top of the few billion dollars it was already raising the deal by going to the $33-a-share mark, up from its initial $31-a-share offer.

So there you have it, it’s over — at least for now. Nothing would stop Microsoft from another attempt a few months from now if certain circumstances present themselves, such as Yahoo not being able to hit the numbers it’s projecting for the future. Still, one would have to assume that even with Microsoft out of the picture, Yahoo and Google will forge ahead with their search advertising deal, which should help Yahoo financially in the near term.

While the hostile approach seemed much more likely than Microsoft walking away for much of this, Microsoft is thought to have had serious concerns about integrating Yahoo if it was forced to either replace Yahoo’s board or take the deal directly to shareholders to push it through. It looks like the entire thing just became too big of an ordeal for them.

It will be interesting to see what the fallout is for Microsoft’s chief executive Steve Ballmer, the driving force behind the deal in the first place. Yahoo chief executive Jerry Yang may been seen as saving Yahoo in the short term, but he could very well have face some very tough questions himself, especially if that stock price does not stay somewhere near Microsoft’s offering price. Obviously we’ll all be watching that when the stock market opens on Monday.

update: Microsoft has already issued an announcement on the withdrawal of its offer. Included is Steve Ballmer’s letter to Jerry Yang.

The rationale behind not going hostile is that Microsoft felt Yahoo would take actions that would significantly devalue the company before a takeover could be completed. This could have been the “scorched Earth” strategy where Yahoo would liquidate some of its valuable assets prior to the takeover, or the “poison pill” approach in which Yahoo would have flooded the market with more shares of its stock, making it much more expensive for Microsoft to buy them up. Netscape and Ning co-founder Marc Andreessen had more on this in a post last week.

In the end, the two sides were about $5 billion apart. This represents the $4-a-share gap mentioned above.

The full letter below:

Read the rest of this entry »

People enjoy epic films. The action, the suspense, the pageantry — it’s larger-than-life and entertaining. Most people would also agree that they tend to go on for far too long. That has been the general consensus about the tech world’s latest epic narrative, the Microsoft takeover of Yahoo. But fear not, signs point to an end very soon.

Microsoft and Yahoo are talking once again today, according to The New York Times which cites a person involved in the discussions. Microsoft is said to have increased its offer “by several dollars,” presumably even more than the $32 to $33-a-share range Microsoft had indicated it would go to just a few days ago. Yahoo was said to be holding out for a number in the higher $30s. As we expected, with the two sides being so close, it looks like each may be willing to budge a bit to make the deal happen.

Yahoo’s stock is rallying on the news. It started the day in the $27-a-share range, and has now surpassed the $29-a-share mark in after-hours trading, a gain of over eight percent.

While it is unlikely the two sides would reach an agreement today, it could happen as soon as Monday — if it’s going to happen at all. And that is still thought to be a big “if”. This should be the absolute last chance the two sides have to come together in some sort of amicable way, otherwise, Microsoft walks or goes hostile — neither of which are good options at this point for Yahoo.

So, sit back, relax, and watch the final scenes play out. The credits should roll soon — unless of course the fade-to-black is used a liberally as it was in the final Lord of the Rings film. In which case, we may be here a while yet.

[photo: New Line Cinemas]

In a surprising turn of events, Microsoft is now indicating it would be willing to raise the value of its offer to buy Yahoo — something it has publicly stated multiple times it would not do. Microsoft leaked to The Wall Street Journal that it is willing to go as high as $33-a-share (well above the current deal now valued at just over $29-a-share).

Of course, the raising of the bid isn’t all that surprising. We’ve stated multiple times that Microsoft would jump at the chance to raise the bid if it thought it would get the deal done quickly. The surprising part is that this maneuver still may not get the deal done quickly, because Yahoo is now thought to want in the upper $30s-a-share.

And so the saga continues…

Still, with Microsoft now showing it is willing to move, and the sides being as close as only $2-a-share off, it would seem more likely than ever that a (somewhat) amicable agreement can and will be reached. That is, unless Yahoo is simply playing games and continuing to move the carrot just a little farther beyond Microsoft’s reach as it inches closer.

If that is the case, expect the hostilities to commence or a complete disengagement any day now. This calm can only last so long.

Oh yeah, and don’t forget about the whole Google/Yahoo search advertising charade, which is still going on. The Wall Street Journal says that is still playing a role in all of this as well.

Microsoft’s 3-week ultimatum for Yahoo to start negotiating to accept its takeover offer or face hostile action came and went on Saturday with nary a whimper. However, don’t think the silence means Microsoft was just bluffing. This is likely the communication-jamming time before an imminent attack.

Microsoft is expected to announce its next move this week, possibly as soon as today, according to The Wall Street Journal. While all options are thought to remain on the table — Microsoft nominating its own Yahoo board of directors, Microsoft taking its offer directly to Yahoo shareholders and Microsoft pulling its offer — many think Microsoft nominating its own board will be the eventual play. TechCrunch believes it has uncovered 8 of the 12 potential board members Microsoft would nominate already.

At the very least, the board replacement maneuver will buy both Microsoft and Yahoo more time to evaluate the options. A vote on the new board would not take place until Yahoo’s shareholder meeting, and that is likely not going to take place until the last possible date allowed under Delaware law (where Yahoo is incorporated), in July. It’s possible that Yahoo could even further drag things out until the fall with some lawsuits that would delay the board meeting. Netscape and Ning co-founder, Marc Andreessen, had a very detailed post about laying out such scenarios this weekend.

If Microsoft were to walk away from the deal entirely it’s likely that Yahoo’s stock would plummet, perhaps even below the $19.18 it was at when Microsoft initially made its offer (Yahoo’s stock is currently hovering around $27.50-a-share). This worry was clearly the main ammunition in Microsoft’s threat that it would walk away, but it appears, for now, that Yahoo called that bluff.

New reports suggest that Microsoft is already taking actions to ensure it can retain Yahoo employees in the event of a takeover. Court papers uncovered by The Wall Street Journal state that Microsoft earmarked $1.5 billion dollars for Yahoo employee retention.

[photo: flickr/RTPeat]

Skype is the name that immediately jumps to mind when thinking of VoIP (Voice over Internet Protocol) calls. This is mostly due to its longevity and its easy-to-use software client. With over 300 million users worldwide, it would be nearly impossible for an up-and-comer to get close. That’s what partnerships are for.

Jajah, the online telephone service, has just announced a partnership with Yahoo to bring its service to the over 90 million worldwide Yahoo Messenger users. All Phone-to-PC and PC-to-phone calls now made via Yahoo Messenger will be on behalf of Jajah, which promises high quality and low-costs to users in over 200 countries.

This partnership comes alongside news that Jajah has just signed up its 10 millionth customer on the eve of its 2nd birthday. This represents impressive growth considering that just last year, JaJah only had 2 million customers. The company hopes that other partners, along with Yahoo, will soon get on board with its new Jajah Managed Services for business.

Jajah often gets confused with the other “J” online calling services, Jaxtr and Jangl. Jangl and Jajah actually formed a partnership back in November.

Jajah, is backed by Sequoia Capital, and raised $20 million in a third round led by Intel Capital last year.

Xobni, the email service whose fans include Bill Gates, is getting ready to expand beyond its current Microsoft Outlook-only product. That’s a smart and obvious move, and the startup’s new service is particularly juicy for Internet rumormongers –Xobni plans to add compatibility with Yahoo Mail, including features that let you use Yahoo Mail and Outlook together, according to TechCrunch.

This news fits in nicely with a couple of acquisition stories that have been floating around. First, of course, there’s the continuing saga of Microsoft’s attempt to purchase Yahoo. But there have also been rumors that Microsoft wants to purchase Xobni for $20 million, although Xobni co-founder Matt Brezina told us it’s too early to comment. If the Yahoo deal (finally) goes through, it’s easy to see why Microsoft would want to own a startup that not only enhances Outlook, but connects Outlook to the very popular Yahoo Mail.

We were pretty impressed when we played with Xobni Insight last September. The San Francisco startup’s product helps you organize and navigate your email, primarily through a sidebar that shows you profiles of people you’re corresponding with. Soon, Xobni will give you the same functionality in Yahoo Mail, and also help you consolidate your past correspondence and contacts from both services. That’s going to be pretty useful, even if the acquisition rumors turn out to be little more than empty talk. It’s a good next step for Xobni — the company’s long-term plans probably include compatibility with as many email programs as possible. With its enormous popularity, Yahoo Mail is an obvious choice, not to mention the fact that Xobni brought on Jeff Bonforte, Yahoo’s former vice president of social search, as its new chief executive in February.

The past two decades have seen some great second acts in business – people or companies that were up so high, then fell so low to the point of possible extinction, only to come roaring back to the top again. Donald Trump and Apple are two that immediately spring to mind. Soon, we may have to include another company on that list: AOL.

Traffic to its web properties has grown over 15 percent in the past year. The first quarter of this year saw 56.5 million unique visitors, according to comScore. This, combined with news earlier this month that AOL’s Platform A is now the top ad network, beating out competing efforts from Yahoo and Google, are very good signs for the company.

It’s not all good news yet, as Time Warner is expected to announce a relatively weak quarter for AOL when it reports earnings next week, according to The Wall Street Journal. But the pieces may be in place now for a serious comeback down the road.

This turnaround has been a long time in the making. AOL was arguably at its peak when it bought media giant Time Warner in 2000 for $147 billion. (For some perspective of just how big this deal was, remember that Microsoft’s current bid for Yahoo is $44.6 billion.) From there, things went south pretty quickly for AOL.

The problem was, it was in the dial-up web portal business, which was the only way millions of people could access the Internet at the time. When broadband connections started to pop up,  AOL’s core business became increasingly worthless. But AOL failed to recognize this trend and adapt to it in time. In fact, it took the company until 2006 to formally decide it would shift from a paid web portal to a free one.

AOL realized that content was king and that it had quite a few properties that were leading the way in their respective fields thanks to its purchase of the blog network, Weblogs Inc., in 2005. The next step was realizing that if it had all this content, why pay someone else to set up the ads for it. And, with that in mind, the company launched Platform A last year.

AOL then bought social network Bebo in March of this year and it’s kept the ball rolling with its recent purchase of blogging search and relevancy engine, Sphere.

There is also the Yahoo wild card to consider as well. While most people wrote off the idea of an AOL/Yahoo combination as a viable alternative to Microsoft’s hostile bid for Yahoo, perhaps such a partnership would not be such a bad idea. AOL/Yahoo could make for a very powerful online ad/content network.

AOL is continuing to expand its web properties, rolling out new sites at a rapid pace this year. We’ve questioned this apparent strategy of quantity over quality, but perhaps it could just work. Rather than having all its chips in one basket, as it arguably did in the 1990s with the dial-up portal business, AOL now has its chips in multiple places, and the strategy appears, at least for now, to be paying off.

Here’s the latest action:

More earnings info — While we wrote earlier about Microsoft’s earnings, plenty of other companies are posting theirs, too. Motorola disclosed that its market share is down to 9.5 percent, while Qualcomm’s profit is up. Amazon’s Q1 profits rose 30 percent, Nintendo profits hit a record high on strong Wii and DS sales, and Juniper Network’s profits leaped 66 percent over last year’s.

Greenhouse gas emissions are accelerating — The rise in atmospheric levels of carbon dioxide has gone from one part per million each year in the 1960s, to 1.5ppm in the 1980s, to 2ppm in 2000. Now emissions appear to have picked up even more sharply, with the latest numbers from the National Oceanic and Atmospheric Administration showing an increase of 2.4ppm last year. Overall levels are rapidly approaching 400ppm; an atmospheric concentration of 450ppm is widely held as a point of serious danger.

Russia looking into Internet censorship — While the Russian media is kept under tight control, Internet access in the country has so far remained unfettered. That may be set to change, as Ars Technica reports.

CNET and Yahoo to ink editorial / ad deal – Yahoo has agreed to run much of CNET’s content on its site, as well as selling remnant advertising from the company, according to Kara Swisher.

Another Twitter engineer flitters away — Lee Mighdoll, a VP of engineering and operations added to the Twitter team back in January, has left the company. That follows the departure of chief architect Blaine Cook, for reasons still not entirely clear. Twitter has come under a lot of criticism this past year for its downtime issues, perhaps having some heads roll will help shore things up. The company also may also be preparing to raise a new Series C round, according to Silicon Alley Insider.

Ooma lowers prices in bid to compete — Ooma, as you’ll recall, is a startup selling $400 units that allow people to make free calls, for life, over a broadband internet connection. Following a rumor from Valleywag that the company is struggling, it has rolled out a new scheme to sell units for $249, with an optional monthly service plan for “enhanced telephony services”.

Google’s $70M restaurant bill — Even for Google’s famous free lunch, somebody pays: The company itself. The bill comes to $70 million, according to the Silicon Alley Insider. My question: Who gets the tip?

Earnings calls are a little like campaign stump speeches these days. Microsoft Chief Financial Officer Chris Liddell used his company’s quarterly earnings call to rattle sabers with Yahoo again. Microsoft to Jerry Yang, in brief: Whaddaya mean, you’re worth more than what we offered?

He didn’t call Yang any names. But Liddell said that it was “clear that speed is of the essence in the deal. Unfortunately, the transaction has been anything but speedy given the unrealistic expectations of valuation” by Yahoo’s board. He reiterated that Microsoft’s $31 a share — or $44.6 billion — offer represents a significant premium on Yahoo’s current $27.30 a share stock price and that Yahoo’s financial condition continues to decline. (Although Yahoo beat expectations earlier this week.) He said Microsoft would consider its options if Yahoo doesn’t respond by Microsoft’s stated deadline this weekend.

“[Microsoft] will remain disciplined about the offer,” and will not increase the price just because it can afford to, he said.

Meanwhile, Microsoft reported third fiscal quarter earnings Thursday that slightly beat expectations on earnings but fell short in revenue, prompting a small sell-off (down 4 percent) in after-hours trading.

Earnings were $4.41 billion, down from $4.9 billion a year earlier. Revenues were $14.45 billion, up slightly from $14.39 billion a year ago. Liddell said in the conference call that Entertainment & Devices, which includes the Zune and Xbox 360 businesses, contributed positively to results.

“Our businesses remain robust in spite of the uncertainty” in the information technology markets because of the current economic environment, Liddell said.

He said he assumes the current economic environment — slow in the United States, healthy worldwide — to persist for the rest of the year.

A few tidbits stood out to me. PC sales growth slowed during the quarter, but international sales made up for that slowness. The growth rate of PC unit sales is about 12 percent to 14 percent for the year. It seems clear that Microsoft is losing some ground in market share to Apple, whose growth was better during the quarter. Read the rest of this entry »

Yahoo is going open in a big way so that it can enlist third-party developers to make its search and web site portal much more relevant to Internet users.

Yahoo Chief Technology Officer Ari Balogh talked at the Web 2.0 Expo about the company’s plans to enable developers to create applications that will lead to far more customized and social experiences for the users, making Yahoo products stickier than they are today.

He didn’t say this was how the company would fend off Microsoft and stay relevant in the face of big social networks, but that was the subtext.

“We are opening up the assets of Yahoo to developers in a way that we never have before,” he said. “We are rewiring Yahoo from the inside out to create a development platform to open Yahoo’s platforms up to developers. As part of this, we are going to make the consumer experience of Yahoo more social and make the hooks for that available to developers.”

The company announced its “search monkey” platform a couple of weeks ago where developers can integrate their own applications directly into Yahoo’s search results. Today, it is opening up a beta program for search monkey so developers can start creating mash-ups for search results. Developers will be able to customize applications such as Yelp so that its restaurant reviews are much more readily accessible through Yahoo’s search results, he said.

“It gets the user from ‘to do’ to done more quickly,” he said. It won’t just be for search. In the future, Yahoo will enable developers to customize things such as its front page, mail, and other platforms as well.

“Tremendous creativity will be unleashed here,” he said. “Even on the front page. We will allow consumers to put apps on their front page, where those were developed by developers outside of Yahoo. Even with mobile.”

As users navigate to a sports news page, for instance, they can hover over parts of the page and activate third-party developer applications that deliver more news related to a picture or other things on a page. To create apps for the Yahoo front page or mail or other functions, the developer simply creates the app with Yahoo’s development tools. Then the developer selects which platforms where the apps should run. Then they can roll out the app simultaneously across all of the Yahoo properties.

“This is a stylized install screen,” he said, pointing to a screen with a bunch of check boxes. “It will be this simple.”

The search monkey beta is the first step. More releases will come this summer. Throughout this year and next, the results will show up for consumers on the Yahoo platforms. As for the social features, he said, “We are not creating another social network. We are going to rewire the entire Yahoo experience so users can experience a social dimension. We don’t see social as a destination. It infuses everything that we experience on the web. The kind of things we can do with this are endless.”

You can use the “social graph,” for instance, to view messages that are most relevant to you in various Yahoo communications programs. When you visit a news page, Yahoo can “contextualize the experience.”

“That gives you a glimpse of how we are rewiring Yahoo,” he said. “It includes opening it up in a way that we never have before and making the entire Yahoo experience more social.”

While the recent Google and Yahoo quarterly financial results were largely based around more abstract ideas such as paid-clicks, the focus of Apple’s quarterly results were more concrete: computer sales. And boy did Apple sell a lot of computers. Simply put, this was Apple’s strongest second quarter ever.

Apple shipped over 2.2 million Macs in the quarter, representing 51 percent unit growth and 54 percent revenue growth over the year-ago quarter. One reason for this is Apple’s retail stores, which are doing extremely well. On the conference call, Apple stated that 50 percent of the computers sold in the retail stores were sold to customers who had never owned a Mac before. If those numbers hold, the market share gains Apple has been seeing are certainly going to continue.

Overall revenue was up 43 percent from the previous year. Net quarterly profit was $1.05 billion on $1.16 earnings per share. All of these beat analysts expectations easily.

More numbers in Apple’s official release here.

Apple said that it remains confident that it will hit its stated goal of 10 million iPhones sold by the end of 2008. In terms of the SDK (software development kit) for the iPhone, Apple says that over 200,000 developers have already signed up and downloaded the kits. Of note is that one third of the Fortune 500 companies are said to be included in those downloading the software.

When asked about the 3G iPhone, Apple would only say that it does not comment on new products. The company did however acknowledge that unlocked iPhones were at least part of the sales for the device.

All of this is good news, so why is the stock dropping in after-hours trading, down over four percent? Well, Apple gave some comparatively weak expectations for next quarter. However, many analysts think Apple is setting the bar low on purpose so that it can continue to blow away numbers as it did today.

Apple remained silent on its purchase of chip maker PA Semi, which was revealed yesterday.

Even in a time of economic uncertainty in this country, Apple is continuing the shine. For what Steve Jobs’ (who wasn’t on the call) thoughts might be, watch the video below.

Company earnings reports involve a lot of numbers. Unless you’re a student of Wall Street, or are following a company closely, it can be hard to decipher exactly what these numbers mean. Usually a good way to know how well a company did is to look at a stock price once the numbers are out. Last week we saw Google soar through the roof, going up over 20 percent upon beating estimates. Today, Yahoo’s stock is going up and down in after-hours trading — these swings are canceling each other out. This reflects Yahoo’s financial performance: decent, but nothing special.

This is important because many analysts and stockholders were looking to Yahoo’s numbers last quarter to see if there was something there that would allow the company to fend off Microsoft’s hostile takeover bid. Yahoo may have bought itself a little bit more time today by beating estimates, but the numbers simply weren’t good enough to throw away a $40+ billion dollar deal (which Microsoft is offering).

For those who like the numbers: Yahoo reported $1.35 billion in net revenues ahead of the $1.32 billion Wall Street estimate. Net revenues were up 14 percent from the year-ago period. Earnings per share came in at $0.11, ahead of the estimate of $0.09. However, Yahoo’s $121 million operating income was a decrease of 28 percent from 1Q 2007.

So the next question is: did Yahoo have a good enough quarter to make Microsoft raise its bid? Microsoft chief executive Steve Ballmer earlier today said he would not be raising the bid no matter what Yahoo reported today. However, as we’ve said previously, if it will get the deal done tomorrow without all the hostility, don’t be surprised if the bid goes up a few dollars a share.

Yahoo chief executive Jerry Yang also said during the earnings call today that the company was “raising our cash flow guidance for the year.” (see the chart below) Statements such as this make a compelling argument for why Microsoft perhaps should up its bid.