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IPhone glitches may be fixed in September — A chip in the iPhone is being blamed for dropped calls and choppy web reception, according to BusinessWeek. The problems will hopefully be fixed next month with a software upgrade.

Netflix suffers shipping and distribution outage — The outage affects one-third of the movie rental service’s 8.4 million customers. Executives say they’re trying to figure out an appropriate refund or credit.

Open source movement scores court victory — A federal appeals court ruled that even if a software programmer gives away their code, they can still dictate how that code is distributed. The decision bolsters one of the key principles behind open source software and overturns a ruling that many open source licenses are too broad to carry legal weight.

Icahn allies appointed to Yahoo’s board of directors — The appointment of Frank Biondi, Jr. and John H. Chapple is part of the deal struck between Yahoo and investor Carl Icahn, who tried to swing the board his way after acquisition talks with Microsoft fell apart.

Analyst: The strengthening dollar will hurt tech companies — That’s because a weak dollar boosts the earnings of companies that sell their goods overseas in foreign currencies, but report their profits in U.S. dollars, says Bernstein Research analyst Toni Sacconaghi.

Confirmed: Lulu has acquired book search engine uGenie — The rumor started earlier this month after self-publishing company Lulu announced a partnership with uGenie, which is backed by Sierra Ventures and BlueRun Ventures. Now we have confirmation that the deal is real, although the price was not disclosed. UGenie’s founders have reportedly joined the Lulu team.

Judge keeps gag order intact in subway hacking case — A federal judge upheld the order that prevented MIT students from giving a presentation at DefCon on their research into security vulnerabilities in the Boston subway system.

AMD launches four new processors for the business server market — The processors are triple-core and quad-core.

Flypaper Studio, the creator of an easy-to-use Flash presentation editor, has raised $3.5 million in additional venture funding.

Through a graphical interface reminiscent of Microsoft Powerpoint, Flypaper users can create presentations that are more than simple slide shows, incorporating interactivity and a range of different media. Users can also share templates, images and other media with each other on the Flypaper site. The Phoenix, Ariz. company offers both a free application and a product called Flypaper Pro, which provides analytics tools, extra storage and other features for $195 per year; the free version has been downloaded “tens of thousands” of times, a spokesman says.

While Flypaper can be useful to anyone who wants to make a cool presentation (or brochure, or portfolio), chief executive Pat Sullivan says the company is focusing on sales and marketing customers. There is, after all, an obvious appeal to creating flashy promotional materials without much difficulty, and it gives the product an identity beyond “easy-to-use Flash editor,” which a number of companies offer. (Sprout, for example, has been praised for its fancy Flash widget editor.) That’s also the audience Flypaper is targeting with its pro product, since the analytics data can help salespeople see which parts of their presentations seem to be effective. Sullivan says the company has plans for an “enterprise” product this fall, which will include integration with customer relationship management (CRM) software and the ability to create a private company network for media-sharing.

One of the more disappointing aspects of Flypaper is that, as a downloadable application, it doesn’t work on Macs. Sullivan acknowledges that Mac compatibility has been one of the top customer requests. There aren’t any specific plans on the project roadmap, he says, but Flypaper Studio will probably address this problem by creating a version that works on any computer, using platforms like Adobe AIR or Microsoft Silverlight.

The funding is part of Flypaper Studios’ first round, which includes $3 million raised already. It comes from existing investors Sierra Ventures and SCF Arizona. The company will probably go out for a full second round next year, Sullivan says.

After years dominated by lumbering giants like Peregrine Systems and BMC Remedy, the customer service market is ripe for innovation, say executives at a startup called Parature. The company bootstrapped itself for several years, but chief executive Duke Chung sees a coming “land grab” as more companies enter the field and start targeting the smaller customers who have traditionally been ignored.

In order to keep up with the competition, Parature has been raising substantial amounts of cash — a $13.5 million first round back in 2006, and now $16 million led by Accel Partners.

The Vienna, Va. company says that through its software-as-a-service model and multi-tenant server architecture (in which a single server is used by several companies at once), it’s able to provide customer support software at a much lower price than the competition, putting it within reach of smaller startups that would normally just use email and in-house solutions. That setup also allows Parature to deploy and update its product much more quickly than traditional companies.

The startup has been refining its core product for several years, which emphasizes the customer service “portal” it creates for each client. By creating an easy-to-navigate site where users can find the information they need, and where members of the community can help each other through forums, Parature “deflects” numerous requests, freeing customer service representatives to focus on longer-term issues like improving the portals.

(There are other startups trying innovative approaches to customer service too, such as Satisfaction, a San Francisco startup that allows consumers to drive the service process.)

Accel Partner Rich Wong describes Parature as a company with the potential to become “the Salesforce.com of customer service” — namely, the pioneer and leader in providing customer service through a SaaS model. He was also impressed that, unbeknownst to him, several Accel companies like Trulia and Coremetrics were already using Parature.

Parature’s background is in many ways a classic startup story. Its founders, who initially saw Parature as a way to deliver tutoring software, started the company in a Cornell dorm room. Although its early offering was little more than instant messaging software and service, Parature started building momentum early on; a division of Hewlett Packard was its 14th customer, and started paying before the team had left that dorm room.

That momentum has continued building — the Vienna, Va.-based company now boasts more than 650 customers and has helped served around 10 million customer service requests to date. Much of that demand comes from Linden Lab, the company behind the enormously popular virtual world Second Life.

The company was already pretty successful in 2006, when it had around 300 customers, Chung adds. But he and his cofounders realized that they were losing potential clients to the larger salesforce of competitor RightNow, and if they wanted to continue growing, they needed to bulk up Parature’s sales team too.

“We were losing deals because we weren’t at the table,” Chung says.

He says his long-term goal is to one day make a similar boast to McDonald’s — “I’d like to eventually be able to say we served 1 billion customers.” That’s a distance off, but it sounds like Parature could one day make that dream a reality.

Existing investors Sierra Ventures, Valhalla Partners and angel investor Ching-Ho Fung also participated in the new round.

The convergence of several global trends — rising populations, increased food production and declining water stocks — has helped turn the once dull water sector into a cleantech darling. Startups that specialize in filtration, purification and treatment technologies have popped up in recent years, with more likely to come as worldwide demand for for clean water grows.

Miox, an Albuquerque, New Mexico, company that sells water purification equipment, has greatly benefited from these trends — having already expanded its presence overseas to over 40 countries. The company has received over $30 million in venture capital funding, including a $14.5 million second round in January 2007; its lead investors include Flywheel Ventures and Sierra Ventures.

Originally developed for the military to provide a low-cost water, chemical-free purification method, MIOX’s purifiers are now used in a variety of industrial water treatment applications. When untreated water is added to the purifiers, it is mixed with salt and zapped with the simple push of a button; through a process known as electrolysis, the electric current separates the salt into its components — sodium and chloride.

The result, a mixed oxidant (a combination of chlorine and chlor-oxygen compounds) solution, can destroy all pathogenic microorganisms within the span of a few hours. Each purifier is able to process large volumes of water with only a little salt and simple camera batteries.

Mountain Safety Gear (MSR), a company that caters to outdoor enthusiasts, uses Miox’s technology in its handheld purifiers. The technology has also been incorporated into large industrial machines, which are used in factories and municipalities worldwide. The $1.5 billion City of Dreams casino in Macau, which will open in late 2008, will install eight of its industrial water purifiers, and the company recently announced a partnership with distributor DUPUY SAS to install its water treatment systems in France.

It also plans on opening a regional office in Hong Kong to manage sales in Asian markets. It used a chunk of the seed money it raised in 2007 to aggressively expand into Colombia, Mexico and other Latin American markets.

CEO Carlos Perea expects demand in developing countries, which lack advanced water-treatment infrastructure, to remain strong. Eastern European countries, which are struggling to modernize their infrastructure in time to enter the European Union, could be the company’s next target; Romania was the first to purchase an industrial purifier last year to treat water in the River Bega. International sales accounted for 31% of Miox’s total sales in 2007, and the company is on track to increase sales by 100% this year, according to Perea.

Purfresh, a Livermore, California, company that provides purification services to the food industry, has also seen its business surge over the last few years — spurred by large investments from corporate giants like Coca Cola and PepsiCo. In addition to its proprietary water purification systems, which use ozone to disinfect untreated water, it sells sunshields for increased crop yield and Intellipur, an informatics system which helps track food in storage or transit.

According to recent statistics, more than 1 billion people in the world currently lack access to clean water — a figure that is likely to worsen over the next 2 decades as the average supply of water per capita drops by a third. Companies like Miox and Purfresh will be well positioned to take advantage of this global trend.

updated to add video tour of the product

Ooyala, a company founded by a couple of former high-ranking Google employees that wants to revolutionize advertising within online video, has received $8.5 million in a second round of investment.

Ooyala’s initial investors also took part in the investment, but the round was led by Sierra Ventures.

Ooyala, of Mountain View, Calif., allows you to upload your video to the Internet via a service called Backlot. The service helps you stream it to viewers, syndicate it, get analytics and keep it all organized. See video below, where Ooyala’s marketing manager, Alexa Lee, takes you on a tour of its considerable features.

More profoundly, though, Ooyala analyzes the video for recognizable objects – famous actors, for example, or sports players, or things as banal as a chair or a piece of fruit. Ooyala can then offer up to the viewer other clips or information about the objects — such as other movies the actor may have played in, or the game statistics of an athlete. Similarly, targeted advertisements can be shown, embedded directly within the video. Ooyala can detect what parts of a video are fast-forwarded through by a viewer or which parts are rewound and watched again. This behavioral data can also help direct advertising to viewers based on their interests and habits. More of Ooyala’s features can be found in this article from BusinessWeek.

Ooyala charges eight cents per hour of video it processes for viewing. Backlot was launched last November. We first mentioned the company here.

In an interview with VentureBeat today, Ooyala co-founder Bismarck Lepe claimed that Backlot has more than 4,000 customers and about 200 active users that make daily posts. This includes sites like Comedy.com and VOIG.com. Lepe also stated that Ooyala will soon be announcing major deals with several studios and “a couple of networks.”

When we wrote about Simplify Media in July, we pointed out the company’s ability to tie together the libraries of iTunes users, allowing them to stream music to their friends or to themselves, when away from their home computer.

The Redwood City, Calif. company has now added support for Winamp, iPhone and iPod Touch. Users can hop onto a WiFi connection with their iPhone, hook up to their home computer and listen to their full collection remotely.

Simplify is interesting because, while iTunes includes native support for streaming, the program restricts sharing to a limited number of authorized computers. The Simplify add-on instead opens your collection to up to 30 other devices on your list, providing full access as long as your computer remains on.

And because it’s built in to other existing applications, Simplify’s app doesn’t require users to learn a new system for sharing. The company’s end-goal is to work across every program, opening up friends’ playlists to each other even when they all have different music players.

While Apple, for one, could build in more streaming abilities, its fragile relationships with music labels will likely prevent it from moving back to a more free-spirited sharing system such as existed on early versions of iTunes.

Nor is Apple likely to add iTunes streaming for the iPhone or iPod, which could be seen as invalidating the different storage limits of the devices. (Why buy an 8 gigabyte iPhone over the 4GB model, when you can stream your full collection from home?)

There are some competitors for Simplify. NuTsie.com, for example, all allow users to upload music to a server and play it back remotely, while Mundu Radio streams music onto your phone. Avvenu, a service allowing remote access to any files on a user’s computer from a mobile phone, was acquired by Nokia about a week ago. And of course, there are always streaming radio services like imeem.

Simplify, which users can download for free, plans to pull in revenue by selling music through affiliate programs linking to the online music stores of Amazon, iTunes and others. “People discover new music using us, but when their friend’s computer turns off, they can’t access it anymore,” co-founder Bill Bradford told us. “There’s a built-in incentive to go buy the music, to have permanent access.”

Although Simplify isn’t disclosing the exact amount of its first funding, Bradford says it was a “modest amount,” between $1 and $5 million. Sierra Ventures was the sole investor. You can check out a video of Simplify being used on the iPhone here.

(Updated, to include precise amount of funding, and reporting about privacy controls NebuAd has implemented not included in the first version of this story)

NebuAd, a controversial advertising firm, emerged from secrecy today to announce it has received $20.5 million in a second round of financing.

Its “targeted” advertising technology is likely to add fuel to the debate about privacy. The service can be used by your Internet service provider to get an unprecedented look at the types of Web sites you visit. While it will bring smiles to the faces of marketers, it may enrage people worried their privacy is already non-existent on the Web.

Targeted advertising usually relies on “cookies” that a Web site places on your browser when you visit it. The cookies can afterwards track which individual pages the visitor accessed. Cookies have a number of limitations, not least their inability to see what a user has done away from that particular website. Technology developed by Redwood City, Calif.’s NebuAd  a different technique called “deep packet inspection,” which can be likened to poking through all the mail that arrives at or leaves your house to get an idea of who you correspond with, and what you tell them. NebuAd offers its packet inspection software to internet service providers, the services you use to access the internet. NebuAd then turns around and provides the traffic information to advertising networks.

Surfers visiting pages with ads from NebuAd-affiliated networks will find the ads more likely to be meaningful to them; a user researching electric cars, for instance, might be less likely to see an ad for an SUV, and more likely to see one for a Prius.

NebuAd’s CEO, Bob Dykes, claims that such targeted advertising is superior to even the best offered today by companies like Tacoda, which collect cookies from all the webpages that connect to a particular ad network. Tacoda was acquired in July by AOL for a reported $300 million. NebuAd’s technology will collect more information than Tacoda’s cookies do. The more targeted the advertising, the more money can be generated — up to dozens of times what an untargeted method might be worth. Under NebuAd’s system, all stand to take a cut of the enlarged pie.

The funding was led by Sierra Ventures. Menlo Ventures, which provided the company’s first $11 million round of funding in May, also participated. Founded in early 2006, NebuAd has about 90 employees.

In an interview with VentureBeat, NebuAd’s Dykes said the company has taken measures to avoid collecting information users are uncomfortable with. For instance, any traffic going to or from websites with pornography or information on illegal acts would be filtered out. NebuAd’s data is also collected in a way that it can’t be used by anyone to identify individual users, even if it fell into the wrong hands, he said. As data about an individual’s Internet behavior flows NebuAd’s appliance, the individual is represented merely as a hash number, he said. It doesn’t know the individual’s name, because it hasn’t asked for it from the ISP.

Privacy advocates, who have long decried even the tracking performed by cookies, aren’t happy with closer scrutiny of surfer’s habits — but are apparently consoled by NebuAd’s promises to keep the information anonymous. Scott Bradner, a technology security officer at Harvard backtracked on an original critique in Network World, in which he called the approach “disgusting.” He now says NebuAd is acting responsibly.

ISPs are also required to mail or email documents to their users asking for permission to track their surfing habits, Dykes said. There is more than one way of going about getting agreements, however, and our concern is if ISPs prefer to simply bury a clause in the inevitable legal agreements that accompany every modern service.

Finally, users will be able to permanently opt-out through a separate NebuAd service called Fair Eagle, assuming they know of its existence. NebuAd, in response, says its opt-out option is obvious enough; it is stated on its Web site.

NebuAd isn’t alone in attempting to pull packet information from ISPs, although it has taken the most funding so far. Vancouver-based Adzilla uses the same techniques, and has so far signed up eight ISPs, according to its homepage. NebuAd, which is scheduled to have its official launch in November, has been testing on several ISPs, but wouldn’t tell us how many.

Now that the deep packet inspection cat is out of the bag, it isn’t likely to climb back in, despite the objections of onlookers. Owners of websites and ISPs will find the technology well-nigh irresistible, if it delivers on its promises of valuable, always-targeted advertising. Advanced tracking also holds promise for ad-supported internet access, which has not yet successfully implemented.

For more information about targeted advertising and ad networks, visit this VentureBeat post, written by contributor Jeremy Liew.

Grayboxx is a secretive Saratoga, Calif. startup that plans to launch later this year to help you search for popular local businesses, from restaurants or dry cleaners.

We’d normally yawn at such a company, because a dozen other companies are more or less directly competing in the area. But we got a sneak peak, and we were impressed with its very different way of collecting data to determine business popularity. The data includes where people make purchases and what businesses they recommend to each other. (Apologies for being vague, but the company is keeping its exact method under wraps. )

What Grayboxx does show is that there’s a lot of innovation left to uncover in search. Unlike Yelp, Yahoo Local, Google and other local review sites (including Google’s new local initiative), Grayboxx relies on its own data (again, confidential for now) instead of using page rank or relying on local user generated content. In a demo provided to us by founder Bob Chandra, we tested Grayboxx with random searches based on our local knowledge of which stores in Palo Alto were good or not.

When somebody searches for, say, Asian fusion restaurants in Palo Alto — of which there are many — Grayboxx points to the businesses its data suggests are the most popular. The results were on point for Palo Alto businesses — Tamarine for Asian fusion food, for example. Grayboxx also helped us find a new dry cleaners.

The market for local information online is wide open. For example, people still prefer newspapers to local search engines for getting local shopping information, according to the Kelsey Group last year.

As SearchEngineLand points out, nobody can even agree on the size of the local online advertising market in the next five years: Research groups are estimating anywhere from $5 billion to $30 billion in the US. What these researchers do agree on is strong overall growth in the market — with no clear winners as of yet.

Rajeev Motwani, a Stanford computer science professor who advised the Google founders while they were still students, has joined the company’s board, along with a number of other search, data-collection and local advertising veterans.

Grayboxx has received an undisclosed amount of funding from Sierra Ventures.

Expresso Fitness, a Sunnyvale, Calif. company that provides a way for you to interact with a video screen while riding a stationary fitness bike, said it has raised $9.3M in a third round of financing.

The technology is significant because it brings interaction into the huge U.S. fitness services market, estimated by Expresso to be worth $14.39 billion last year. Of that, the majority comes from peoples’ payments to gyms in the form of dues/memberships. About $4.32 billion was made last year from “non-dues” services, i.e., the portion Expresso is targeting.

The company’s software lets you do things like race against a “ghost” on the screen alongside you. You can set the software so that the ghost rides at your personal best on a charted course. That way, you can try to beat it, as you race along the virtual hills, or valleys (you can choose a number of landscapes, and skill levels). You can also connect friends so that they race alongside you; you can see where they are on the course via a little map on the screen.

We tested this product late last year. We liked the experience as far as it went. Expresso lets you log each ride into its system so that you can monitor your progress over time. You can then use any Web browser to view your fitness progress.

However, we believe it should be taken a lot further. This is no Web 2.0 product. It is a relatively closed system, prohibiting full interaction with the Internet. Ideally, Expresso would open its software to let outside developers build programs for it. Also, while interactivity sounded intriguing before we got on the bike to try it out, the experience was less than we’d anticipated. There are realistic parts: If you start climbing a hill, you have to downshift gears and pedal much harder. But there are significant drawbacks: While the course on your screen turns corners, for example, your actual exercise bike doesn’t (it doesn’t lean, and moving handle bars does nothing).

The whole system, including the bike and software, costs $4,995.

The company also faces challenges in its efforts to sell to gyms and other for-profit fitness organizations. Those gyms often have few incentives to allow their customers to become too enraptured of the biking experience, because it means the customers will never leave, making it difficult to bring in new customers. Indeed, this is one reason why Expresso has been slow to open its system up to full interaction with the Web.

We mentioned this company two years ago, when it raised $4.5 million in its second round.

Sierra Ventures, a new investor to Expresso, led the latest round, and was joined by existing investor, San Diego-based Enterprise Partners Venture Capital.

Greenplum, a San Mateo company offering businesses an affordable way to sort though hundreds of terabytes of data to become more intelligent about their customers’ habits, has raised $19 million in financing.

Greenplum is significant because it says it provides a database for speedy data warehousing at a tenth of the cost of leading incumbent, Teradata. It does so by working with the new server built by Sun co-founder Andy Bechtolsheim, billed internally as the “Web 2.0 server.”

Called the Sun Fire X4500, the server has 48 disk drives and 24TB of storage, a significant amount considering the server is the size of two telephone books. (See Bechtolsheim demo the server in YouTube video below). Tim O’Reilly, a publisher who has in recent years become obsessed with collecting and processing business data to make better business decisions, has used it (see here for more details and a video where O’Reilly speaks with the former Greenplum CEO). O’Reilly discusses how Amazon and other Internet companies will need this technology, because they want to measure clicks, and other customers actions — to understand trends and find ways to boost profits. Greenplum has 15 customers, and announces tomorrow (Tuesday) that it has signed up the largest Phillipines wireless service provider, SMART, which also serves the most SMS messages in the world (the Filipinos really like texting).

Sierra Ventures led a $15 million cash investment, and was joined by existing investors Mission Ventures, Dawntreader Ventures, and EDF Ventures. Comerica Bank provided $4 million in debt. Notably, Sierra was the investor in competitor Teradata. Greenplum sells 100 TB hardware and software for $1.8 million, a tenth of Teradata’s price, co-founder Luke Lonergan tells VentureBeat. Teradata had $1.5 billion in sales last year, and revenue growth of 7.5 percent.

The company named Sun executive Bill Cook as chief executive. Greenplum is built on the high-end open source database, PostgreSQL

updated

Piczo, the social networking company that tries to distinguish itself as the safer place for teens, has raised $11 million in a third round of funding, it tells VentureBeat.

Piczo is one of handful of sites gunning for “second place” behind MySpace, the overwhelming leader with 65 million unique users a month. Facebook is around 17 million. Piczo boasts 10.5 million monthly unique visitors worldwide, mainly in Europe and the U.S. Bebo and Hi5 are around that. Like other networking sites, Piczo offers video, photo-sharing, and other communication tools. However, it doesn’t allow people to search profiles, creating more of a sense of security for young people. It’s also invite-only.

The round was led by U.S. Venture Partners (USVP) and Mangrove Capital Partners. Piczo’s existing investors, Sierra Ventures and Catamount Ventures, also participated in the third round of funding.

The company has now raised $18 million since 2005

Chief executive Jeremy Verba tells VentureBeat the company has hit saturation point in the UK, and Canada, but is growing rapidly in Germany, with a million uniques now, up from nothing last summer. Overall, Piczo is adding 30,000 registered users a day, he says.

Piczo is also seeing a lot of overlap with MySpace. MySpace, which is open to search, is like a wide-open “disco,” says Verba. Piczo is like a private party, in comparison — where many of the same people using MySpace go to link privately with their friends, typically ten or 15 people. Another difference is freedom of expression. MySpace keeps users to similarly structured profile templates. Piczo lets users play with their pages more creatively. Its target age group is 13 to 16. Girls make up 70 percent of users.

Verba says there’s no deadline to hit profitability, but there are multiple ways to make money — through advertising and other means. Piczo’s users don’t seem to mind pop-up notes, for example telling them about a Justin Timberlake Piczo page, where they can go and get wallpaper, links to Timberlake’s music videos and pictures and chat with fans. Piczo makes money because Timberlake’s label, Sony BMG sponsors it.