All Things Digital

Steve Jobs has apparently accepted the unacceptable: Things don’t always go Steve’s way. The mercurial Apple (AAPL) CEO has been notoriously intransigent when it comes to matters of variable pricing on iTunes, arguing that charging higher prices for more popular content might backfire, sending customers off to the file-sharing networks. Now, as predicted yesterday, he appears to have reconsidered that stance, at least when it comes to HBO’s Emmy Award-winning programming.

This morning, Apple’s U.S. iTunes Store began offering six HBO series: “The Wire,” “Flight of the Conchords,” “Sex and the City,” “The Sopranos,” “Rome” and “Deadwood.” The first three are priced at iTunes’ standard rate of $1.99 per episode. The second three are $2.99 each, marking the first time Apple has allowed variable pricing for TV shows in the U.S.

Quite a coup for HBO (TWX), especially given some of the other concessions it was able to win from Apple: HBO programs won’t be offered for purchase on iTunes until they hit the DVD window, and new episodes of series won’t be available until months after their TV premiere.

Hewlett-Packard’s (HPQ) acquisition of technology services giant Electronic Data Systems Corporation (EDS) will be the company’s largest acquisition since the $20 billion merger former HP CEO Carly Fiorina orchestrated with Compaq Computers six years ago.

Hopefully, it won’t be nearly as rancorous.

Valued at $13.9 billion, or $25 per share, the deal will more than double the size of HP’s consulting and outsourcing business. It will likely do the same to the $16.6 billion in revenue from services the company made in 2007 as well.

When the dust has settled around the merger, HP will be the second-largest provider of consulting and outsourcing services, behind IBM (IBM). But it will take some doing to get there. “It’s a very significant combination,” said Ben Pring, a research vice president in the IT Practices Group at Gartner. “[But] people who are skeptical of big integrations will have a field day around this. It’s putting together two large businesses with two different heritages. It’s going to be a big culture clash.”

But if HP manages to pull it off? Well, as Fiorina would likely tell you, bigger is better if you can do it right.

“It’s somewhat amusing because we’ve seen this play before. I think this is sort of further evidence that HP really does see value at scale basically, at size,” said Illuminata analyst Gordon Haff. “One of the things we’ve seen very clearly over the last couple years is that Carly really had the right idea, she just couldn’t execute on it. She wasn’t wrong for saying HP needed to be bigger, effectively,” said Haff. “If (the merger) does go through we’re going to end up with an HP that looks a lot like Carly wanted it to look.”

HBO (TWX) has reportedly managed to do what NBC Universal (GE) failed so miserably at last year: convince Apple (AAPL) to adopt variable pricing at its iTunes digital media storefront.

Sources close to the network tell Portfolio.com that Apple will soon bring its programming to iTunes along with a separate and distinct pricing structure. No word yet on what that pricing structure is, but presumably it’s a lot more favorable than the one NBC Universal had.

An interesting move for Apple, and one that marks a shift in the company’s hard-line views of pricing. Perhaps the HBO arrangement is unique, perhaps not. But even if it is, it won’t be long before the entire content industry begins demanding similar deals.

With its curvier edges, stylish silver trim, half-VGA 480-by-320 pixel screen and improved iTunes compatibility, Research in Motion’s (RIMM) new BlackBerry Bold should be a big hit with IT operations professionals convinced the iPhone isn’t an enterprise-class mobile device but driven to near-aneurysm by discontented employees demanding them.

The device is largely as expected–an iPhonish-looking thing with both GPS and Wi-Fi, 1GB of permanent flash memory, a 2-megapixel camera, full HTML browsing, 3G support on GSM networks with HSDPA access and, of course, the BlackBerry’s one-trick killer app: instant, secure email. That’s a compelling combination for business users and casual ones not easily swayed by the iPhone’s hype juggernaut as well. Indeed, Citigroup analyst Jim Suva says it could boost RIM’s quarterly shipments by 200,000 to 400,000.

But perhaps not without a bit of struggle. The BlackBerry Bold won’t ship until as late as August, which means Apple (AAPL) could beat it to market with the enterprise-friendly 3G iPhone it’s rumored to be uncrating at its Worldwide Developer’s Conference in June. Which has got to worry RIM. After all, the first-generation iPhone had claimed a 28% market share by the fourth quarter of 2007. That’s still less than the BlackBerry, which holds about a 41% market share, but the iPhone hasn’t even been on the market a year.

Google calls its latest data portability effort Friend Connect, but a better name might have been AdWords Connect. Because, like most Google (GOOG) initiatives, that’s really what it’s all about, isn’t it? Connecting people to ads? And there’s a lot more opportunity for that when the Web itself becomes a social network. Which is exactly the sort of thing you hope for when those unobtrusive little contextual ads you sell are as ubiquitous as street signs on the Web.

Designed to help Web publishers easily add social-networking features to their sites, Friend Connect requires just a snippet of code to bring social features to a site along with a means of coordinating them with other social networks like Facebook, Plaxo and Google’s Orkut. It’s another in a recent string of data-portability efforts that hope to apply the distributed model to social networking and put an end to its so-called “walled gardens.”

“The distributed model has worked well for the Web,” David Glazer, Google director of engineering, told Outside the Lines’ Dan Farber. “That is what the Web does–many points of light loosely coupled and massively distributed, allowing users to connect to pages of information. Now it is working to connect people to other people.”

And all of them to Google AdWords, of course. More Internet usage. More ad revenue.

QUOTED

An intelligent personalized agent (e.g., guardian angel) monitors and evaluates a user’s environment to assist in decision-making processes on behalf of the user. Such implementation may be presented in the form of a software-assisted mind amplifier. The amplifier analyzes preferences and predicts future actions based on the analysis.”

–Microsoft, for one, welcomes our new “guardian angel” overlords.

Was he inebriated? Do you even know anyone who owns a Zune?”

–-Apple CEO Steve Jobs on Microsoft’s claim that the Zune is now a worthy alternative to the iPod.

Despite its feature differentiations and, er, “distinctive” color palette, Microsoft’s (MSFT) Zune has yet to prove itself the iPod killer it was once touted as. Since its launch in November of 2006, the Zune has sold 2 million units. In comparison, Apple (AAPL) in its last quarter sold 10.6 million iPods–quintuple Microsoft’s cumulative sales to date. Zune’s market share in this space during the first quarter: 4%. Apple’s share: 71%.

Clearly, the only thing being killed by Microsoft’s iPod killer are Microsoft’s chances for unseating Apple in a market that would seem–according to relatively flat year-over-year iPod sales–to have peaked without it.

Microsoft (MSFT) is appealing the $1.38 billion fine given it by the European Commission for failing to comply with a landmark antitrust ruling in what it describes as a “constructive effort to seek clarity from the court.”

By “clarity,” Microsoft means an annulment of the EC’s February decision imposing the fine–the highest ever meted out in an antitrust case. But it’s not likely to get it. At least according to the EC. Said an EC spokesperson: “The commission is confident that its decision to impose the fine is legally sound.”

Translation: No. How’s that for “clarity”?

Microsoft (MSFT) has withdrawn its bid for Yahoo (YHOO), spanked its CEO in a stink-bomb of a public letter, disavowed plansfor any future acquisitions, and disbanded the slate of dissident directors it had lined up should it have decided to go forward with a hostile proxy bid for the company.

But if Yahoo, beaten into submission by irate investors, should suddenly come crawling back to the now empty negotiating table, Microsoft might indulge it, if only for a moment. For now, it’s busy with what Microsoft’s Chief Research and Strategy Officer Craig Mundie refers to as “Plan B.”

“The market may wish that the Yahoo deal may come back together, but Microsoft at least at this point assumes it’s over,” Mundie told Reuters. “Yahoo could always come back again and say, Please buy us for $33 (a share), and I’m sure we might reconsider it, but we’re not assuming that’s going to happen.”

Seems Microsoft, like Yahoo CEO Jerry Yang, is more than willing to listen if the company has anything new to say. And it’s not even facing any shareholder lawsuits …

QUOTED

I’m pretty proud of what we’ve been able to accomplish in China. Google has a far superior track record than other Internet or Internet search companies in China.”

–Google co-founder Sergey Brin adjusts the company’s informal corporate motto “Don’t Be Evil” to “Don’t be AS evil” for the Chinese market.

A Blockbuster (BBI) acquisition of Circuit City (CC) may not be as much of a long shot as it first appeared. This morning the electronics chain, which has been vocal in its skepticism of Blockbuster’s ability to finance such a deal, finally opened its books to the video rental outfit.

Why the sudden turnabout? Two words: Carl. Icahn. Apparently, the billionaire investor–Blockbuster’s largest shareholder–has promised to purchase Circuit City if Blockbuster is unable to finance the $1.3 billion deal. In a statement, Circuit City Chairman and CEO Philip Schoonover made it quite clear that Icahn is about the only thing Blockbuster has going for it in this particular gambit and cautioned against reading too much into the sudden opening of its books. “While the Circuit City board has confidence in the company’s ability to successfully implement its turnaround plan and generate shareholder value, we believe that we can best serve the interests of our shareholders by exploring all possible alternatives to enhance shareholder value,” Schoonover said. “Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal, that the board has taken a position on the company’s value or that it has settled upon a particular strategic course of action.”

Not yet, at least. In that same statement, the retail chain said it has hired Goldman Sachs & Co. to explore strategic alternatives, which may include a sale of the company. Seems Circuit City’s board may not have as much confidence in the retailer’s turnaround plan as Schoonover would suggest. And why should it? Circuit City has been posting losses amid declining sales for some time now. And though it has restructured itself a bit, it continues to hemorrhage market share to Best Buy and Wal-Mart et al. That said, selling itself to another struggling company with an outdated business model hardly seems a good solution to such problems. It’s like two drunks propping each other up on the dance floor.

This morning, Peter Chernin, the chief operating officer of News Corp. (NWS) (which owns Dow Jones and this site), acknowledged that Fox Interactive Media, which includes MySpace, will fall short of its goal of generating $1 billion in revenue for fiscal 2008. A surprising shortfall for a division that operates the strongest social-networking offering on the Web.

But not to worry, MySpace has a solution for that. It’s just one that lacks an obvious monetization strategy. It’s called Data Availability and it’s a way for MySpace members to share and sync profile data across partner sites–starting with Yahoo (YHOO), eBay (EBAY), Twitter and Photobucket. “The walls around the garden are coming down–the implementation of Data Availability injects a new layer of social activity and creates a more dynamic Internet,” enthused Chris DeWolfe, CEO and co-founder of MySpace, in a statement. “We, alongside our Data Availability launch partners, are pioneering a new way for the global community to integrate their social experiences Web-wide.”

That’s all well and good. But how about pioneering a new way to, you know, make money off that integration? Data portability is wonderfull and all. But so is revenue. And right now, MySpace’s Data Availability initiative doesn’t include any advertising deals.

Vonage’s slow death is … well, it’s slowing.The financially struggling Internet-phone company reported today a smaller first-quarter loss thanks largely to prudent cost cuts.

Great news for Vonage (VG), which has been tormented by a barrage of costly legal battles and set upon by new and powerful rivals. The company’s net loss shrank to $8.96 million, or 6 cents a share, from a loss of $72.3 million, or 47 cents, in the year-earlier quarter.

Sadly for Vonage, the company’s Q1 loss isn’t the only thing that shrank. Subscriber growth did as well. The company signed up just 30,000 new subscribers in the quarter, a big decline from a year earlier when it added nearly 166,000 subscribers. Worse, turnover rate increased to 3.3% from 3% in the fourth quarter.

Still, Vonage is a bit healthier than it’s been for some time now. So while it may not exactly be on the road to recovery, it’s at least crawling in its general direction. To that end, the company’s inked a deal to resell Covad’s DSL service under the Vonage Broadband name. An interesting idea, in that it will allow Vonage to bundle a broadband offering with its Internet telephony services like most other phone and cable companies on the planet. But DSL? Really? At a time when Verizon (VZ) is expanding its FiOS fiber-optic service and Comcast (CMCSA) is boosting the speed of its high-tier cable broadband?

You wouldn’t know it from the protests over Microsoft’s decision to retire Windows XP at the end of June or the PC users exercising their Windows Vista downgrade rights, but Vista is actually selling quite well. Microsoft (MSFT) Chairman Bill Gates said today that sales of Windows Vista have reached 140 million copies worldwide. “That’s a very rapid sales rate,” Gates explained.

Sure is. Especially for an operating system that’s met with such a middling reception. That said, you’ve got to wonder if the 140 million copies to which Gates refers are deployed copies or licenses sold. Because if it’s the latter, the number would be decidedly less impressive. It wouldn’t really account for volume licenses sold to corporate customers, copies pre-installed on OEM computers, and copies downgraded to Windows XP. And Gates has made exactly this type of oblique statement before, the last time Microsoft announced Vista sales figures.

If the defining characteristics of Web 2.0 are “groundbreaking” Facebook widgets, easy access to dumb capital and haughty start-ups dangerously over-leveraged on other companies’ assets what (or who) will define the Web 3.0 epoch?

The answer’s obvious isn’t it? Salesforce.com CEO Marc Benioff.

Why? Because he says so, that’s why.

Speaking at the company’s DreamForce Europe event, Benioff said that Web 3.0 will be the Platform-as-a-Service (PaaS) era. A fascinating definition–convenient too, since this is precisely the sort of business Salesforce.com (CRM) is in. “We think Web 3.0 is now upon us. It’s the era of platforms,” said Benioff. “New platforms are coming right out of the cloud. It’s time to make a choice. You can continue to build your applications in the software model or you can move your applications to the new model of cloud computing. There is a new way to build your applications.”

So Web 3.0 is not, as Tim Berners-Lee, inventor of the World Wide Web, once suggested, the semantic Web–”day-to-day mechanisms of trade, bureaucracy and our daily lives handled by machines talking to machines.” Rather, it’s Web 2.0 with another 1.0’s worth of marketing BS. The “Whatever-I-Say-It-Is Web”–the “Al Franken Decade” of the Internet age.

Well, the “me” decade is almost over, and good riddance, and far as I’m concerned. … That’s right. I believe we’re entering what I like to call the Al Franken Decade. Oh, for me, Al Franken, the ’80s will be pretty much the same as the ’70s. I’ll still be thinking of me, Al Franken. But for you, you’ll be thinking more about how things affect me, Al Franken. When you see a news report, you’ll be thinking, ‘I wonder what Al Franken thinks about this thing?’, ‘I wonder how this inflation thing is hurting Al Franken?’ And you women will be thinking, ‘What can I wear that will please Al Franken?’, or ‘What can I not wear?’ You know, I know a lot of you out there are thinking, ‘Why Al Franken?’ Well, because I thought of it, and I’m on TV, so I’ve already gotten the jump on you.”