All Things Digital

The stress of Microsoft’s failed bid for Yahoo has apparently been so great, the company’s been put off its food. Microsoft (MSFT) says it has no intention of seeking the search-advertising market heft it might have gained in an acquisition of Yahoo (YHOO) with a spate of other Internet purchases.

“People don’t understand what they’re talking about,” Microsoft CEO Steve Ballmer told the Financial Times, referring to speculation about a post-Yahoo buying spree. “At the end of the day, this is about the ad platform.”

And don’t forget Google (GOOG) …

Time Warner, the world’s largest media company, soon won’t be quite so large. This morning Time Warner revealed the details of its planned spinoff of Time Warner Cable, a massive transaction that will separate the company’s content and distribution businesses once and for all.

The deal, which has been approved by both companies’ boards, calls for Time Warner Cable to pay a hefty $10.9 billion one-time dividend to shareholders. As parent company, Time Warner (TWX) will pocket $9.25 billion of that payout.

It’s a flashy move for Time Warner’s new CEO Jeff Bewkes, who’s been hard pressed to reinvigorate the company’s stock price. “After the transaction, each company will have greater strategic, financial and operational flexibility and will be better positioned to compete,” he said in a statement. “Separating the two companies will help their management teams focus on realizing the full potential of the respective businesses and will provide investors with greater choice in how they own this portfolio of assets.”

That’s all well and good, but how does Time Warner plan to realize the full potential of a $9.25 billion payout? By buying a company or two, perhaps. “Our share of the special dividend will clearly enhance our financial flexibility,” Bewkes said during a conference call this morning. “… We’re looking at all of the usual uses of capital, including returning capital to stockholders, including disciplined acquisitions and including investing further in our business.”

Microsoft (MSFT) has withdrawn its bid for Yahoo (YHOO), spanked its CEO in a stink-bomb of a public letter, disavowed plansfor any future acquisitions, and disbanded the slate of dissident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 …

Good thing so rarely a correlation exists between a company’s public announcements and its corporate actions. Otherwise, it might be tough to parse Microsoft’s recent comments about future acquisitions in light of some rumors floating around Silicon Valley today.

While touring Japan this week, company Chairman Bill Gates told a news conference that Microsoft (MSFT) isn’t likely to pursue other deals following its withdrawal of its ill-starred takeover bid for Yahoo (YHOO). Said Gates, “Now at this point Microsoft is focused on its independent strategy.”

Windows Live General Manager Brian Hall echoed that sentiment at an analyst meeting yesterday: “We’ve withdrawn the offer and moved on, and now are focused on how we grow as fast as possible organically.”

Seems this whole Yahoo debacle has put Microsoft off acquisitions entirely. Or has it? As first reported by BoomTown’s Kara Swisher, Microsoft recently contacted Facebook to gauge the Internet company’s willingness to sell it the 98.4% of the company that it doesn’t yet own. No word on what Facebook’s reply was, although CEO Mark Zuckerberg has long said he’s not interested in selling the company. And even if he were, Facebook doesn’t exactly solve the problems that Yahoo would have. It’s hardly a viable source of online advertising …

Microsoft (MSFT) and Yahoo (YHOO) are talking again–but apparently they’re talking in circles. The two companies met this week to discuss Microsoft’s proposal to acquire Yahoo, but failed to resolve the differences that have so far hamstrung the deal. Sources familiar with the talks claim the two companies remain at an impasse, with Yahoo refusing to begin formal negotiations until Microsoft sweetens its cash-and-stock offer, and Microsoft refusing to sweeten it. Redmond likely sees no reason to raise its bid until Yahoo reports first quarter earnings later this month, figuring it may not have to raise it at all if those earning are as dissapointing as some expect them to be.

Dell (DELL) will conclude its first first official analyst meeting in three years later today. And judging from the street’s tepid reaction to it, the company probably could have postponed it for yet another year. The big news this afternoon: Dell isn’t planning any large acquisitions, which for a company in Dell’s current position is something of a truism. “I wouldn’t hold your breath for a big acquisition,” CEO Michael Dell explained today. “There are a number of network-effect acquisitions, where we can acquire a product line or a key methodology or a key group of skills that we can leverage across our entire network. Our acquisitions will be that kind of thing.”

The Amazon bears are growling this morning.

Shares in the company, which have already lost more than 20% of their value in 2008, slipped further in early trading (but recovered later), though Amazon said yesterday that profits more than doubled in its fourth quarter. “This quarter showed accelerated sales growth and record operating profits,” CEO Jeff Bezos said in a statement released with the earnings. “In our view, these unusual financial results are driven by one thing: continuously improving the customer experience.”

But such enthusiastic pronouncements didn’t matter a whit to jittery investors worried about a slowing economy and Amazon’s tight margins. Shares of the retailer, which closed yesterday at $74.21, fell 8.2% to $68.15 before opening bell today. And they slipped even further, to $66.49, after Amazon announced plans to acquire Audible in a deal valued at about $300 million - a premium of more than 20 percent over the audiobook retailer’s Wednesday closing price.

Perhaps investors haven’t yet realized that Audible controls an astonishing 95% of the online audiobook market and, as Staci Kramer over at paidContent notes, is the top spoken-word provider for Apple’s iTunes Store. Amazon almost certainly plans to distribute Audible content wirelessly via its Kindle e-book reader, which may turn it into the iPod of e-book readers whether Apple CEO Steve Jobs likes it or not. “It doesn’t matter how good or bad the product is, the fact is that people don’t read anymore,” Jobs said recently when asked about the Kindle. “Forty percent of the people in the U.S. read one book or less last year. The whole conception is flawed at the top because people don’t read anymore.”

That may be so, but as Jobs well knows they do listen. Which begs the question: Why didn’t Apple buy Audible? “We have long suspected that Apple would be the party most interested in acquiring Audible, considering the close ties between the two companies,” Richard Fetyko, an analyst with Merriman Curhan Ford, wrote in a research note this morning. “Audible’s audiobook content is sold within Apple’s iTunes online music store, which represents about 25% to 30% of Audible’s revenue. Also, most of Audible’s customers are iPod users. We would not be surprised to see [if] Apple made a bid for Audible to preserve its leadership in online-audio content distribution. There are no alternatives to Audible in the marketplace with any significant scale.”

… For Google, privacy did not begin and does not end with our acquisition of DoubleClick. And we believe that privacy for legislators, regulators, privacy groups and other stakeholders shouldn’t begin or end with Google. Privacy is a serious issue that spans several industries from financial services to entertainment to e-commerce, and that ought to be addressed holistically in the interest of individuals throughout Europe and the world. One particular company–and certainly one particular merger–should not be singled out.”

–Peter Fleischer, Google’s Global Privacy Counsel

The Federal Trade Commission’s decision to approve Google’s proposed $3.1 billion acquisition of online ad-serving vendor DoubleClick without condition hasn’t exactly elicited resounding calls of huzzah! from the European Union. On the contrary, European parliamentarians seem out to spoil the deal.

At a hearing before the European Parliament’s Civil Liberties Committee to discuss the legality of search companies’ privacy policies, talk quickly turned to the acquisition and its potential impact on citizens’ online privacy. Seems a few of the EU’s top privacy regulators feel that IP, or Internet Protocol, addresses should be protected as personal information when they can be used to identify an individual on a computer network. Google, which uses IP addresses to identify users’ geographical location, among other things, disagrees.

After first upbraiding the committee for attempting to shoehorn a privacy case into a competition law review, Peter Fleischer, Google’s Global Privacy Counsel, pointed out that IP addresses aren’t always personally identifiable. “There is no black or white answer: Sometimes an IP address can be considered as personal data and sometimes not,” he said. “It depends on the context and which personal information it reveals.” And this is true to some extent, but becoming less so as we move toward Internet Protocol version 6 (IPv6).

Of course, were IP addresses to be categorized as personal information, Google would have a more difficult time delivering relevant search results and, more importantly, ads. Which, as Dutch parliamentarian Sophie in ‘t Veld pointed out is the real reason Google is arguing so vehemently against treating IP addresses as sensitive personal data. “The reason you want to have the data is because it gives you a competitive advantage,” she said. “It is business. I don’t think they can be completely disconnected. And we should discuss that side of things too. … Having that much information is market power.”

This proposed acquisition raises serious competition and privacy concerns in that it gives the Google DoubleClick combination unprecedented control in the delivery of online advertising, and access to a huge amount of consumer information by tracking what customers do online.”

–Microsoft General Counsel Brad Smith

The Federal Trade Commission isn’t going to let calls for the recusal of Chairwoman Deborah Platt Majoras or the concerns of Microsoft, AT&T and consumer advocacy groups at home and abroad get in the way of Google’s purchase of online ad-serving vendor DoubleClick.

The FTC today voted 4-1 to approve the $3.1 billion acquisition without condition. “After carefully reviewing the evidence, we have concluded that Google’s proposed acquisition of DoubleClick is unlikely to substantially lessen competition,” the commission’s majority wrote in a statement, adding that it planned to keep an eye on the company should it wield its market power unwisely. “The markets within the online advertising space continue to quickly evolve, and predicting their future course is not a simple task,” the commission continued. “Accounting for the dynamic nature of an industry requires solid grounding in facts and the careful application of tested antitrust analysis. Because the evidence did not support the theories of potential competitive harm, there was no basis on which to seek to impose conditions on this merger. We want to be clear, however, that we will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the commission intends to act quickly.”

One would hope so. In a lone dissenting opinion, commissioner Pamela Jones said the merger of Google’s data with DoubleClick’s is potentially quite problematic.

The transaction will combine not only the two firms’ products and services, but also their vast troves of data about consumer behavior on the Internet. … I acknowledge that behavioral targeting may create economic efficiencies that would–in the short run–be attractive to the parties’ advertiser and publishing customers (putting aside for a moment the potential impact on consumers on the privacy front). Still, marrying the two datasets raises long-term competition questions that beg further inquiry.

• In a post-merger online advertising market driven by the value of behavioral targeting, will Google/DoubleClick face meaningful competition?
• Will any other firm be able to amass a dataset of the same scope and size?
• Will any other company be able to overcome network effects and offer an equally focused level of behavioral targeting?
• If advertisers and publishers have to channel their online advertising through Google/DoubleClick in order to access the best dataset that supports targeted advertising, will any other firms have the ability or incentive to compete meaningfully in this market?

“… I am convinced that the combination of Google and DoubleClick has the potential to profoundly alter the 21 century Internet-based economy–in ways we can imagine, and in ways we cannot. I do not doubt that this merger has the potential to create some efficiencies, especially from the perspective of advertisers and publishers. But it has greater potential to harm competition, and it also threatens privacy. By closing its investigation without imposing any conditions or other safeguards, the commission is asking consumers to bear too much of the risk of both types of harm.”

The FTC’s ruling now leaves the final decision on the deal to the European Commission.

Gateway CEOs are like Spinal Tap drummers–they don’t seem to last very long. The company has had five CEOs (four permanent and one interim) in six years. And now the fifth is departing as well.

Gateway CEO Ed Coleman, who joined the company in September 2006, announced his resignation today. He’ll leave the company in January, handing over his responsibilities to Rudi Schmidleithner, president of American operations for Acer, the PC maker that acquired Gateway this summer.

“The secret of success is: Start 12 years ago.” That’s how Multimap Founder and Chief Executive Sean Phelan once described the digital-mapping business. And he’s probably right. Of course, there’s another secret to success as well: acquire a business that started 12 years ago.

Which is what Microsoft did today when it purchased Multimap for a reported $50 million. “The addition of Multimap enhances Microsoft’s position as a leading provider of mapping and location platform services,” Sharon Baylay, general manager of Microsoft’s Online Services Group, said in a statement. “This acquisition will play a significant role in the future growth of our search business and presents a huge opportunity to expand our platform business beyond the U.K. and globally.”

Leading provider of mapping and location platform services? That’s a bit of a stretch. According to Nielsen Online, Microsoft’s Windows Live Maps service had 7.1 million unique users worldwide during October. By comparison, Google Maps had 71.5 million unique users, its Earth service 22.7 million. Clearly, Microsoft is in a losing battle against Google in the mapping space, though this acquisition will give it a powerful weapon with which to fight.

“The magazine of sex, politics and protest” is now the “The magazine of sex, politics, protest and social networking.”

Penthouse Media Group has acquired Various and its more than 25 “Friendfinder” social-networking sites for a reported $500 million. Among the company’s properties, pop-up purveyor Adultfriendfinder.com (“The World’s Largest Sex & Swinger Personals Community”), Italianfriendfinder.com (“The Italian Way of Love!”) and Bigchurch.com (“Bringing People Together in Love and Faith”).

Taken together, the Various sites have a membership base of more than 260 million, with roughly 1.2 million subscribers who pay up to $50 a month for their services. And the company is rumored to be raking in “hundreds of millions of dollars” in annual revenues. Seems Penthouse got itself quite a deal.

With some $15.4 billion gathering dust in its bank accounts, Apple’s cash reserve is among the Fortune 500’s largest. Yet since 1999, it’s spent just $217 million to repurchase stock and it’s not yet declared a stock dividend.

What is the company planning to do with all that money? Certainly, CEO Steve Jobs must have an idea or three. Fortune’s Jon Fortt speculates that the company might use a portion of those funds to buy its way into a new niche market with some small acquisitions. It may finally go through with that long-rumored TiVo acquistion.

Or it could do something else entirely. Like join the Federal Communications Commission’s upcoming auction of the 700 MHz wireless spectrum, either as a partner of Google or alone.

Apple can’t be too happy with AT&T right now. First the carrier turned its iPhone activations into a nightmarish PR disaster, then its CEO pre-announced a 3G version of the device that will make its precursor obsolete right before the annual holiday consumer binge.

Were Apple to bid in the auction and win, it would provide a nice solution to problems like these. A viable 700-MHz network and an OS X-friendly VOIP client is all the company would need not just to dump AT&T, but also compete with it. “Apple is the most anti-carrier company there is,” a former Apple executive recently told BusinessWeek. “They’re probably already frustrated with AT&T. If they put a few billion behind this, they could build a kick-ass network.”