All Things Digital

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Microsoft (MSFT) has withdrawn its bid for Yahoo (YHOO), spanked its CEO in a stink-bomb of a public letter, disavowed plansfor any future acquisitions, and disbanded the slate of dissident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

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.”

July 3 will be “Independence Day” for Yahoo (YHOO) shareholders (”Independence day. Heh. “Enjoy The Shareholder Meeting. It May Be Your Last …“). So says Eric Jackson, president of Ironfire Capital, who is doing his damnedest to recruit an alternate slate of directors to present at Yahoo’s annual meeting on that day.

“It’s hard to believe the board could let this happen,” Jackson told the Associated Press. “I think they completely misconstrued the situation and thought, ‘Microsoft is rich, so let’s soak them.’ They were bluffing all the way and got caught.”

If Jackson hopes to make good on his threat, he’d best get cracking. Shareholders have only 10 days from the announcement of Yahoo’s annual meeting to nominate directors and Yahoo did just that this past Monday. That means Jackson has until May 15 to pull his slate together. Perhaps he can just borrow Microsoft’s (MSFT) …

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 …

Those on-again, off-again talks between Sprint (S) and Clearwire (CLWR)? They’re on again. In fact, they’re so on that they’re already over. This morning the two companies announced a $14.5 billion multi-player joint venture backed by cable operators Comcast and Time Warner as well as Intel and Google.

The alliance will see the four cable and tech companies investing $3.2 billion in the nationwide wireless network that Sprint and Clearwire have been struggling–with profound unsuccess–to roll out. Comcast (CMCSA) will contribute $1.05 billion, Time Warner Cable (TWX) $500 million. Intel (INTC) will invest $1 billion, Google (GOOG) about $500 million. The new venture will be majority owned by Sprint, but it will take the Clearwire name and be run largely by Clearwire execs, among them cellular industry pioneer Craig McCaw.

For the cablecos, which have yet to settle on a clear wireless strategy, the deal is a quick and dirty way to establish the high-speed wireless network they need to compete with telcos like AT&T (T) and Verizon (VZ). For Sprint and Clearwire, it’s a chance to make their non-starter of a WiMax network viable and something happy to talk about when conversation turns to Sprint’s stock price, which has fallen nearly 60% over the past 12 months.

That said, the deal is not without its problems–top among them WiMax itself. As Craig Moffett, an analyst with Bernstein Research, explained in a note to clients earlier this year, the 2.5 GHz spectrum upon which Sprint and Clearwire are building their network isn’t nearly as good as the spectrum Verizon and AT&T just purchased in the FCC’s 700 MHz auction. “Serious questions remain about penetration through walls and windows,” Moffett explained. “Elsewhere in the world, operators have also raised questions about WiMax’s real-world bandwidth, latency and non-line-of-site coverage. How competitive the offering would be versus Verizon’s or AT&T’s planned LTE broadband service therefore remains to be seen.”

That it does–though there have been some indications that it may not be quite up to par. Speaking at an international WiMax conference in Bangkok in March, Garth Freeman, CEO of Buzz Broadband, Australia’s first WiMax operator, described the technology variously as a “disaster,” “miserable failure,” and a standard “mired in opportunistic hype.”

So will that prove true for Clearwire as well? We won’t know for some time. Building out a massive network like this will take some doing. “We’ll likely to see early trials in 2010, but a full-fledged build-out will take longer,” Clearwire CEO Benjamin Wolff said during a conference call this morning. “Building faster is a matter of logistics. The build plan we’ve laid out will be one of the largest and fastest build-outs ever done. We have the capability to do it, but it’s a massive undertaking.”

As the anniversary of the iPhone’s market debut approaches, the Mac faithful are quickly succumbing to Apple (AAPL) Rumor Seasonal Affective Disorder, an ailment most often associated with the lead-up to Macworld.

Fueling that trend today is a memo, purportedly leaked from inside AT&T (T), instructing employees not to schedule any vacation between June 15 and July 12 to ensure sufficient staffing for “an exciting Summer Promotional Launch.” This, of course, is being taken as proof positive that the 3G iPhone will arrive at market sometime during that timeframe. And for good reason, AT&T issued a similar mandate last year prior to the iPhone’s official debut.

Meanwhile, Vodafone (VOD) and Telecom Italia (TI-A) said today that they’d both won contracts to bring the iPhone to Italy this year, the first time Apple has allowed two mobile carriers to distribute the device in a single country.

An interesting bit of news and one that lends some validity to recent reports that Apple is stepping back from the exclusive iPhone distribution arrangements it’s been inking to spur iPhone growth abroad. “Apple’s either turned a corner that they’ve had to turn, or that they’ve chosen to,” Technology Business Research’s Ezra Gottheil said of the Vodafone and Telecom Italia deals. “I don’t know if they prefer the exclusivity, and the revenue sharing that goes along with it, or just prefer to sell iPhones and grow their share of the [handset] market.”