A Chinese court has ordered the software giant to stop producing and selling versions of its Windows OS that include Chinese fonts developed by a local software company. Microsoft’s (MSFT) use of two Chinese fonts developed by Zhongyi Electronic, a Beijing-based software company, was not covered by the licensing agreement between the two, the court found, and therefore infringed on Zhongyi’s rights. And so Microsoft must pull from the shelves Chinese language editions of Windows 98, Windows 2000, Windows XP and Windows Server 2003.

“By winning this case against an internationally well-known company like Microsoft, it shows that China, although still a developing country, is taking positive steps to protect intellectual property rights,” an attorney for Zhongyi Electronic told Reuters.

Microsoft, for its part, insists its agreement with Zhongyi covered its use of the fonts at issue and plans to appeal the decision. “Microsoft respects intellectual property rights,” the company said in a statement. “We use third party IPs only when we have a legitimate right to do so.”

And if Microsoft should fail in its appeal? Well, piracy is so rampant in China, a court order preventing the company from selling certain versions of Windows isn’t exactly going to hamstring Microsoft’s business. “The majority of operating systems in the market today are illegal copies, and the ones that are Zhongyi-related have an even smaller share of the market,” Analysys International analyst Edward Yu explains. “So I don’t think it will have much impact on Microsoft’s business.”

Excluding one-time items, Cisco (CSCO) said it earned 36 cents a share, down from 42 cents a share in the same period last year. Still, that was better than the consensus estimate. Analysts polled by Reuters had expected the company to deliver a profit of 31 cents a share on sales of $8.745 billion.

“Building off what we saw as a clear tipping point in Q4, our Q1 results continued to reflect strong sequential growth trends that meet or exceed expectations during normal economic times,” CEO John Chambers said in a statement.

“We view the improving economic outlook, combined with solid execution on our growth strategy, as creating unparalleled opportunity to drive more value into the core of the network,” Chambers continued. “Simply said, we believe that key market transitions across collaboration, virtualization and video will drive productivity and growth in network loads for the next decade, and are evolving even faster than expected.”

At $24.20, shares in the company are trading up nearly four percent on the news.

That’s nowhere near the one million iPhone 3Gs Apple (AAPL) sold in the first three days of the device’s launch in 2008. Nor is it the 13,500-a-day Apple sold during the first 74 days of the original iPhone’s debut. Disappointing to say the least — even if there are already an estimated 1.5 million to two million gray-market iPhones in use in China.

“We view the 5k units as soft,” Piper Jaffray analyst Gene Munster said in a note to clients this morning. “Using the Jun-07 U.S. launch as a comparison we would have expected about 30k units….We originally thought China would contribute about 1-2m iPhones to our 36m unit estimate for 2010. The launch runrate of about 1,500 units per day would suggest 550k units per year.”

Nonetheless, Munster is maintaining expectations. “We are maintaining our overall numbers,” the analyst notes, “despite the soft China launch based on our belief that other wild cards remain for upside to our iPhone units in CY10 including the rollout to new carriers. We believe that eventually China will emerge as a major market for iPhone sales but it could take a year or two to gain meaningful unit traction as it did in the U.S.”

[Image credit: Mobile163.com]

The deal gives Cisco (CSCO) a foothold in China’s massive cable market, whose 160 million subscribers make it the largest in the world. And with the Chinese government mandating full digitization by 2015, this figure could grow to 200 million in as little as three years.

“That presents for Cisco and other competitors in the market a very, very compelling market opportunity,” Hilton Romanski, VP of corporate development for Cisco, told Reuters. “What we’re trying to get access to is good local expertise that can help us think about how to make this transition, becoming an increasingly local company in China.”

Dragging the company down: A 908 million euro goodwill write-off in the Nokia Siemens Networks venture it co-owns with Siemens (SI). Revenue was 9.8 billion euros, or about $14.6 billion, which was down about 20 percent compared to last year. Worse, smart-phone market share declined to 35 percent from 41 percent in the previous quarter.

Six points gone in three months? That’s a brutal loss and one that demonstrates just how much pressure the company is seeing from Apple (AAPL) and Research in Motion (RIMM), among others.

“Nokia is launching plenty of new high-end smartphone models, such as the N900 and N97 mini,” Strategy Analytics analyst Neil Mawston told Reuters. “But as yet there is no iPhone killer to drive a major revival in its smartphone volumes. Nokia is still struggling in the U.S. smartphone market, and with competition intensifying in China as well, Nokia’s battles can only get tougher in 2010.”

Still, Nokia (NOK) did have some good news to report. It expects mobile device volumes to increase in the fourth quarter of 2009 and it sees the global handset market shrinking less this year than analysts had feared–seven percent instead of 10 percent.

“It is encouraging to see some signs of recovery in our markets,” Kallasvuo said during a conference call. “But let’s be clear, uncertainty in end-consumer demand remains.”

“[A partnership with Apple] is something that’s likely to come over time,” Hastings said. “But nothing in the short term. [With] movie watching, we are not focused on mobile yet, but on the TV, on Blu-ray and on the video game consoles. We will get to mobile eventually, including the iPhone.”

Of course, bringing a Netflix (NFLX) streaming-video app to the iPhone will no doubt take some doing–and a few concessions. Certainly, it seems unlikely that AT&T (T) would be thrilled to have Netflix streaming movies over its wireless cellphone network. So at the very least, the company would have to agree make its app Wi-Fi-only.

To wit, Google’s announcement Monday of a number of concessions to the European Union, which seems a bit dubious of the whole thing. In a letter to several publisher associations in Europe, the company invited two non-U.S. representatives to join the board that will oversee the book rights registry that is to distribute royalties from digital book sales under terms proposed by the settlement. The company also promised to seek their permission before digitally publishing European works still protected by copyrights.

“Books that are commercially available in Europe will be treated as commercially available under the Settlement,” Google (GOOG) explained. “Such books can only be displayed to US users if expressly authorised by rights holders.”

Quite a concession, given Google’s plans to create a so-called “last library,” but clearly necessary with opposition to the deal abroad so pronounced. Already, Germany has filed an objection to it, saying the agreement would “irrevocably alter the landscape of international copyright law.” And now France is about to do the same.

“Google will have a monopoly digitalising European orphan works without permission,” Nicolas Georges, director for books and libraries at the French Culture Ministry, told Reuters. “Google has the power to determine which work will be in its database or not. For example, some works that are not commercial may be removed by Google.”

Seems Google’s effort to establish a de facto worldwide copyright regime isn’t going to be quite as easy as the company had hoped.

That said, it’s also entirely possible that there will be no official announcement tomorrow. After all, we’ve been hearing reports like those above about the Apple (AAPL) iPhone in China for quite a while now and these negotiations are quite complex. As Dan Butterfield at iPhonAsia notes, “I am skeptical that an Apple/China Unicom iPhone deal announcement will come on Friday as there are likely two iPhones in the approval pipeline–models A1324 and A1325. The WiFi enabled model (A1325) may still be in CTTL testing and Apple may not want to make a deal official until both iPhones have received their network access licenses, which could take another month or so.”

Analysts surveyed by Thomson Reuters expected Intel (INTC) to report revenue of $7.3 billion and a profit of eight cents per share. Instead the company reported revenue of $8 billion and non-GAAP profits of 18 cents (PDF). And it predicted third-quarter revenue above Wall Street’s expectations.

In a statement, CEO Paul Otellini said the results “reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half.”

Now admittedly, Intel did post earnings of 28 cents a share in the same period last year. So its fortunes clearly declined in the months that followed. That said, the company appears to be on the rebound after hitting the bottom Otellini declared back in April.

“Basically, very strong numbers for the quarter and guidance is in line with seasonal trends,” Collins Stewart analyst Ashok Kumar told Reuters.” It’s an extremely strong number given the macro economic backdrop. Despite those headwinds, the company delivered significant upside to both guidance as well as as expectations. The big unknown is whether it’s anything more than inventory replenishment.”

Intel shares are on the upswing on the news.

On Monday the company once again said its bid for the data storage equipment maker Data Domain is “superior” to a competing offer from NetApp. This, despite the fact that Data Domain earlier in the day issued a statement recommending that shareholders reject EMC’s $30-a-share cash bid and instead accept a $30 cash-and-stock offer from NetApp.

“Our Board is committed to enhancing stockholder value and, after careful review with our outside advisors, determined that the $30 per share EMC Offer is not in the best interests of our stockholders at this time,” said Frank Slootman, president and CEO of Data Domain.

Why not? Well, among other things Data Domain hasn’t been able to discuss EMC’s offer because EMC hasn’t yet accepted the confidentiality and standstill agreement that would allow it to do so. For another, Data Domain must pay a $57 million termination fee if it should abandon its deal with NetApp–and that’s on top of a host of other considerable transaction expenses.

That’s understandable, I suppose. Still, it’s difficult to see why Data Domain insists that EMC’s all-cash offer is worth less than NetApp’s cash-and-paper bid. Unless it’s doing so to force EMC’s hand deeper into its wallet. And, indeed, that may be exactly what’s happening here. Sources say. EMC (EMC) could raise its offer to as much as $35 per share to win Data Domain (DDUP) or force NetApp (NTAP) to pay more than it can afford for it. “EMC is in the win-win box and NetApp is in the lose-lose box,” a source close to the company told Reuters. “EMC can pay more than NetApp can in a reasonable range. If NetApp wants to pay at an unreasonable range, that’s good for EMC.”

Among those doing so today: Morgan Stanley’s Kathryn Huberty, who lifted hers to $180 from $105, arguing that iPhone demand through 2010 is being underestimated by the market and will help drive Apple’s stock value up. “We believe Apple is emerging as the clear leader in the battle over the mobile Internet,” Huberty wrote in a research note to clients, adding that some future pricing adjustments will only solidify that position. “We expect a price cut to the current generation iPhone to drive 50 percent to 100 percent (two million to four million units) incremental unit demand,” she said. “Our survey data suggests 15 percent plus of the iPhone installed base typically upgrade to a new phone.”

A bullish call, especially for Huberty, whose opinion of Apple has historically been mercurial at best. Shares of Apple (AAPL) rose five percent to $128.60 in early trading this morning.

Tempering Huberty’s exuberant pronouncements today is Global Equities Research analyst Trip Chowdhry, who tells Reuters that the iPhone will suffer a bit at the hands of the Palm (PALM) Pre, which is scheduled to arrive at market on June 6. “Investors should not think the upcoming version of iPhone 3 is going to be as successful as iPhone 2.0 because it will have solid competition from Palm Pre, developed by ex-Apple designer Jon Rubinstein,” Chowdhry said. “Palm Pre has a superior operating system than iPhone. It runs on a better network–Sprint CDMA-versus iPhone which runs on GSM.”

“When I look at netbooks, I see cramped keyboards, terrible software, junky hardware, very small screens,” he explained, noting that it’s “a stretch” to call a netbook a personal computer. “It’s just not a good consumer experience and not something we would put the Mac brand on….it’s not a space as it exists today that we are interested in, nor do we believe that customers in the long term would be interested in. It’s a segment we would choose not to play in. That said, we do look at the space and are interested to see our customers’ respond to it. People that want a small computer so to speak that does browsing and e-mail, might want to buy an iPod Touch or they might want to buy an iPhone. And so, we have other products to accomplish some of what people are buying netbooks for and so, in that particular way we play in an indirect basis.”

Turns out, Research in Motion co-CEO Jim Balsillie feels pretty much the same way. In a recent interview with Reuters, he said the company has no interest in adding a netbook to RIM’s product line. The only netbook Balsillie is interested in is one “you can hold up to your ear and clip onto your belt.” In other words, a BlackBerry. Anything larger just won’t cut it, as a parade of discontinued nonphone portable hardware has already shown us. “These devices don’t work,” Balsillie said. “At the end of the day what we’ve really found is that if [customers] can do it on a BlackBerry that’s what they’ll want.”

Interesting to hear these two companies come out so strongly against netbooks given the current buzz around them. Demand for netbooks is reportedly surging, so much so, it’s singlehandedly bolstering PC sales slowed by the econalypse. Nokia (NOK) is considering entering the netbook market according to Chief Executive Olli-Pekka Kallasvuo. So why are Apple (AAPL) and Research in Motion (RIMM) thumbing their noses at it? Perhaps because they view the netbook as an interim product, a placeholder. Perhaps because they know that the handset is the next computer?

Apple certainly does. The iPhone already runs a spartan version of the company’s OS X operating system. How long will it be before the device is outfitted with a more powerful processor–perhaps one designed by PA Semi–capable of running OS X SL? How long before the iPhone (or its dock) is outfitted with the Mini DisplayPort that will connect it to a monitor? How long before we no longer need netbooks or notebooks because our handsets do it all?

“If we were any more successful, we’d be bankrupt.”

– Sony CEO Howard Stringer on the company’s LCD business, May 28, 2008

About the best thing to be said for Sony’s grotesque financial results is that they came in smaller than expected. The company’s 98.9 billion yen ($1 billion) loss for the fiscal year ended March–its first net loss in 14 years–wasn’t nearly as bad as the 150.0 billion yen ($1.57 billion) figure it had predicted in January or even close to the 173.8 billion yen ($1.8 billion) analysts polled by Thomson Reuters had been forecasting. And the same is true for Sony’s fourth quarter, as well. The net loss of 165.1 billion yen ($1.7 billion) it reported was far better than the 228.7 billion yen ($2.39 billion) forecast.

Still ugly as hell, though. And according to the company’s leadership, its next fiscal year will be little different. Sony is forecasting a loss of 120 billion yen ($1.2 billion). Given that unfortunate outlook, Sony (SNE) is closing three factories in Japan, part of an ongoing effort to shore up a business ravaged by the worst recession in decades. But cost-cutting measures like that can only do so much.

As analysts note, what Sony really needs is a killer product. It is no longer the force it once was in consumer electronics, having ceded its dominance in portable music players to Apple (AAPL) and its leads in the television and videogame console markets to Samsung Electronics and Nintendo. “Their outlook gave me the impression that their business is heading for a gradual recovery,” Fujio Ando, senior managing director at Chibagin Asset Management, told Reuters. “But it would all depend on whether they would be able to start producing popular products, because right now they have no ‘Number One’ products. I see Sony’s branding power weakening.”

And that’s something of which Sony is painfully aware.

“We have two distinct challenges facing us,” Sony CEO Howard Stringer recently told the New York Times. “The first is the global slowdown, which forces us to make significant adjustments. The second challenge is the evolution of our competitive environment. New competitors [are] springing out everywhere.”

Indeed. And while Sony seems to be meeting the first challenge, albeit slowly, it hasn’t yet begun to make headway toward meeting the second. And at this point, one wonders if the company is even capable anymore. As Japanese Economy, Trade and Industry Minister and former Sony employee Akira Amari asked back in October 2006, “What has become of the Sony known for its technology?”