Under terms of the deal, EA (ERTS) will initially pay $300 million for the developer of such social games as Pet Society, Who Has the Biggest Brain and Restaurant City, including a $25 million retention agreement with Playfish employees. It will subsequently pay $100 million more if the company meets undisclosed profit targets.

By acquiring Playfish, EA is not only validating the social gaming market, but perhaps setting the valuation benchmark for Mafia Wars creators Zynga, which is expected to go public next year. It also tempers–to some extent, anyway–concerns that the lead-generation scam controversy that recently blew up around Zynga and Playfish might harm their perceived value in the market.

“This deal came about very quickly, but let me say that Playfish was never ‘up for sale’,” de Halleux told PaidContent. “We were focused on building our business, because we believed—and still do—that the game industry is changing. EA approached, and we realized that we could be in a better position to act as an agent of change, through them. We could build games and attract users on our own, but this deal accelerates that to a degree that wouldn’t have been possible.”

“Social gaming, with its emphasis on friends and community, is seeing tremendous growth and this is the right time to invest to strengthen our participation in this space,” said Barry Cottle, senior vice president and general manager of EA Interactive. “With the addition of proven expertise from Playfish, their broad consumer base and strong game brands, we’re moving ahead aggressively in our plans to lead in the category of cross-platform social entertainment.”

If there was ever a doubt that social networks might be a viable gaming platform, this acquisition pretty much obliterates it.

Analysts polled by Thomson Reuters had been expecting earnings of 59 cents on revenue of $27.17 billion at Verizon (VZ). Excluding one-time costs, the company reported a profit of 60 cents a share on revenue of $27.3 billion. That’s a 10 percent decline year-over-year, but still better than expected. (See chart below; click to enlarge.)

Wireless subscription gains, though they trailed AT&T’s (T) iPhone-bolstered numbers, were impressive nonetheless. Verizon added 1.2 million wireless customers during the quarter, raising its total count to 89 million. That’s not the two million AT&T added, but it certainly demonstrates that the absence of the Apple (AAPL) iPhone from Verizon’s handset lineup isn’t holding the carrier back all that much.

Verizon also added 198,000 net new customers for FiOS Internet and 191,000 for FiOS TV service.

“Verizon continues to generate strong cash flow, which we have used in building the foundation for sustainable, long-term shareowner value,” Verizon CEO Ivan Seidenberg said in a statement. “Even through the worst of the recession, we have continued to raise our dividend and to add new customers, expand markets and grow revenues based on the power and innovation of Verizon’s wireless, broadband and global networks.”

The online auctioneer reported revenue of $2.23 billion, up six percent from a year ago, while net income fell 29 percent to $350 million or 27 cents per share. Excluding some items, earnings were 38 cents a share. Analysts who follow eBay expected the company to turn in a gain of 37 cents per share on sales of $2.14 billion.

Gross merchandise volume–the value of all goods sold via eBay–rose seven percent from the same period last year. Analysts had believed it would drop between five and 10 percent.

EBay said it sees fourth-quarter earnings of 38 cents to 40 cents a share, on revenue of $2.2 billion to $2.3 billion.

“Our third quarter results were strong, with PayPal gaining momentum and market share worldwide and our core eBay business showing positive trends,” John J. Donahoe, eBay’s chief executive, said in a statement.

NOTES FROM THE EARNINGS CALL

On business overall:
eBay CEO John Donahoe: “These are strong results for a strong company….We’re seeing our turnaround efforts begin to pay off.”

On the economy:
Donahoe: “The economy as we see it is stable, and we’re cautiously optimistic about consumer spending going into the holiday.”

On the Skype lawsuit:
eBay CFO Bob Swan: “We’re highly confident in our position.”

That said, Nintendo is cutting the price of its Wii videogame system by $50 in hopes of growing the market for the popular device as we head into the winter holidays. On Sunday, the company will begin peddling the Wii at a suggested retail price of $199.99.

The new price is the first reduction since the console launched in November 2006 and follows similar price cuts by two rivals, Sony’s (SNE) PS3 and Microsoft’s (MSFT) Xbox 360.

All three are hoping they’ll attract recession-addled gamers into the market, and according to Reggie Fils-Aime, president of Nintendo of America, they’ve got decent shot at it. “Our data shows in the U.S. alone there are 50 million consumers who are interested in playing videogames but they haven’t yet done so,” Fils-Aime told The Wall Street Journal. “They are waiting for product innovation or a slightly better value.”

Overall, I believe Snow Leopard will help keep the Mac an appealing choice for computer buyers, and I can recommend it to existing Mac owners seeking more speed and disk space, or wanting to more easily use Exchange. But I don’t consider Snow Leopard a must-have upgrade for average consumers. It’s more of a nice-to-have upgrade. If you’re happy with Leopard, there’s no reason to rush out and get Snow Leopard.

– Walt Mossberg, The Wall Street Journal

The changes here are modest, and the performance gains look promising but beyond the built in apps, just a promise. If you’re looking for more bells and whistles, you can hold off on this upgrade for at least awhile. But my thought is that Snow Leopard’s biggest feature is that it doesn’t have any new features, but that what is already there has been refined, one step closer to perfection. They just better roll out some new features next time, because the invisible refinement upgrade only works once every few decades.

– Brian Lam, Gizmodo

Here’s the thing about Snow Leopard, the single inescapable fact that hung over our heads as we ran our tests and took our screenshots and made our graphs: it’s $30. $30! If you’re a Leopard user you have virtually no reason to skip over 10.6, unless you’ve somehow built a mission-critical production workflow around an InputManager hack (in which case, well, have fun with 10.5 for the rest of your life). Sure, maybe wait a few weeks for things like Growl and MenuMeters to be updated, and if your livelihood depends on QuickTime you might want to hold off, but for everyone else the sheer amount of little tweaks and added functionality in 10.6 more than justifies skipping that last round of drinks at the bar–hell, we’re guessing Exchange support alone has made the sale for a lot of people.

– Joshua Topolsky, Engadget

Snow Leopard is Apple’s lowest-priced OS update in eight years. Granted, it’s a collection of feature tweaks and upgrades, as well as under-the-hood modifications that might not pay off for users immediately. But the price of upgrading is so low that I’ve really got to recommend it for all but the most casual, low-impact Mac users. If you’ve got a 32-bit Intel Mac (that is, one powered by a Core Solo or Core Duo processor), the benefit of this upgrade will be a little less. But for most Mac users, especially the kind of person who reads a Web site devoted to the subject, the assorted benefits of Snow Leopard outweigh the price tag. I’d pay $30 just for the improved volume ejection, the ability to create services with Automator, and the improvements to the Dock and Exposé–though I admit I’d pay slightly more to not have the misguided QuickTime Player X as a part of the package. If you’re a user who connects to an Exchange server every day, upgrading to Snow Leopard really is a no-brainer. For everyone else, maybe it’s not quite a no-brainer-but it’s awfully close. Snow Leopard is a great value, and any serious Mac user should upgrade now.

– Jason Snell, Macworld

Impressive and important, it’s an update that will revitalize your existing Mac even though you’ll be stumped for a quick five-minute demo that convinces the people around you that much of anything has changed at all.

– Andy Ihnatko, Chicago Sun Times

In my experience, Mac OS X was already a superior operating system to Windows. With Exchange and other technologies, Snow Leopard adds bite, especially for business. But as upgrades go, this one is relatively tame.

– Ed Baig, USA Today

If you’re already running Leopard, paying the $30 for Snow Leopard is a no-brainer. You’ll feel the leap forward in speed polish, and you’ll keep experiencing those ‘oh, that’s nice’ moments for weeks to come. If you’re running something earlier, the decision isn’t as clear cut; you’ll have to pay $170 and get Snow Leopard with Apple’s creative-software suites–whether you want them or not. Either way, the big story here isn’t really Snow Leopard. It’s the radical concept of a software update that’s smaller, faster and better–instead of bigger, slower and more bloated. May the rest of the industry take the hint.

– David Pogue, New York Times

Now, according to a regulatory filing, Google (GOOG) has gone and sold its share back to Time Warner (TWX) for $283 million, about a quarter of what it originally paid. Which means that in four years, AOL’s value has declined from an estimated $20 billion to an estimated $5.7 billion.

What an amazing loss of value.

According to the filing, AOL, which will be spun off by Time Warner later this year, made $678 million of the $2 billion in advertising revenue it collected in 2008 from its search advertising partnership with Google. Quite a chunk. AOL CEO Tim Armstrong best hope he’s able to renew that partnership when it expires at the end of 2010.

Earnings were $2.32 per share, up from $1.97 per share in the same period last year, and well above the $2.02 per share the Street was looking for. Sales were $23.25 billion, lower than the $23.59 billion predicted by analysts, but second-quarter net income was $3.1 billion, up 12 percent year-over-year.

IBM, it seems, is generally weathering the econalypse pretty well (investor presentation). Indeed, the company raised EPS guidance for the full year, saying it now expects to earn at least $9.70 per share this year, compared to its previous forecast of $9.20. (Click on Highlights summary below to enlarge.)

“As a result of our strategic transformation, we have a very strong business model that is delivering superior earnings, cash, and client value,” said IBM CEO Sam Palmisano in a statement. “We are optimistic about how IBM is positioned to make the most of current growth opportunities as well as those that emerge as the economy recovers.”

I guess IBM’s practice of sacking U.S. employees and shifting their jobs to lower-cost countries is serving it quite well in this souring economy.

IBM (IBM) shares, which are already up more than a quarter this year, rose another 2.1 percent to $112.93 on the news.

Which is exactly what Data Domain did.

One consolation: NetApp (NTAP) may have failed as a suitor, but it received a $57 million breakup fee from Data Domain (DDUP) as a result of the termination of the agreement.

Still, it’s a tough blow for NetApp (NTAP), which will now focus on “existing growth opportunities” instead of ill-starred bidding wars with rivals.

Said Dan Warmenhoven, NetApp’s chairman and CEO: “While NetApp’s acquisition of Data Domain would have produced benefits for customers and employees and complemented NetApp’s existing growth trajectory, we remain highly confident in our already compelling strategic plan, market opportunities, and competitive strengths.”

“NetApp applies a disciplined approach to acquisitions, one focused intently on creating long-term value for our stockholders.” Warmerhoven added. “We therefore cannot justify engaging in an increasingly expensive and dilutive bidding war that would diminish the deal’s strategic and financial benefits. NetApp has established leadership positions in virtualized infrastructure, storage efficiency, and unified storage, even in these difficult economic times, by helping customers meet their business objectives with less physical storage while reducing costs. That commitment will not change. We look forward to continuing to build on our foundation of innovation and customer service, and to continuing to execute our successful growth strategy.”

[Image credit: despair.com]

“If (the Eee PC from) Asus starts to do well, we are all in trouble. That’s just a race to the bottom.”

– Mike Abary, senior vice president of Sony’s IT product division, February, 2008

If the netbook market is a race to the bottom, then Sony is bringing up the rear. Not a year after Sony execs disparaged netbooks as undeserving of its premium brand attention, the company announced its token entry into the market: the Vaio W.

Outfitted with a 10-inch screen, an Intel (INTC) Atom processor, 1GB of memory, a 160GB hard disk drive and Windows XP, the machine prices out at $630 in Japan, $499 in the U.S. That’s quite a bit more expensive than rival netbooks. Which is odd since the market for these machines is fairly price-sensitive. Still, Sony (SNE) feels the W is good value for the money, given its design, cheery color palette (white, brown, pink!) and screen resolution–at 1366 by 768 pixels, the W’s display is clearly better than that of its rivals.

Said Vaio chief Nicolas Barendson, “We believe that this screen resolution and design offers our customers a better experience, and that it will be popular with both newcomers to the netbook market looking for a quality portable PC at a netbook price point, and customers wanting to improve their existing netbook experience to date by upgrading their screens.”

Sony’s announcement leaves Apple (AAPL) as the lone major computer manufacturer without a netbook offering, a designation it’s likely to keep for the foreseeable future, according to company execs. “When I look at netbooks, I see cramped keyboards, terrible software, junky hardware, very small screens,” COO Tim Cook said back in April, 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.”

This morning, EMC raised its offer for Data Domain to $2.1 billion from $1.8 billion, an 11 percent increase over its previous all-cash bid. Data Domain’s board had previously recommended that shareholders reject EMC’s $30-a-share cash bid in favor of a $30 cash-and-stock offer from NetApp (NTAP).

Hard to see the board doing so again now that the EMC (EMC) has sweetened the financial end of its proposal and removed some deal-protection provisions with which Data Domain (DDUP) had taken issue. With those gone, EMC’s bid is clearly superior to NetApp’s, CEO Joe Tucci claims, and it would be hard to argue otherwise.

“Over the past several weeks we’ve received strong support from many Data Domain stockholders and customers, validating our belief that EMC is Data Domain’s best choice,” Tucci wrote in a letter to Data Domain’s leadership. “With regulatory requirements now fulfilled, and in light of the clearly superior proposal we submitted to Data Domain’s Board of Directors today, we expect Data Domain to sign our definitive agreement that will deliver superior value in cash to the Data Domain stockholders in as little as two weeks.”

Data Domain has until midnight on July 17 to accept the offer.

UPDATE: NetApp responded to EMC’s announcement with the following statement:

“In response to EMC’s revised, unsolicited offer, the NetApp Board of Directors will carefully weigh its options, keeping in mind both its fiduciary duty to its stockholders and its disciplined acquisition strategy. We will provide an update shortly.”

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.”

Continuing, Folino accuses Broadcom of engineering its bid to commandeer new contracts that Emulex recently won at the expense of its rivals–including Broadcom.

“Your unsolicited proposal is opportunistic given Broadcom is uniquely aware of the new unannounced design wins that Emulex has secured with tier-one OEMs at the expense of Broadcom and other competitors,” Folino writes. “As you know, these design wins are kept confidential at our customers’ request and do not typically begin contributing revenue for several quarters. Thus, Emulex’s stock price does not fully reflect the long-term value creation potential that the Company has already secured. However, given that some of these design wins have come at your expense, including your core Ethernet networking business, you are uniquely aware of the future value we have secured and how well positioned we are to unseat you on many other platforms in the near future. We believe your proposal is an opportunistic attempt to capture that value, which rightly belongs to our stockholders.”

In other words, quit low-balling us–especially if, as you profess, you’d like to move ahead with a deal in a “friendly, collaborative manner.”

Confirming recent speculation, Sony this morning said that it’s dropping the price of the PlayStation 2 from $129 to $99.99 as of April 1. “With this new price, we intend to introduce a new generation of consumers–some of whom weren’t even alive when the system was first introduced in 2000–to the immense entertainment value offered by PlayStation 2,” John Koller, Sony’s director of hardware marketing, explained in a blog post. “In the gaming industry, the typical lifecycle for a console is around five years, but because we build each of our platforms for a large and diverse consumer base, we design our platforms differently. With the original PlayStation and now PlayStation 2, we’ve proven that consumers can rely on our platforms for their gaming and entertainment needs for at least a decade.”

And that does indeed seem to be the case. Though nearly 10 years old, the PS2 remains quite popular. Indeed, Sony expects to sell eight million of the consoles in its current financial year–not so far off from the 10 million PlayStation 3s it expects to sell in the same period. And it will certainly grow in popularity at this lower price point, giving Sony (SNE) a means to really take Nintendo’s Wii to the mat.

Now, about that PlayStation 3 price cut rumor: Sony isn’t planning one, though arguably that’s exactly what the console, which is being outsold two-to-one by the Xbox 360 and the Wii, needs. “As we have stated previously, we do not have plans for a PS3 price drop, and any rumors to that effect are false and are the result of speculation,” Sony Computer Entertainment America said in a statement. “SCEA remains focused on the long-term momentum of PS3. With the industry’s best software lineup this year, combined with our most aggressive marketing campaign to date, we remain confident in our approach and the value we’re delivering with PS3.”