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When you talk about, even think about, digital content stores, Apple’s iTunes is the natural selection.   It’s the dominant, mainstream store in the market.  Amazon’s MP3 and video store pops up as second mention.  Amazon being synonymous with retail.   Microsoft is hoping to change that, or at least join the party.

The “Xbox Live” environment for gamers has been growing steadily.  Microsoft has put money into original content and licensing. Still, that’s a niche market.  In October, they went more mainstream and begin selling videos in their Zune Marketplace. The offerings at the time, however, were limited. Now, the Zune Marketplace is expanding a little more. 

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Steve Ballmer said the deal would happen if the circumstances were right, that it wouldn’t if they were wrong.  He said walking away was an option.  He wasn’t kidding. 

Shocking many analysts who predicted a deal was likely or, at the least, a hostile takeover was the next step if no agreement was reached, Microsoft pulled the plug on their efforts to acquire Yahoo.

The reversal followed a face to face meeting in Seattle between Steve Ballmer and Jerry Yang, Saturday morning.  People familiar with the negotiations said Microsoft had increased its offer to $33, a share ($47.5 billion) but that Yahoo was unwilling to accept anything less than $37.

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Saturday,  Microsoft withdrew their bid to acquire Yahoo.  What follows is a reprint of  CEO Steve Ballmer letter to Jerry Yang and then Yahoo’s reply. 

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In early April, Microsoft issued Yahoo an ultimatum.  By April 26th, one way or another, Microsoft pledged, there’d be a decision.  Either Yahoo would accept, Microsoft would take their buyout offer to the shareholders, or they’d walk. Something would happen.  April 26th, along with earnings announcements from all relevant players, came and went.  The ultimatum deadline rang out with all the import of a fire drill in an empty building.

Today, its five days since the deadline’s expiration and we’re still waiting. When I searched for Yahoo with a Google News Search, I found 498 articles linked to the first hit.    That’s a lot of baited breath.

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Apple announced this morning (press release) they will be getting select videos on iTunes the same day the films are released on DVD.  That news is getting the headlines, and deservedly so, it’s a big story and coup for Steve Jobs and team, but there’s a bigger story locked within the soundbytes.  It’s a story about Hollywood and a modernizing movie industry.   It’s a coming of age film.  It’s a story about distribution technology and profit margins, about the old guard accepting and embracing the new.  If there were a trailer to watch, the voice over would talk about throwing stones through the leaded glass of old traditions.  It might close: “Broken Windows, coming soon to the Internet theater nearest you.”

The “windows” in reference are release windows, the prescribed time gaps between which films are aired over different media.  Click to Read More

Last week, Apple made a tiny debit from their enormous cash reserves to buy small semi conductor design firm PA Semi.  At approximately $278m, the deal barely shifts the multi billion dollar cash account on the balance sheet; still it has left many analysts, watchers and writers asking questions.  The first and most obvious is “why?” Why did a company that favors buying companies in the early stages of development buy a company with an established customer list? And why given Apples’ focus and success with consumer-focused products choose to invest in the challenging and cyclical semiconductor industry?

Another more macro set of questions (in a companion post to this article) query whether the deal represents a possible shift in Apple’s acquisition policies.  Was this the start of a more acquisition friendly Apple; one interested in taking advantage of weaknesses in the current financial markets to fortify underlying tech assets?

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Adding to what has already been a crowded and busy earnings week, Microsoft announced their 3rd quarter results to the waiting market on Thursday.  In most categories, the results were sufficiently positive to meet or exceed expectations.  Guidance for the quarter ending in June was mixed.

Net income for Q3 came in at $4.4b or 47 cents s share on revenue of $14.45 billion.  Last year, for the same period, Microsoft earned 50 cents a share but that number was inflated thanks to onetime gains resulting from coupon programs that were aimed at addressing concerns caused by Vista and Office 2007 shipping delays.  Taking into account the onetime benefits, the year to year results were very similar.  

For the current quarter, the consensus expectation among analysts was earnings of 44cents a share on revenue of $14.5billion.  The actual was enough to beat between one forecast and fall just short on the other.

Getting deeper into the numbers Click to Read More