It appears that Microsoft has upped its ante for Yahoo above $31/share. The report, provided by AP does not indicate what the $$ amount is. But if Microsoft has upped it to $34-35 the deal will be done. The big stock holder will see to that. They smell profit in the water.

Sadly the AP report has this interesting piece –

The Redmond, Wash.-based software maker upped its offer beyond the original value of $44.6 billion, or $31 per share, according to a person familiar with the matter. The specifics of the new offer weren’t known by this person, who didn’t want to be identified because the negotiations are still confidential.

So the ’source’ does not know the details, only that a higher offer is happening. Sounds shaky so I will take it with a grain of salt. All we can do is wait.

For those that don’t know Microsoft they do not follow a calendar year. Hence Jan-Mar is their 3Q. Regardless it is dismal for Uncle Bill. Profit is off 11% same period last year. Which begs the question is the downturn a reflection of dismal Vista or stupid Yahoo?

Regardless Microsoft is feeling the squeeze. Gross revenues were up a little over a Billion but net margin was down. Delivery of product is becoming harder to do. Couple that with the fact that they can no longer call the shots on standards like they used to in the late 80’s.

More on the financials here.

Like a basketball game near the half and the home team down by 20, Yahoo is to go into a 4 point stall using AOL for a cover on merger write offs. The rumor details here.

But I hate to say it — does this make sense? From a strictly financial view I say no. All you would have is two weak second tier players waddling down the street hand in hand. They would still face an uphill battle getting their systems integrated, layoffs, etc. Another words a 4-5 year effort to still be a number two.

But I will tell you where it does make sense — the board room. By Yahoo buying AOL from Time-Warner they take on debt and make the meal that Microsoft has to swallow that much bigger. Its a variant of the poison pill defense. Most likely at that point Microsoft backs off from any take over efforts. The Yahoo crowd then uses the cover of merger write offs to bury a lot of old bad decisions.

Its a merger of convenience folks, with little or no synergy opportunities to be had.

Does your desktop or laptop have the logo on the left stuck to it? Well Dear Reader, how do I put this kindly…, You’se been had. A suit has been leveled at Redmond that the “Vista Capable” Program that from the get go was mismanaged and ill conceived. Does it border on fraud? Hard to tell. That may not have been intended as such but in the wake of time it took to produce the product the inception of “Vista Capable” to what rolled out under RTM did not match and were not fulfilled. Bait and Switch might be more appropriate. Here’s the tale as we are able to piece it together –

In an email to Ballmer, Steven Sinofsky wrote, “No one really believed we would ever ship, so they didn’t start the work until late 2006. This led to lack of availability. For example, my home multi-function printer did not have drivers until 2/2 and even pulled their drivers and re-released them [Brother].”

Sinofsky continued, “Massive changes in the underpinning for video and audio led to a really poor experience at RTM, especially with respect to Windows Media Center. This change led to incompatibilities. For example, you don’t get Aero with an XP [graphics] driver, but your card might not (ever) have a Vista driver.”

And then this admission: “Many Windows XP drivers are not really working at all — this is across the board for printers, scanners, WAN, accessories (fingerprint readers, smartcards, tv tuners) and so on . [...] Microsoft’s own hardware is missing a lot of support (fingerprint reader, MCE extender, etc.)”

Another words welcome to driver hell. But it gets better. Even Microsoft Execs could not tell what Vista Capable meant
More on Vista Incapable? Most Likely!

Our buddies in Redmond have admitted to a problem. They don’t know what is causing data corruption with the Windows Home Server that users are complaining about. Remember these are the ‘experts’ on all things OS —

Microsoft has admitted it still has no fix for a data corruption issue Windows Home Server users are encountering.

The software giant first acknowledged the problem on December 21 last year, providing a list of programs that could cause data on a Windows Home Server to become corrupted, including Windows Vista Photo Gallery, Windows Live Photo Gallery, OneNote 2007, OneNote 2003, Outlook 2007, Money 2007, SyncToy 2.0 beta, QuickBooks and uTorrent.

It says customers have also reported problems with the following software (though Microsoft has not yet been able to replicate the problem first-hand): Photoshop Elements, Zune Software, Apple iTunes, TagScanner, Mozilla Thunderbird, Adobe Lightroom, Intuit Quicken, MS Digital Image Library, MP3BookHelper, ACDSee, WinAmp, Windows Media Player 11, Microsoft Office Excel and Visual DataFlex.

Heh. I figure eventually they will find the cause and fix it. That is MS strength, they never say die unless they know it is hopeless.

But I have to ask, why not consider something else? A product I find very appealing in this same market niche is ClarkConnect. There he goes again talking about Linux again. Yeah. But hold your thought and consider I have had version 3 of that software running at home for 430 days straight. Try that with a windows box. Ain’t happening.

Clarkconnect is the name of the product and the company. It has its feet in both both FOSS and commerical interests. Its a VPN box, its a NAT, its a storage server, its a mail caching server, its got intrusion firewalls. It can do bandwidth throttling. It can protect the kiddies from bad sites you find. It supports wireless wifi. And to top it off you can manage the box with a web front end. You can buy the commerical product that has even more bells and whistles. And you can subscribe to their internet protection service an they will keep your server up to date automatically against most known viruses/spyware/etc.

Its a good thing.

APC article.
ClarkConnect website

Microsoft withdraws an SP1 update. It appears that this particular patch causes data loss in the OS. Still more trouble for the less than stellar OS.

Servicing stack update KB937287, released last week, contained updates to Windows Vista installation software, and was billed as being “necessary to successfully install and to remove Windows Vista SP1 (Service Pack 1) on all versions of Windows Vista.”

Microsoft stopped distributing the update on Wednesday, according to a blog post by Microsoft product manager Nick White.

“We’ve heard a few reports about problems customers may be experiencing as a result of KB937287,” wrote White. “Immediately after receiving reports of this error, we made the decision to temporarily suspend automatic distribution of the update to avoid further customer impact while we investigate possible causes.”

Vista SP1 is already available to subscribers to the Microsoft Developer Network but won’t receive a formal public release until mid-March.

linky.

In what has to be a feint in the virtual softs vs the shrink wrap softs, Google has enlisted Codeweavers to assist in developing a WINE port for Photoshop. This could have some significant impacts that I will get to –

Google recently confirmed in a blog posting that it had paid Codeweavers to help develop WINE to make Photoshop usable on the well-regarded but still somewhat unpredictable software package, which aims to replicate Windows libraries to enable popular Windows applications run in a Linux environment.

Photoshop CS2 running on WINE, thanks to Google”Photoshop is one of those applications that Desktop linux users are constantly clamoring for, and we’re happy to say they work pretty well now,” Google engineer and Wine release manager Dan Kegel wrote. “About 200 patches were committed to winehq, and as of wine-0.9.54, Photoshop CS2 is quite usable,” Kegel noted in a separate post.

The sponsorship was also mentioned during a Google presentation at Linux.conf.au in Melbourne last month, focusing its Summer of Code student training program. “We have paid for a whole bunch of improvements to a whole bunch of stuff,” program manager Leslie Hawthorn said. “We haven’t actually talked about it, but we recently paid CodeWeavers to do some work on Wine so you can run Photoshop CS2 and 3″

So what’s the import of this? Well first consider that Google selected Photoshop as the application to have Codeweavers to assist. Why not MS Project that has about the same level of usage? And a similar difficulty in getting to work in WINE? You Dear Reader know why. Instead of going battleship to battleship in a Battle of Trafalgar scene on the online webtop space; Google sends in a destroyer to torpedo Microsoft’s under belly in the shrinkwrap OS space.

The scenario would go something like this. Google hires Codeweavers or starts a WINE fest paying bonuses to anyone who develops port configurations for every applicable Windows application in sight. I mean the top 80% of market share, including the MS apps - Office, Project, IIS, et. al. At that point who needs to pay for the OS to run these apps? You don’t. That single torpedo strike sinks a third of Microsoft’s $51.1B income stream — Blub, blub, blub. [cue Johnny Horton, Sink the Bismark]

For Google, no risk, they don’t play in the space. Nor for Codeweavers, short of a MS attempting a buyout, they have Google covering their backs. And the Open Source community keeps marching as MS has no tool to fight back with against something that has few ROI concerns. The timing is perfect too if you’re Google. Vista has been a minor disaster. Many corporations are now holding back on a conversion to Vista. With that WINE port base Google then turns to Red Hat and Cannonical [Ubuntu] to have it included in their repositories. With the next OS 2 years out for Microsoft, a stable WINE port base for most Windows applications could sink even considering a deployment to the next Windows OS. The rest is just a write up of MBA case studies.

I have to give it to Google. This is the best business play I have seen since Bill Gates faked IBM out of not owning the code for DOS to the IBM PC.

Linky

Microsoft makes a buy for Danger Inc., source for the Sidekick phone. Danger has about $50m in revenues and its biggest outlet is T-Mobile. For Microsoft this is small potatoes. Bill could have bought this firm out of his own petty cash fund. But it does signal a continuing effort by Microsoft to invest in the mobile space. Which tends to signal something I will get to after this –

Microsoft Corp. today announced it has entered into an agreement to acquire Danger Inc., the company responsible for the software and services powering many popular consumer handsets. The acquisition will align Danger’s nearly 10 years of expertise in the mobile consumer space with Microsoft’s vision to provide innovative and compelling mobile experiences to a growing base of customers.

“Microsoft is a global leader with our Windows Mobile software and expanding mobile services,” said Robbie Bach, president of the Entertainment and Devices Division at Microsoft. “The addition of Danger serves as a perfect complement to our existing software and services, and also strengthens our dedication to improving mobile experiences centered around individuals and what they like.” The Palo Alto, Calif.-based company provides services that allow people to keep in touch, stay organized and keep informed while on the go through real-time mobile messaging, social networking services and other applications - all blended together on a single phone that is intuitive and customizable.

“Danger continues to provide an effortless and fun mobile experience for consumers,” said Henry R. Nothhaft, chairman and CEO of Danger Inc. “Now by combining our uncompromised application software and powerful back-end service with Microsoft, we can expand our innovative service offerings even further and take mobility to a new level.”

And…

Defining the Mobile Experience
Through focused efforts Danger has successfully delivered a software and services platform to the mobile mass market. Applications on Danger-powered handsets include HTML Web browsing, instant messaging, games, multimedia, social networking, Web e-mail and personal information management applications.

Related…

Tim Bajarin, president of Creative Strategies of Campbell, said the acquisition provides further evidence that Microsoft is mirroring the thinking of Apple, which has married software and hardware to make simple, fashionable consumer products like the iPod and iPhone.

“Sometime in the last two years Microsoft fundamentally woke up and realized that even though they’re a software company, they had to use hardware to control their destiny,” Bajarin said. “That’s why it got into the X-Box, but also why it brought out the Zune even though 20 other companies are using Microsoft software on mp3 players. It’s becoming a very important part of Microsoft’s strategy.”

Microsoft’s Rockfeld downplayed that interpretation, saying that Danger doesn’t make hardware. He also deflected a question about whether consumers might one day see a “Zunephone.”

“We obviously will react if consumers ask for it,” Rockfeld said, “but at this time there’s no plans to make hardware.”

The deal is also a sign of the intense competition to provide operating systems for the next generation of smart phones. Symbian currently heads the field, powering all of Nokia’s smart phones. But many phones operate on systems based on Linux or software from Apple, Windows Mobile, Palm and Research in Motion.

First of all how quickly the drones assimilate. Did you catch the ‘Software + Services’ subdural pronouncement by Danger?

I am starting to notice some trends here that might catch the Telcos flat footed. That is the hardware device side is consolidating. Not only that but concentrating in companies that are not in the realm of a traditional Telco supplier. Given a couple of years the carriers just might find themselves at the mercy of the like of Microsoft, and Nokia as the only proprietary suppliers around. The carriers will adopt Android kicking and screaming. But their options on the other front might be just as limiting. Microsoft would love to be in a position to tell AT&T its $249 + 30% of message stream — And you will like it!

Danger Inc press release.
Mercury News article.

In what is the last thing that Yahoo needs it looks like they may have a proxy fight on their hands. As we detailed previously, Yahoo cannot afford the distraction of either a protracted proxy fight or a drawn out board room battle. In a sense neither can Microsoft. Yes M$ has oodles of cash and can wait a corporate siege. But in the marketplace, its opportunity to realize ’software+services’ is a losing one. And if the marketplace coalescences around a Google-Sun-Open Source matrix the opportunity to be in the game may close while they are counting proxies. –

Hours after Yahoo officially rejected Microsoft’s takeover offer on Monday, calling it too low, Microsoft described Yahoo’s response as “unfortunate” and said its own proposal was “full and fair.”

Microsoft’s statement suggests that, at least for now, the company is not willing to raise its price. Microsoft also indicated anew that it was ready for a fight, repeating earlier statements that it might consider “all necessary steps” to ensure the deal is completed.

Experts said Microsoft could ratchet up pressure on Yahoo’s board by taking its offer directly to shareholders and waging a proxy fight to oust Yahoo’s directors; it has until March 13 to nominate a new slate of directors.

Earlier in the day Yahoo said Microsoft’s bid “substantially undervalues Yahoo including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments.”

continuing …

“I think Microsoft has made it pretty clear that they are not about to back off here,” said Ryan Jacob, portfolio manager for the Jacob Internet Fund, which counts Yahoo among its top holdings. Mr. Jacob, whose fund has about $60 million in assets, said he favored a combination of Yahoo and Microsoft, as it would create a stronger competitor to Google. But he defended Yahoo’s initial rejection, saying the board was right to hold out for a higher offer.

Microsoft suggested that Yahoo shareholders it had polled viewed the deal favorably. “Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties,” Microsoft said. Many Yahoo shareholders are also Microsoft shareholders and might not necessarily favor a higher offer.

And Yahoo’s options seem to lessen every day…

Yahoo’s CEO and founder Jerry Yang is in a tough spot: find a better solution or wheedle a better price out of Microsoft. And the latter solution seems like the likeliest scenario.

Last week, Microsoft seemed to have landed a knockout punch, says Jeffrey Lindsay, a senior analyst at Sanford Bernstein. Now, it seems that Yahoo has gotten off the deck and is fighting back. Still, after years of management missteps and sagging stock price, Yahoo’s options appear limited.

No white knights are likely to save Yahoo. Very few companies have the hefty amounts of cash needed to nab an expensive prize like Yahoo.

Google cannot step in because a Yahoo-Google merger would likely be considered a violation of antitrust regulations, considering that Google practically owns the search ad market. Rupert Murdoch’s News Corp., which wanted to buy a 25 percent share in Yahoo last June, is probably not interested in the entire company, say analysts.

ThirdPipe keeps saying move to the SMB services market Yahoo. Think outside of the internet industry, get in bed with ADP, GrandThronton, and other business service providers. It one of your few options.

NYT article.
MSNBC observations.

The who’s who of significant and would be wireless web players are converging for the wireless fair next week. Many attendees who will come to exchange information and and engage in cooperation are soon to be combatants. With all of the hype we’ve seen over the years about the promise of a truly portable utility, the pieces are in place for an explosion of devices, apps and loosely defined open services. In every category there will be a bloody battle for supremacy. I’m predicting the dominant battle will be between Microsoft and Google. I’m also predicting that Google will quickly learn to embrace Microsoft’s no quarter tactics and that Ballmer will never attend burning man.

And the scramble to capitalize on that opportunity will loom over all other business at next week’s Mobile World Congress.

“Web, Web, Web — if you ain’t walking onto the stand hand in hand with a Web guy you ain’t no one,” said Ben Wood, chief analyst at UK-based telecoms and IT research firm CCS Insight.

The outcome of the struggle to win the mobile Web will not only be crucial for the combatants but will decide how the mobile Web is experienced by billions of people.

At the fair, visitors will be on alert for sightings of prototypes of the Gphone — phones built on a Google open software platform that will help it loosen up the market and extend its online advertising power into mobile search ads.

Chip designer ARM Holdings Plc, for one, will show Google’s so-called Android platform in action at the four-day fair that starts in Barcelona on Monday, a source close to the company has told Reuters.

Google rival Yahoo’s alternative strategy of refining its mobile search and teaming up with operators to make it more visible to consumers, will also come under scrutiny, especially as it mulls a $45 billion bid from Microsoft.

Nokia is expected to give more details of its own push into Internet services, including gaming and music and video sharing offerings that it started to roll out last week.

“I’ve heard people say many times that this is the year the mobile Web’s going to happen … but this year I’m getting a different feeling,” said Paul Nerger, an executive at dotMobi, which registers mobile domains and helps build mobile sites.

“It’s a question of when we get to critical mass. I think it’s this year.”(from Yahoo)