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San Jose Mercury News, Calif., In Hindsight Column: Is the Microsoft-Yahoo Saga Finally Over?

July 27, 2008

By Frank Michael Russell, San Jose Mercury News, Calif.

Jul. 27–Here’s some news you may have missed last week, based on staff and wire reports.

Monday

This should make for some exciting board meetings: After months of drama (and accusations) over the possibility that Redmond, Wash., software giant Microsoft would acquire all or part of Yahoo, the Sunnyvale Internet content powerhouse reached a truce with dissident shareholder Carl Icahn. The activist investor agreed to drop his proxy fight to take over Yahoo’s board of directors. In exchange, Yahoo gave Icahn three seats on the board.

Apple, meanwhile, reported skyrocketing sales and profit for its latest quarter. The Cupertino company sells a lot of iPods, and its magical new iPhone 3G has attracted plenty of media attention. But Apple’s flagship “I’m a Mac” computers are driving the company’s results. Apple sold nearly 2.5 million Macs in the quarter, up 41 percent from a year earlier. Profit jumped 31 percent to $1.07 billion. Sales climbed 38 percent to $7.46 billion. Apple, however, offered a disappointing forecast for its current quarter. Even more worrisome to investors, the company declined to comment on the health of Chief Executive Steve Jobs, who battled pancreatic cancer successfully four years ago but appeared disturbingly thin at an event in June. “Steve has no plans to leave Apple,” Chief Financial Officer Peter Oppenheimer said, according to a Mercury News report. “Steve’s health is a private

matter.”

And as if it wasn’t busy enough for a Monday, pharmaceutical giant Roche offered to pay about $44 billion for the 44 percent stake it doesn’t already own in South San Francisco biotech pioneer Genentech.

Tuesday

As the on-again, off-again takeover drama unfolded, Yahoo tried to carry on with its business, even though the economic downturn cut into advertisers’ enthusiasm to spend money. Yahoo’s sales for its latest quarter came in at $1.798 billion, up 6 percent from a year earlier but ever so slightly lower than in the previous quarter. Profit, meanwhile, was down 18 percent year over year to $131.2 million.

Wednesday

Speaking of Yahoo and Microsoft, we’re not sure if this is an odd twist in the takeover saga, or merely a coincidence: Microsoft’s top online executive, Kevin Johnson, who led the attempt to buy Yahoo, decided to leave the company. The next day, Sunnyvale network-equipment maker Juniper Networks (whose headquarters, oddly enough, are just a short half-mile walk from Yahoo’s) announced it had hired Johnson as its CEO.

And speaking of the Internet, Facebook has been the next big thing for quite some time. The Palo Alto social-networking upstart has become such a powerhouse that it drew hundreds of programmers to its f8 developers conference in San Francisco, our always lovely (if somewhat smaller) neighbor to the north. Returning from an around-the-world vacation, Mark Zuckerberg, Facebook’s 24-year-old sweatshirt-clad founder and chief executive, presented his vision for the site’s continued growth: “to provide people the power to share and make the world more open and connected.” Conspicuous by its absence, though, was the expected announcement of a payment plan that would help Facebook make more money from its millions of members. Zuckerberg said Facebook was considering its options. “It’s pretty clear we haven’t figured out a way to do this,” he said.

Thursday

It’s official: Microsoft no longer has any interest in acquiring Yahoo, CEO Steve Ballmer told analysts. “It didn’t work out,” he said, according to a report in the Merc. “Fine. We’re done. We can move on.” (Trust us, we’re ready to move on, too.)

Friday

We love Netflix, but we’ve been so busy lately (now that we can watch all the “South Park” and Conan O’Brien we want on the Internet) that we’ve downgraded to the $4.99, two-a-month plan. The Los Gatos online-DVD company more than made up for In Hindsight’s lost business by adding 168,000 new customers in its latest quarter. Netflix said its profit edged higher to $26.6 million. Revenue jumped 11 percent to $337.6 million, in line with Wall Street forecasts.

A good week for: Frank Quattrone

The legendary Silicon Valley tech investment banker’s career was derailed for a time by that pesky obstruction-of-justice case. But Quattrone was “back in business” last week (at least according to one of the Merc’s legendary headline writers), dispensing advice to start-ups at the AlwaysOn technology conference at Stanford University. “It feels great,” Quattrone said, according to a Merc report. “I feel like I’m a kid in a candy store.”

A bad week for: struggling borrowers

The Silicon Valley housing downturn has been unpleasant for many of us, but it has been truly painful for homeowners who can’t afford their monthly mortgage payments and can’t sell at a price high enough to pay off their loans. Owners in Santa Clara County lost a record 1,560 homes to foreclosure in the second quarter, according to DataQuick Information Systems.

Contact Frank Russell at frussell@mercurynews.com or (408) 920-5876.

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Copyright (c) 2008, San Jose Mercury News, Calif.

Distributed by McClatchy-Tribune Information Services.

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