By Michael Santo
Editor-in-Chief, RealTechNews

Apparently not satisfied with his “win” against Motorola, Carl Icahn has been buying up Yahoo! stock, apparently planning a proxy fight designed to replace the Yahoo! Board of Directors with a set of nominees that will move forward toward a possible merger with Microsoft. On Thursday Icahn sent an open letter to Yahoo! Chairman Roy Bostock outlining his plans, stating that the company’s board had “acted irrationally and lost the faith of shareholders and Microsoft.”

The letter, revealed in a press release, said the following:
More

By Michael Santo
Editor-in-Chief, RealTechNews

Apple has been adamant about pricing of videos on iTunes, and in fact that’s one of the reasons that NBC left the iTunes store and eventually wound up at the Zune Marketplace. But now it appears they have become more flexible, as HBO and Apple announced on Tuesday that HBO shows are now available on iTunes - and some are priced above the $1.99 price Apple had previously set as a ceiling.

In a press release, Apple said:

Television shows purchased and downloaded from the iTunes Store can be viewed on a Mac or PC, iPod nano with video, iPod classic, iPod touch, fifth generation iPod, iPhone or on a widescreen TV with Apple TV. “Sex and the City,” “The Wire” and “Flight of the Conchords” are $1.99 per episode, and “The Sopranos,” “Deadwood” and “Rome” are priced at $2.99 per episode. iTunes customers can also choose to purchase entire seasons of their favorite programs.

So, Apple has broken their glass ceiling of $1.99. Hey, NBC, are you watching all this drama?

By Michael Santo
Editor-in-Chief, RealTechNews

A story in the New York Times had the blogosphere up in arms, but Microsoft indicates we shouldn’t believe it. The Times said that Microsoft is working to implement an anti-piracy filter into its Zune media players, which would prevent playback of unauthorized videos.

This information came via J. B. Perrette, the president of digital distribution for NBC Universal, who explained to the NYT why NBC chose Zune Marketplace over the iTunes Store.

According to the NYT, he indicated that the first reason was one we already knew: Apple insists that all TV shows have an identical wholesale price so that it can sell all of them at $1.99, while NBC wants to sell its programs for whatever price it wants.

The second reason given was the interesting one. He said that Apple refused to cooperate with NBC on building filters into its iPod player to remove pirated movies and videos. Perrette said that while the filter is still under development and that its exact form is undecided.

However, at a semi-official Microsoft Zune Blog, a blog post denied Microsoft has any such blog:

We have no plans or commitments to implement any new type of content filtering in the Zune devices as part of our content distribution deal with NBC.

We think some folks in the industry were expressing hopes for how the entire industry, not just Microsoft, would come to look at content distribution, and some speculation has ensued. Again, no plans are in place toward this end.

Interesting that it completely contradicts Perrette. Of course, that doesn’t mean Microsoft will never consider such a filter, does it?

By Michael Santo
Editor-in-Chief, RealTechNews

McAfee and Yahoo! announced on Tuesday a new feature for Yahoo! Search which will supposedly make searching safer: the flagging of potentially unsafe Web sites appearing in Yahoo search results.

The initiative uses McAfee’s SiteAdvisor technology to mark risky sites in search results. SiteAdvisor itself is already free, but not having to install it makes life a whole lot easier for those who might move from PC to PC, or even browser to browser.

According to Yahoo!’s press release:

SearchScan will be turned on by default for all users in the U.S., Canada, UK, France, Italy, Germany, Australia, New Zealand, and Spain, and will scan for three types of risks in our search index:

• Browser Exploits — These are sites that can stealthily harm a user’s computer or install malware simply by visiting the site. Beginning today, any such sites or pages included in McAfee’s data will be removed from search results automatically.
• Dangerous Downloads — SearchScan will display warnings next to search results for sites that offer potentially dangerous software, such as viruses, spyware or adware. Users often may be unaware that these can be passed along with the screensavers, games and other software downloads.
• Unsolicited Email — SearchScan will alert users to scanned sites that send unsolicited emails or inappropriately share email addresses with third parties.

SearchScan will be on by default but users can turn off or even filter all sites with warnings from their results.

This is a feature that’s been available for some time for Google users, as Google has teamed with StopBadware.org. Interestingly, the site flagged above is not flagged in Google’s results. Who are you supposed to trust?

By Michael Santo
Editor-in-Chief, RealTechNews

No doubt the biggest story of last weekend was Microsoft abruptly walking away from their unsolicited deal with Yahoo!. And no doubt among the biggest stories of today are “what now?” and “what’s happening to their stocks?”

Yahoo! stock plummeted in pre-market trading, down 19.7% to $23.02 at market open on Monday. It’s recovered slightly to $24.06, down 16.1% at the time of this writing.

Meanwhile, Microsoft shares opened at $29.95, up 2.4% from Friday’s close, and is at $29.86 at the time of this writing, up 2.1%.

Google might be one of the the beneficiaries of the weekend’s events. It has been reported that Yahoo! may begin outsourcing its search ads permanently to Google as early as this week (recall that Yahoo!’s earlier trial with outsourcing was successful). Google shares are up to $596.01 or $14.72 (2.53%) at the time of this writing.

And what about Time-Warner, parent company of AOL, which has been widely rumored to be interested in a possible merger of AOL with Yahoo!? That stock is up $0.13 or .82%.

Just prior to the announcement of Microsoft’s advances, on Jan. 31st, Yahoo! stock was $19.18. Since then Yahoo’s shares have traded as high as $30.25 and as low as $25.72, prior to today.

Speculation? Are we about to see a precipitous drop? Right now it appears what Yahoo! CEO Jerry Yang has done since then has at least given investors a “higher than $19 / share” feeling about Yahoo!, as the stock has stabilized since today’s opening.

There’s no doubt, however, that Yang is on the hot seat. Yahoo! wanted $37 / share, Microsoft offered $33 / share. If Yang can’t convince investors of the same, it’s not going to be pretty. And in terms of “now what?” Yang was clear, particularly to employees, in a blog post yesterday. It’s time to work.

No one is celebrating about the outcome of these past three months… and no one should. We live and work in a competitive world and the Web is only going to get more competitive. Executing on our strategic plan is what matters most.

Is that plan good enough? Time will tell.

By Michael Santo
Editor-in-Chief, RealTechNews

Despite reports on Friday that Yahoo! had been brought to the bargaining table by a higher Microsoft offer, Microsoft issued a press release on Saturday indicating it was walking away from the deal.

In the press release, which also contains the text of a letter from Microsoft CEO Steve Ballmer to Yahoo! CEO Jerry Yang, Microsoft indicated that although they had raised their offer to $33 per share or a total of $5 billion, Yahoo! wanted $37 per share, or still another $5 billion. Microsoft decided this was just too much. Ballmer said:

“Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal.”

Additionally, Microsoft felt a proxy fight, or hostile takeover, was not worth it either. In his letter, Ballmer indicated that Microsoft felt that during any ensuing fight, Yahoo! would take steps to make their company “undesirable.” More

By Michael Santo
Editor-in-Chief, RealTechNews

It hardly seems like enough time has passed, but the test of Google search ads with Yahoo! search has apparently been so successful that things are already progressing. The Wall Street Journal’s “people familiar with the situation”, who seem all over the MicroHoo deal, have spoken thusly.

As you may recall, Global Markets analyst Mark Mahaney has said that such a deal could increase Yahoo!’s cash flow by more than $1 billion a year, because Google generates much more revenue for each query than Yahoo!’s does.

Such an infusion of additional revenue would obviously complicate matters for Microsoft, raising the value of Yahoo! and potentially blocking any hostile takeover by Microsoft. At the very least, it would make things more difficult for Ballmer and group, as well as increasing the odds that Microsoft will have to raise its bid.

It also gives Yahoo! time to continue its discussions with AOL. Of course, would anything like this even be under consideration without the pressure from Microsoft. Naturally not. Is this just gamesmanship? Hard to say, but the clock is ticking on Microsoft’s ultimatum to Yahoo! and something has got to give soon.

By Michael Santo
Editor-in-Chief, RealTechNews

In another of those “you haven’t said yes so we’re going to the public” deals that seem so common nowadays, Blockbuster has announced it has made an offer to Circuit City for a “combination” of the two companies.

The offer, made on February 17th, apparently wasn’t swiftly responded to, and because, as Blockbuster said in a press release:

Unfortunately, to date, Circuit City has failed to provide due diligence necessary to allow Blockbuster to make a definitive proposal. Blockbuster is making its proposal public because it believes the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company. In addition, as Blockbuster has other strategic opportunities, its offer is conditioned upon timely commencement of the due diligence process.

The offer is for at least $6 per share and equate to $1 billion, or approximately 54% more than Circuit City’s current value. In its letter to Circuit City, Blockbuster said the offer could go as high as $8 / share, based on “due diligence.”

Part of the letter says:

The combination of Blockbuster and Circuit City will result in an $18 billion retail enterprise uniquely positioned for the convergence of media content and electronic devices. We would seek to differentiate products in both Blockbuster and Circuit City stores by offering exclusive content and content-enabled devices. Both companies would benefit from complementary products, marketing, management strengths, technology and distribution and the resulting synergies would significantly improve consolidated financial performance. Overall, I strongly believe that a combination of Blockbuster and Circuit City would deliver significant value to our respective shareholders, enhance the overall customer experience, and energize our employees.

It seems that Blockbuster sees the “someday movies will mostly be downloaded” writing on the wall and thus wants to get into some sort of hardware sales. Of course, as Best Buy has been beating Circuit City into submission of late, I’m not sure a combination of these two would make a difference. Of course, let’s not forget Netflix vs. Blockbuster on the other side of the fence.

At the same time, as has been typical of late, the company in question, Circuit City, has acknowledged the unsolicited offer, and said “hang on, don’t do anything” to shareholders.

Circuit City also indicated it has doubts Blockbuster could follow through:

The Company noted that its Board of Directors has previously reviewed a similar private proposal from Blockbuster. Circuit City, Blockbuster and their respective financial advisors have been in a process of exchanging information regarding the proposal, but to date Blockbuster has been unable to satisfy Circuit City and its advisors that Blockbuster’s proposal could be financed. In particular, Blockbuster’s proposal appears to contemplate a rights offering of unprecedented size relative to the issuing company’s market capitalization and at a price that is at a significant premium to Blockbuster’s current market price. Circuit City’s advisors have noted that most rights offerings, of which there have been very few in the United States, occur at discounts to market.

Full text of the letter from Blockbuster to Circuit City and the tepid response are as linked above.

We Say: Sure is “unsolicited takeover” season, isn’t it? Not that this will distract us from the “Microhoo” drama.