A few things I've been meaning to blog about:

• Firefox has become a buggy, bloated piece of code rivaling IE.  It now crashes daily.  Is there correlation or causation with Mozilla's increased EU lobbying efforts?
• Both Firefox and IE disproportionately take the blame for the collection of bugs that is the Flash runtime, which in turn is a sibling to the world's most bloated piece of code: Adobe Reader.  Get Foxit for PDFs.
• The proposed financial industry regulatory overhaul means "brokers would be held to a higher 'fiduciary' standard that would compel them to place their client's interests ahead of their own."  I suppose it would be too much to ask Congress to hold themselves to a standard of fiduciary responsibility.
• Oracle and cloud computing: "Pay no attention to Larry"
• IBM's Second Life infatuation continues.  Now they're cutting out the middle man.  Good thing IBM had that partnership with Second Life in the meantime to accelerate their time to market in the hotly contested enterprise-class virtual worlds market (hat tip Peter).
• IBM's preferred Second Life platform comes under antitrust scrutiny.  An IBM spokesman uttered the following with a straight face: "The IBM mainframe has been around for decades, and there have always been competitive options and alternatives to it."  Live by the lobbyist, die by the lobbyist.
• Windows 7 pricing: doth pricing power goeth before the fall?  I still need to start a pool on how long it takes Windows 7 to exceed the share of the immortal Windows XP.

Microsoft's netbook pricing dilemma continues.  It is tough to optimize for both unit share and revenue, but my former colleagues in Redmond remain undaunted.  In our last installment, I suggested:

Starter Edition seems to be dead on arrival (in fact, to go back to a stock soundbite, you can't spell Starter Edition without the letters D, O and A...), but they can always keep offering the immortal Windows XP if necessary.

Since then, Starter Edition has gone back to the drawing board and XP has gotten yet another life extension.

But wait, no stone is being left unturned in this campaign:

Microsoft at Computex has said it wants PC builders to avoid using the term "netbook" in the future.

Microsoft now plans to call them "low cost small notebook PCs"

As the kids say, good luck with that.  So what if the category name is too big to fit on the packaging of most netbooks.  Suggested official pronunciation: "lick-snips" (handy mnemonic: put your tongue in a weed-whacker).  I for one am heartened that the oft-criticized but much misunderstood Microsoft naming department survived the recent layoffs.

Some suggest it is more than just another step in a relentless quest for terminological precision:

While ostensibly claiming it's primarily a definition, Microsoft is believed to be using the new label to better let it force system makers into using more expensive versions of Windows 7 on certain computers. Vendors have already been told that they can only install Windows 7 Starter Edition on notebooks with no more than a 10-inch screen, 1GB of memory, a 250GB hard drive and a single-core 2GHz processor. By exempting systems that don't quite fit into the category even if their characteristics are similar, Microsoft could require that they pay for the significantly costlier Windows 7 Home Premium.

In other news today:

• Microsoft also said it wants Internet users to avoid using the term "Google" in the future, particularly if they are anywhere near a browser address bar.
• IBM spokesman Lou Canute reminded PC users to be sure to regularly save files they are working on to their "hard file", or they could risk losing data.
• Descendants of Claudius Ptolemaeus issued a statement commemorating the 675,000th successful orbit of the Sun around the Earth since the publication of their ancestor's earthshaking astronomical work Almagest.
• Larry Ellison suggested Soracle might build netbooks (Ok, this is real).  Soracle officials say they have what it takes to compete in low-cost, high volume consumer markets as evidenced by this clamshell-style prototype developed in Sun's labs which can be seen below:

Larry Ellison is banging the drum about how Soracle is serious about keeping Sun's hardware business.  What should we conclude from this? 

That Oracle desperately wants to get rid of Sun's hardware business...

The Christian Science Monitor puts this link-baiting headline (ok, it worked) on a story about Twitter's retention rate.  They don't answer the question (or even mention Second Life) in the story , but if you want an answer there is a clear tell here: IBM.

In the absence of announcements about making Twitter run on the mainframe, enterprise-class Twitter, Twitter interoperability with private Twitter clouds, IBM company meetings on Twitter or a concerted press campaign about Sam Palmasaino's Twitter account, I think it is safe to say that Twitter is not the next Second Life.

This bodes well for Twitter whose simplicity and accessibility are the antithesis of IBM.  IBM has product names that won't fit in the 140 characters of a single Tweet.  The B in IBM isn't brevity.  But I digress.

It is good to see that even as IBM continues their stealth layoffs, their commitment to Second Life is unwavering (Silicon Alley Insider has covered for my negligence in mocking recent developments in IBM's Second Life strategy here, here and here).

Yesterday I was wondering how Microsoft will price Windows 7 for the netbook market and speculated that Microsoft could

always keep offering the immortal Windows XP if necessary.

And just like that, the edict came down from upon high.  This suggests the OEMs aren't falling for Windows 7 Starter Edition and Home Premium will be priced at too high a premium for netbooks.

Is it too early to start a pool on XP's market share in 2021, when it will be twenty years old?

A few observations on the super heavyweight, no-holds-barred, ultimate cage match between Google and Microsoft.  Some of these have been rattling around in my head for a while so please excuse my inability to embrace the real-time "what are you thinking (or eating) this instant" Twitter aesthetic.

Google's Soft Landing

Google's Q4 and Q1 performance was brilliant.  Amidst an imploding economy, they managed to ramp revenue and cut costs.  They increased monetization (let no screen space go without an ad...), slashed capex, deferred datacenter build-outs, slowed headcount growth to almost nothing, trimmed employee perks (while repricing options) and whacked a bunch of services that were going nowhere (all but killing the 20% time myth in the process).

There was always a question about Google's management chops and how they would perform when push came to shove.  The question appears to have been answered and the new CFO seems to be getting most of the credit.

Microsoft spent the better part of a decade on its odyssey from shrimp to weenies, slowly squeezing costs as growth slowed, and still had a lot to clean up after the dot com implosion.  Doing this kind of deceleration in less than a year is very impressive.  While the claim that search advertising is immune from macroeconomics has been put to a rest, Google will outperform amidst the ongoing (and likely protracted) "global economic crisis".

Microsoft Windows Live MSN Kumo Yahoo Search

While Google shows it has knobs that do in fact go beyond 10, Microsoft continues to play rope-a-dope in search, with an ever diminishing quantity of rope.  (Microsoft watchers should understand that When We Were Kings is a SteveB favorite).

Despite new management at Yahoo, the company still seems infected with Paralysis Yahoois, so the inevitable combination of Microsoft and Yahoo search drags on and on.

Hopefully Microsoft has more in the cupboard here than just a new name.

Windows 7

I have only played with the public beta, but it looks very good.  It even runs nicely on my much-despised Sony laptop, which was unusable with Sony's craplets and Vista. 

And it should be good, given three years to put Vista on a diet and add some user interface chrome (all for the better, especially fixing the wireless UI which I find to be the single most annoying aspect of Vista).  In many ways, Windows 7 is Vista Service Pack 7.  The biggest competitor for Windows is always the previous version of Windows, so the recent "Vistaster" will be a boon.

In the last month I've heard from people seeing more recent builds there are still a fair number of bugs to fix, but it is going out hell or high water.  Microsoft is very anxious to put Vista behind them.  Figure a street date two months after it releases to manufacturing, so it could be in stores on new PCs as soon as July.

I think the product will be an unambiguous critical success from a product perspective.  But the big question is not the product but its impact on the business.  Microsoft has a very tough pricing decision ahead of it for Windows 7 on netbooks which are the only bright spot in an otherwise dismal PC market.

A great example of unintended consequences, netbooks started out as the Taiwanese PC industry's response to the $100 One Laptop Per Child initiative.  But instead of being sold to kids in developing markets, consumers in developed markets are buying them as cheap second or third PCs.  And all the protestations you hear that they aren't cannibalizing more expensive PCs are a sure sign they are cannibalizing more expensive PCs.

Moore's Law has powered the industry for decades: you get twice the processing power for the same price you paid 18 months ago.  But there is a flip side to Moore's Law (and one Intel in particular has feared for years): you also can have the same processing power as the last generation for half the price.  This is the dynamic driving netbooks which are now 10% of the PC market and the ramp is unbelievable.  Basically 0 million units in 2007, 15 million units in 2008 and a projects 30 million units this year.

Netbooks have had a bigger impact on the Wintel business franchise than all the anti-PC children's crusades of the last 20 years combined.  Average selling prices of PCs have dropped by about a third due to netbooks.  Both Intel and Microsoft have chosen to eat their own young rather than let someone else do it, but it has come at a cost.  Intel's CY-Q4 revenue was down 20% and you really see it in Microsoft's CY-Q4 and CY-Q1 results.  Windows revenue doesn't usually decline, much less faster than PC units.  The drop in the premium mix is even more precipitous (double digit hits in both of the last two quarters).  This is an ominous sign of declining pricing power.

Microsoft got its share back in the netbook space in 2008, but did it with sub-$20 copies of Windows XP Home.  So will they price Windows 7 to keep that share or protect revenue?  Starter Edition seems to be dead on arrival (in fact, to go back to a stock soundbite, you can't spell Starter Edition without the letters D, O and A...), but they can always keep offering the immortal Windows XP if necessary.  Home Premium will protect the revenue, but it is likely to be too expensive for $300 PCs that are on a trajectory to a $100 BOM cost and will face a bunch of even cheaper Linux and Android-based competitors this year.  So the big question is will Microsoft go for units or dollars with Windows 7?

Google and the Enterprise

Google is just not serious here.  The outages and privacy-breaching data spills don't help.  The economic situation means they have the tailwinds behind them and the shift to the cloud in general, but they just don't seem to be serious about this business.  Is it a cultural thing where they're just not willing to do what it takes?  It took Microsoft over 15 years to be able to say they got the enterprise with a lot of motivating/de-motivating beatings along the way.

A possible by-product of the soft landing is that the great Google land grab may be coming to an end.  Google's window to throw new stuff at the wall and see what sticks could be over.  My guess is we're seeing a cultural shift that can't be reversed.  It is tough to dream big dreams and pursue ruthless efficiency.  Google has staked out a very lucrative and high growth franchise that they can very successfully milk for the next decade, but I think we're less likely to see radical and disruptive thinking from them in the future as they optimize what they've got.

Microsoft certainly benefited from having a long time window and multiple product cycles to invest in new businesses like the enterprise and entertainment.  Google's window may have been much shorter (and in general I believe Google has followed the Microsoft arc albeit much more compressed.  To prepare for their next act I suggest they "lawyer-up").  They have a great franchise, but they didn't build any new franchises during the land grab.  So they're still fundamentally a one-trick pony.

Microsoft (market cap $182 billion) is fixated on Google.

Google (market cap $122 billion) is fixated on Facebook.

Facebook (market cap ~$3 billon) is fixated on Twitter.

Who or what is Twitter fixated on? 

Revenue?  Uptime?  Oprah?  Rolling up the $300 billion in market cap chasing them?

Proposed stock symbol: SORE

Customer line: "I'm a SORE customer..."

Rejected names: Sunacle?  Too close to Unocal.  Orasun?  Sounds like a cloying dental product.  Orsun?  You could easily swap Ellison for Hearst in the remake of Citizen Kane...

Ok, so this isn't a merger of equals.  It is the end of Sun.  Only Oracle survives.  But this deal surprised me.  I figured if Oracle wanted Sun, their well-oiled M&A machine would have swooped in a while ago rather than waiting for IBM to set things in motion, though there are rumors that Oracle made a joint bid with HP last year.  They certainly could have gotten a better price.  Did IBM get pulled in to play the second bidder?  The extra dime Oracle is sharing is not exactly the sign of a bidding war.

Quick thoughts:

• MySQL - you'd never know Sun owned it from the Oracle press release.  Interesting market definition problem for the antitrust authorities evaluating this transaction.  With MySQL's European heritage, maybe we'll get some more novel legal theory from the EU.
• Solaris - Oracle has been treating it as a legacy platform in recent years and it is hard to see Oracle being any more successful with Solaris vis-a-vis Linux than Sun. After all, Oracle's Linux relationship is unbreakable...  But the acquisition means Solaris can reestablish itself as Oracle's choice for high-end deployments.  Not clear whether Solaris remains a go-to platform beyond the database.
• Sun's Hardware Business - this definitely gets flipped to HP, Fujitsu, an Asian up-and-comer or someone else.  Sun doesn't have the share and Oracle has too much invested with partners to go to the vertically integrated model (not even IBM can sustain the vertically integrated model and they invented it).  Oracle must already have a plan here (is there another shoe to drop with HP in the next few days?).  The hard part is how to minimize the atrophy during the long road to closing the deal.
• SPARC - Oracle wants nothing to do with this.  Maybe Fujitsu will take it.
• StorageTek - hope someone does the math on how much value got destroyed with this acquisition.  Sun bought this company just as disk became cheaper than tape.
• OpenOffice - this deal could be a big boost for OpenOffice, as Oracle can't resist an opportunity to tilt at Microsoft, especially with Microsoft driving more and more integration between the Office suite and the back-end applications that are Oracle's bread and butter.  Oracle can provide OpenOffice a value proposition beyond price.
• IBM - they got a good look at Sun, but in the end I suspect they're going to regret not doing this deal.  They regretted giving Microsoft control of the software crown jewels for the PC; they may face similar situation now on the server.  Oracle can have a lot of fun making IBM choose between  open systems sanctimony and controlling their own destiny.  That of course assumes there is more relevant innovation to be had around Java.  IBM should have figured out how to get through regulatory approvals or how to cut the company up into piece parts to get what they wanted.
• Integration Risk - this is a very different deal than the other big acquisitions Oracle has done. Sun customers are skittish as is and there is minimal maintenance gravy train here.  Whereas Sun offered IBM access to a bunch of net-new customers, I suspect Oracle is already in all of Sun's accounts.  Serious layoffs ahead at Sun regardless of how it plays out for Oracle.
• Consumer/Embedded Java - not exactly high on Oracle's priority list.  Maybe it finally gets liberated in gesture of openness/misdirection by Oracle.  Maybe they can sell it to Google.  It fits nicely with the Android (lack of) business model.
• Open Source - will be interesting to see if any of the projects Sun open-sourced get fork and/or critical mass.  Some argue Sun has already lost control of MySQL.
• Timing - I need to go back and look at the sequence, but Oracle has been pretty good since their acquisition parade began at timing deals in such a way that they help their year-on-year comparisons.  Never forget Oracle is managed financially these days.  This might explain why they didn't pull the trigger on Sun earlier.

What did I miss?

Policymakers have woken up to the plight of the newspapers and are on the problem:

Post Post-Intelligencer

The newsprint carcass of the Seattle PI isn't even cold yet and we're already learning new (and perhaps revisionist) things about the departed:

The two best print newspapers in the United States – the Seattle Post-Intelligencer, and the Christian Science Monitor – have just died.

How typical of us not to appreciate what we have until it is gone.

The author then goes on to suggest France as a model for saving newspapers where they are inculcating a (state-subsidized) love for newsprint amongst teenagers.  (Hat tip to John who monitors cutting edge European policy innovations for Platformomics).

Senator Blowhard to the Rescue

Evidently the newspapers' problem isn't a demand issue like declining readership, they are just taxed too much:

With many U.S. newspapers struggling to survive, a Democratic senator on Tuesday introduced a bill to help them by allowing newspaper companies to restructure as nonprofits with a variety of tax breaks.

Easy to offer tax breaks to money-losing entities that don't pay taxes...

If governments really want to help newspapers, banning the Internet seems like a better way to address the root cause.  Still waiting for a flat-out, cold-hard-cash newspaper bailout, but it can't be that far off.