In all the he-said, she-said aftermath of the failed Microsoft bid for Yahoo!, all parties are unanimous about one thing. Google was the reason the bid was launched and Google was the reason it failed. Microsoft needed Yahoo! to compete against Google in the online world. But Google managed to spoil the deal by offering to share some of its advertising skill with Yahoo! This gave its board the confidence to hang on for a better price. 

In an interesting New York Times article on the deal’s collapse, the author muses that about the search giant’s influence:

(Google’s) economic power is still derived largely from a simple, seemingly prosaic business: the ability to place interesting text advertisements in front of people when they do searches. Advertisers pay for those ads - sometimes $1 or less - only when users click on them. In a sense, Google has built a highly profitabley$16.6bn empire a dollar at a time.

This comment made me think of the five and dime stores which sprang up in the US in the era before the shopping mall. The five and dime, in essence, would stock anything that would sell for a nickel or a dime. And on that basis, customers streamed in, finding themselves irresistably drawn to items that were affordable, attractive and cheap. The concept became the basis of 20th century mass-market retailing, later up-dated by Sam Walton into Wal-Mart, the world’s biggest retailer.

With the internet fast becoming the retailer of choice for more and more consumers, Google is today’s five and dime. And the moral here is that Microsoft needs to start thinking like Sam Walton if it wants to outsmart Google at its own game. And here’s a message for the Microsoft board: Walton didn’t get rich by taking over other companies.

All dressed up and no place to go? Microsoft’s deadline for its US$41.2bn bid for Yahoo! has come and gone and the company remains undecided about what to do now. The fact is that the world’s biggest software company needs to act if it wants to prevent itself sliding into the status of a yesterday’s man in the fast-changing tech world.  It’s shares have dropped 20% this year and last week it announced a 11% fall in quarterly earnings. It’s not even certain that an agreed purchase of Yahoo! - a clear second to Google in the online world - would return Microsoft to a growth path.

The company, however, is sitting on an embarassment of riches thanks to its near monopoly of the PC operating environment to date. It’s net cash as of March 31st was a stunning US$11.8bn, up from US$7.6bn a year ago. In its latest quarterly statement, Microsoft stated that about 9% of its pre-tax earnings came from investment income. If it can’t find a home for this money, it’s going to become a bank, not a technology company. In the meantime, it remains a very rich groom indeed.

E-inclusion is the new buzz word in the world of global internet policy. Governments are especially keen for all their citizens - young, old, literate or not - to be online. This fact is highlighted in the latest EIU’s E-readiness rankings which were released last week. While a few top-ranked companies exchanged places - the US ranked first, taking over from Denmark - the gap between wired and non-wired countries remained stark. India, for all its high-powered growth, ranked 54th out of 70. The Philippines, China, Egypt, Columbia, Russia, Nigeria, and Ukraine, to name a few, all ranked lower.

But how to get someone online who a) can’t read or b) can’t afford a computer? A new project from the Department of Rural Development in the state of Andhra Pradesh is providing some answers. Using readily available technology, it allows government departments to issue payments to citizens with specially-equipped mobile phones. These phones are loaded with applications which, in turn, communicate with biometric smartcards via RFID to validate a customer’s details. So, a illiterate farmer is notified by a special ring tone that  his monthly government stipend has arrived. He then takes the phone and card to a bank or shop to get his money, where his fingerprint is checked against his card. 

The programme will soon be extended to allow users to make other transactions such as housing payments or small loans repayments. To make this really take off, though, the technology should probably move to eye-scans, thereby avoiding all the business of a biometric card which can be lost or stolen. But these kinds of schemes will surely be an interim solution. Full internet access, whether by phone or PC, is becoming as basic to economic development as water.

With memory chipmakers floundering in the Far East and the NAND flash business on the skids, these were already lousy days for the semiconductor industry. So today’s news that AMD, the world’s second largest manufacturer of microprocessors, plans to shed 10% of its workforce this year will have many investors hanging their heads in dismay.

It wasn’t altogether a surprise, however. AMD had been through five consecutive quarters of poor earnings reports, having completely lost the initiative it stole from Intel, the market leader by a long shot, back in 2004. Then, AMD was deemed the R&D innovator, and Intel a bumbling copycat. Today, those tables have turned.

Nevertheless, the magnitude of the cutbacks, and the scale of revisions to company forecasts, have left some observers reeling. AMD intends to send 1,600 employees packing before the end of the third quarter, and it now reckons next quarter’s revenues will fall sequentially by 15% to US$1.5bn, instead of the 5–10% previously expected.

The question on everyone’s mind is whether AMD is now suffering at the expense of a rejuvenated Intel, which has emerged from its own cost-cutting exercise in fine fettle, or whether it is simply the victim of the economic turmoil. Various investment banks think it will lose market share in months ahead, which points to the former, and yet the people who buy chips from Intel hardly sound upbeat. Shaun DuBravac, an economist with the Consumer Electronics Association, has previously told the Economist Intelligence Unit that he expects revenue from PC sales in the all-important US market to fall 2% this year.

If both measures apply then Intel might also stumble. It disappointed bankers last quarter, despite posting pretty impressive results, and so everyone will be watching eagerly to see what happens next quarter round. Intel chief executive Paul Otellini is clearly keen to defy the bears. Earlier today he was telling BBC News that he does not expect a looming recession to have much effect on his business, seeing Intel’s exposure to business outside the US as a shield against a US downturn. If nothing else, that might rub a little salt in AMD’s recent wounds.

While not exactly blue skies, there was a distinct lack of storm clouds in Oracle’s third quarter results released this week. True, the company came in at the low end of its own expectations, saying that software licensing revenues were up 16% for the quarter ended in February. It had been hoping for a jump of between 15-25%.

But Oracle’s recent acquisition strategy is providing a nice updraft. With a much stronger application software than IBM - and a wider middleware line-up than SAP - Oracle is now the only company other than Microsoft able to sell a full “stack” of software to corporate customers.

The results speak for themselves - new database and middleware licenses were up 20% in the quarter. And overall, Oracle took in $1.3bn in net income, an increase of 30%, on revenues which grew 21% to $5.3bn. The company’s CFO says that its taking more time to close deals these days but predicts that current quarter will see sales growth of 10-20%. 

If the US is on the brink of recession, maybe someone should tell the folks at Oracle?

The LTE versus WiMax debate won’t be silenced, but there’s really just one question that needs to be answered. Does LTE offer a more natural evolution path than WiMax for existing 3G players? If it does, WiMax will struggle to ever get the support it needs to become a mass-market offer, even with its time-to-market advantage.

The fact that more 3G operators are coming out of the woodwork and backing LTE suggests there is some commonality, but Intel – the daddy of WiMax – continues to insist LTE is an entirely different technology.

I put this point to Jeanette Fridberg, head of product marketing for chief LTE backer Ericsson, earlier today. Fridberg accepts that LTE cannot re-use 3G radio technology or base stations, and has no advantage over WiMax in that respect (it is, in fact, based on the same air interface as WiMax). But she says LTE can be deployed at 3G base station sites, which account for up to 80% of the capital expenditure.

So what’s to stop an operator from deploying WiMax at 3G sites? Not much, apparently, except that WiMax base stations provide less coverage than LTE and 3G ones. That means a 3G operator rolling out WiMax would have to build more sites to fill the gaps in coverage, which could be not only costly but also inefficient, leaving it with sites that overlap in coverage.

The unresolved question is how much of this coverage advantage stems from LTE’s reliance on FDD technology, as opposed to the TDD used by WiMax (FDD uses two spectrum channels, one for sending information and one for receiving it, while TDD uses a single channel for both). If an FDD version of WiMax would level the playing field then Ericsson will have to be on its toes. Supporters of WiMax say they are working on an FDD system now.

There’s been a lot of activity around mobile software platforms and application development this week. Microsoft has made its Silverlight web platform available on some of Nokia’s phones, Google has revealed that its own Gears platform can now be used on Windows Mobile devices and Apple is getting ready to launch its software development kit for the iPhone later today.

It makes the mobile sector sound like a rich emporium for the end user. But it really goes to show just how fragmented the industry has become. Take the iPhone, for example. It may be a great-looking device – possibly even a revolutionary design – but it presents third-party application developers with a tough choice. Do they invest precious time in writing a version of an existing application for the iPhone? Or is it better to invest those resources in coming up with a new application for a Symbian handset?

Making that decision probably means spending even more time analysing the market and trying to figure out whether the iPhone will become a serious rival to Symbian smartphones. And meanwhile the customer is left waiting.

Sadly, things look set to get even worse with the summer arrival of Android, Google’s hyped operating system for mobile phones. Android is eagerly awaited by those who reckon it will lower pricing and improve the experience of using mobile applications. Yet it’s described as “another bloody platform” by Carl Uminski, the chief technology officer of Trutap. That’s telling, because Trutap is exactly one of the third-party application developers Google would assume is on its side.

Uminski’s not the only one feeling exasperated. Charles Wiles says he’s working to bring Windows-compatible software to Android and other capable web browsers. Who is he? The product manager for Google Gears.

One data point really stuck out at this week’s FTTH Council Europe Conference. In a presentation by Alice Wong, the financial controller for Hong Kong’s City Telecom, the figure of €88 was cited as the cost per home of building a fibre network in Hong Kong. That’s a tenth the cost facing most European and US operators.

As Wong explained to perplexed members of her audience, the cost is so low because most of Hong Kong’s residents live in tower blocks, or what the telecoms industry calls ‘multi-dwelling units’. These can be connected with a single fibre and some nifty in-building wiring, which makes installation relatively cheap. Operators in some European countries, on the other hand, are looking at streets full of detached, one-family homes, and a hefty capex bill to boot.

City Telecom claims to have covered 1.4m homes with its network and to have around 650,000 customers using services that cost from €26 per month. A back-of-an-envelope calculation shows that even if all those customers are on the base offer, payback on capex is just over seven months. By contrast, it will take many companies in the Western hemisphere more than seven years to pay off their capex investments.

Geography can be so unfair.

It’s maybe no wonder Deutsche Telekom has fewer than 150,000 customers for its IPTV offer. According to Thomas Langer, who heads equity research into communications for investment bank WestLB, the German incumbent has been telling customers on its website that it can only guarantee them a service after they have placed an order.

When Langer told senior managers at Deutsche Telekom that such a clause probably wasn’t the best way to attract new business, he fully expected them to remove it. But nine months on it’s still there.

It shows just how bad Deutsche Telekom is at marketing and external communications, says Langer. And he doesn’t stop there, describing the high-speed VDSL network it is building to support IPTV as a ‘lame duck’. It’s little surprise to Langer that Deutsche Telekom is scaling back its national rollout to 40 cities, down from the 50 it planned to serve originally.

Chief executive René Obermann was quick to blame competition for a lacklustre set of quarterly results earlier today. But if his marketing managers don’t wake up soon, competition could be the last of his worries.

An obscure French economist from the eighteenth century would seem unlikely to pop up at a present-day conference about cutting-edge telecoms. But the rather grizzled image of Jean-Baptiste Say, born in Lyon in 1767, made a hard-to-miss appearance at the FTTH Council Europe Conference being held in Paris today.

Say hit the big presentation screen at the Palais de Congrès courtesy of Brett Swanson, the senior director of a thinktank called the Centre for Global Innovation. During his keynote speech this morning, and in front of a giant projection of Say’s portrait, Swanson reckoned the Frenchman would have been a major advocate of the investments in high-speed fibre networks that are the topic of this trade show. Known in some circles for his belief that ‘supply creates demand’, Say thought producers and entrepreneurs were the key drivers of any economy and far better at anticipating the needs of a society than the consumers within it.

The ‘build it and they will come’ philosophy has a encouraging ring to it, but delegates at this conference probably didn’t need reminding. Many of them are already deploying fibre networks without any firm evidence that a mass market either wants or needs more bandwidth.

In some cases, though, early indications are not promising. France Telecom says just 5–10% of customers in areas now served by fibre have immediately taken up the new offer. One wonders what Say would make of that.