Lidell joined in May, 2005 from International Paper. The stock is at about the same place as when he joined. Liddell has overseen a period of cost-cutting and stock buybacks at Microsoft.

Klein heads up finance for Microsoft’s largest division, which includes the Office business. Last quarter, the Business Division brought in $4.4 billion in revenues and $2.9 billion in operating income, which was nearly twice as much profits as Microsoft’s Windows business. Microsoft is handing over the corporate CFO spot to the man with the most individual financial responsibility in the company.

Lidell will remain at Microsoft through the end of the year to oversee the transition.

Microsoft’s next earnings report will be crucial as it comes off another down quarter. Some of the decreases in the company’s Windows business were due to the building anticipation leading into the Windows 7 launch last month. Early reports of Windows 7 sales have been positive, but it’s still too early in the product’s lifespan to call it a hit.

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AOL may be brushing up its brand image in preparation for its spin-off IPO in December, but brushing up its underlying business will take a little longer. Barclays analyst Douglas Anmuth released a report on AOL today complete with an earnings and revenue model going out to 2014 (see below). He projects absolutely no growth in revenues over the next five years, and only a one-time bump in profits in 2011, due to cutting one third of its current labor costs, before declines set in again.

In other words, investors who buy AOL stock will do so because it is a cost-cutting and turnaround story not a growth story, and that will determine what kinds of investors will buy the stock.  Anmuth outlines some of the key factors which investors should be paying attention to.

Key things to watch for:
1) Time Warner shareholder reaction following the spin;
2) significant cost-cutting to drive free cash flow;
3) a new search deal beginning in late 2010;
4) whether AOL’s display strategy can gain traction;
5) trends in key metrics like Unique Visitors and Page Views.

Since all existing Time Warner shareholders will become shareholders of AOL, if a lot of them decide to dump their shares that would create downward pressure on the stock. But Anmuth feels that a fair valuation is $35 to $39 a share, giving AOL a market capitalization between $3.8 billion and $4.2 billion. As AOL goes through its layoffs and other cost-cutting, those measures should help its free cash flow by eliminating about $300 million in annual expenses.

However, AOL cannot cut its way to prosperity. The cuts will buy CEO Tim Armstrong some time to put his new content strategy into place and boost display ad revenues.

Even here, though, AOL is fighting against a downward trend (see chart above). Display ads are driven by pageviews, which are down 22 percent year-over-year across AOL’s sites to 14.3 billion. Unique U.S. visitors to AOL sites are down 11.5 percent from a year ago to 98.5 million people.

AOL also runs display ads across other sites, of course, but is able to charge a premium for its own audience. The core of that audience still comes from its 5.4 million access subscribers, who are declining but still account for about 60 percent of AOL’s EBITDA (earnings before income taxes, depreciation, and amortization). They are also AOL’s most valuable audience in terms of advertising, which explains why Armstrong felt it was necessary to hold onto the access business as long as possible.

The other big source of earnings comes from AOL’s very lucrative search deal with Google, Armstrong’s former employer. Anmuth estimates that AOL gets 92 percent of the search revenue generated by search ads on its site through its deal with Google, and that search ads account for 36 percent of its EBITDA.

Armstrong needs to renegotiate that deal and play Google off of Bing, which might end up with the business and pay AOL a higher revenue-share than the 88 percent it will be paying Yahoo through it search deal still awaiting approval. The problem for AOL is that its overall share of searches, while still a significant 3 percent in the U.S., is less than half what it was three years ago, and keeps going down.

That leaves Armstrong with getting display ad revenues back on track. Anmuth forecasts that AOL’s display ad revenue growth will lag the industry’s recovery until 2012, remaining essentially flat next year and then growing a tepid 3 to 5 percent annually after that. Fortunately, selling ads is what Armstrong does best, so he might surprise investors on the upside there. But as these numbers make clear, it is going to be a tough slog.

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Google is aiming Chrome OS right at the bottom of the market. That is to say, cheap computers, netbooks. Apple, of course, takes the opposite approach, targeting the high end of the market with their high-quality and high-margin machines. If Google is successful with its Chrome OS netbooks (let’s call them ChromeBooks), what we could see is the squeezing of Microsoft, an idea I first laid out a month ago. With attacks from the top and bottom, Windows will be relegated to the middle. And ultimately, if Google has its way, marginalized.

There are a number of problems with being in the middle. First and foremost, the middle is average, boring, bland, etc. There’s nothing particularly wrong with that, unless you’re a company like Microsoft with an image problem. After years of taking hits, Microsoft is trying to revamp its image with expensive ads, new stores, and a new OS, among other things. But the middle is hard to sell. It’s neither the cheapest nor the best. It’s the thing people have to settle on.

Microsoft, of course, is also in the netbook space with Windows XP and now Windows 7. But after being a sector on fire for much of the year, signs point to a slowdown in sales. While you might think that would be bad news for both Microsoft and Google, Google’s ChromeBooks are really a new category altogether. As Google said during its event, they’re working with specific hardware manufacturers to make machines set to a certain standard. This means that they’ll have larger keyboards and trackpads than most netbooks, among other things. In other words, they’ll be better, from a hardware perspective, than most netbooks.

And they potentially serve a different purpose. A couple days ago, Daring Fireball wondered if the real key for Chrome OS (and netbooks) may be to serve as your secondary computer. But there’s really no need to wonder, Google’s VP of Product Management, Sundar Pichai, said as much during the Q&A session. “This will be a secondary device. It may be a primary device in terms of time spent on it, but we expect people to have other computers too,” he said when asked about more powerful editing software not being able to run on Chrome OS.

People aren’t buying $300 computers with the expectation of running Photoshop (which costs $700) on them. They are buying them mainly to get an extremely portable machine that can surf the web. Google’s promise with Chrome OS is the fastest way to do that.

And that’s what a lot of critics are missing (but we’ve been saying since July). Google isn’t trying to compete with a standard OS, they’re trying to help users realize that for the majority of computing they do, they don’t need one in the first place. Maybe you have a desktop computer at home for those few tasks that need dedicated native applications, and maybe that runs Windows or maybe that runs OS X. But maybe the machine that you use most of the time is your cheap, fast ChromeBook.

Though they get criticized a lot for not making a netbook, Apple also competes in this highly mobile space — their “netbook” is the iPhone. While unlike Chrome OS, the iPhone can run native applications, it speaks to a similar point: Increasingly, for most of your computing, you don’t need Windows.

The point is that consumer computing is shifting to a place where speed and mobility are paramount. The reason people are so excited about products like the CrunchPad and Apple’s tablet isn’t because they can run Photoshop — they can’t — it’s because they offer an easy way to use the Internet. Same thing with the iPhone. Same thing with Android phones. And it will be the same thing with Chrome OS and the ChromeBooks.

The difference is that these ChromeBooks will be the first devices that actually look like the traditional computers we’re used to. They will look like they could be Windows machines, but they won’t be. That’s a powerful stereotype to break. And if Google breaks that at the bottom of the market, with Apple continuing to break it at the top of the market, Microsoft will begin to feel squeezed.

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Remember the flurry of new features Bing rolled out last week?  Bing announced Wolfram Alpha results for nutrition searches, more in-depth weather results, enhanced hover previews, better maps, and turned MSN Video into Bing Videos. Well, it turns out it is also quietly launched another feature which highlights the latest posts from news sites.

If you do a search for “TechCrunch” or “New York Times,” for instance, underneath the summary information and deep links there are the three latest headlines under “Latest posts.”

This format is similar to when you search for certain widely-followed Twitter users and you get their latest Tweets. It’s part of Bing’s obsession with providing realtime results. Just as the recent broader integration of Twitter into search results brings the latest conversations into search, showing the latest headlines for news sites shows readers what’s breaking on the site without having to click through. Funny that it doesn’t work for the “Associated Press.”

Just to be clear, this is different than searching for a topic which is in the news and getting news results at the top in the form of headlines, which all search engines do. The “Latest posts” appear when you do a search for a specific news site. You’d think it would work for any blog with a feed, but it doesn’t seem to come up for many smaller blogs I tried.

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Microsoft announced the availability of Silverlight 4 in beta at its Professional Developers Conference (PDC) today. Some of the new features include more fluid animations, Webcam, microphone and printing support, 200 percent faster start times than Silverlight 3, deep zoom and multi-touch support and more. It now also supports Google Chrome, even though it’s just a rounding error of a browser.

One of the big capabilities of Silverlight 4 is its ability to take rich-media experiences outside the browser in client apps which will compete with Adobe AIR. The non-browser apps fully support HTML, allowing tight integration with content from the Web. It also supports notifications.

During one demo, Microsoft showed what a Silverlight version of Facebook might look like. Using Facebook’s APIs, Microsoft created a demo app which was completely reskinned, complete with news feed, contacts, and photos. Cycling through photos in the Silverlight Facebook app, for instance, was much faster than doing it in the browser. Although I’m not sure we’re oing to start to see a whole bunch of Facebook desktop apps like we do with Twitter, but the it was a good demo.

Some screenshots below of what Facebook would look like as a Silverlight app. They show a reskinned stream view, a people view, Facebook photos, and a grid view.

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Professional social network LinkedIn is showing a little Microsoft love today. In conjunction with the announcement of the beta of Microsoft’s Office 2010 at its Professional Developer Conference, LinkedIn and Microsoft have partnered to offer an add-on that integrates much of your LinkedIn contact information with your Outlook contacts.

The add-on to Outlook will provide professional and social context to any Outlook users everyday email experience. When you received an email from a contact who happens to be a member of LinkedIn, Outlook will show a collapsible pane that will show information on what the contact’s latest activity is on Linkedin.

So in Outlook, you’ll be able to see a picture of contacts (pulled from their Linkedin profile), who they have recently connected to on the network, and any status updates they’ve posted on the site. The add-on will also show you the most recent professional information about a contact, including the most recent job and city that he or she lives in. And if you aren’t connected with a contact on LinkedIn, you can easily invite him to connect within Outlook (but you cannot accept invitations yet; this feature will be included in the future).

The other bonus of the add-on is the synchronization between Outlook and LinkedIn contacts. Outlook will bring automatically consolidate information for existing contacts who are LinkedIn contacts and new LinkedIn contacts. Plus, you can send messages to a LinkedIn contact directly from Outlook. And if a contact in Outlook changes any contact information within LinkedIn, Outlook will automatically be updated too.

The add-on will ship with Microsoft 2010, but can be downloaded to work with Outlook 2003, and 2007. While social network has a Outlook toolbar that has been available for some time, this appears to be the first major partnership between LinkedIn and Microsoft.

LinkedIn’s Director of Product Development, Elliot Shmukler says that the fundamental idea behind the product is to bring the value of LinkedIn to where professionals do their work and Outlook has a fundamentally professional userbase. LinkedIn also partnered with IBM’s Lotus Notes and Xobni, providing a similar integration. But what about Google Apps? Shmukler declined to comment directly on a potential partnership but did say that there will be future integrations with additional email clients in the near future.

The past few weeks have seen a few key partnerships for LinkedIn. The connection with Microsoft is a huge, considering the widespread user of Microsoft Outlook in professional environments. LinkedIn also recently launched integration with Twitter, enabling Tweets to be sent from LinkedIn’s platform and more.

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We sat down with him to do a proper exit interview while he was in town.

I got a few tips from Googlers that he was seen roaming their Mountain View headquarters, and I confirmed tonight that he has been offered a job at the company. He has accepted, and will shortly begin working for the company that he only recently considered the enemy.

It’s unheard of for Google to go from a first interview to an offer in such a short period of time. For Dodge, the process from first interview to first day on the job was less than a week.

He’ll be working for another ex-Microsofter, Vic Gundotra. Gundotra worked 15 years at Microsoft as General Manager of Microsoft’s developer outreach efforts. He joined Google in 2007 as VP Engineering, responsible for mobile applications and developer evangelism.

Dodge will have a similar job at Google as he did at Microsoft – developer evangelism. He’ll be focusing on Google Apps.

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The meeting came literally days after Rupoert Murdoch said he was considering withdrawing his vast newspaper empire from Google’s index, despite the possibility of losing a lot of traffic.

What was discussed provides a glimpse of what newspaper publishers may do next, and how Bing will collude in this new war on Google.

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In July of last year, I wrote about The New Apple Walled Garden. The post was about the irony of developers and advocates who were otherwise open standards and open source champions being absolutely pro-iPhone, a platform that is closed and proprietary in every sense. Since that post, the horror that was foreshadowed by some has been realized – rejected apps, rejected apps, rejected apps. We documented the troubles here at Techcrunch and the overall response was nothing more than long comment threads, complaints, and a few wise people changing their minds. The complaints to date are from some bloggers and a small number of application developers, incidents that Apple are able to write-off as being minor, as they have a dedicated fan base and growing market share to fall back on. That was, until yesterday.

Yesterday, a high-profile iPhone developer became fed up with the nature of the platform and decided it was time to call it quits. Joe Hewitt of Facebook not only pronounced that it was time for him to move onto ‘other projects’, but had the courage to state that his reason was because of the closed nature of the iPhone platform and his frustration with the approval process. Joe is not just the guy who wrote the Facebook application, within 12 hours of the first iPhone launching he released a library for app developers to create iPhone-like applications. This was back in the first generation, when iPhone ‘applications’ were nothing more than websites. Without any documentation from Apple, and with sheer enthusiasm for the new-born platform, Joe created a library for other developers that would help them build applications that would mimic native iPhone applications built by Apple.

As somebody who downloaded the very early releases of Joe’s library, I could immediately see that most, if not all, of the first iPhone applications were built on, or at least inspired by, the iUI library he released. The credibility that Joe has and the work that he did not only inspired developers, but it gave them an easy path to developing the first generation of software for the iPhone. With the statements that Joe made yesterday, Apple has not only lost another developer that it can write-off, but has lost somebody who was an early adopter of their platform and an impetus for others.

Most iPhone and Apple fans would retort that “Apple make great products, and it is winning in a market where the consumer has free choice”. I agree that they make great products, I am writing this post on a Macbook. I was beside myself with excitement when I found out about Rhapsody, about OS X, about the new Mach kernel, about FreeBSD code being used for userland (my code is in there, somewhere). I was so enthusiastic about the second coming of Jobs that I had an email exchange with him about incorporating OpenSSL, amongst other things, when the early dev previews were out. I was totally sold, because an operating system was being built and released that combined the best of UNIX with the best of great interfaces. Finally, the open source on desktops conundrum had been solved, I cheered. The biggest non-Microsoft company had adopted what we knew was good, as a way to compete against the standard. It validated my belief in the BSD license, and I was completely spellbound and a fan (although not in the more recent fanboi sense).

It was not until the iPhone was released that I felt let down. I felt betrayed. I wanted to hack, and I wanted to do so standing on the shoulder of a giant who was gaining market, a giant who was my old friend. I hold a very strong belief in the open market, a concept which at a theoretical level is difficult to argue against. The iPhone took advantage of a market where the competition was completely clueless. It took an intelligent and smart outsider to recognize that. What has shaken my belief in the open market is that an otherwise good company can enter a market, show them how it is done – but do it in a bad way for the overall ecosystem, and at the same time win the support of people who would otherwise philosophically disagree with them, completely on the basis of that company being not-Microsoft and, well, being sexy.

I never believed that Microsoft were evil, first because as a user and developer I had a choice. Second, Microsoft gave me free tools to learn how to code. And last, despite the position Microsoft were in on the desktop they never asked me to send them my code so that they could test it against their black-box of what is ‘compliant’. Microsoft never sent me a letter to say that speech bubbles can not be used in my application. Microsoft platforms let me run whatever-the-hell voice provider I wanted. Microsoft, as far as I can recall, also never told me that I could not have a sense of humor (the ironic 1984 reference has already been done, thanks Jon). Developers today also have a choice with mobile applications, and the sooner more developers raise their blinkers and realize that the popularity of the iPhone is built on the applications they are building, the sooner we can either get rid of this mess and see Apple change, or see a new more open alternative thrive.

Hewitt’s statements, as a model iPhone developer from a large company, can be the tipping point. The only thing holding this back right now are Facebook themselves, who seem keen on preserving a business relationship and casting Hewitt off as a rogue. Facebook came out today, and in a more official capacity (ie. somebody with ‘communications’ in their title, as opposed to ‘developer’), said that “Facebook’s relationship with Apple and our commitment to the iPhone platform remain strong”, and that “There’s been a fair amount of confusion and speculation about Joe’s comments” (chuckle, chuckle) and that “Facebook has a great team of engineers taking over iPhone related development”. Joe is probably taking some heat from his employer right now, and he probably knew he would before he made any comment. Facebook could have simply shifted Joe to another project (Android, I hope), and many wouldn’t have noticed – but he stood up for what he believes in, and what many have been thinking, and he deserves the full support and credit from everybody who believes in transparency and free opinion, regardless of which side of the iPhone debate your opinions may reside.

If it comes down to Facebook vs iPhone, Facebook wins. If Apple hold to their position on being the gatekeeper for everything on their platform, we only win if the developers say no. An iPhone platform with applications only from Apple and no third-parties is no longer a viable platform, and no longer a device that consumers will purchase — because they are making decisions based on applications and access, not on the brand or suburb engraved on the back of it (I hope).

Facebook should recognize this and back Joe all the way. If they do, it will show that that interest of what they want to do takes precedence over what a handset manufacturer wants to do. Apple can squash small developers, but if a big developer were to set aside short-term business interest for a moment, they will win in the longer term. If only we could all do that and not be blinded, perhaps, well, the free market could work again.

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After two straight quarters of annual declines (aka, the Great Ad Recession of 2009), it looks like online advertising revenues stabilized in the third quarter. The combined online advertising revenues of Google, Yahoo, Microsoft, and AOL rose 1.2 percent to $8 billion. While the online advertising industry is not out of the woods yet, it might be stabilizing.

At least it is for Google, which was the only one of the four horsemen of Internet advertising to see its ad revenues rise in the quarter (up roughly $400 million from both last quarter and last year). Yahoo, AOL, and Microsoft were all down on both a sequential and annual basis. (All the individual company figures are in the table below).  Google benefits more from search advertising and is less exposed to display. The question now is whether display advertising will follow the recovery already being experienced by search advertising.

Since these four companies account for such a large portion of total Internet advertising, looking at their combined advertising revenue numbers serves as a good indicator of the health of the overall online advertising industry.  I like to keep track of the combined total every quarter

These numbers represent global advertising revenues, and include network revenues paid to affiliates through AdSense and Yahoo’s ad network. Google’s licensing revenues for Google Enterprise Apps have been stripped out. For Microsoft and AOL, I include only the advertising portions of their online revenues as reported in their quarterly earnings statements.  Microsoft restated revenues for its online division last quarter, largely due to the divestiture of Razorfish, so the overall numbers changed a bit from previous posts.

Below is a table with all the numbers:

Online Advertising Revenues (in millions)

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Ever since Microsoft launched its Bing search engine last May, there’s been buzz that it’s been talking with Wolfram Alpha to license some of its search data. In August, I was able to confirm that a deal had indeed been struck between the two. Today, Bing is finally rolling out its first integration with Wolfram Alpha for searches around diet and nutrition.

Whenever you do a nutrition or diet-related search on Bing, it will serve up structured data from Wolfram. For instance, a search for any food item will bring up a nutrition tab and summarize nutrition facts about that kind of food, including the total fat in a single serving, along with the percentage of the recommended daily allowance that represents and other nutritional data. The results will be marked as “computed buy Wolfram Alpha.” Wolfram will also power a body mass index (BMI) calculator which lets you enter your height and weight, and calculates your BMI.

In that August post, I speculated:

Perhaps Bing’s deal with Wolfram is to license some of its data to create a specific science category search or a Q&A portion of the site.

Whatever it is, if it turns out to be popular, Bing might end up licensing more data for more categories of search. In the end, Wolfram could have more luck licensing its data to other search engines than bringing people to its site, despite the surge in “fall traffic” Stephen Wolfram is still hoping for.

There has been no discernible surge in fall traffic at Wolfram’s main site. Striking licensing deals with Bing could prove much more lucrative since Bing has much more search traffic and does a better job presenting complex data in an intuitive way. This deal makes Microsoft one of the first commercial licensees of Wolfram’s API.

Bing is also releasing two other improvements today. When you hover over a search result, it will bring in more information into the pop-up preview pane, including deep links to the most clicked-on pages in that site and a search box which lets you search the site without leaving Bing. If the result is a Facebook profile page, it will show the person’s picture, their network, and allow you to send a message or friend request.

The second improvement is a weather results page which brings together all sports of weather data whenever you search for a place or weather. Much of the data is what you can already find on MSN Weather—multi-day forecasts, satellite maps, and monthly averages—but it gathered on the fly in a new Weather Results page on Bing. You get the feeling that, just like it did yesterday with videos, this may be another content category Microsoft will eventually move entirely from MSN to Bing.

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It appears that both Yahoo and Microsoft are duking it out to help power the technology for India’s Unique Identification project. Spearheaded by Indian tech czar and Infosys co-chairman Nanden Nilekani, the project aims to assign every Indian citizen with a unique identification number that will identify him or her, similar to a U.S. social security number.

This is no small task considering India’s population of 1.2 billion citizens. It will involve a powerful technology to assign the numbers and a vast database to organize each unique ID. That’s where Microsoft and Yahoo come in.

Earlier this year, Microsoft chairman Bill Gates expressed a strong interest in participating in the project, meeting Nilekani and assuring him that Microsoft would be able to assign the IDs swiftly.

This week Yahoo CEO Carol Bartz lobbied India’s Prime Minister Manmohan Singh to use Yahoo for the project, but Bartz says that there’s no commercial interest in the deal and Yahoo would help power the project on a non-profit basis. Bartz added that Yahoo would be the optimal choice because Yahoo has a major presence in India. The company claims that three out of four Indians access the Internet through Yahoo.

While Yahoo is vastly popular in India thanks to sites like Yahoo Cricket that appeal to the population, its hold may be slipping. Gmail recently overtook Yahoo Mail as the most trafficked email site and Yahoo was forced to shut down its Indian social network SpotM a few months ago, as Google’s Orkut and Facebook emerge as the dominant social networks in India.

It’s unclear if Microsoft has the same “non-profit” stance as Yahoo, but obviously both companies want a piece of a highly ambitious project that could be implemented in other emerging countries. And it looks like IBM is also throwing its hat into the ring as well, so it should be interesting to see which tech giant wins out.

Photo credit/Flickr/Voobie

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I bring this up because today brought some very interesting numbers from the research firm, Strategy Analytics. According to them, Apple has surpassed Nokia as the most profitable phone maker in the world. I’ll throw some numbers at you in a second to show why this is really incredible, but the key takeaway is that this is why, at the end of the day, Apple wins.

While the press and rivals obsess over market share, Apple quietly comes in and makes an insane amount of money. It’s the same in the computer industry. Small market share, huge amount of money. The most important thing for all of these are companies is the bottom line. Apple wins that battle.

According to the report, Apple made $1.6 billion in operating profit off of the iPhone in Q3. Nokia, meanwhile, made $1.1 billion. Let’s put this in perspective. Recent numbers suggest Nokia controls roughly 35% of the worldwide handset market. Apple? About 2.5%.

Not 25%. Two point five percent.

Since the launch of the iPhone in 2007, just about everyone has been clamoring for more variety in Apple’s offering. People wanted iPhone minis, they wanted CDMA iPhones, etc. But Apple stuck to its guns and has basically sold one phone, which it could manufacture efficiently, when rivals like Nokia are busy peddling dozens. Sure, there are a few variations on the iPhone (included memory, and now the 3G/3GS), but basically, it’s one phone that is pulling in hundreds of millions of dollars of more profit than the market leader.

To people who follow Apple closely, this should be absolutely no surprise. It’s the same thing it does in the computer industry. Despite having a much smaller market share than its rivals, it makes more money than most of them. The key, of course, is that Apple maintains its high profit margins, while the competitors shuffle to battle each other for market share.

That’s not to say that Apple doesn’t care about market share for either its computers or the iPhone, it undoubtedly does. But it’s a secondary goal to running a successful business. A business which is now absolutely thriving in an awful worldwide economic environment.

If Apple wanted to boost its computer market share, it could do so in a heartbeat simply by slashing into its margins and chopping hundreds of dollars off its machines. That’s why those “I’m A PC” shopping commercials this summer were humorous. They’re attacking Apple for not competing in segments (low cost PCs) that it has absolutely no desire to compete in. Would those commercials be effective if Apple chose to sell a $500 MacBook? No, because Lauren probably would have bought it (remember, her first stop was the Apple store).

Most consumers obviously shouldn’t like the idea that a company is purposely charging more for its product to keep its margins high. But Apple has a winning proposition for that because it builds machines of such high quality that to many users it seems like they should cost more than they actually do. Or as Apple COO Tim Cook put it in a earnings call over the summer, “Our goal is not to build the most computers. It’s to build the best.” When you do that, apparently you can keep your margins high and in turn, make insane profits.

The iPhone is a bit different because Apple has a partner that it has convinced to pay it an insane amount of money for each device sold and then subsidize the cost of it for consumers. Remember that when the iPhone first came out it was $600. That’s the price Apple clearly felt comfortable setting for it to maintain what it thought was a good margin.

That price, of course, was ridiculous (though, admittedly, myself and plenty of others paid it). A few months later, Apple realized this too, and slashed a couple hundred dollars off the price, thus slashing it margins. But then they figured out a better way. Previously, they had been getting a cut of every monthly AT&T iPhone contract. But with the iPhone 3G, Apple decided to give all that money to AT&T in exchange for one upfront payment, and the promise that AT&T would subsidize the cost of the phone down to $199 (and $299). Jackpot.

So basically, Apple is now making a huge margin on every iPhone sold, while AT&T more or less picks up the tab. (Don’t feel too bad for them, they still make plenty on those monthly contracts.) Now you see why Apple doesn’t mind that exclusive agreement even while us consumers bitch to no end? There are 1.6 billion reasons why they like that deal (okay, probably some smaller percentage of that, but still).

And because Apple makes all of this money, they have money to pour into making that next great product. A product that will likely be high quality — and sell with a high margin. Hopefully some of that $34 billion in cash (with no debt) is being poured into finalizing the tablet as we speak.

This influx of profit also allows Apple to take the plunge into new markets, like it did with the iPhone. Earlier today, blogger John Gruber recalled what former Palm CEO Ed Colligan said when he heard that computers makers like Apple could enter the phone market:

“We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said. “PC guys are not going to just figure this out. They’re not going to just walk in.”

Not only did they walk in, they walked in, changed the landscape, and have what now appears to be the best business model industry-wide.

Just as with the computer industry, while all its rivals were busy jockeying for market share, Apple secured the high ground and figured out the best way to bathe in profits.

[images: Touchstone Pictures and flickr/jaci xiii]

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Details are scarce at the moment, but Microsoft, Cisco Systems and Telefónica Europe (O2) are said to be looking to buy the venture capital-backed company for a price ranging from $200M to $400M. We’re digging for more information.

Jajah was founded back in 2005 and in March 2006 introduced the world to a pretty decent consumer service that allowed cellphone users access Jajah’s low-cost calling system through their mobile devices, over the Web. Jajah went on to raise $28 million in VC funding from investors like Sequoia Capital, Globespan Capital Partners, Deutsche Telekom and Intel.

The Skype rival amassed about 10 million users when in April 2008 they announced a deal that would bring its premium voice services to nearly 100 million Yahoo Messenger users more. The deal proved crucial for Jajah, which connected its 1 billionth call last Summer. And that was before it turned to Twitter to spread the voice service even more.

Jajah says it currently serves over 25 million consumers and business callers in more than 122 countries, and provides calling access to more than 200 destinations globally. It’s unclear how much revenue it is generating from these users, but it’s apparently enough – or has enough potential to scale and grow – to make for an interesting strategical acquisition target for companies with deep enough pockets to engage in a bidding war.

It’s odd to see O2 mentioned as one of the companies who’s sitting at the negotiation tables, and I consider Microsoft and Cisco to be more likely buyers. Both of them sit on heaps of cash and are undeniably acquisition-hungry, and Redmond has the added benefit of having entered into a partnership with Jajah on enterprise IP communication solutions.

The price range seems to be on the high end, but that’s what happens when a bidding war goes the way the company that’s on the table (and its financial backers) would want it to go.

We’re cataloging this as a solid, plausible rumor for now and will update with more information / confirmation as soon as it comes in.

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Over the past few weeks, it’s definitely been crunchtime as we’ve been putting together the panels and demos for our Realtime CrunchUp on November 20 in San Francisco. After much back and forth, and with the help of our Realtime Board, we finally have an agenda we are very excited to present (see below). Get your tickets here.

Speakers will include Twitter COO Dick Costolo, Salesforce CEO Marc Benioff, Facebook VP of Product Chris Cox, Foursquare CEO Dennis Crowley, angel investor Ron Conway, FriendFeed co-founders (and now-Facebook VPs) Paul Buchheit and Bret Taylor. The CrunchUp will take place at the Intercontinental Hotel in San Francisco and will kick off with a big roundtable discussion and one-on-one interviews, followed by startup demos and panel discussions drilling down into geo streams, media streams, marketing, and venture capital.

If there is anything that is capturing the attention and excitement of the technology community right now, it is realtime streams. Twitter, Facebook, Google, Microsoft, and startups galore are all active in the realtime Web and will be at the event. Nearly 40 startups applied to fill ten demo slots for new realtime product launches.

But as more of us immerse ourselves in our Twitter and Facebook streams, and Foursquare check-ins, the need to filter out the noise is becoming acute. That will be a big theme, and we’ll hear about different approaches to do that ranging from better user interfaces to better realtime search. We are also seeing the emergence of new types of streams, particularly geo streams that tell everyone where you are at any given moment, and media streams that inject photos, videos, and other content beyond text into the the realtime conversation.

The CrunchUp will explore both the technological side of the phenomenon and the business side. These streams represent a new communications layer across the Web, as well as a platform for building products and startups. Come join us to find out where the stream is going next.

If you feel like your company can add to the few holes left in the agenda, please contact us at realtime [at] techcrunch [dot] com. Bloggers and journalists can request a press pass by contacting Daniel Brusilovsky.

The CrunchUp also provides an amazing sponsorship platform for start-ups and brands to reach both conference and networking attendees. Please contact Heather Harde or Jeanne Logozo to learn more about sponsorship packages and custom opportunities.

CRUNCHUP AGENDA

9:00 – 9:30 AM From RSS To Realtime: A Conversation With Twitter COO Dick Costolo

9:30 – 11:00 AM Roundtable: Filtering The Stream. Getting Rid of the Noise.

Facebook, VP of Product Chris Cox
Google, Google Fellow, Amit Singhal
Seesmic, CEO Loic Le Meur
Futurity Ventures, investor/entrepreneur Edo Segal
CrowdEye, CEO Ken Moss
Microsoft, GM of FUSE Labs, Lili Cheng
Facebook, VP of Platform, Bret Taylor
Thing Labs/Brizzly, CEO Jason Shellen
Angel Investor Ron Conway
MySpace, Chief Product Officer Jason Hirschhorn

11:00 – 11:15 AM Break

11:15 – 11:45 AM The Social Enterprise: A Conversation With Salesforce CEO Marc Benioff

11:45 – 12:30 PM Where Is The Stream Going? Tomorrow’s Killer Apps (Demos)

Hot Potato (event streams, launch)
Seesmic (a special surprise)
StatusNet (DIY microblogging, launch)
Stealth Startup (RT social address book)
Realtime Pitch From The Audience*

12:30 – 2:00 PM Lunch

2:00 – 2:45 PM Where Is The Stream Going? Tomorrow’s Killer Apps (Demos)

PlyMedia (new product launch)
Stealth Startup (live video streams)
Stealth Startup (RT news streams)
Tweetmeme (new product launch)
Rippol (video streams, public launch)
Stealth Startup (mobile noise assassin)
Realtime Pitch From the Audience*

2:45 – 3:30 PM Media Streams: Are These The Ultimate Marketing Vehicles?
DailyBooth, co-founder Ryan Amos
Ad.ly, CEO Sean Rad
Hollywood agent, Robin Bechtel (digital strategist for Britney Spears, Warner Bros. Records)
more
NewTek, SVP strategic development Philip Nelson

3:30 – 3:45 Break

3:45 – 4:30 Geo Streams: We Know Where You Are, Right Now
Foursquare, VP business development Tristan Walker
Twitter, director of platform Ryan Sarver
Google, Steve Lee, Group Product Manager Google Maps for Mobile and Google Latitude
SimpleGeo, founder Matt Galligan
Hot Potato, founder Justin Shaffer
Mixer Labs, CEO Elad Gil

4:30 – 5:00 Can We Kill Email Already? All Aboard The Micro-Message Bus
A discussion with Paul Buchheit (Facebook/Friendfeed/Gmail) and Rob Goldman, CEO Threadsy

5:00 – 5:45 PM Where The Realtime Rubber Meets The Road: When Does The Serious Money Come In?

Angel investor, Ron Conway
Microsoft, corporate VP for Strategic and Emerging Business Development, Dan’l Lewin
Charles River Ventures, VC George Zachary
Accel Partners, VC Andrew Braccia
Facebook/Friendfeed, Paul Buchheit

5:45 – 7:30 PM Realtime After Party

Tickets are on sale now. You can still get them for $395. Prices go up to $495 the week before the event.

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All layoffs suck, but letting Don go is a huge mistake for Microsoft. He nearly singlehandedly defends the Microsoft brand in a fairly anti-Microsoft developer and user community. For many people in the startup community, Don is the face of Microsoft. He travels constantly, speaking at events whenever he’s asked, and makes a big effort to give young startups the attention they deserve. This is a guy who gives a heck of a lot more to the community than he ever takes back.

Don has been an expert panelist at all three TechCrunch50 conferences. He has also written guest posts for us covering startup events we couldn’t attend personally.

His reaction to today’s news shows what kind of person he is. I reached him by telephone just an hour after he heard the news. And he didn’t have a bad word to say about Microsoft. He was more concerned that I not write anything negative about the company than anything else. Even after they turned their back on him, he was still on their side.

My opinion of Microsoft dropped a notch today. A big notch. Don invested years of his time making Microsoft seem more human, and there are very few people I respect more than this man. He wasted all that time, apparently.

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Under the agreement, Pasadena-based OpenX becomes a preferred partner to publishers for enterprise ad serving solutions and has agreed to promote Microsoft’s Content Ads monetization products and eventual future products to its own roster of web publisher customers.

OpenX said that publishers usings its recently launched OpenX Market and Ad Server products will be able to use MS’s Content Ads, and that the Redmond software giant will refer potential customers to OpenX.

Financial details of the advertising tech partnership, which has been in trial since August 2008, were not disclosed. Microsoft’s director of advertising business development Peter MacDonald did tell Reuters there will be the opportunity for both companies to make money in the deal.

OpenX, interestingly based on open-source ad-serving tech, claims it works with more than 150,000 independent sites that collectively serve more than 300 billion ad impressions a month. The company – formerly known as Openads – is led by former AOL CEO Jonathan Miller (Chairman) and ex-Yahoo exec Tim Cadogan (CEO). The company’s backed by over $30 million in funding, most recently having raised $10 million from a host of venture capital firms.

OpenX competes with companies like Google (which owns DoubleClick) and, notably, Microsoft because of its own aQuantive product.

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But this latest video almost had a very different tone. “I thought about writing them an anti-corporate anthem, something they could raise their tiny, furious fists to, but ultimately decided on this,” Mann tells us. Too bad, because that would be been awesome. It could have been “Another Brick In The Wall [Part 2]” for the 21st Century.

Representatives for Bing also wrote us after our “torture” post to point out the backstory about the students singing the Bing jingle. Apparently, they decided to do it on their own — or rather, their teachers decided to make them do it. Still, it’s very creepy. And as a number of readers pointed out, a little bit too much like Jesus Camp (trailer below Mann’s new video and the students singing his song).

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The main change is that Bing has been completely revamped for touchscreen smartphones and devices. Currently, this means the G1, the Verizon Imagio, the Samsung Omnia, the Zune HD, and yes, the iPhone. In its blog post, Bing even uses a picture to highlight how nice Bing Mobile looks on the Apple device.

The new interface is easy to navigate, offering tabs for different types of searches, and an easy way to clear old searches and start fresh. It also offers a nice, visual way of looking up movies. Visual search is one of the key things Bing has been focusing on to differentiate itself from Google.

For those users without these touch devices, Bing Mobile has some new features you can use as well. An easy-to-use flight status checker is nice, but the key new feature is the NFL search results. Now, with Bing Mobile, if you do a search for “Tom Brady,” you’ll get a player card at the top of the results with his picture, season stats, and previous and upcoming games this season. This is a nice feature for football season, and could actually drive some usage of Bing Mobile on Sundays.

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