He once called Twitter the poor man’s email. But to hear Google CEO Eric Schmidt today, one would be forgiven for thinking it’s the next big thing.

Schmidt’s comments on the microblogging site are picked over with the kind of meticulous care often associated with neurosurgery, simply because Twitter is often rumored to be a Google acquisition target.

On Thursday, In an apparent reversal of his earlier pooh-poohing, Schmidt declared Google to be open to some sort of advertising partnership with Twitter.

“Twitter proves innovation is alive and well in Silicon Valley, and it’s really come on-board very strong in the last year,” Schmidt told investors and analysts on a conference call after unveiling better-than-expected first-quarter earnings.

“To the degree they become successful, it could become a channel for real-time information, for which you can hang advertising products, whether it’s a text ad or video ad, off of it. I don’t know personally their strategy, but it strikes me that’s a logical strategy for them to pursue and something we would be happy to pursue.”

If not Twitter, anyone else?

“Well, I think the most important thing to say, that it (cash) is not burning a hole in our pocket. $2.2 billion of incremental cash will sit in nice space, low interest bearing accounts while the economic system works its way through the banking system and all of that,” Schmidt said.

“We continue to evaluate what we might do with the cash but our view at the moment is to remain very, very conservative and I don’t think that will change any time soon.”

Google remains the undisputed leader in U.S. Internet searches, but Microsoft can claim it is the fastest-growing, according to the latest figures from digital tally-keeper comScore.

Google claimed 63.7 percent of “core” U.S. internet searches in March, not counting mapping, directory or video sites like YouTube. That is up 0.4 percent from February.

Meanwhile, Yahoo and Microsoft, which are still umming and ahhing about combining their internet search efforts in some way, traded some gains and losses.

Yahoo, the No. 2 search engine, fell 0.1 percentage points to 20.5 percent while Microsoft gained 0.1 percentage points to 8.3 percent.

The consolation Microsoft can take is that it is the fastest-growing player in a still burgeoning business. Overall core searches in the United States rose 9 percent in March from the previous month, to 14.3 billion.  Microsoft outstripped that with an 11 percent increase in searches on its sites, nosing ahead of Google’s 10 percent growth and Yahoo’s 9 percent.

Clearly that’s not enough of a difference to threaten Google, but it might be a sign of momentum that emboldens Microsoft to take the plunge with Yahoo and have a tilt at the top spot.

ComScore’s March figures are available here.

Are Microsoft and WPP gearing for an asset swap?

Advertising Age’s Abbey Klaassen is reporting that the two companies — criticized for overpaying for their respective digital advertising acquisitions — have rekindled six-month-old discussions to scratch each others itch.

Microsoft may possibly be seeking to shed its Avenue A/Razorfish, one of the units of aQuantive it purchased last year in a $5.9 billion deal. Avenue A accounted for about 60 percent of aQuantive’s revenue. But getting anywhere close to $3.5 billion would be far-fetched. The division’s market value is close to $800 million, Klaassen calculates.

Enter WPP’ s Martin Sorrell, who has also sought to unload Open AdStream, the ad-serving division of 24/7 Read Media, which WPP purchased for $649 million.

The hitch: Sorrell sees m&a activity in emerging markets like China, not the United States.

Keep an eye on:

• Merrill Lynch may seek to revise its contract with MGM to see if the studio violated any terms by “axing” Paula Wagner as UA’s CEO (NY Post)
• Beijing Olympics were a big ratings success for NBC, but profit estimates of as much as $100 million are too high. (FT)
• Consumer electronics companies want your TV to talk to your fridge. (NYTimes)

(Photo: Reuters / WPP’s Martin Sorrell)

Even before a deal to bankroll Steven Spielberg and David Geffen’s new studio has closed, India’s Reliance ADA Group is now on the hunt for U.S. mobile content publishers including game makers, according to the Wall Street Journal.

“The thought is to build a distribution model across the world,” Rajesh Sawhney, president of Reliance Entertainment, a unit of Reliance ADA, told the Journal. “For the content we’re acquiring now, we want to exploit it globally.”

Reliance hired Silicon Valley consultants VSC Consulting to scout out targets. The Mumbai-based conglomerate is also seeking to license content from big producers. This all comes on the heels of signing deals with eight Hollywood production house run by the A-listers George Clooney, Tom Hanks and Brad Pitt.

The latest suggests Reliance has cast its gaze beyond Hollywood.

Keep an eye on:

• Beijing Olympics attract record viewers. (Reuters)
• China TV companies are expected to pay at least 10-times more for the rights to broadcast the Olympics. (FT)
• Hulu reaches 105 million video streams in July. (paidContent) Hulu selects Crispin Porter + Bogusky. (AdWeek)

(Photo: Reuters / Reliance ADA Chairman Anil Ambani)

Progress?

Video games company Electronic Arts has just updated Wall Street on the latest stage in its drawn-out $2 billion bid for Take-Two Interactive Software with news that it will allow its tender offer to expire at midnight New York time.

But Take-Two, maker of the Grand Theft Auto video game franchise, said it is now willing to provide a management presentation to EA containing non-public information in connection with the bid such as its three-year product release schedule and financial projections.

EA and Take-Two’s chief executives exchanged letters over the weekend and had a phone conversation on Friday.

Here’s an excerpt from Take-Two chairman Strauss Zelnick’s letter to EA Chief Executive John Riccitiello dated Aug 17:

The Company has made significant strides since EA first expressed interest in the Company….I believe our presentation will enable you to understand better the value of our Company to EA.

 Here’s an excerpt from Riccitiello’s Aug 18 response:

We no longer believe we can integrate Take-Two ahead of the important holiday season….we  require due diligence to support a transaction and are therefore letting the tender offer expire tonight. However, we are pleased to accept your offer to review your management presentation as outlined in your letter.

(Photo Reuters)

Keep an eye on:

* Wal-Mart to sell rock band AC/DC’s album exclusively. (Wall Street Journal)

*US Federal Communications Commission will decide next month if it plans to employ unused TV channels to provide cheap high-speed Internet networks. (Wall Street Journal)

*NBC has been a surprise winner at the Olympic Games in Beijing. (New York Times)

Is silver-haired media investor Mario Gabelli playing matchmaker?

In an interview, he says that it’s about time Cablevision get down to business and hook up with Time Warner Cable. Gabelli, who runs hedge fund Gamco Investors,  a top Cablevision shareholder, tells Bloomberg the family run cable operator and networks company should be “making love with Time Warner Cable.”

Gabelli’s proposal goes much further than the potential moves proposed by Cablevision CEO Jim Dolan. Not content with just a stock buyback or a dividend or even just spinning off some businesses, Gabelli suggests Cablevision should do nothing less than break up the company and hand over the cash to shareholders.

It’s no secret how Time Warner Cable has coveted Cablevision’s New York area cable systems. On more than several occasions over the past decade, Time Warner has held talks to varying degrees to snatch the systems.

From Bloomberg: “They have made a commitment to follow through,” said Gabelli, who two days ago called on Cablevision to sell Rainbow and use the money to buy back stock. “If they don’t, there are board seats available.”

We bet he’ll be pressing his case at a series of investors meetings the Dolans are planning to hold with top investors.

And how happy would he be if Jim Dolan came through this time?

Bloomberg: Breaking up the company would be “like hitting a grand slam home run in the bottom of the ninth inning of the seventh game of the World Series,” he said.

(Photo: Reuters)

TechCrunch’s report on AOL’s “sunsetting” of Xdrive, AOL Pictures, MyMobile and Bluestring spread like wildfire yesterday, at a time when the future of its ownership hangs in the balance.

Are these latest actions in anticipation of an AOL sale? Actually AOL’s been trimming for some time. Who hasn’t, given the state of the economy. You just haven’t noticed.

About 50 products including a video download service, a 10-foot UI experience (Internet in the living room), AIM phone line, and Tegic, have been “sunset”, we’re told.

Here’s AOL EVP Kevin Conroy’s memo to employees, dated July 14, from TechCrunch, which we also independently verified:

There was a time at AOL when the strengths of our aggregate portfolio of products more than compensated for the weakness of an underperforming product. The realities of the industry and market shifts in online advertising no longer make that possible. Simply put, every product makes a direct impact on our bottom line. With two quarters behind us, it is fair to say that results across the AOL products team have been mixed.

Personal Media: Bluestring, Xdrive and AOL Pictures will be sunset. These consumer storage products haven’t gained sufficient traction in the marketplace or the monetization levels necessary to offset the high cost of their operation.

We’ve always wondered whether AOL had too many irons in the fire. Yesterday’s TechCrunch scoop is just the latest in a long string of trimming actions that are not only considered rational given the state of the economy, but also in line with others considering the industry-wide belt-tightening. Even Google has dialed back spending like “drunken sailors” to borrow Bernstein’s Jeff Lindsay’s words.

Arrington further speculates on Conroy’s future. We’re hearing from sources that Kevin’s not leaving any time soon. Rumors of his departure have dogged Conroy for years. Still not true. Conroy, who has been responsible for e-mail, software products, radio, video, Apple-related products and mobile, will continue to do so. Nothing changes.

The memo follows on the heels of TechCrunch’s reporting earlier yesterday about budget cuts at AOL’s blogs division, with some bloggers being told to stop working for a couple of weeks. Before you hyperventilate — Engadget won’t be affected.

Also, an AOL source tells us that the budget trimming does not reflect a cut back in blogs, but mainly affected its stable of freelancers and was designed to meet budgets that shot past projections.

From the memo to blog staffers:

The most important point I want to make is that the Weblogs budget is
NOT being cut. Rather, our situation is one in which, over the past
several months, our post rates and costs have increased significantly
faster than expected. As such, we are now in a position of
significantly exceeding our 2008 budget unless we take measures to
slow down our posting costs until we can get back into line with our
budget.

It’s really that simple, and there is absolutely nothing grave about
the situation. In fact, the Weblogs budget has increased
significantly in each of the past two years, and we expect it to
increase again in 2009. Why? — because our business is thriving both
in terms of Revenue and traffic, which bodes very well for our future.

It seems Time Warner’s ongoing discussions with Yahoo and separately with Microsoft over an AOL deal has now amplified every move the Internet unit makes.

Keep an eye on:

• DVDs getting more, not less, retail floor space. (Pali Research) (subscription required)
• Fox reaches deal to invest in digital cinema. (Reuters)
• Once media-shy Taliban go hi-tech in propaganda war. (Reuters)

(Photo: Reuters / AOL CEO Randy Falco)

Microsoft’s president of platforms and services Kevin Johnson, who spearheaded the company’s pursuit of Yahoo, plans to bolt for the top job at nearby Juniper in a move that deals a setback to the software giant’s online chase after Google.

AllThingsD’s Kara Swisher comes up with a shortlist of candidates from her sources that include a roster of insiders, led by aQuantive’s Brian McAndrews, with SVP Satya Nadella, who will run search, MSN and ad platform engineering efforts in a new reorg, and Strategic Partnerships SVP Yusuf Mehdi, who has previously led online businesses at Microsoft, considered long shots.

Heading the list of external candidates is former AOL Chief Jon Miller, who also happens to be a candidate for Yahoo’s board after activist investor Carl Icahn settled with Yahoo this week.

For a guy who was unceremoniously ejected out of Time Warner, Miller, now a partner at tech investment firm Velocity Interactive Group, is emerging as the prettiest girl at the dance.

(AllThingsD)

Keep an eye on:

• NBC, Fox sue video-sharing service Redlasso for copyright infringement. (Reuters)
• Google launches Knol, a wiki with bylines. (Reuters)
• Barack Obama losing his YouTube mojo? (Silicon Alley Insider)

(Photo: Reuters)

Is Yahoo letting the fox in the hen house or did activist investor Carl Icahn settle after eyeing weakness in his campaign?

Whatever the case, Yahoo’s settlement with Icahn, who had planned to run a rival board slate but now gets three board seats including himself and possibly former AOL Chief Jon Miller, averts what was expected to be a bloody battle on Aug. 1.

Miller, who was pushed out of the Time Warner division, was responsible for turning the subscriber-losing AOL into an Internet company after dismantling its walled garden.

Left unanswered: What will Microsoft say later today? Did Icahn get assurances from the software giant that it would be willing to negotiate any deal with Yahoo in the new board configuration?

(Reuters )

Keep an eye on:

• Macrumors.com founder Dr. Arnold Kim quits medical practice to blog full time. (NYTimes)
• Facebook to get redesign to give users more control. (Reuters)
• Batman smashes Spider-Man’s weekend box office record. (Reuters)

We can spend a lot of time analyzing how Yahoo really feels about Carl Icahn and his rival slate. But this, found at the top of Yahoo’s latest proxy filing and its homepage, says it all.

(Photo: Yahoo)