If you want to take a bite out of Apple’s piece of the staggeringly huge (but difficult to quantify in $$$ terms) smartphone market pie, you’d better either have the magical new “thing” or be willing to spend to buy it.

As Anupreeta Das reports, Palm – one of the stalwart originals in the mobile handset space -- has remade itself into a terrific target with the success of its Pre. Palm’s stock got a jolt this week on talk that Nokia could be considering a bid. But as she explains, Palm may prove to be too pricey a purchase, even for those with deep pockets.

Since introducing the Pre, Dell, Microsoft, Nokia and Motorola have been mentioned as possible suitors. If one of these cash-rich companies was to bid for Palm today, it would be targeting a stock that has quadrupled this year. Complicating matters, “details on how many units it has sold are skimpy, making it difficult to value the success of Palm's turnaround story,” she reports.

Palm's market capitalization is $2.4 billion. Based on the average 34 percent premium that technology, media and telecommunications companies have been sold for this year, according to Thomson Reuters data, this means a price tag of about $3.2 billion.

Dell is already in the early stages of buying up Perot Systems, but will still have nearly $7 billion in cash on hand should it choose to go on a spree. Microsoft, while a cagey customer, as shown in its dealings with Yahoo, has buckets more. For big tech players, the price itself is not the problem.

“To them, Palm is a thousand-dollar used model locomotive. Now you have to buy the other cars, and the tracks, and fake trees, etc. You have enough to pay for it, but you don’t even know if it works properly,” said a guy here at Reuters when the subject was being kicked around.

Thousands of Microsofties yucked it up at the expense of rival Apple at their annual get-together at Seattle’s Safeco field on Thursday.

Saturday Night Live star Seth Meyers set about the old foe, which had its own festival of self-congratulation yesterday.

“Who at Apple let an 8-year-old girl name their new operating system Snow Leopard?,” Meyers asked, according to one employee spreading the good word on Facebook. “What, was Unicorn taken? Was Pony not available?”

Fair point, perhaps. But what’s this? A preview of the first TV ad for Microsoft’s new Windows 7 operating system, airing on prime time tonight. It features a young girl and a — admittedly kitsch — unicorn.

-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --

The fate of Yahoo Inc has become intertwined in the public's imagination with the success or failure of its dealings with Microsoft Corp in recent years.

That's despite the fact that as much as 70 percent of the value investors put on Yahoo's depressed shares are tied up in its international assets or cash holdings -- factors that have nothing to do with Microsoft.

Yahoo's operations trade for just $5 to $6 per share out of its current $15 share price, once you exclude its Asian investments and the value of its cash. Its hidden assets in Japan and Chinese affiliates -- Yahoo Japan Corp and China's Alibaba Group -- alone are worth around $6 to $7 per share.

The trouble is that Yahoo needs to find a way to cash out of its increasingly rocky relationship with Alibaba Group, in which it holds a 39 percent stake after it pulled back from operating its own business in China in 2005.

Yahoo's best chance here may come next year if Alibaba succeeds with a second IPO of its Taobao.com consumer ecommerce site, building on the success of the 2007 IPO of Alibaba.com, now valued at more than US$13 billion on the Hong Kong exchange.

Truth be told, Yahoo's huge success in building the biggest U.S. Internet media destination never translated very well overseas, despite the early foray into Asia that left it with lucrative assets in Japan and China. These passive investments came to substitute for a global operating strategy.

But that's changing now, as Yahoo once again has begun investing in international operations it can fully control.

In its latest such push, Yahoo said on Tuesday that it would buy Maktoob.com, the largest Internet media site for the Arab world, with an estimated 16.5 million users. Terms were not disclosed.

Yahoo's international stronghold is Asia, where it had 172 million unique users in the month of June, according to industry estimates. It is the top player in Japan through its stake in Softbank-controlled Yahoo Japan, and is dominant in Taiwan and Hong Kong as well.

In India, Yahoo has the most visited home page and is the most popular provider of e-mail, instant messaging and online news to consumers. In a country mad on the sport, Yahoo operates the most popular site for cricket fans. Yahoo had 23 million unique monthly users in India in June, according to market researcher comScore.

But Yahoo stock gets little to no stock market credit for these international operations. Converting market share into meaningful financial results will take years. First, Yahoo must develop its patchwork of leading properties in places like the Philippines and Vietnam and Latin America into a global franchise. And it's hard to see how Yahoo can regain lost ground in Europe's more developed Internet markets.

Until now, the trap for Yahoo has been that much of its international value remains latent, locked up in investments in Japan and China rather than in operating businesses it controls. That is changing, slowly.

This leaves Yahoo at the mercy of an eventual rebound in U.S. advertising markets. For the foreseeable future, any significant rebound in Yahoo's share price depends on conjecture over the still unknown potential of getting into bed with Microsoft.

-- At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article, with the exception of a token Yahoo share. He may be an owner indirectly as an investor in a fund. --

The long-anticipated price cut on Sony’s PlayStation 3 video game console might have come just in the nick of time, as industry sales continue to wilt in the heat of summer. Both game hardware and software sales have been flagging, but console price cuts typically spur game sales.

Sony took the PS3’s price to $299 from $399, and the company sounded bullish on its prospects for the holiday selling season.

“With this price move, we’re extremely confident,” said Jack Tretton, CEO of Sony Computer Entertainment America, in a interview. “I don’t think there’s anything more that we could realistically ask for in terms of putting us in a position to be successful this holiday, I really feel like everything’s lined up for us.”

Sony’s PS3 has languished in third place in U.S. home console sales, trailing Nintendo’s Wii and Microsoft’s Xbox 360, both of which carry lower price tags. While many analysts say the PS3 is the most  technologically advanced and powerful of the three systems, the $400 price tag in the depths of a recession was a tough sell. U.S. video game equipment and software sales fell 29 percent in July. Activision’s CEO even threatened to stop making games for the PS3, due to high costs and poor sales.

But Tretton said the home console cycle lasts for 10 years, making for a long race. “We’ve kind of kept out guard up and kept our powder dry and now we’re coming out with both fists swinging. We feel like we’ve weathered some significant competitive blows and now we’re great position to land a knock-out punch.”

“I think our competitors have had success in the case of Wii with the innovation and social aspect of the game play, but that seems to be wearing a little bit thin right now, and Microsoft seemingly pulled out all the stops last year, stripping down their machine and hitting that $199 price point on their base device.”

“If you follow this industry and follow where retail sales are generated it’s much like the football season, everything before holiday is pre-season and the numbers really don’t count. But when your get into the fall that’s when the majority of the sales are done, and we really wanted to time this announcement to take advantage of the fall selling season.”

Suddenly, after limited news over the past year, Epix has been very much the talk of the town in recent days. A number of publications, including Reuters, have picked up on some announcements out of the pay TV site jointly owned by Paramount, Lions Gate, and MGM.

The key bit of news, of course, was the announcement that it had reached its first distribution deal, with Verizon. Chief Executive Mark Greenberg suggested to us that other deals should be coming soon — that he is talking to everybody and “some are further along than others.”

This is key, in the eyes of Wall Street. Distribution deals are always a bit tricky, and even tougher in the current economic environment. But analysts want to see Epix sign a deal with one of the big players — one with a ton of subscribers. We’re talking about Cablevision, Comcast, Time Warner Cable, DirecTV. So far the reaction has been a little lukewarm from some of the big boys but that could just be a negotiating tactic.

That aside, there have been some other relatively significant bit of news. In case you missed…

• Epix will be launching in October, though hasn’t announced an official date. Sounds like they could be planning some sort of “event” or “special” to kickstart the channel

• The epixHD.com web site, which we’ve seen, is going to launch earlier.  It’s currently in beta, and looks good. Has some of the feel of Hulu.com

• Epix, which will be home to some 15,000 films, including titles like “Iron Man” and “Star Trek” and the James Bond movies, just signed a content deal with independently owned Samuel Goldwyn Films.

• Other content deals will likely follow, but Greenberg seemed doubtful that any full, equity partners would be brought on board.

• While most pay-TV channels air films about 12 months after the hit the theaters, Epix is planning to roll its out in 9-1/2 months (helps to be owned by the studios).

Still, none of this matters all the much without distribution. We’ll keep you posted.

Keep an eye on:

• In other news on Monday, Dish Network’s stock is jumping. The reason? For the first time in over a year the company added subscribers — impressive in the current climate. (Reuters)

• Bon Voyage. As expected, Microsoft has sold the Razorfish ad agency to France’s Publicis. (Reuters)

(Photo: Reuters)

Video compression technology can be interesting, really.

Most people forget how online video worked before YouTube popularized the embedded Flash video player. Remember the frustration of making sure you had the right video player to play this or that web video? It was YouTube that popularized giving people one-click access to videos.

On Wednesday, Google said it had agreed to acquire On2 Technologies, a maker of video compression technology, in a deal that could have sweeping effects for how video works on the web. The Internet search leader has a bland blog post about how it intends to use On2 to innovate in how video working on the Web, but it isn't at all clear how far it Google is ready to go.

There's lots of speculation that Google may choose to open source, or give away, On2's video compression technology, undercutting royalty-bearing video compression technologies in use across the Web. That could undermine Adobe and its widely used Flash player, Microsoft, with its Silverlight alternative, not to mention Apple Inc and RealNetworks. Dan Frommer at Silicon Alley Insider spells out how far-reaching the Google gambit could be.  As a counterpoint, Dan Rayburn of StreamingMedia.com argues the Google move is no big deal.

Google is only paying $106.5 million in stock for the American Stock Exchange listed-firm based in Clifton Park, New York. Because the deal involves two public companies, there's an outside chance that a competitor may want to mount a rival bid. The On2 board would have to consider a richer bid for fiduciary reasons. Google might have more on its hands that it bargained for.

(Images: Beet.tv, Google Finance)

Better luck next year for Android
Taiwanese smartphone maker HTC has warned of a revenue shortfall, saying it has too many new phone models chasing too little revenue. Revenue growth will turn negative in 2009, instead of growing 10 percent, as the company had previously forecast.

Chief Executive Peter Chou says: "Momentum on both the Windows Mobile and Android platforms are also turning out to be weaker than expected."

HTC said it is boosting its marketing spending to more than 15 percent of revenue from 13.5 percent to fend off market leader Nokia and the Apple iPhone juggernaut.

My favorite line:  "Investors have been relatively bearish on the company this year, with HTC's shares having risen about 36 percent so far, far lagging the 54 percent advance on the TAIEX share index."

Bharti looks ready to raise price for MTN
Bharti Airtel and MTN have agreed to a month-long extension to merger talks to seal a deal that would create the world's third largest mobile phone company in subscriber terms.

This looks like the prelude to Bharti raising its bid for MTN, answering resistance to the deal by investors in the South African company. It all follows weeks of jockeying by Bharti to line up funding with banks and key shareholders.

The merger appears to be moving ahead despite signs of growing worker unrest in MTN's homeland. Over the weekend, South Africa's Communication Workers Union said workers at the fixed-line operations of Telkom SA will hold a two-day strike this week.

Shareholder alignment
The Times reports that Virgin Media is considering a secondary listing in London, seeking to cure the decade long mismatch between the entirely UK-focused broadband business and its U.S. listing on Nasdaq. It's all a hangover from the American origins of its bankrupt predecessor, NTL.

Communion wafer apology
From Canada, newspaper backtracks on saga over communion wafer.

The saga started here, nearly a month ago.

The newspaper's apology both to Canada's prime minister and to its own reporters:

The apology in context, thanks to Parker Donham and his blog, Contrarian.

(Photo credits: Reuters, Albert Gea, Barcelona; Google Finance stock chart; Reuters/Ajay Verma, Chandigarh)

Never one to let an opportunity pass to tweak a competitor, Microsoft CEO Steve Ballmer got off a few zingers at long-time rival Apple at the software giant’s analyst meeting on Thursday.

“Share versus Apple, you know, we think we may have ticked up a little tick, but when you get right down to it, it’s a rounding error,” he said. “Apple’s share change, plus or minus from ours, they took a little share a couple quarters, we took share back a couple quarters. But Apple’s share globally cost us nothing. Now, hopefully, we will take share back from Apple, but you know, Apple still only sells about 10 million PCs, so it is a limited opportunity.”

Shipments of Apple’s Mac PCs rose 4 percent in the June quarter, while the global PC market shrank 5 percent, according to Gartner.

Ballmer also touched on the advertising war that has blossomed between Microsoft and Apple, and said the Windows ads have proven to be “quite effective”:

“Starting about two years ago, I started to get the question, what’s up with the Apple ads? It was one of the few places where I had a lot of investors pushing me to spend money as opposed to constrain the spend of money. Well, those folks ultimately won.”

Microsoft, of course, also plans to open its own chain of branded branded stores, some right next door to Apple’s outlets.

Watch Microsoft’s Robbie Bach getting out of breath playing a wall-demolition game using Xbox’s new Natal technology, which works entirely on body gestures rather than a hand-held controller. (Click on the video and scroll onto 23:30)

Bach, head of entertainment and devices, demoed the new system at Microsoft’s annual financial analyst meeting in Redmond, Washington. There is still no date set for its commercial release.

The company hopes the new technology will vault it past Nintendo’s all-conquering Wii and rival Sony’s PlayStation.

Ah, the morning after.

Microsoft and Yahoo have finally come to an understanding, putting to rest what seemed like an endless back-and-forth (As Barry Diller said yesterday,  “We’re not going to have to talk about whether or not it’s going to happen anymore).

In case you were at the beach, on the golf course, riding your bike, or hiding out in a cave yesterday, here are the very basics: It’s a 10-year Web search deal; doesn’t include display; Microsoft will the guarantee revenue per search for the first 18 months; Yahoo expects deal to boost income by $500 million and save about $200 million in capex; Microsoft will pay traffic acquisition at an initial rate of 88 percent; Yahoo will act as the global sales force for both companies’ premium search advertisers; etc. etc.

Just about everyone has weighed in on the deal, and more analysis is certain to come in the days ahead. In the meantime, here’s what we see as a few key questions about the deal.

Will it get regulatory approval? Tough call. It certainly will get a close look, given the high-profile names of the companies involved. And, remember, it leaves really only two major search engines rather than three. On the other hand, is the market really competitive at the moment? And won’t Google just keep extending its lead — and hurting competition — if Yahoo and Microsoft don’t get together? “Without this deal, I think it would be really unlikely that you’d have a market with three robust search providers in 10 years,” said Beau Buffier, an attorney with Shearman & Sterling LLP. (More here from Reuters)

What do advertisers and media buyers think? Most appear, at first blush, to be happy with the deal. Having one dominant search player — Google — makes it tough for the advertising community. So they seem to welcome the idea of some competition. Plus, it simplifies life for media agencies. “”This is extremely encouraging and introduces more balance into the search and display markets,” said Sir Martin Sorrell, chief executive of British advertising group WPP. “It is good for our clients and our agencies and for regulators.” (More here from Reuters)

Can Yahoo and Microsoft put their differences aside? This is always a major hurdle in joint-ventures, partnerships and mergers. It could be especially difficult in this case, given the fiercely competitive nature of both companies. What’s more, in the case nobody is fully in control, unlike a takeover, where, it may be ugly, but one company can impose its will on another. “It ties them together but in a complicated way with no long-term certainty and limited control,” said Ryan Jacob, chief investment officer of Jacob Asset Management, which owns Yahoo shares. (More here from Reuters)

Who came out on top? This will be the big one — at least in dinner party circles.  The early opinion seems to be Mcrosoft (particularly if you want to use stock market performance as a gauge). True, Yahoo is getting a big 88 percent of revenues from sending queries to Microsoft, it will cut spending, and increase operating income. But what about the company itself? Is banking on display advertising really a smart move? Are they locked into a strategic no-man’s land for the next 10 years? As BreakingViews put it, “This turns Yahoo into a company oddly reminiscent of the Internet also-ran AOL.” Reuters columnist Eric Auchard offered a similar comparison, writing “For Yahoo shareholders, it’s value destruction not seen since the misguided merger of America Online and Time Warner at the peak of the dot-com era.” (More here from Reuters)

Keep an eye on:

• Believe it or not, there is other news in the media world. For instance, Cablevision has approved the spinoff of its Madison Squarter Garden unit (Reuters).

• Sony had a tough quarter, reporting a big loss. Again. But the company says better times may be in sight.  (Reuters)