That’s a lot of videos! As usual, no word on financials, profitability, etc. But there is plenty of congratulatory back-slapping here and here.

Best part, by far: A brief anniversary message from Conan O’Brien, in which the comedian connects YouTube’s rise with America’s decline: “Nobody actually makes anything anymore. We’re all watching monkeys in propeller hats flush themselves down a toilet. And that’s why India is kicking our ass. And China, and pretty much everyone else. Switzerland, kicking our ass. Guam, way ahead of us.”

And he effectively sums up Web economics, or lack thereof:
“That’s not the point of the internet. It’s not to make money. It’s for someone you’ve never met, who’s a nerd, in Palo Alto, to make money.”

O’Brien also offers up his five favorite YouTube clips. Here are four of them. To see the fifth (something inscrutable and German) you’ll have to visit the site. If you’re time-pressed, definitely go with the cat.

“The PC took computing out of the back office and into everyone’s office. The Tablet takes cutting-edge PC technology and makes it available wherever you want it, which is why I’m already using a Tablet as my everyday computer. It’s a PC that is virtually without limits–and within five years I predict it will be the most popular form of PC sold in America.”

– Bill Gates, Nov. 11, 2001

Microsoft (MSFT) Chairman Bill Gates has long been an evangelist for tablet PCs, but he’s not impressed by Apple’s (AAPL) new variation on the device, the iPad. In an interview with BNET, Gates–who evidently finds the iPad neither magical nor revolutionary–diplomatically dismissed it.

“You know, I’m a big believer in touch and digital reading, but I still think that some mixture of voice, the pen and a real keyboard–in other words a netbook–will be the mainstream on that,” Gates said. “So, it’s not like I sit there and feel the same way I did with iPhone where I say, ‘Oh my God, Microsoft didn’t aim high enough.’ It’s a nice reader, but there’s nothing on the iPad I look at and say, ‘Oh, I wish Microsoft had done it.’”

Not yet, you don’t. Keep in mind that Gates said essentially the same thing about the iPod in 2004, only to launch the Zune two years later.

“There’s nothing that the iPod does that I say, ‘Oh, wow, I don’t think we can do that,’” he said. “There’s often, early in the new market, a few products that help get the category to critical mass. In the long run, people are going to buy what gives them the right price, performance, and capabilities. And does everybody want to have exactly the same thing? Probably not.”

Today, it’s Sun co-founder Scott McNealy who is bidding farewell. Sources close to the company tell me that he too will leave Sun following the close of Oracle’s $7.4 billion buyout.

Word of McNealy’s fate comes a day before Oracle is to unveil its strategy for Oracle (ORCL) and Sun (JAVA) at an event tomorrow.

McNealy’s farewell memo to employees, below.

Gang,

When I interviewed many of you for employment at Sun over the years, one commitment often made was that things will change above, below, and around you faster than any place you have ever been. Looks like this was one area we exceeded plan for 28 years. While it was never the primary vision to be acquired by Oracle, it was always an interesting option. And this huge event is upon us now. Let’s all embrace it with all of the enthusiasm and class and talent that we have to offer.

This combination has the potential to put Sun, its people, and its technology at the center of yet another industry and game changing inflection point. The opportunity is well documented and articulated by Larry and the Oracle folks. Not much I can add on this score. This is a very powerful merger. And way better than some of the alternatives we were facing.

So what do I say to all of you now this is happening?

It turns out that one simple message to the large and diverse Sun community is actually quite hard to craft. Even for a big mouth who is always ready with a clever quip. The community includes our resellers and customers, our current and former employees, their friends and families who supported our employees on their mission to change the industry, our investors, our supply and service partners, students and educators, and even our competitors with whom we often collaborated.

But let me try. Though nothing I could write comes close to matching the unbelievably strong and positive emotions I have for you all. See, I never was able to master dispassion. I truly loved starting, running, and living Sun. And the last four years have not been without serious withdrawal. And the EU approval rocked me more than it should have.

So, to be honest, this is not a note this founder wants to write. Sun in my mind should have been the great and surviving consolidator. But I love the market economy and capitalism more than I love my company.

And I sure “hope” America regains its love affair with capitalism. And except for the auto industry, financial industry, health care, and some other places (I digress), the invisible hand is doing its thing quite efficiently. So I am more than willing to accept this outcome.

And my hat is off to one of the greatest capitalists I have ever met, Larry Ellison. He will do well with the assets that Sun brings to Oracle.

What we did right and wrong at Sun over the years might make for interesting reading. However, I am not a book writer. I am a husband, father of four, and a builder and leader of people who want to make a difference.

But spare me a bit of nostalgia. Not of the mistakes we made, and lord knows I made a ton. But of the things we did right and well.

First and foremost, Sun innovated like crazy. We took it to the limit (see Eagles). And though we did not monetize our inventions as well as we could have, few companies have the track record in R&D that we had over the last 28 years. This made working at Sun really cool. Thanks to all of you inventors and risk takers who changed how we live.

Sun cared about its customers. Even more than we cared about our own company at times. We looked at our customer’s mission as more important than ours. Maybe we should have asked for more revenue in return, but our employees were always ready to help first. I love this about Sun which I guess makes me a good capitalist if not a great capitalist.

Sun did not cheat, lie, or break the rule of law or decency. While we enjoyed breaking the rules of conventional wisdom and archaic business practice and for sure loved to win in the market, we did so with a solid reputation for integrity. Nearly three decades of competing without a notable incident of our folks going off course morally or legally. Not all executives and big companies are bad. Really. There are good companies out there. Special thanks to all of my employees for this. I never had to hide the newspaper in shame from my children.

Sun was a financial success. We paid billions in taxes, salaries, purchases, leases, training, and even lawyers and accountants for devastatingly cumbersome SOX and legal compliance (oops, more classic digression). Long term and smart investors made billions in SUNW. And our customers generated revenue and savings using our equipment in countless ways. Many employees started families, bought homes and put them through school while working at Sun. Our revenues over 28 years exceeded $200B. Few companies make it to the F200. We did. Nice.

Sun employees had way more fun than any other company. By far. From our dress code (“You must!”) to beer busts to our April Fools pranks to SunRise to our quiet enjoyment at night of a long hard well done day of work, no company enjoyed “work” more than Sun. Thanks to all of our employees past and present for making Sun such a blast.

I could go on for a long time reminiscing about the good and great stuff we did at Sun, but just allow me one last one. We shared. Not the greatest attribute for a capitalist. But one I could not change and was not willing to change about Sun while I was in charge. We shared in the success of Sun with our resellers. With our employees through stock options, SunShare, beer busts, and the like (for as long as Congress would allow) and through our efforts to keep as many of them on board for as long as possible during the inevitable down cycles. With our partners through the Java Community Process, through our open source collaborations, and licensing strategies. With our customers through our commitments to low barriers to exit. Sun was never just about us. It was about we. And that may be a bit of the reason we are where we are today.

But I have few regrets (see Sinatra’s “My Way”) and will always look back at Sun and its gang with only pride. Enormous pride. You are the best this industry ever had though few outside of Sun recognized it.

And what we are about will live on in Sparc, Solaris, Java, our products, and our spirit. Well past everyone’s recollections of what we did together. I will never forget though.

Oracle is getting a crown jewel of the technology industry. They will do great things with Sun. Do your best to support them and keep the Sun spirit alive and well in the industry. Our children will be better for it.

Thanks for the off the charts support to everyone who ever carried a Sun badge, used our products, or helped our company through the years.

And thanks to my wonderful wife, Susan, who gave this desperado (see Eagles) a chance to choose the Queen of Hearts before it was too late.

Someday, hopefully, you will all get to see or meet her and my other life’s works named Maverick, Dakota, Colt, and Scout. If you do, perhaps you will understand why I stepped back from the CEO role four years ago. And why I feel like the luckiest guy in the whole world.

My best to all of you, and remember: Kick butt and have fun!

Scott

FURTHER READING:

• Sun CEO Set to Resign
• Sun CEO: Go Oracle, Beat IBM [Internal Memo]
• EU Approves Oracle-Sun Deal
• EU Poised to Approve Oracle-Sun Deal
• Oracle Sack Half of Sun’s Workforce? Ridiculous, Says Sun.
• Q: What’s the Difference Between Neelie Kroes and Larry Ellison?
• Ellison: Oracle Is the New IBM
• Oracle: IBM, Come Out to Play-ee-ay
• Mr. Ellison Asks That His Burgers Be Served With Freedom Fries Until Further Notice

Live in New York City? Want to buy an iPhone? Don’t try ordering one from AT&T’s Web site: The wireless carrier, at least for now, won’t sell New Yorkers a new phone online, citing “increased fraudulent activity.”

But residents of Manhattan and the city’s other four boroughs can buy an iPhone directly from AT&T (T) stores. And the city’s five Apple (AAPL) stores will sell you one, too.

So what gives?

An initial report from Consumerist.com, quoting an AT&T online service rep, suggested that the carrier shut down online sales because “New York was not ready for the iPhone” and that the city doesn’t “have enough towers to handle the phone.”

That answer might strike a chord with New York iPhone owners who gripe about the carrier’s capacity. But it strains credulity: Would AT&T really try to resolve its iPhone problem by hampering iPhone sales–and not tell anyone in advance? And if so, why not choke off online sales in San Francisco and the Bay Area, where heavy iPhone use also strains the carrier?

New story: Since the Consumerist story appeared Sunday afternoon, AT&T service reps have been telling New Yorkers like me that it won’t sell us the phone online because of fraud problems.

What does that mean? Sean, the pleasant AT&T rep I talked to tonight, told me he could sell me a refurbished, 8-gigabyte 3G iPhone online or over the phone. But if I wanted a new iPhone, he said, I’d have to go to a retail store.

Why? “There’s actually been a problem in that area with fraud for the iPhone. It’s kind of a high-risk area.” Sean then reassured me that he was “not saying there’s bad neighborhoods anywhere. That’s not what that means.” But he couldn’t offer any more details.

Digital Daily’s John Paczkowski, in an online chat with a service rep, got a similar answer. As John points out, this answer also doesn’t make a lot of sense. If New York really is beset by a plague of scammers, why is AT&T selling other expensive smartphones, like Research In Motion’s (RIMM) BlackBerry line, over the Web? (Click text below to enlarge.)

There are other things that don’t line up here: The AT&T PR rep I talked to tonight knew nothing about this. And shutting off online sales of the company’s most high-profile phone to the biggest city in America seems like the kind of thing a corporate spokesman would have an inkling about.

Likewise, AT&T’s Google (GOOG) ad campaign sends New Yorkers searching for iPhones directly to this page, which doesn’t mention that you can’t actually buy an iPhone online. If you click on the “Buy Now” and give the site a New York zip code, you get the following nonsensical message: “We’re sorry, there are no Packages & Deals available at this time. Please check back later.”

My hunch: This is a decision that didn’t get run all the way up the chain of command. And it’s one that’s going to get reversed sooner than later. I’ll update when I hear back from AT&T.

UPDATE: This won’t clear anything up: “We periodically modify our promotions and distribution channels,” says AT&T PR guy Fletcher Cook, via email.

Should make for an interesting meeting given Oracle’s refusal to take the EC’s concerns about the future of Sun’s MySQL database seriously. Certainly, it’s difficult to imagine Oracle (ORCL) caving to the Commission’s demands when it has criticized the group’s findings as a “profound misunderstanding” of the database market and open source.

And if not that, then what? Would Oracle abandon the deal instead? That too seems unlikely because it would mean delaying CEO Larry Ellison’s plan to transform Oracle into the next IBM (IBM). As Ellison said in October, “T. J. Watson’s IBM was the greatest company in the history of enterprise in America because its combination of hardware and software was running most of the enterprises on the planet. We think with the combination of Sun technology and Oracle technology we can succeed and beat IBM. That’s our goal.”

Given the EC’s concerns about the Sun (JAVA) acquisition and Oracle’s refusal to address them, what other option is there?

But Spotify has yet to make a key expansion: To the U.S., where the big music labels worry that consumers will love everything about the site except paying for it. That’s bad, since Spotify is supposed to work best as a subscription service.

Most Americans have never heard of Symbian, though it remains the biggest player in the global smartphone market (as long as you use a broad definition of smartphone). But it’s telling that Spotify made a point of making its service compatible with Apple’s (AAPL) iPhone and Google’s (GOOG) Android handsets first.

In any event, Spotify is only available via mobile to paying subscribers, who shell out around $16 a month in the U.K. (and less in some countries). They key question for the music business is how many subscribers there are.

Spotify won’t release statistics, but one number that I’ve heard from people close to the company is 100,000, which works out to less than two percent of the company’s overall user base (free users can listen to the service only on their PCs and have to endure a small smattering of ads). But U.S. music industry executives worry that the subscription number may be even lower than that.

The two sides continue to chat, and conventional wisdom is that the service will indeed get to the U.S. one day. But at one point, Spotify was talking about coming to America in 2009, but that looks just about impossible. Now, CEO Daniel Ek is talking about the first half of 2010.

“I don’t think John McCain could run a major corporation. I don’t think Barack Obama could run a major corporation. I don’t think Joe Biden could, either. But it is not the same as being the president or vice president of the United States. It is a fallacy to suggest that the country is like a company. To run a business, you have to have a lifetime of experience in business, but that’s not what Sarah Palin, John McCain, Barack Obama or Joe Biden are doing.”

– Former Hewlett-Packard CEO Carly Fiorina

Her dreams of heading up the World Bank dashed, former Hewlett-Packard (HPQ) CEO Carly Fiorina, the architect of one of the worst tech mergers in history, has turned her attention to the U.S. Senate.

After months of speculation, Fiorina officially announced her candidacy today. She’ll run as a Republican against Sen. Barbara Boxer (D., Calif.). Of course, to do that, she must first win the Republican primary. Fiorina broke the news in an op-ed in the Orange County Register.

“Admittedly, I have not always been engaged in the electoral process, and I should have been,” she wrote. “For many years I felt disconnected from the decisions made in Washington and, to be honest, really didn’t think my vote mattered because I didn’t have a direct line of sight from my vote to a result. I realize that thinking was wrong.”

Reflecting on her personal history, Fiorina continues: “As I grew throughout my career, beginning as a secretary and eventually becoming a CEO, I saw how government impacted business. I learned more as a member of advisory boards at the State Department, the Pentagon and the CIA. I now understand, in a very real way, that the decisions made by the Senate impact every family and every business, of any size, in America. This is what motivates me to run for the U.S. Senate. And so today I am announcing my candidacy to serve the people of California as your next U.S. senator….Together we can turn things around.”

Together we can turn things around? Not if Fiorina’s performance at HP is any indication. Before she was forced out of the company by its board of directors, she was so at odds with the uniquely Californian “HP Way” that her corner office could have been powered solely by Bill Hewlett spinning in his grave.

UPDATE: Here’s another Fiorina op-ed from earlier this year in which she discusses executive pay. Unsurprisingly, she is against President Obama’s efforts to restore “common sense” to CEO compensation. And why wouldn’t she be? After all, she walked away from HP with a $21 million severance package.

UPDATE: For those of you just joining us over at CNet, the headline is a joke referring to HP’s ill-starred merger with Compaq.

“Recent reports indicate that Google’s Google Voice service restricts calling from consumers to certain rural communities,” the FCC wrote. “We are interested in gathering facts that can provide a more complete understanding of this situation.”

Though Google (GOOG) has until Oct. 28 to file a formal response, the search giant was quick to thump the tub in its defense on its Public Policy Blog. There, Rick Whitt, the company’s telecom and media counsel, argued again that Google Voice is not a traditional phone service and should not be regulated like one.

“Google Voice is not intended to be a replacement for traditional phone service–in fact, you need an existing land or wireless line in order to use it. Importantly, users are still able to make outbound calls on any other phone device,” Whitt wrote. “…AT&T apparently now wants web applications–from Skype to Google Voice–to be treated the same way as traditional phone services. Their approach is what a former FCC chairman has called ‘regulatory capitalism,’ the practice of using regulation to block or slow down innovation. And despite AT&T’s lobbying efforts, this issue has nothing to do with network neutrality or rural America. This is about outdated carrier compensation rules that are fundamentally broken and in need of repair by the FCC.”

“Recent reports indicate that Google’s Google Voice service restricts calling from consumers to certain rural communities,” the FCC wrote. “We are interested in gathering facts that can provide a more complete understanding of this situation.”

Though Google (GOOG) has until Oct. 28 to file a formal response, the search giant was quick to thump the tub in its defense on its Public Policy Blog. There, Rick Whitt, the company’s telecom and media counsel, argued again that Google Voice is not a traditional phone service and should not be regulated like one.

“Google Voice is not intended to be a replacement for traditional phone service–in fact, you need an existing land or wireless line in order to use it. Importantly, users are still able to make outbound calls on any other phone device,” Whitt wrote. “…AT&T apparently now wants web applications–from Skype to Google Voice–to be treated the same way as traditional phone services. Their approach is what a former FCC chairman has called ‘regulatory capitalism,’ the practice of using regulation to block or slow down innovation. And despite AT&T’s lobbying efforts, this issue has nothing to do with network neutrality or rural America. This is about outdated carrier compensation rules that are fundamentally broken and in need of repair by the FCC.”

Just hours after Julius Genachowski, chairman of the Federal Communications Commission, unveiled his open Internet proposal, a number of Republican senators stepped forward to oppose it. Arguing that Net Neutrality will “impede investment and innovation of new technologies,” Sen. Kay Bailey Hutchison (R., Texas) proposed an amendment to an Interior Department appropriations bill that would bar the FCC from using federal funds to implement the proposal.

“I am deeply concerned by the direction the FCC appears to be heading,” Hutchison, the ranking Republican on the Senate Commerce Committee, said in a statement. “Even during a severe downturn, America has experienced robust investment and innovation in network performance and online content and applications. For that innovation to continue, we must tread lightly when it comes to new regulations. Where there have been a handful of questionable actions in the past on the part of a few companies, the commission and the marketplace have responded swiftly.”

Joining her in proposing the amendment were Senators John Thune (R., S.D.), Sam Brownback (R., Kan.), David Vitter (R., La.), Jim DeMint (R., S.C.), and John Ensign (R., Nev.), who had this to say in a statement of his own:

“In this struggling economy, any industry that is able to thrive should be allowed to do so without meddlesome government interference that could stifle innovation. We must avoid burdensome government regulations that micromanage private businesses or that limit the ability of companies to provide what their customers want. The Internet has flourished in large part because of a lack of government interference; I see no need to change that now.”

Nor does AT&T (T), which–coincidentally, I’m sure–happens to be a top-20 donor not just for Ensign and Hutchison, but for the four other senators who would block Genachowski’s initiative as well. Said Jim Cicconi, AT&T’s senior executive vice president of external and legislative affairs: “AT&T would be very disappointed if [the FCC] has already drawn a conclusion to regulate wireless services despite the absence of any compelling evidence of problems or abuse that would warrant government intervention.”

Just hours after Julius Genachowski, chairman of the Federal Communications Commission, unveiled his open Internet proposal, a number of Republican senators stepped forward to oppose it. Arguing that Net Neutrality will “impede investment and innovation of new technologies,” Sen. Kay Bailey Hutchison (R., Texas) proposed an amendment to an Interior Department appropriations bill that would bar the FCC from using federal funds to implement the proposal.

“I am deeply concerned by the direction the FCC appears to be heading,” Hutchison, the ranking Republican on the Senate Commerce Committee, said in a statement. “Even during a severe downturn, America has experienced robust investment and innovation in network performance and online content and applications. For that innovation to continue, we must tread lightly when it comes to new regulations. Where there have been a handful of questionable actions in the past on the part of a few companies, the commission and the marketplace have responded swiftly.”

Joining her in proposing the amendment were Senators John Thune (R., S.D.), Sam Brownback (R., Kan.), David Vitter (R., La.), Jim DeMint (R., S.C.), and John Ensign (R., Nev.), who had this to say in a statement of his own:

“In this struggling economy, any industry that is able to thrive should be allowed to do so without meddlesome government interference that could stifle innovation. We must avoid burdensome government regulations that micromanage private businesses or that limit the ability of companies to provide what their customers want. The Internet has flourished in large part because of a lack of government interference; I see no need to change that now.”

Nor does AT&T (T), which–coincidentally, I’m sure–happens to be a top-20 donor not just for Ensign and Hutchison, but for the four other senators who would block Genachowski’s initiative as well. Said Jim Cicconi, AT&T’s senior executive vice president of external and legislative affairs: “AT&T would be very disappointed if [the FCC] has already drawn a conclusion to regulate wireless services despite the absence of any compelling evidence of problems or abuse that would warrant government intervention.”

The reasons for the decline? Seasonality, the econalypse and the maturation of the market. “The second quarter has proven to be traditionally weak for broadband growth, but with the market becoming more mature, broadband adds further waned,” Bruce Leichtman, LRG’s president and principal analyst, said in a statement.

Poor broadband infrastructure and limited access to it in rural areas clearly also played a role. In rural America, just 31 percent of residents have a broadband connection, as opposed to more than two-thirds in the rest of the country, according to the Pew Internet and American Life Project. No wonder America now ranks 15th in the world on broadband access, according to the Organization for Economic Cooperation and Development.

So that $7.2 billion in broadband investments the Obama administration recently pledged stands to do a lot of good–assuming it’s put to use by the right folks. It’s not yet clear that will happen, however, because the large network operators best positioned to roll out access to underserved areas are afraid of taking stimulus money for fear of net-neutrality conditions that might be attached to it, as well as of unwanted government scrutiny.

And as Robert Atkinson, president of the Information Technology and Innovation Foundation, notes, that’s really too bad. “If you want to get broadband out, you have to do it with [those] who brought you to the dance in the first place, and in this case it is the incumbent cable and telephone carriers who have 85 percent of lines in the country,” he told the Washington Post. “This is not basket weaving. This is really complex and intensive technical stuff that takes a fair amount of sophistication and scale to be able to do right and to continue to upgrade.”

[Image Credit: Flickr/alan i am]

We absolutely will offer MMS on iPhone 3G S in the late summer, once we complete some system upgrades that will ensure our customers have the best experience with MMS. These upgrades are unrelated to our 3G network. … We plan to offer a tethering plan but we don’t have anything to announce today.

– AT&T spokesperson Seth Bloom

Welcome news for folks who love the iPhone, but hate AT&T. The increasing prevalence of exclusivity agreements between wireless carriers and cellphone manufacturers, like the one between Apple (AAPL) and AT&T (T), is drawing some government scrutiny. Four U.S. senators are urging the Federal Communications Commission to review such deals with an eye toward determining whether they unfairly restrict consumer choice and hamper competition. In a letter, the four asked that the Commission specifically consider the following:

• Whether exclusivity agreements are becoming increasingly prevalent between dominant wireless carriers and handset manufacturers

 

• Whether exclusivity agreements are restricting consumer choice with respect to which handsets are available depending on a consumer’s geographic region, particularly for consumers living in rural America

 

• Whether exclusivity agreements place limitations on a consumer’s ability to take full advantage of handset technologies, such as the ability to send multimedia messages or the ability to “tether” a device to a computer for Internet use.

 

• Whether exclusivity agreements are manipulating the competitive marketplace between commercial wireless carriers. Specifically, whether the ability for a dominant carrier to reach an exclusive agreement with a handset manufacturer is inhibiting the ability of smaller, more regional carriers to compete

 

• Whether exclusivity agreements play a role in encouraging or discouraging innovation within the handset marketplace

An interesting list and one that seems to single out AT&T, though it doesn’t mention the carrier by name. Indeed, limiting “a consumer’s ability to take full advantage of handset technologies, such as the ability to send multimedia messages or the ability to ‘tether’ a device to a computer for Internet use” is exactly what AT&T will do later this week when the iPhone 3G S and iPhone OS 3.0 debut without the carrier’s support for their new tethering and MMS capabilities.

And then there’s this: The iPhone 3G S is compatible with high-speed packet access 7.2 technology, which offers theoretical peak download speeds of up to 7.2 Mbps. But AT&T doesn’t plan to begin deploying HSPA 7.2 until later this year and the company doesn’t expect to complete the rollout until 2011.

Finally, the company’s refusal to sell the iPhone in rural areas where it provides only roaming coverage certainly restricts “consumer choice with respect to which handsets are available depending on a consumer’s geographic region, particularly for consumers living in rural America.”

Clearly, if the senators responsible for this letter were looking for a case study for the problems with exclusive carrier-device agreements, they’ve got one ready-made in AT&T.

A difficult question. It’s clear that Microsoft (MSFT) has so far failed to improve Windows Mobile to better compete with the iPhone, and with handsets using Google’s (GOOG) Android, which are slowly beginning to arrive at market. When will it close the gap?

Ballmer’s answer? We’re getting around to it.

“We have a significant release coming this year,” he said. “Not the full release we wanted to have this year but we have a significant release coming this year with Windows Mobile 6.5….We still don’t get some of the things that people want on the highest-end phones. Those will come on Windows Mobile 7 next year. Certainly I’m not, um–there’s opportunities for us to accelerate our execution in this area, and we’ve done a lot of work to really make sure we have a team that’s going to be able to accelerate. With that said, we did sell more Windows Mobile devices last year than Apple did iPhones–just an important factoid to have. Blackberry was a little bit ahead, and Google was nowhere to be seen, except in Silicon Valley, I’m sure. But we’ll do our best to help you with that challenge.”

We’re doing our best? Not the answer the questioner was looking for, I’m sure. And noting that there were more Windows Mobile devices sold last year than Apple (AAPL) iPhones doesn’t make the disparity between the two any less vast. Finally, it’s all well and good that Microsoft is accelerating Windows Mobile development to better meet its competition. But that competition isn’t exactly standing still waiting for Microsoft to bring itself to parity. It lapped Microsoft two years ago, and if the software behemoth continues at its present pace, the competition will lap it again. Perhaps it already has.

The latest to arrive is the Samsung Instinct, to be introduced by Sprint (S) on June 20. I’ve been testing the Instinct, and while it isn’t a bad phone and has some features the Apple product lacks, it’s no match for the iPhone. The manufacturers haven’t replicated the iPhone’s greatest strength: beautiful, powerful, breakthrough software.

Samsung Instinct

Also, the timing of the Instinct is unfortunate. It was designed to go up against the first iPhone. Sprint even has a Web site (nowisgood.com) comparing the two devices. But the Instinct will go on sale only three weeks before Apple and AT&T (T) start selling the new 3G iPhone, the second-generation model announced earlier this week. This second iPhone model corrects some of the first model’s main weaknesses, wiping out some advantages Sprint hoped the Instinct would have.

Before getting into the details of the Instinct, a few words about the new iPhone, its main competition. I don’t do full reviews of products until I have tested them extensively, but my first impressions of the 3G iPhone are largely positive.

The price of the new iPhone’s base model, which comes with 8 gigabytes of memory, is $199, a 50% price cut from the comparable first-generation model. Yet, it now works on AT&T’s fastest data network, promising anywhere from two to five times the speed of its predecessor. It also has GPS for tracking your location, and fully supports over-the-air synchronization of email, contacts and calendars — through Microsoft (MSFT) Exchange in corporations or via a similar new consumer service from Apple called MobileMe. And you’ll be able to download directly to the phone a whole universe of third-party programs, from productivity software to games.

On the downside, the new iPhone’s camera remains very basic and still can’t capture video. For people who prefer physical keyboards, the iPhone will still fall short. It continues to include only a virtual onscreen keyboard. And the iPhone remains locked to a single carrier in the U.S., AT&T, which will charge $10 more per month for unlimited data consumption on the device.

The iPhone, along with some competitors like the BlackBerry, are really hand-held computers that happen to make voice calls. And they’re getting more powerful and innovative. So far, competitors like the Instinct, while trying to look like iPhones, are still mainly voice devices with so-so computing features tacked on.

For instance, while the Instinct is a touch-screen device, it lacks the iPhone’s “multi-touch” system, which includes features that recognize multiple fingers and gestures, and allows actions like shrinking a photo by “pinching” it. The touch system on the Instinct is more like that on an ancient ATM than a cutting-edge gadget, even though it has a gimmicky feedback mechanism that gives you a tiny vibration-jolt when you press an icon.

Physically, the Instinct looks a lot like the iPhone — a dark slab without a physical keyboard or many buttons dominated by a large screen. It’s a bit longer and thicker than the iPhone, but a tad narrower and lighter. Its screen is smaller than the iPhone’s and has lower resolution.

The Instinct has the same $199 price tag as the new iPhone, after a rebate and with a two-year contract. Service plans are likely to start at around $70, in line with the minimum monthly fee AT&T will charge on the new iPhone. But it comes with just one-quarter of the memory the base iPhone includes.

Like the 3G iPhone, the Instinct runs on a fast cellular network that promises speeds similar to what people get with slow home DSL service. In my tests, it seemed to deliver this promised speed. It also has GPS and navigation. But, unlike the iPhone, the Instinct lacks Wi-Fi wireless networking, which can often be faster than the cellphone networks or available where there is no speedy cellphone coverage.

The Instinct has a removable battery, something the iPhone lacks. And Sprint claims 5.7 hours of talk time on one charge, more than the five hours that Apple claims for its 3G model. Sprint’s new baby has a few other features that even the latest iPhone omits, such as a built-in service for viewing TV shows and a voice-command system.

But I found its email system and Web browser to be less sophisticated than the iPhone’s or the BlackBerry’s. I also thought the phone’s onscreen keyboard was harder to use than Apple’s. It would flip unpredictably from landscape to portrait mode. The Instinct does allow handwriting recognition as an alternative, something the iPhone doesn’t.

If you’re a devoted Sprint customer, or want to avoid AT&T, the Instinct is an OK choice. But it’s no iPhone.

• Find all of Walt Mossberg’s columns and videos online, free, at the new All Things Digital Web site, http://walt.allthingsd.com. Email him at mossberg@wsj.com.