Cisco appears to have continued its recovery following a painful restructuring. Sales are up and setting records, earnings beat the consensus of analysts, and Cisco’s outlook for the coming quarter is positive, too. Cisco’s even reached a point where it’s at least close to fitting into its old skinny jeans. What a difference a year makes. Last year it was all about gloom and doom and some irritable investors were calling for Chambers to lose his job.

Since then the company has undergone a painful but necessary restructuring, shed thousands of jobs, shut down marginal business units and refocused on its core businesses, and as yesterday’s quarterly earnings report proved, the results are not only starting to show, but starting to stick.

So is the work done? Definitely not. Yes, Cisco is showing some return to its strengths, but there’s still a long way to go. We talked about that, the troubles Cisco’s competitors are facing, his long-held view that companies like Cisco should get a tax holiday to repatriate their cash held outside the U.S. and many other things.

Also Chambers, remembering that I dedicated “How Ya Like Me Now” to Cisco last quarter as it turned the corner on its troubles, asked me what song I might use to characterize its results this quarter. Taking inspiration from the headline of my first story and from his cautiously optimistic tone, I settled on “It’s Getting Better All The Time,” the Beatles track, performed by Paul McCartney and embedded after the Q&A. Enjoy.

AllThingsD: John, I don’t know if you saw the headline I wrote earlier, but I said you fit into your skinny jeans again. Is that fair?

John Chambers: [Laughs] I think it’s fair. We were up about four or five inches there so I think we have an inch or two to go, but we’re getting close.

So let me ask about the quarter. It looks like a solid quarter where a lot of the troubles were starting to get behind you. In broad brush strokes, where were Cisco’s strengths? I know some of your competitors were having their own troubles, but where were you strong in particular?

The strengths were that we appear to be executing on the market transitions that are going on, and we appear to be reinventing ourselves, not just in terms of how we control our costs, but in terms of the productivity we’re getting out of our employees. So if you look at the major transitions going on in the industry from an economic point of view, to how customers buy, to where the high tech industry is going, which I would argue is all connected to intelligent networks, that all appears to be playing out as we had hoped. The other transitions that you think about, like data centers and the cloud, we saw 90 percent growth in an industry that is growing at best in the teens. Our ability to move in collaboration, where we grew 10 percent though I think we could do better — it remained solid for us. In video with set-top boxes up 23 percent to new video technologies growing well and seeing improvement in the margins. There are things we need to do to reinvent Cisco. I think I said this at your own conference a decade ago [Chambers spoke at D5 in 2007, but that is not where he made this comment. -Ed.] that voice will be free. It’s almost there. You could see the trend, and what it meant is that once voice would become a smaller part of the network load, that would be given away in order to make way for the video and the entertainment. The same trends are taking place all over again at multiple speeds and multiple gears, which if we’re right, they all play together. Everything from mobility to cloud to the intelligent network, to wireless to security, to video being pervasive, all of those are coming together at tremendous speed. And we’re pulling them all together pretty well for our customers. Now, this is just the beginning if we execute right, and we have plenty of hurdles in front of us, but this may be the voice-will-be-free trend times 10 in terms of the impact of the transitions going on. We appear to have managed them well; we did what we said we would do, turned in record earnings and record revenues, and earnings per share were up 48 percent. We’ve realigned ourselves and reinvented the company, which I think you have to do every five years. Sometimes it takes a crisis to reinvent. … It’s a journey and we’re just getting started.

What’s the number one hurdle that you want to get over this year, that’s in front of you right now and keeping you up at night?

I want to build deeply into our capabilities, a continued focus on gross margins and effectiveness, from product design to sales all integrated together. You probably know this, but we’re the only company who’s anywhere near this profitable with $45 billion in sales with open standards. It isn’t a mainframe business where everything is proprietary or like in Apple’s situation where it’s a wonderful company but it has an architecture. We do it entirely with open IP, so we can be challenged by a 10-person start-up or a by the biggest giants like Dell or IBM or Hewlett-Packard to come at us. With this type of margin but so low a barrier to entry, we’re doing relatively well. But we still have to reinvent ourselves at a faster pace. We have to do what I call the basic blocking and tackling to participate in the new capitalism that we’re heading into. That’s the attention to gross margins, getting the market transitions right, tying the products together so you can get the price premium on them. But what really keeps me up at night this last year was the realization that this has to be constant reinvention. Average is over. An average high-tech company is headed down. Those above-average companies are going to head down in 3 to 5 years. If as a company you can’t reinvent yourself every 3 to 5 years, you have a problem coming at you.

Does that then imply that Cisco had become complacent or even average? It was and is the biggest networking player, but did Cisco lose its way and try to do too much?

Well, I could give you a long list of things we have to do better. We’re a healthily paranoid company so we always have things we could do better. I do think we were fat. Four to five inches, not just one or two. We’re not back in our skinny jeans yet, as you put it, but we’re within an inch or so of getting there. We missed market transitions at the speed at which they occurred. We should have seen the drop-off in public spending coming at us sooner. Everyone else has still run off the turn, even though they saw what happened to us two to four quarters ago. We should have seen it sooner and reinvented ourselves before it hit us, and made the turn much more effectively, and I’m committed to doing that, and the leadership team is, too. It would have been easy to just cut a billion dollars in expenses, reorganize sales and how customers buy. We realized that gross margins can deteriorate not just because of what competitors do but what we do to ourselves, like what we did on switching. We should have been smarter there.

On the conference call you mentioned the possibility of getting back into the mergers and acquisitions game. Any hints on where you might go or whom you might buy?

I think it’s a fair question. Part of the reason we said that was to explain why we’re building up cash in the U.S. Part of it was for share buybacks because the price was attractive. A lot of people don’t realize that we use M&A deals to gain leadership. We were a routing company, we acquired three switching companies. We were an enterprise and commercial company, we acquired a service provider company in Stratacom. If you look at where it’s going to be, it’s probably in data center, collaboration and video, and combining those with security, bring your own device and mobility. A large part has to do with our government allowing us to bring money back to our country.

That’s always been a big issue of yours. You made some comments about it on the conference call as well. Care to elaborate?

I think that it’s going to happen in the next presidential administration whether the president is re-elected or someone else is. I’ve been disappointed that we haven’t been able to get our message out about this more effectively. Ironically, I was in Europe, the government leaders there look you right in the eye and ask what they need to do to bring jobs to their country and keep the ones they have. They are partnering with business. I think we’re following Europe in the wrong way and following more of what they did to get them in trouble in the first place.

There’s a bit of a disconnect, however, to anyone who sees on one hand a company that wants to bring cash back in a tax-advantageous manner in the name of creating jobs, while the same company just fired so many people in the restructuring. Can you connect those dots for the person who sees the apparent logical disconnect? If it’s about jobs, then why are you firing people in the first place? If you were having lunch with President Obama or any other political leader, they might be confused, so how do you explain it?

They’re related. The first thing you’ve got to do when you hit bumps in the market is find out how much of the damage was self-inflicted and how much was the result of the conditions of the market. It would be a cop-out to say it was all the general market. We had to look at what we were doing internally. Every government leader in the world who’s adding to government payrolls and adding government debt is going in the wrong direction. We have to use technology to deliver services better. You do see most government leaders saying they want to get their own houses in order. The second thing they do is look at ways to generate private sector jobs. I’m a strong Republican, but I think President Clinton got it right with business and knocked the ball out of the park. He partnered with business, he was critical where appropriate, but in six years he generated 22 million jobs, grew GDP on average by 4 percent per year, and he was America’s champion on the Internet. I think that’s a more practical example. He grew private sector employment versus government employment by a ratio of 9 to 1, and created a positive climate for business, and when business got out of line he’d whack ’em. I think it would be a major mistake not to let companies repatriate their cash because whoever is in the Oval Office next year is going to want to get private sector jobs growing again, and there really aren’t very many levers left to pull. We’ve never had this slow a recovery after this deep a recession.
–

Getting Better – Paul McCartney

But those factors didn’t prevent Chelsea Clinton from landing a plum assignment: joining the board of Barry Diller’s Internet media holding company.

In her new role, the daughter of former President Bill Clinton and U.S. Secretary of State Hillary Clinton will be the youngest member of IAC’s board by seven years.

Fellow directors include Michael Eisner, former chief of Walt Disney Co., and Edgar Bronfman Jr., chairman of Warner Music Group.

Read the rest of this post on the original site »

Microsoft made the announcement at the annual meeting of the Clinton Global Initiative, the philanthropic organization run by former President Bill Clinton. The meeting is getting underway today in New York.

The problem Microsoft is trying to solve is sometimes called “digital exclusion.” Think about how much you rely on day-to-day access to the Internet at home to do your job, and then imagine your life without it, or with only spotty access. There are lots of families with school-age children who are at a disadvantage because they don’t have access at home, or because their families can’t afford computers or the monthly fee for broadband.

Lacking that access has a lot of long-term economic repercussions, none of them good. Without access, kids don’t perform as well in school, because they don’t have the Internet to help them with homework. And while there are usually other socioeconomic forces to consider in these cases, having not done well in school, these children have a greater tendency to not finish high school; therefore they don’t go on to college, and later on have a harder time finding meaningful work.

There have been lots of attempts to count all these unconnected households. The FCC estimates that there are 100 million people in the U.S. without access to broadband. Some lack access because of where they live, while others simply can’t afford it. Within that number, there is thought to be some 9.5 million school-age kids who are effectively “digitally excluded.”

The irony, of course — at least to anyone who remembers how Bill Clinton’s Justice Department so vigorously pursued Microsoft through the courts during the 1990s — is how friendly Clinton and Microsoft co-founder Bill Gates seem to have become in public. The photo is from Gates’s appearance with Clinton at last year’s CGI meeting.

Last night, Bill Clinton–arguably the first Internet President–got a little nostalgic.

“We are actually here today because the people sitting in your seats 20 years ago imagined a different world, though they didn’t know exactly how it would come out,” he said in a keynote speech for the 40th meeting of the Internet Corporation for Assigned Names and Numbers, ICANN, at the Westin St. Francis in San Francisco. “They just knew that a networked world would probably work better than a bureaucratic one.”

Yes, indeed, the world has come a long way from when Clinton was in office.

In fact, Clinton noted that to the 800 attendees last night–correctly calling himself “the president at the dawn of the Internet age”–that there were only 50 Web sites in 1993 when he was inaugurated, and 36 million when his term was up in 2001.

Clinton’s speech, a paid appearance, touched on his history with ICANN, as well as the intersection of the Internet, geopolitics, poverty, the global distribution of wealth and infrastructure.

ICANN is the multinational, non-governmental organization that researches, debates and enforces decisions that affect how traffic gets sent around the pipes of the Internet.

It decides, for instance, that Libyan domain names end in .ly.

Clinton’s focus last night was urging the international crowd to try to use technology and their positions around it to build physical and financial infrastructure systems for poorer nations.

He called for a renewed focus on technology-sector job growth and touched the geopolitical implications of free access to the Internet.

Invoking the recent revolution in Egypt, he said that ICANN needed to ensure universal access to a free Internet and the continued vibrancy of the Web.

“That’s why it’s important that you want the Internet to stay forever young,” said Clinton. “One hundred years from now, you want somebody in some godforsaken place that’s been beat down to be able to do what the kids in Cairo did.”

At the conclusion of the address, Clinton sat on stage with ICANN President and CEO Rod Beckstorm and answered pre-selected questions.

The former President mostly stayed above the fray of the major debates surrounding this ICANN meeting, only peripherally mentioning the next day’s headline issue–the possible adoption of the .xxx top level domain.

That issue has seethed online for several years, and was supposed to come to a head Thursday. Several attendees related that a troupe of porn stars were expected at the following day’s meetings to protest the adoption of the .xxx domain for adult sites on the Web, as a modern day scarlet letter.

President Clinton’s most direct response was related to sales tax being levied on online purchases. It was his policy preference at the beginning of the e-commerce era to keep sales tax out of online transactions, so that those companies could have the chance to grow, he explained. He said that e-commerce didn’t seem to need the help anymore, and Amazon’s complaints about recent changes sounded like “a high class problem.”

ICANN 40 wraps up Friday, but won’t conclude before addressing other key topics, such as solving the global shortage of IP addresses–the unique numbers that identify every Internet-connected device–and aiding the proliferation of the next generation of online security protocols.

Adding more numbers to the list of IPs, or verifying a site’s identity, doesn’t sound complex. But, on the global scale, even simple changes require massive coordination.

Another issue: Lack of international enforcement could create a haven for online fraud in countries that can least afford it.

It was on this point that the former President’s speech and ICANN’s actual agenda converged.

“We need to ask ourselves if we are forming a more perfect union across the globe,” he said, urging those in the room not to get mired in small disagreements.

His advice: Focus on the larger mission of ensuring that the benefits of Internet access will be distributed equally, worldwide and beyond the foreseeable future.

“You have to be vigilant, because at some point all institutions are led by people more interested in maintaining the present than creating the future,” he said.

Word, Bill.

The release this week of a flood of documents pertaining to the Viacom (VIA)-YouTube lawsuit shed light on a lot of interesting data–and a lot of, uh, not-so-interesting stuff. Peter Kafka was on duty this week to discern the difference, so you don’t have to. Among the highlights: YouTube’s pre-Google finances revealed, how YouTube split up Google’s (GOOG) billions, proof that Viacom wanted to buy YouTube four years ago, and a whole lot of emails, but no smoking gun. It’s all on MediaMemo.

Over at Digital Daily, John Paczkowski wondered if the licensing of its webOS could be a salvation for Palm (PALM), and later in the week, whether Palm’s dismal third-quarter earnings mean the beginning of the end. John also reported that given details revealed Monday morning, Windows Phone 7 could make Microsoft (MSFT) a contender in the mobile operating system wars. Microsoft isn’t the only company having a good month, however–Mac sales during February were up 43 percent for the month, after a 36 percent spike in sales during January. Accordingly, Piper Jaffray analyst Gene Munster has declared 2010 the “Year of the Mac.”

In Personal Technology this week, Walt took a look at two new ThinkPads from Lenovo. A departure from Lenovo’s standard template, they sport lower prices and new designs, and both got good grades. Watch the video of Walt’s comprehensive review and then check out his appearance on WSJ’s “Digits” for more on the new ThinkPads and a discussion of Google’s upcoming foray into television. At Mossberg’s Mailbox, Walt answered readers’ questions about sharing e-books and wiping hard drives. And in the Mossberg Solution, Katie Boehret tested Xobni Mobile, an app that generates contact info for everyone users have ever communicated with in Microsoft Outlook. So far Xobni is available for BlackBerry only, but word is, the company’s considering apps for Android and the iPhone.

More next week.

Here is a video I did of former President Bill Clinton talking at an event related to the 25th anniversary of the first .com domain registration.

Clinton gave a keynote speech first–which was, inexplicably, about health-care legislation and global warming.

But after Clinton was done, he sat down with VeriSign (VRSN) CEO Mark McLaughlin to talk about a range of Web-related topics, in a very amusing interview exchange.

They included what devices he uses, broadband access and the dire state of traditional media.

Clinton talked about what sites–largely political–he likes. He mentioned Politico, Daily Beast and the Huffington Post for their analysis and outlook, as well as far-right ones, to keep track of his opposition.

Interestingly, he did not mention the Washington Post (WPO) or the New York Times (NYT) online, although he said their deep reporting was valuable.

Still, Clinton noted, “It’s almost impossible, given the economics of the modern world for newspapers to continue.”

And the 42nd President of the United States is an Apple (AAPL) fanboy, naming his iPhone as his fave gadget (although he said he also has a BlackBerry).

Clinton joked that his predecessor, No. 41, former President George H.W. Bush, is a maniac user of the Research in Motion (RIMM) BlackBerry, likening him to a teenager.

Also, no Kindle from Amazon (AMZN), since Clinton said he still likes books.

Here’s the video (sorry about his shiny watch, but you can hear him!):

]]> http://allthingsd.com/20100318/president-clinton-talks-about-his-internet-legacy-btw-hes-an-iphone-dude-while-the-gops-41-is-a-blackberry-teen/feed/ 4 http://allthingsd.com/20100315/boomtown-in-d-c-to-say-happy-25th-birthday-to-com-and-hello-to-broadband-plan/ http://allthingsd.com/20100315/boomtown-in-d-c-to-say-happy-25th-birthday-to-com-and-hello-to-broadband-plan/#comments Mon, 15 Mar 2010 14:54:33 +0000 Kara Swisher http://kara.allthingsd.com/?p=25604

Last night, I jetted east to Washington, D.C., for an unusual confluence of events: The 25th anniversary of the .com Internet domain name and the Federal Communications Commission’s release of the much anticipated National Broadband Plan.

Both are set for tomorrow in the nation’s capital and both concern the impact of the Web on the United States in the past and the future.

Incredibly, .com was almost .cor, for corporate.

And the first .com address handed out–Symbolics.com–belonged to a now-defunct Massachusetts computer company.

(It signed up via the domain registrar, Network Solutions, which was bought by VeriSign in 2000. The Symbolics.com domain was sold in 2009 to Missouri-based XF.com, which “operates commercial real estate and premium domain properties.”)

In honor of the anniversary, VeriSign (VRSN), which administers the .com registry, is hosting a policy forum in D.C. It includes a keynote address by former President Bill Clinton, as well as some panels.

I will be moderating the one in the afternoon titled “The Next Generation.” The panelists, looking to the future, include, among others: Arianna Huffington of the Huffington Post; Aneesh Chopra, Federal CTO of the U.S.; and Fred Wilson of Union Square Ventures.

There will be another gala event to honor Internet innovators in San Francisco in late May.

While the growth of .com was slow until the browser became popularized–numbering under 15,000 in 1992–there are now close to 85 million .com domains. This commercial one is clearly the most important of the designations, both financially and perceptually.

Still, despite how much impact the Internet has had globally, spurred mostly by innovation in the U.S., this country still remains woefully behind in high-speed access to the Web.

While it is easy–and fun–to blame the greedy telcos and cable companies (and they do deserve some of the blame), the lack of a federal imperative has been the most appalling explanation.

It is as if the federal government had decided dirt roads were preferable to the highway system or tin cans and string were better than universal telephone access.

Will making broadband access easy, fast and cheap for most people in the U.S. be the end result of the National Broadband Plan, to be officially unveiled by the FCC tomorrow?

As I wrote last week:

“The two key questions about the effort to get the United States up to speed, so to speak, with decent digital access: Will it be toothless or not and will there be any money to pay for it, given the cash-strapped federal government?”

A possible highlight of the plan concerns whether spectrum should be allocated for a free or inexpensive high-speed wireless service, as well as restoration of some regulations lifted in the previous Republican administration.

But the main focus will be that the U.S. needs high-speed access to improve dramatically across the nation, especially for poorer citizens and in rural areas.

After a quarter-century of .com, the growth of a trillion-dollar industry from one punctuation mark and three letters, and badillions of page views, you would think this would be glaringly obvious to our federal government.

You should think it would.

]]> http://allthingsd.com/20100315/boomtown-in-d-c-to-say-happy-25th-birthday-to-com-and-hello-to-broadband-plan/feed/ 3 http://allthingsd.com/20100201/youtube-nabs-a-sit-down-with-barack-obama/ http://allthingsd.com/20100201/youtube-nabs-a-sit-down-with-barack-obama/#comments Mon, 01 Feb 2010 15:39:06 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=15721 Yet another tie-up between Google and the White House: A one-on-one interview between Barack Obama and YouTube.

Google’s (GOOG) video site says it has collected 11,000 questions from its viewers and will ask a small fraction of them during a live sit-down with the president at 1:45 Eastern. No word on who’s actually going to deliver the queries to POTUS, but YouTube insists that “neither the President nor his staff will know which questions will be asked ahead of time.”

The YouTube part aside, there’s not a ton of novelty here: Asking citizens to send in questions for a political Q&A isn’t a new idea. The fact that the Q&A will be streamed live is more interesting to me, since it signals the site’s increasing interest in real-time events (see, for instance, U2).

Today’s Q&A did prompt me to scan YouTube for something apposite, but disappointingly, clips from Bill Clinton’s MTV “choose or lose” appearance are hard to find. And I can’t find any version of Tabitha Soren’s famous “boxers or briefs” query. Did turn this one up, though:

]]> http://allthingsd.com/20100201/youtube-nabs-a-sit-down-with-barack-obama/feed/ 0 http://allthingsd.com/20090512/facebooks-privacy-chief-and-california-attorney-general-candidate-chris-kelly-speaks/ http://allthingsd.com/20090512/facebooks-privacy-chief-and-california-attorney-general-candidate-chris-kelly-speaks/#comments Tue, 12 May 2009 09:52:53 +0000 Kara Swisher http://kara.allthingsd.com/?p=13492

BoomTown tried to get Chris Kelly (pictured here) to give up more during an onstage interview I did with the Facebook chief privacy officer last night at the third “Tech Policy Summit” and was only moderately successful in the endeavor.

He talked about the recent Terms of Service debacle as a snafu that got sensationalized by the media, the Beacon advertising controversy as a snafu that got sensationalized by the media and the Free-the-Scoble-5,000 data-sharing debate as a snafu that got sensationalized by the media.

But Kelly also managed to say that the media were sensational for keeping Facebook–the dominant social-networking site in the whole wide world–honest as it grows into a behemoth grasping a scary amount of personal information on its 200 million users in its claws.

Oh, he is a smoothie all right, as a lawyer and now as a wannabe politician.

Kelly–who is still working at the start-up, where his job it is to make sure consumer data, privacy, the children and CEO Mark Zuckerberg’s reputation are all safe and sound–is also running for the job of California’s attorney general.

(Here is his Facebook page about the effort.)

Born in Silicon Valley, with a troika of diplomas from fancy schools (undergraduate from Georgetown in 1991, a master’s from Yale in 1992 and a law degree from Harvard in 1997), Kelly worked as a lawyer and also as a policy adviser for President Bill Clinton’s White House Domestic Policy Council and Department of Education before coming to Facebook four years ago.

For a closer look-see at the candidate for the Golden State’s top cop position, here’s a video interview I did with him after the onstage chat in San Mateo, Calif.:

]]> http://allthingsd.com/20090512/facebooks-privacy-chief-and-california-attorney-general-candidate-chris-kelly-speaks/feed/ 0 http://allthingsd.com/20080713/new-microsofticahn-deal-semi-sweet-to-yahoo-now-turns-sour-for-all/ http://allthingsd.com/20080713/new-microsofticahn-deal-semi-sweet-to-yahoo-now-turns-sour-for-all/#comments Mon, 14 Jul 2008 04:51:41 +0000 Kara Swisher http://kara.allthingsd.com/?p=2336

If you want to get to the heart of the truly dysfunctional relationship between Yahoo and Microsoft, consider the alleged 24-hour deadline that Yahoo claimed Microsoft and its loyal sidekick, activist investor Carl Icahn, gave the company to respond to the pair’s most recent joint proposal to settle their differences.

I say “alleged,” because as in all things related to this takeover mess, the trio disagrees on exactly what even that meant.

Frankly, it’s enough to make one think former President Bill Clinton’s definition of what “is” is makes more sense.

Yahoo (YHOO), in a rather strong statement Saturday night, said Microsoft tried to jam the company into swallowing a semi-sweetened new search deal with a side order of Icahn control.

But Microsoft (MSFT) sources scoff at the notion, noting that they only wanted to try to move a deal forward more quickly than the previous interminable roundelays that have exhausted everyone.

Before we get to this latest disagreement, here are the terms of the new Microsoft/Icahn joint deal to take control of Yahoo’s search business and hand over the rest to Icahn, which, according to numerous sources from both sides, was quickly rejected by Yahoo Saturday.

The deal included:

– $1 billion for Yahoo’s search business and a five-year guarantee of $2.3 billion in search ad revenue, with an option to renew it for another five years at a $1.6 billion minimum;

– An offer by Microsoft to buy $3.9 billion of Yahoo shares, and lend the company $2.8 billion at a five percent interest rate, by taking over a part of its debt. The money would be used to give a special dividend to shareholders;

– An agreement to raise the TAC rate (a payout to Yahoo on each search query) to 85 percent from its former offer of 70 percent, for three years, and to 75 percent after that;

– A plan, unclear as to specifics, to spin off Yahoo’s Asian assets, with money going to shareholders;

– And, last of all and the obvious dealbreaker, Icahn would get control of the rest of the company, which includes the massive content and communications assets. Apparently, one or two current Yahoo board members could possibly stay on. Presumably, Icahn could then strike a deal to merge those with assets of News Corp.’s (NWS) MySpace or Time Warner’s (TWX) AOL. (News Corp. is the owner of Dow Jones and of this site.)

But, Yahoo rejected the proposal in strong terms, especially stressing that it would not negotiate such a big deal under a time constraint.

Here’s Yahoo’s official version, from a statement :

“The proposal was made on Friday evening and Yahoo! was given less than 24 hours to accept the proposal, the fundamental terms of which Microsoft and Mr. Icahn made clear they were unwilling to negotiate.”

And Chairman Roy Bostock piled on: “After negotiating among themselves without the involvement of Yahoo!, Carl Icahn and Microsoft presented us with a ‘take it or leave it’ proposal under which we would be required to restructure the Company, hand over to Microsoft Yahoo!’s valuable search business and to Carl Icahn the rest of the Company, giving us less than 24 hours to respond. It is ludicrous to think that our Board could accept such a proposal.”

Microsoft sources consider the talks much less dramatic that that, noting that Yahoo had been talking to Icahn all week, and especially Thursday, about a new deal to take over Yahoo’s search business, and that an Icahn board was mentioned.

And, they add, Bostock was the one who insisted to Icahn that he needed to talk to Microsoft CEO Steve Ballmer directly, even though the software giant had publicly said it was unwilling to do so anymore.

But several times, the trio, along with a passel of bankers and lawyers, did just this, starting last Thursday night and, most significantly, Friday afternoon for 45 minutes.

It was in that call that the three sides discussed the proposal in detail, which included slides sent from Microsoft, although there was no term sheet.

Ballmer, a source close to both Yahoo and Microsoft said, did express being tired of the endless loop Yahoo and Microsoft were caught in and said that he did not want prolonged negotiations to go on.

This was not an ultimatum, according to Microsoft sources, but more of an expression of weariness at a new round of tedious back-and-forth.

“This has just gotten impossible,” said one Microsoft source. “We just wanted to have talks that went somewhere.”

When pressed, some sources close to Yahoo do confirm that they talked extensively to Icahn and then Microsoft. The 24-hour number came about because Ballmer asked Bostock to get back to him the next day, but that it was not exactly what one would call a threat.

“We felt he was saying Microsoft was not willing to put more on the table and, if we agreed to it, it would have been on their terms,” one source explained.

You get the picture–this is how wars start.

And that’s where Yahoo is now headed with Icahn–and by extension, Microsoft–as their proxy fight shifts into high gear heading into Yahoo’s annual meeting on Aug. 1.

What would it take to get Yahoo and Microsoft to come to some sort of rational agreement to strike a partnership of some sort before that?

Well, Sigmund Freud might be a start–or even Dr. Phil at this point–in this warped relationship.

Now, it seems, we’ll be moving directly to Judge Judy.

More on that later today.

]]> http://allthingsd.com/20080713/new-microsofticahn-deal-semi-sweet-to-yahoo-now-turns-sour-for-all/feed/ 0 http://allthingsd.com/20080604/yahoo-players-burkle-icahn-crawford-and-also-the-web-make-some-news-some-not-so-good/ http://allthingsd.com/20080604/yahoo-players-burkle-icahn-crawford-and-also-the-web-make-some-news-some-not-so-good/#comments Wed, 04 Jun 2008 13:06:10 +0000 Kara Swisher http://kara.allthingsd.com/20080604/yahoo-players-burkle-icahn-crawford-and-also-the-web-make-some-news-some-not-so-good/ You would have to have been under a rock not to have heard about the controversial piece in Vanity Fair magazine this month about the escapades of former President Bill Clinton since he left office.

Called “The Comeback Id” (oh, how pun-ny!), the article has gotten a lot of attention for pointing out the rampant speculation that Clinton’s well-known penchant for marital infidelity had returned.

And the reason for that disturbing development, besides Clinton himself? The piece actually placed a good bit of the blame on Clinton’s close friend, grocery magnate and billionaire Ron Burkle (pictured here), who also has been one of the key directors at Yahoo (YHOO) in its takeover fight with Microsoft (MSFT).

It’s a wonder Burkle can focus on the turmoil at Yahoo, given how busy he appears to be in the article corrupting Clinton both personally and–worse–professionally, via some questionable investments the pair had made through Burkle’s Yucaipa Companies.

Writer Todd Purdum paints a decidedly unattractive picture of Burkle, noting even the tasteless nickname of Burkle’s plane these days, in a portrayal so rough that Yahoo CEO Jerry Yang’s tough treatment by the press recently looks like a walk in the park.

Well, almost.

In what amounts to a rant by Carl Icahn (pictured here), The Wall Street Journal gives the billionaire investor lots of room to kvetch about what he thinks of Yang, including asserting that he will oust the Yahoo founder if he wins his proxy fight against the company.

“I am amazed at the lengths that Jerry Yang and the board went to entrench themselves in this situation,” said Icahn.

Apparently, Icahn was the only one who didn’t get the memo that Yahoo has been consistently obstreperous about Microsoft’s many overtures, since–well, let’s do the exact calculations–forever. And a day.

Still, Icahn perseveres and hangs this old entrenched management chestnut on a lawsuit that was recently filed by shareholders that points to the massive and costly severance plan Yahoo sneakily put into place as a ploy to fend off Microsoft.

“It’s no longer a mystery to me why Microsoft’s offer isn’t around,” Icahn said. “How can Yahoo keep saying they’re willing to negotiate and sell the company on the one hand, while at the same time they’re completely sabotaging the process without telling anyone.”

How? By Yang opening his mouth, that’s how, and then doing nothing much.

As a student of this lugubrious style of Olympic dithering, I would point Icahn to Yang’s 100-day Sacred Cow VisionQuest, well before this soap opera got started.

You need to catch up pronto, Carl!

And speaking of people irked by Yang of late, investor Gordon Crawford (pictured here) also made some news yesterday with his investment in Veoh Networks, part of a $30 million round that included Intel Capital and Adobe Systems (ADBE).

Existing investors in the not-YouTube video service–Shelter Capital, Spark Capital, Goldman Sachs (GS), Michael Eisner’s Tornante Company, Time Warner Investments (TWX) and Jonathan Dolgen–also ponied up more money.

Crawford, the SVP of Capital Research Global Investors, manages a massive portfolio, and it is one of Yahoo’s biggest shareholders.

And, unlike Veoh, Yahoo is an investment Crawford has not been happy with recently.

“I am extremely angry at Jerry Yang and at the so-called independent board,” he said in an interview a month ago. “I’m hoping that there is such an outpouring of outrage that the board is embarrassed into revisiting this thing, but I’m not optimistic about that.”

And by independent board, by the way, he meant directors like–you guessed it–Ron Burkle!

At least Burkle’s not to blame for the so-so, lots-and-lots-missing–Google? What Google? (GOOG)–piece in the same Vanity Fair issue, an oral history of the Internet.

Called “How the Web Was Won,” it makes the founding of the world’s most important medium seem awfully dull.

I’d recommend instead–as any sentient being would–the cover story on Angelina Jolie, with this sharp quote from her: “In my father’s generation, the product was 80% of what you were putting into the world, and your personal life was 20%. It now seems that 80% of the product I put out is silly, made-up stories and what I’m wearing.”

Or not wearing, in the case of the pictures of Jolie in this article.

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