The planned investment fund, run from the New York company’s asset-management unit, is expected to raise between $500 million and $750 million, these people said. Marketing materials were sent to prospective investors starting about two weeks ago.

It isn’t clear whether J.P. Morgan plans to invest directly in target companies or buy and sell shares on behalf of clients. But the investment fund will target “late-stage” private companies, or those with an up-and-running business model, steady revenue and cash flow, according to people familiar with the situation. A J.P. Morgan spokesman declined to comment.

Read the rest of this post on the original site »

Confused by all those options? There’s also a basic RunKeeper app that has enough tracking and reporting features for many users and has always been free. I wrote recently about its social features.

Apple recently said RunKeeper Pro was one of its top-grossing apps of 2010. FitnessKeeper, a small Boston-based start-up that just raised $1.1 million in funding, wouldn’t disclose revenue or download numbers, but said it has been cash-flow positive every month since it was founded two-and-a-half years ago.

The company announced this week it would take down one part of its pay barrier from now through the end of January, giving away RunKeeper Pro for free during New Year’s resolution season.

Launched yesterday on iPhone, that promotion has already been highly successful, with 171,000 RunKeeper Pro downloads yesterday on the iPhone, more than 10 times as many as it gets in a normal day. The app is currently quickly climbing the Apple App Store charts, now at No. 5 in the free app category (it was No. 12 this morning). The promotion is also launching on Android this afternoon.

And as of this writing, it’s only New Year’s resolution time in about half the world.

In an interesting corporate move, the COO of online real-estate site Zillow, Spencer Rascoff (pictured here), has been promoted to CEO, replacing founding CEO Rich Barton.

Barton–who is also venture partner at Benchmark Capital and on the board of Netflix (NFLX)–will remain executive chairman of Zillow.

He co-founded it in 2005 after founding the Expedia travel site in 1994, while an exec at Microsoft (MSFT) and spinning it out in 1999.

After Expedia, Barton moved on to Zillow, also based in Seattle, which has raised $87 million in funding.

“Zillow is in a fantastic spot on many metrics, so it was ready for a new leader for the next phase,” said Barton, who said he would still remain very involved in the company.

One of the reasons Barton said he felt he could move on: Zillow is now profitable on a cash-flow basis via local and national advertising and referral fees. And it had 12.5 million unique users in August, up 41 percent year over year, despite an economic downturn.

Zillow has been focusing a lot on mobile apps, which now represents 15 to 20 percent of Zillow traffic on weekends.

Rascoff said he will focus on further growing reach and revenue on the Web and via mobile. “It’s a priority to grow the size of our audience,” he said.

The overall goal? Unlike a lot of start-up heads who are wary of IPOs, Rascoff said a public offering was the likely path for Zillow.

“I would like us to be public and we intend to be,” he said.

Here is the official Zillow press release:

Zillow Appoints Spencer Rascoff CEO

Co-founder Rich Barton Remains Executive Chairman

SEATTLE–September 14, 2010–Zillow, Inc., which operates leading real estate website Zillow.com®, Zillow® Mortgage Marketplace, and the industry’s largest mobile real estate platform, today announced Spencer Rascoff has been named chief executive officer. Co-founder Rich Barton, who has been the company’s CEO since it was founded in 2005, will continue to be actively involved in Zillow as executive chairman of the board of directors. Fellow co-founder Lloyd Frink will move from president to the new full-time role of chief strategy officer.

Rascoff joined Zillow in 2005 as one of the original executive team members and has been serving as chief operating officer since October 2008. Previously he was chief financial officer and vice president of marketing. As COO, Rascoff has been responsible for the majority of Zillow’s day-to-day operations for the past two years, overseeing marketing, finance, partner relations, legal and human resources as well as the execution of the company’s recent partnership with Yahoo! He is also a frequent housing market commentator on CNBC, CNN, FOX and Bloomberg TV.

“Spencer is an immensely capable and energetic leader who has been a driving force at Zillow from the beginning, helping to grow the company from a spark of an idea into a profitable industry leader. This promotion is well-deserved and reflects the leadership responsibility he’s been carrying for a while,” said Rich Barton, co-founder and executive chairman of Zillow, Inc. “As executive chairman, I look forward to continuing to work with Spencer and the entire team to extend Zillow’s leadership position in online and mobile real estate.”

“Working with Rich, Lloyd and the entire Zillow team has been the most exciting and rewarding period of my career,” said Spencer Rascoff, chief executive officer of Zillow, Inc. “I am extremely proud of our progress to date and even more excited about the opportunities ahead.”

Prior to Zillow, Rascoff served as vice president of lodging at Expedia, which he joined after InterActiveCorp’s $675 million acquisition of discount travel site Hotwire.com in 2003. Rascoff co-founded Hotwire in 1999 and helped grow the company from an idea to a leading online travel company in just four years. Previously, he was an investment banker in the merger and acquisitions group at Goldman Sachs and held other investment-related positions at TPG Capital, Bear Stearns and Allen & Co. He graduated cum laude from Harvard University, and he serves on Harvard’s Digital Community & Social Networking Advisory Group.

As one of the most-visited real estate sites on the web, Zillow has broken multiple records in operating and financial metrics in the past year and is profitable. In August, 12.5 million unique users visited Zillow.com, up 41 percent year over year. Zillow Mortgage Marketplace logged a record 314,000 loan requests in August, up six-fold from a year ago. National and local advertising sales, including sales through the company’s location-based mobile apps, are also accelerating. Total downloads of Zillow’s mobile apps have surpassed 2 million, making Zillow the most popular real estate app on iPhone®, iPadTM, Android® and Windows® Mobile devices. As previously announced, Zillow recently teamed with Yahoo! Real Estate to create the largest real estate ad network, for which Zillow coordinates sales across the two platforms. Later this fall, Zillow will power all for-sale listings on Yahoo!, bringing more than 4 million home listings to Yahoo! users.

Steve Case is most famous for building America Online, which became the Internet’s first mega-company, and for merging it with Time Warner (TWX), which became the worst corporate marriage in recent history.

But AOL (AOL) is 25 years old, and the AOL-Time Warner deal is a decade old. What has Steve Case been doing since then?

Investing, in a lot of different stuff. His Revolution holding company has stakes in everything from Revolution Health, a wellness/fitness/medical advice Web site, to Cacique, a Costa Rican resort, to Clearspring, a Web widget company. Late last year, Case sold Revolution Money to American Express (AXP) for $300 million. And Zipcar, another portfolio company, has just filed for a $75 million IPO.

Liveblog

“We meet again,” sighs Kara. “I just can’t quit you.” “We’re off to a good start,” says Steve.

1:58 pm: Kara–Let’s go back 25 years. Talk about the beginning of AOL.

1:59 pm: Case–Well, Zuckerberg was one year old.

I got into this when I was in college, reading Alvin Toffler’s “The Third Wave.” It was riveting.

We started in 1985, in partnership with Commodore. It was a total bet on community. We believed the killer app was community. Chat rooms, bulletin boards, etc.

On the road show, no one believed us. Which was fair, because we didn’t have many customers seven, eight years into it. Needed lots of technology to catch up a bit. And needed people to catch up, too.

2:01 pm: Kara–What put you over the top? All of those discs?

2:02 pm: Case–It wasn’t the discs. It was the content. By 1992, ’93, many more people had computers in their homes, connectivity was better. The Internet was evolving–it wasn’t legal for us to connect to the Internet until 1991.

It took a while before we were considered an Internet company. Even when we went public, we were an interactive company, or online services. Had to morph as market evolved.

2:04 pm: And at some point News Corp. (NWS) sued you?

2:04 pm: Yeah, in 1998. they were upset about an online game they thought we were excluding. There was a lot of antitrust chatter then. Those were the good old days.

Kara: Well, you proved them wrong, the idea that you were too powerful.

Case: “I’m not going to comment on that.”

2:05 pm: On the Time Warner deal: Made sense for us and our shareholders at the time. It made strategic sense. But as Thomas Edison said, vision without execution is hallucination.

I’m recalling, by the way, that one of our strategies was to buy Apple (AAPL), hire Steve Jobs and put him in charge. It was an idea that was floated.

Big point is that with the right leadership, which my group, including me, couldn’t provide, we were set up to succeed. Look at stuff like iTunes, YouTube, etc.–all of that could have come from that company.

2:07 pm: I stepped down after the merger. After a couple of years, I started making one-off investments. Then created Revolution as a holding company. Runs through portfolio, which you can see on his site.

2:09 pm: Kara–You were early on a lot of important trends. Oh, and tell me about your favorite device that isn’t the iPad (thanks, Kara!).

2:10 pm: I’m interested in the social media side, and there’s some stuff bubbling there that reminds me of the early days. Also, mobile and location-based stuff, really. But really, how the Internet can be a platform to change the world. Even companies like Zipcar and our resorts properties only work because of the Internet.

Kara: What’s the relevance of the Internet to a company that helps rich people travel?

Case: Booking tickets on the Web [hmm]. Health care is the one that can really benefit from the Web. Runs through Revolution Health portfolio.

2:13 pm: Case–Turns out I’m much more interested in businesses that touch consumers. Like Steve Jobs said, I like that better than enterprise.

And health care is really a wellness push. Because health care as we define it is really sick care.

2:14 pm: Kara–Talk about Twitter and Sarah Silverman.

Case starts to answer, but Kara interrupts and steers him somewhere else.

Case: I really didn’t want to do a blog in the last 10 years, because that seemed like work. But Twitter made sense. I signed up early, like three years ago, but like a lot of people, it didn’t make sense to me. About a year and a half ago it made sense. Less about what you’re doing than what you’re interested in.

2:15 pm: I’ve always liked that interaction part. I wish we’d thought of Twitter–we were headed in that direction with buddy lists, etc.

2:16 pm: Kara–Tease out the different big Web businesses: Facebook, Twitter, Foursquare.

Case: Facebook’s obviously a real company with real revenue. Twitter and Foursquare are much earlier, but they could be on the cusp of a real business with real revenue.

Kara: If you were a 19-year-old college student, what would you be looking at?

Case: I’m hoping that the Internet just becomes everyday life. You don’t call it email, it’s just mail. Etc.

2:18 pm: Big opportunity for Web integration in health: Wi-Fi pedometers, Internet-connected scales, etc. In most cases, remote diagnostics would be able to help you solve and correct problems.

And I think letting people know about healthier choices can solve a lot of problems, and the Web can help with that.

2:19 pm: Kara–Make some predictions. You’re a visionary!

On Yahoo (YHOO): Case pauses. “I don’t know.” This industry changes a lot. I don’t feel like I’m in a good place to make a judgment. Do remember that iconic brands, with large audiences: You should never give up for dead. Remember what happened to Apple.

On AOL: Obviously it’s not what it was 10 years ago, which is disappointing to see. But still a lot of revenue, cash flow, visitors. A lot of assets for somebody to take forward.

On Apple: Nobody would have imagined this 13 years ago, when Steve came back. Remember that it was worth $1 billion and left for dead. By the way, I’ve told Steve this–I’d love to see Apple focus on health care.

2:22 pm: On Facebook, social networking: Really big. Not going away. That kind of communicating is fundamental to human behavior.

On Hollywood: I do think it’s puzzling. We had a hard time getting VC money into the Internet, but Time Warner would spend $1 billion a year betting on movies. They were very comfortable with that, and so many fail.

2:24 pm: Kara–How do you want to be remembered?

Case: “That sounds kind of like a gravestone question.”

Kara: “Okay.”

Case: I want to be remembered, and my team to be remembered, as mostly a force for good, able to get tens of millions of people to take the Internet seriously and integrate it into their everyday lives. We helped get America online.

2:26 pm: A question from analyst Mary Meeker: Please remind us of the market value of AOL when you went public. And please talk about challenges you had when you were growing (“America offline,” etc.)

Case: We raised $10 million or $15 million, had about $30 million in revenue and were valued at $70 million.

As to the challenges–all of them were double-edged swords. For instance, regarding downtime, it took a better part of a decade to get people to take us seriously, and we let them down. Then again, the fact that people cared about our service problems made it clear that they took what we offered them seriously. It took us a year or so to work through that.

2:29 pm: We had a lot of ups and down. Mostly downs. It was a decade of building. One of my worries now, is that there are so many companies that are built to flip. I wish people took a longer view, and I wish VCs did as well.

2:30 pm: Case: I went to school in Hawaii with Obama.

Kara: How was he?

Case: I don’t know. I was a senior and he was a freshman.

A note about our coverage: This liveblog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations written and posted to the Web as quickly as possible. It is not intended as a transcript and should not be interpreted as one.

Steve Burke is about to take on a very big job: Combining GE’s (GE) NBC Universal with Comcast’s programming assets to create a television colossus. Good thing he has spent a lifetime in TV preparing for it.

But even without those responsibilities, Burke has plenty on his plate. As COO of the country’s biggest cable company, he helps steer Comcast (CMCSA) through tricky waters: Net neutrality, feisty file-sharers, sleeping tech guys, etc.

In certain circles–perhaps one you’re in sitting right now–the central question Burke and Comcast have to answer is: How are you going to survive the attempts of Google/Apple/everyone on the Web to turn you into an irrelevant dumb-pipe provider?

But the flip side of this question is just as valid: How can anyone really dislodge the company that controls the pipe that makes TV?

Liveblog

Kara starts off with the basics: Why do you want to buy NBC?

Burke: We’ve always believed that content and distribution go better together. We’ve had distribution, we’ve been trying to get content for a while. Tried to get Disney (DIS), came close to buying Universal when Vivendi owned the whole thing.

8:16 am: Kara–but lots of companies have tried marrying content and distribution. That doesn’t always work.

8:16 am: Burke–It has for News Corp. (NWS). But in our case, we already have the ability to put up 70,000 hours of content for video on demand. But we don’t have all the content we’d like. We don’t have day-and-date movies. We’d like all prime-time programming on VOD, etc. The thing that slows that down is the natural negotiations that you have to go through when you don’t own the content.

8:18 am: Kara–You’re also worried about becoming a dumb pipe, without control, right?

8:18 am: Burke: I like to think of it as opportunities. Look at DreamWorks (DWA)–they are worried about declining DVD sales, and they’d like to be able to do electronic sell-through. We’re in a position to help craft that evolution.

8:19 am: Kara–Are you sure consumers really want to watch this stuff on TVs, as opposed to iPads, etc?

8:20 am: Burke–We’re all for choice, anytime, anywhere. We believe consumers want that, too, and “it’s frustratingly slow” to get that to happen. “But I think that’s the world we’re all crashing into,” and “you can’t stop it anyway.”

8:21 am: What’s going with Hulu, which you’re going to own a piece of?

8:21 am: Burke–Whether it’s Hulu or Fancast, which we own all of, “people want their shows on the Internet. And they’re going to get their shows on the Internet.” Not sure if it’s going to be ad-supported or a paid model. “I know–I’ve read”–that Hulu is going to try a paid model.

8:22 am: We also support the TV-everywhere concept (spearheaded by Time Warner–get what you want on the Web, as long as you pay for a cable subscription).

8:23 am: Kara–you’re going to be running NBC, right?

8:23 am: When the deal closes, Jeff Zucker will run the entity. But he’ll report to me.

8:24 am: By the way, content and distribution don’t naturally work together. You have to make them work together. You have to do things that sometimes aren’t immediately advantageous for both sides.

8:24 am: Kara–Let’s talk about your individual businesses, as well as Steve Jobs’s expressed lack of interest in getting into TV. So cable is most important to you, right?

8:25 am: Burke–Cable provides the majority of NBCU’s cash flow. They’re the best part of the media landscape right now. Majority of cash at most entertainment companies comes from cable right now, and even more so at NBCU. But we also think there’s upside with Universal studio and NBC broadcast.

8:26 am: Okay, but give me an honest assessment of broadcast. What did you think of the Conan deal? Did they call you?

8:27 am: Burke–as the deal closes, it’s not our company. We can’t manage anything. To a degree, we’re watching things in the same way you are. There’s clearly a separation that exists. Because of regulators [natch].

8:27 am: Anyway, broadcast TV has been challenged for some time. But right now it looks to be on the upswing. Ads are coming back. retrans consent, where broadcasters will get money from cable operators, is coming. But broadly, if you look at TV, including cable, the overall television business is making as much money as ever.

8:29 am: Kara–do you still need broadcast networks anymore, anyway?

8:29 am: Burke–for big events, you can’t get a bigger audience. And that’s very attractive. We’re not naive. We know the business is “very challenged.” But in the next few years, there can be a real upside. We can invest in the business. If you’re in the network TV business, you have to spend the money to be competitive: on pilots, on encouraging creative people to work, etc. Note that NBC spent a lot more on pilots for this fall than they did a year ago. “If you’re in it, you have to be in it to invest and win. You can’t cut your way to success in broadcast TV.” [Which was Zucker's strategy last year. So what does that mean?]

8:31 am: Burke moves on to the Universal movie studio. It can move the existing library to different platforms, help it migrate from DVD to electronic sell-through, etc.

8:32 am: Will Burke have to do a lot of cost-cutting? When we bought AT&T (T), we did. But in this case, it’s not about costs. There’s very little overlap. It’s more of a case of trying to put everything together.

8:33 am: Kara: So will you sell anything off after the deal goes through?

Burke: No. We want the cable systems, but the other stuff has value, too. And all of the parts can work together.

8:34 am: Kara–How do you look at competitors like Apple (AAPL), Google (GOOG). What do you think of Google TV?

8:34 am: Our real competitors are the satellite companies and telcos. Right now. The real challenge is delivering all that data. You need infrastructure–pipe–for that. That’s how you deliver tonnage. And it’s going to be that way for a long time. The Web can deliver video, but not the same tonnage, in the same way. There are a lot of companies that want to get to the TV set. And I think all of them can be complementary. But people who subscribe to us want ESPN, CNBC, etc.

8:36 am: Kara–But why do need bundles and tiers, anyway?

8:36 am: Burke: The programmers we work with want full distribution. And you pay $50, $60, and you get 200 channels. And the ecosystem works very well for the programmers, and it works well for us.

8:36 am: Kara–and for customers?

8:37 am: Burke–TV in the U.S. is better than anywhere in the world. It’s natural to say you only want to pay for two channels. And we could technically do that, and we could offer a less expensive bundle. But I think the business model has evolved to be what it is right now, and it’s been successful for both sides of the equation.

8:37 am: But again, people are picking and choosing what they want on the Web. And some of them seem to be turning off cable as well. Aren’t you worried about that?

8:38 am: Burke: We worry all the time. But the fact of the matter is, it’s counterintuitive. I have five kids. And they all consume media different ways. But quarter after quarter, year after year, cable subs go up. It has never gone down. There’s no evidence that people are giving up their cable. If people want ESPN or CNBC, they’re going to subscribe. In the future, you’ll have more stuff on more devices. But at the end of the day, it’s in the programmers’ interest to get affiliate fees for their stuff.

8:40 am: Kara–But don’t you think people want a la carte?

8:40 am: Burke–I’d like to buy the first section of the Wall Street Journal, and not the rest of the paper [followed by Kara fumbling with some math].

8:40 am: In any case, you’ve got much more choice now than you had 10 years ago. It’ll be the same thing in the next 10 years.

8:41 am: Kara–which devices are important to you beyond TV?

8:41 am: Burke–The iPad, of course. We just showed off that new iPad app/TV controller that will replace the crummy search and navigation that exists on the set-top box now.

8:43 am: Kara–Is 3-D coming to the home?

8:43 am: Burke–Yep. This won’t be like HD sets, where they started off very expensive and came down relatively slowly. We’ll get a point pretty quickly where if you’re buying a nice TV set, it will have 3-D. Now there are a lot of places where 3-D doesn’t enhance the experience. And they need to figure it out. For instance, you don’t 3-D when you have overhead shots at at a football game. So we need to figure out what percent of stuff you watch will have 3-D. But it’s coming.

8:44 am: Kara–Jobs talked about collapsing windows, but windows don’t really seem to ever collapse.

8:45 am: Burke–Right. They are narrowing, but only slightly. You want to have windows, but make sure they have a purpose. For instance, I think the best place to have a movie for the general public is the movie theater. I think that’s going to be the same for a long time.

8:46 am: Kara–But what if you don’t want to go the theater?

8:46 am: Burke–I don’t know. I think there’s a real benefit to having it in theaters opening weekend. But 90 days out, I’m not sure. It probably doesn’t have to be windowed for 90 days; you should be able to get it on VOD, etc.

8:47 am: Kara–One more time: What’s the most important device, either real or overhyped?

8:47 am: Burke–The iPad. I bring it everywhere I go. It’s so elegant. And so early in its life cycle. But I’m looking forward to other tablets, too. The big picture is that all this stuff will enhance the value of great content. That’s the bet we made with NBC, that it can get to more people, over more devices, and get more valuable that way. People are always worried about technology draining value from media, but each new wave of technology has been additive.

Q&A:

Q: Do you think your pipe business will become separate from rest of your business and become commoditized?

Burke: For starters, we’re already separating programming from video (which includes TV, high-speed, etc.

Q: What about the theory that big mergers, like the ones you’re doing, are products of hubris more than business savvy?

Burke: I know that theory. We’ve done a lot of deals. “Every single time we’ve done a deal, Wall Street has said, ‘Why are you doing that?’” But we have a view that content and distribution work together if properly managed. And that a company that gets bigger can do cool things with technology, if you do it right. “But we’re totally aware that there are a lot of people saying–’Why don’t you stay where you are?’ We think we’re getting a fairly priced deal for NBCU.”

Q: Do you think there will be a market for set-top boxes that consumers buy on their own, with features they want?

Burke: Complicated question. Each MSO is a conglomeration of different technologies. We’d love it if people bought their own set-top boxes. We’d save a ton of money. But the different technologies involved make that difficult.

Q: What’s your mobile strategy?

Burke: We’ve invested in Clearwire. We’re rolling out WiMax. We’re big believers in Wi-Fi. The iPad makes you want Wi-Fi meshing in cities, and we’re working on that. But the traditional cellphone business, as a fourth product to complement TV, landline and Web, doesn’t make sense for us.

Q: You guys have been good about chasing after malware, botnets, etc. What can you do to get others to emulate you?

Burke: The Internet business is crucial for us. It’s a growth driver. So we have to provide really reliable, really fast Internet service. And we believe in open internet. But you have to deal with congestion and protect copyrights and prevent malware and spam, and we invest a lot in that. It’s a very tricky balancing act, to make sure that the highway is really fast, but also controlled.

Q: I run Hillcrest, and Hulu blocked my service. Will you do something different when you own NBC?

Burke: “It’s not time for me to answer that question.”

Kara: “Really?”

Burke: “Really.”

Q: Your customers hate you. What are doing about that?

Burke: We’re working on customer service, spending a lot of money on it. If you don’t take care of your customers, they’re going to go somewhere else. The physical networks are getting more sophisticated. But we want to improve them.

Q: Apologies, missed the question here.

Burke is explaining that TV software platform is “balkanized” compared with the Web, where it’s much easier to get stuff to work together.

A note about our coverage: This liveblog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations written and posted to the Web as quickly as possible. It is not intended as a transcript and should not be interpreted as one.

“The Sun integration is going even better than we expected,” said Oracle President Safra Catz. “We believe that Sun will make a significant contribution to our fourth quarter earnings per share as well as meet the profitability goals we set for next year.”

Oracle (ORCL) said its net income for the quarter fell to $1.2 billion, or 23 cents a share, from $1.3 billion, or 26 cents a share last year. But revenue rose to $6.4 billion from $5.5 billion. Excluding items, earnings for the quarter were 38 cents a share, which is what analysts surveyed by Thomson Reuters had been expecting.

Two last details worth noting: Revenue from new software licenses rose 13 percent during the quarter. Another sign that enterprise spending on technology is on the rise.

Oracle CEO Larry Ellison is a funny guy. From the company’s earnings release:

“Every quarter we grab huge chunks of market share from SAP,” said Oracle CEO, Larry Ellison. “SAP’s most recent quarter was the best quarter of their year, only down 15%, while Oracle’s application sales were up 21%. But SAP is well ahead of us in the number of CEOs for this year, announcing their third and fourth, while we only had one.”

Oracle Reports GAAP EPS of $0.23, Non-GAAP EPS of $0.38

REDWOOD SHORES, Calif., March 25, 2010 — Oracle Corporation (NASDAQ: ORCL) today announced fiscal 2010 Q3 GAAP total revenues were up 17% to $6.4 billion, while non- GAAP total revenues were up 18% to $6.5 billion. Excluding the impact of Sun Microsystems, Inc., which Oracle acquired on January 26, 2010, GAAP total revenue grew 7%. GAAP new software license revenues were up 13% to $1.7 billion, and up 10% to $1.7 billion excluding Sun. GAAP software license updates and product support revenues were up 13% to $3.3 billion, while non-GAAP software license updates and product support revenues were up 12% to $3.3 billion. GAAP operating income was down 5% to $1.8 billion, and GAAP operating margin was 29%. Non-GAAP operating income was up 13% to $2.9 billion, and non-GAAP operating margin was 45%. GAAP net income was down 10% to $1.2 billion, while non-GAAP net income was up 9% to $1.9 billion. GAAP earnings per share were $0.23, down 11% compared to last year while non-GAAP earnings per share were up 9% to $0.38. GAAP operating cash flow on a trailing twelve-month basis was $8.2 billion.

“Our solid top line growth, coupled with disciplined expense management, was key in generating $8.0 billion of free cash flow over the last twelve months,” said Oracle CFO Jeff Epstein.

“The Sun integration is going even better than we expected,” said Oracle President, Safra Catz. “We believe that Sun will make a significant contribution to our fourth quarter earnings per share as well as meet the profitability goals we set for next year.”

“Exadata is the fastest growing product in Oracle’s history,” said Oracle President, Charles Phillips. “Introduced a little over a year ago, the Exadata pipeline is now approaching $400 million with Q4 bookings forecast at nearly $100 million. This strengthens both sales growth and profitability in our Sun server and storage businesses.”

“Every quarter we grab huge chunks of market share from SAP,” said Oracle CEO, Larry Ellison. “SAP’s most recent quarter was the best quarter of their year, only down 15%, while Oracle’s application sales were up 21%. But SAP is well ahead of us in the number of CEOs for this year, announcing their third and fourth, while we only had one.”
In addition, Oracle’s Board of Directors declared a cash dividend of $0.05 per share of outstanding common stock to be paid to stockholders of record as of the close of business on April 14, 2010, with a payment date of May 5, 2010. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of Oracle’s Board of Directors.

The presentation catalyzed a movement. Start-ups everywhere adopted a lean, low-burn, low-investment model. To this day, companies seeking funding at our venture firm, Andreessen Horowitz, proudly proclaim in their pitch decks that they are raising tiny amounts of capital so they can run lean.

On the one hand, it is a fact that capital invested is negatively correlated with returns in the venture capital industry. Pumping too much money into a small start-up is unhealthy for both the company and the investor. On the other hand, Facebook has raised several hundred million dollars and is on track to produce fantastic returns for all of its investors.

So what’s a start-up to do? Much of what has been written and said about lean start-ups makes good sense. However, that advice is often incomplete, and some of the things left unsaid are the least intuitive. In this article, I will articulate some of those things left unsaid in arguing the case for the Fat Start-up.

Here is my central argument. There are only two priorities for a start-up:
Winning the market and not running out of cash. Running lean is not an end. For that matter, neither is running fat. Both are tactics that you use to win the market and not run out of cash before you do so. By making “running lean” an end, you may lose your opportunity to win the market, either because you fail to fund the R&D necessary to find product/market fit or you let a competitor out-execute you in taking the market. Sometimes running fat is the right thing to do.

What the hell do I know?

“Al Pacino couldn’t be no gangsta, DeNiro in ‘Casino’ he no gangsta
Wanna be, wanna see, wan’ get a shovel
dig Tookie up n*&%^!, cause he know gangstas”

–The Game

At this point, some of you are asking yourselves, “What the hell does Ben know? If he were really smart, then he’d know that thin is in.” It turns out that I have some experience in managing a fat start-up through the dot-com implosion of the early 2000s. This chart offers a brief summary of equity market history when I was CEO of Loudcloud and Opsware (click to enlarge):

Note that the Nasdaq index is very highly correlated to the start-up funding environment. During the two years I was CEO of Opsware, the Nasdaq fell 80 percent, far more than it has fallen during the current 2008-10 downturn. So the 2000-02 environment was at least as traumatic as this one for Silicon Valley companies–and arguably much worse.

Here is a brief summary of Loudcloud/Opsware’s fund-raising history during that time:

• September 1999: Loudcloud founded
• November 1999: Loudcloud raises $21 million at a $45 million pre-money valuation (Benchmark Capital is the lead investor)
• January 2000: Loudcloud borrows $45 million from Morgan Stanley (MS)
• June 2000: Loudcloud raises $120M at a $700M pre-money valuation
• March 2001: Loudcloud goes public on Nasdaq, raises $160 million and is valued in the public markets at approximately $480 million. Total funds raised to this point: $346 million.
• August 2002: Loudcloud sells the managed services business to EDS (this was the only actual business we had at the time) for $63.5 million and becomes a software company (and changes its name to Opsware).
• September 2002: Opsware trades for 35 cents per share or approximately a $28 million market cap.
• September 2007: Hewlett-Packard (HPQ) acquires Opsware for $1.6 billion

During this period, Loudcloud/Opsware had over 20 direct competitors. Almost all the competitors from the Loudcloud era went bankrupt, including MFN/SiteSmith, Exodus, LogicTier, Williams Communication, Global Crossing, WorldCom/Digex and Storage Networks. Those that survived got bought with valuations of less than $100 million (e.g., Totality) or still have very low valuations (e.g., Navisite).

How did we do it?

“I had a dream I could buy my way to heaven
When I awoke, I spent that on a necklace”

–Kanye West

So how did we navigate through the great dot-com crash, crush the competition, emerge as the No. 1 company in our space and sell the company to HP for $1.6 billion? Did we “cut spending, cut now, and preserve capital?” Did we make cash preservation our No. 1 priority?

No, we didn’t. To underscore the point, here are Loudcloud’s average monthly cash burn figures for the quarters ending in:

• Apr 2001:  $39 million
• Jul 2001:  $35 million
• Oct 2001:  $29 million
• Jan 2002:  $25 million
• Apr 2002:  $22 million
• Jul 2002:  $19.4 million

As you can see, we were aggressively investing in the business throughout 2001 and 2002. While we did reduce our cash burn, we did not make cash preservation our No. 1 priority. As it was, over the course of the transition from Loudcloud to EDS, we sadly laid off 400 employees and transferred another 150 to EDS. However, we didn’t scrimp and save our way to a $1.6 billion acquisition: Instead, it’s what we chose not to cut that ultimately got us there.

Loudcloud was a Web-hosting business. Today, we’d call it a “cloud services” business, but people weren’t quite ready for the “cloud” in 2001. We supercharged our hosting business with software (called Opsware) that automated our Web-hosting operations. The other cloud services businesses of our day also had software investments. However, as the macroeconomic climate changed, they all “cut deep and cut now.” In the end, they ended up putting their software in maintenance mode and stopped building new features.

As we weighed a decision to make the same deep cuts in our own software R&D efforts (a move advocated by the intelligentsia of the day, as well as nearly every MBA we had working in the company), I faced a hard decision: Cut deep and get to cash flow break-even quickly or continue to invest heavily in software?

In the end, I decided to run fat so that we could continue to invest in the Opsware software. At the end of the day, I realized that much larger companies like IBM (IBM) could hire smart people and train them. But without a lasting technology-based advantage, it would be increasingly hard for us to defeat them and build our customer base despite early wins with Ford (F), Fox Sports, and the U.K. government (to name just three of our early customers).

Running fat meant that I laid off zero software engineers so that we could keep on investing in our technology, find our product/market fit, and build a lasting technological advantage.

Still, we had to reduce costs or we would clearly go bankrupt. With this new view of the world, I decided that rather than divesting our intellectual property, I would divest our business. Now, that may sound logical the way I’ve described it, but consider these facts:

• We were generating $65 million/year from the Web-hosting business.
• We were a publicly traded company with a market capitalization of close to $200 million.
• All of our investors (pubic and private) believed in and invested in the Web-hosting business.
• We had close to 500 employees at the time. Nearly all of them were supporting the Web-hosting business.
• We had no other business. We had software, but we did not have a software product and certainly did not have a software business.

Despite all of this, we sold the Loudcloud hosting business to EDS and became Opsware the software company. It was not clear that this was a good idea at the time. In fact, the market thought it was a terrible idea: Our stock promptly lost 80 percent of its value, putting our market cap at about $28 million. It’s worth pointing out that this was about $40 million less than the cash that we had in the bank.

During the transition, we shrank our payroll from 450 employees to fewer than 100. Even with this massive reduction in expenses, it would take another three quarters to reach cash-flow break-even, a milestone we finally reached in Q2 of 2003.

One could argue–and many did–that we should have cut a lot deeper than we did given that we only had one customer. Although EDS was a very large customer (it generated $20 million/year in revenue), a brand new software company doesn’t need 100 people. We could have taken steps to reach cash-flow break-even immediately (clearly, that might have helped us get above 35 cents per share). In other words, we could have “gone lean” by cutting deep, cutting now, and preserving capital.

But rather than do what seemed obvious, I decided to keep on investing. Here’s why: In an economic boom, cash is great, but not necessarily a meaningful competitive advantage. If every company is well funded, being super-well funded doesn’t help you win. In fact, being super-well funded can actually screw you.

But in a bust (like the one we were in), having a lot of cash can be a huge competitive advantage because you can use that cash to put enormous pressure on your underfunded competitors. And that’s what we did.

We spent aggressively to match our best competitor’s product, feature for feature. And we used our public currency to acquire important adjacent functionality (network, process and storage management) that our competitors did not have and couldn’t acquire because they didn’t have the cash (or the equity).

In doing so, we were able to beat a really high-quality start-up (Bladelogic) that did not have the massive technical and cultural baggage that came from exiting the managed services business. Bladelogic was eventually sold to BMC (BMC) for $800 million. But I’m firmly convinced that had we not spent the money, Bladelogic would have emerged as the No. 1 company in the space and gotten the $1.6 billion exit instead of Opsware.

In the end, by continuing to invest aggressively in our technological advantage despite a hellacious funding environment, we were able to turn a doomed business into a winning one.

That is the very short version of how we won the market during the great tech recession of the early 2000s.

So did we learn?

“Hegel was right when he said that we learn from history that man can never learn anything from history.”

–George Bernard Shaw (1856-1950)

Every start-up is in a furious race against time. The start-up must find the product-market fit that leads to a great business and substantially take the market before running out of cash. As a result, the top two priorities are always to:

1. Find the product that 1,000 enterprise or 50 million consumers want to buy and grab those customers before your competitors do.
2. Raise enough cash and spend it intelligently so that you don’t go broke along the way.

Clearly, you can’t succeed if you don’t achieve both priority No. 1 and priority No. 2. So why is taking the market more important than not running out of cash? Because the only thing worse for an entrepreneur than start-up hell (bankruptcy) is start-up purgatory.

What is start-up purgatory, you ask? Start-up purgatory occurs when you don’t go bankrupt, but you fail to build the No. 1 product in the space. You have enough money with your conservative burn rate to last for many years. You may even be cash-flow positive. However, you have zero chance of becoming a high-growth company. You have zero chance of being anything but a very small technology business (see Navisite). From the entrepreneur’s point of view, this can be worse than start-up hell since you are stuck with the small company.

You recruited all the employees, you raised all the money and you made all the promises. You either see it through or leave–without your good reputation. No one wants to work for an entrepreneur who quits his or her own company. This is start-up purgatory, where you work just as hard, reap none of the rewards, and watch all your best people leave you. It sucks to be you.

The Bottom Line

Spending a little or spending a lot is a means, not an end. Choose the right strategy to win the market or you may end up going straight to purgatory.

As you listen to the virtues of the lean start-up–lightweight sales, light engineering, and so on–keep the following in mind:

• If you are a high-tech start-up, your value is in your intellectual property. Don’t stare at your spreadsheets so long that you get confused about that.
• You cannot save your way to winning the market.
• The best companies can raise money even in this market. If you are one of those, you should consider raising enough to wipe out your competition.

Thin is in, but sometimes you gotta eat.

Ben Horowitz is co-founder and general partner of Andreessen Horowitz. He co-founded Loudcloud, later renamed Opsware Inc., in 1999 and served as CEO of the company before it was acquired in 2007 by Hewlett-Packard. He was most recently vice president and general manager of Hewlett-Packard’s Business Technology Organization Unit.

While it was no blowout, Yahoo reported slightly stronger results for the fourth quarter than had been expected by Wall Street today after the markets closed, with revenue down eight percent compared to last year, rather than the predicted 10 percent drop.

Analysts had been estimating that Yahoo (YHOO) would have net revenues of $1.23 billion in the quarter, after commission due to advertisers were taken out.

Instead, it posted $1.258 billion in revenue. Revenue had been $1.38 billion in the same period a year before.

Earnings were right on target to what was expected, $119 million for the quarter, or 11 cents a share. In the same period a year ago, Yahoo has lost $278 million, or 22 cents a share.

Yahoo shares were up almost three percent after the results were unveiled, with the stock rising to $16.45.

BoomTown will liveblog the earnings call, which takes place at 2 pm PT today, where analysts will surely be interested in outlook in the year ahead.

One area of interest will be getting growth back at Yahoo.

Owned-and-operated search revenue was down 15 percent from a year ago, for example, although it was slightly up from the previous quarter and was the first sequential increase since the third quarter of 2008.

Display advertising was down only one percent compared to the same period last year and up significantly on a sequential basis from $399 million in the third quarter of 2009 to $503 million in this quarter.

The results included a four cents a share charge related to costs for the company’s search deal with Microsoft (MSFT).

Here is the press release (without charts and legalese at bottom) from Yahoo on the results:

FOR IMMEDIATE RELEASE

YAHOO! REPORTS FOURTH QUARTER 2009 RESULTS

Company Exceeds Revenue Business Outlook, Demonstrates Ongoing Improvements in Search and Display Advertising

SUNNYVALE, Calif., January 26, 2010–Yahoo! Inc. (NASDAQ: YHOO) today reported results for the fourth quarter and full year ended December 31, 2009.

Revenues were $1,732 million for the fourth quarter of 2009, which exceeded the top end of the Company’s business outlook range. Revenues decreased 4 percent from the fourth quarter of 2008 and increased 10 percent from the third quarter of 2009. Excluding the impact of currency rate fluctuations and divested business lines, revenues for the fourth quarter of 2009 would have declined 5 percent compared to the fourth quarter of 2008. Revenues were $6,460 million for 2009, a decrease of 10 percent compared to 2008. Excluding the impact of currency rate fluctuations and divested business lines, revenues for 2009 would have declined 6 percent compared to 2008.
Income from operations for the fourth quarter of 2009 was $119 million, compared to a loss of $278 million in the fourth quarter of 2008. Income from operations for the fourth quarter of 2009 included $40 million in restructuring charges and $32 million in advisory and retention costs related to the Microsoft search agreement, which amounts were not included in the Company’s business outlook for the fourth quarter of 2009.

Net income per diluted share for the fourth quarter of 2009 was $0.11, including charges of $0.04 per share related to the Microsoft search agreement and restructuring charges. For fourth quarter of 2008, net loss per diluted share was $0.22, including a charge of $0.39 per share primarily related to a goodwill impairment.

Non-GAAP net income per diluted share for the fourth quarter of 2009 was $0.15, compared to $0.21 for the fourth quarter of 2008. Net income per diluted share for 2009 was $0.42, compared to $0.29 for 2008. Non-GAAP net income per diluted share for 2009 was $0.63 compared to $0.70 for 2008.

“The fourth quarter marked a strong finish to 2009, which was a transformative year for Yahoo!,” said Yahoo! Chief Executive Officer Carol Bartz. “We beat the high end of our revenue guidance, saw demand for premium display advertising improve significantly, and grew Owned & Operated search advertising revenue sequentially for the first time since the third quarter of 2008.

“Our business has positive momentum and we feel good as we head into 2010,” said Bartz. “We’re pleased that the midpoint of our Q1 revenue outlook marks the first quarter of year-over-year growth in six quarters.”

Business Highlights

• Owned & Operated display advertising revenue grew 26 percent compared to the third quarter of 2009–compared to a 16 percent increase during the same period in 2008.

• Owned & Operated search advertising revenue continued to stabilize, increasing 4 percent compared to the third quarter of 2009, the first sequential increase since the third quarter of 2008.

• Yahoo! finalized its Search and Advertising Services and Sales Agreement with Microsoft Corporation, and is still hopeful that the transaction can close early this year.

• Yahoo! formed a strategic partnership with Emmy- and Golden Globe-winning producer Ben Silverman’s newly formed content studio Electus, an operating business of IAC/InterActiveCorp. The partnership will produce original programming for Yahoo! users while providing advertisers new opportunities to integrate their brand messages into the next generation of online programming.

• The Company launched Yahoo! Ad Interest Manager, which takes transparency in online advertising to a new level–providing significantly greater control over users’ interactions with interest-based advertising to improve personal relevance and build trust.

“We’re intensely focused on improving execution in all areas of the company, and our solid financial results for the fourth quarter demonstrate the progress we’re making,” said Yahoo! Chief Financial Officer Tim Morse. “We’ll continue to execute against our key financial objectives of accelerating revenue growth, and increasing our operating margin and returns on capital over the next few years.”

Q4 Revenue Results

• In the fourth quarter of 2009, marketing services revenues declined 4 percent and fees revenues declined 7 percent, compared to the fourth quarter of 2008.
• Marketing services revenues increased 11 percent and fees revenues decreased 1 percent, compared to the third quarter of 2009.

• Marketing services revenues from Owned and Operated sites were $971 million for the fourth quarter of 2009, a 9 percent decrease compared to $1,063 million for the same period of 2008. The decrease was primarily driven by a 15 percent decline in search advertising revenue and a 1 percent decline in display advertising revenue.

• Marketing services revenues from Affiliate sites were $564 million for the fourth quarter of 2009, a 6 percent increase compared to $531 million for the same period of 2008.

2009 Revenue Results

• In 2009, marketing services revenues declined 10 percent and fees revenues declined 12 percent, compared to 2008.

• Marketing services revenues from Owned and Operated sites were $3,553 million for 2009, a 12 percent decrease compared to $4,046 million for 2008. The decrease was primarily driven by a 13 percent decline in search advertising revenue and a 9 percent decline in display advertising revenue.

• Marketing services revenues from Affiliate sites were $2,121 million for 2009, a 7 percent decrease compared to $2,270 million for 2008.

Cash Flow and Cash Balance

• Cash flow from operating activities for the fourth quarter of 2009 was $351 million, a 9 percent increase compared to $321 million for the same period of 2008. Cash flow from operating activities for 2009 was $1,310 million, a 30 percent decrease compared to $1,880 million for 2008.

• Free cash flow of $220 million for the fourth quarter of 2009 was flat compared to $219 million for the same period of 2008. Free cash flow for 2009 was $957 million, a 27 percent decrease compared to $1,312 million in 2008.

• Cash, cash equivalents, and investments in marketable debt securities were $4,518 million at December 31, 2009 compared to $3,522 million at December 31, 2008, an increase of $996 million.

Business Outlook

Revenue for the first quarter of 2010 is expected to be in the range of $1,575 million to $1,675 million. Income from operations for the first quarter of 2010 is expected to be in the range of $90 million to $110 million. This business outlook excludes advisory and retention costs related to the Microsoft search agreement and restructuring charges, as these amounts are not currently estimable. See “Yahoo! Inc. Business Outlook.”

Conference Call

Yahoo! will host a conference call to discuss fourth quarter 2009 results at 5:00 p.m. Eastern Time today. A live webcast of the conference call, together with supplemental financial information, can be accessed through the Company’s Investor Relations website at http://yhoo.client.shareholder.com/results.cfm. In addition, an archive of the webcast can be accessed through the same link. An audio replay of the call will be available for one week following the conference call by calling (888) 286-8010 or (617) 801-6888, reservation number: 72652623.

Absent one-time charges, the company broke even for the quarter. Analysts had been expecting a two-cent loss on revenue of $609 million.

Good news, but it was tempered with a bit of bad. Because Sirius’s (SIRI) subscriber growth is slowing. The company ended the quarter with 18.5 million total subscribers. That’s up 103,000 from the second quarter, but down 2.1 percent from a year earlier.

“We are very pleased with what we accomplished during the third quarter, especially when considering the macroeconomic issues affecting consumers and the auto industry,” Sirius CEO Mel Karmazin said in a statement.

“We managed to grow revenue, grow ARPU, reduce operating costs, increase adjusted income from operations significantly, and refinance higher cost debt,” Karmazin added. “We look forward to continuing this performance. We grew subscribers and improved churn in the quarter, and we are well positioned to take advantage of an economic rebound. We expect to grow subscribers, revenue, and cash flow next year regardless of the magnitude of any recovery.”

Excluding special items, NetSuite (N) said earnings for the quarter were one cent a share. Said NetSuite CEO Zach Nelson: “We are very pleased to report record revenue and record cash flow.”

Analysts polled by Thomson Reuters had been expecting earnings of 59 cents on revenue of $27.17 billion at Verizon (VZ). Excluding one-time costs, the company reported a profit of 60 cents a share on revenue of $27.3 billion. That’s a 10 percent decline year-over-year, but still better than expected. (See chart below; click to enlarge.)

Wireless subscription gains, though they trailed AT&T’s (T) iPhone-bolstered numbers, were impressive nonetheless. Verizon added 1.2 million wireless customers during the quarter, raising its total count to 89 million. That’s not the two million AT&T added, but it certainly demonstrates that the absence of the Apple (AAPL) iPhone from Verizon’s handset lineup isn’t holding the carrier back all that much.

Verizon also added 198,000 net new customers for FiOS Internet and 191,000 for FiOS TV service.

“Verizon continues to generate strong cash flow, which we have used in building the foundation for sustainable, long-term shareowner value,” Verizon CEO Ivan Seidenberg said in a statement. “Even through the worst of the recession, we have continued to raise our dividend and to add new customers, expand markets and grow revenues based on the power and innovation of Verizon’s wireless, broadband and global networks.”

Looking ahead, IBM (IBM) expects full-year 2009 earnings of at least $9.85 a share, compared to its previous estimate of $9.70 per share.

“Our long-term strategic shift to higher-value businesses again enabled us to deliver outstanding margin, earnings and cash flow growth in the third quarter,” IBM CEO Sam Palmisano said in an earnings release. “We also saw improved revenue trends in our business and share gains in software and hardware. We continued to invest for growth in areas where clients see potential for value creation including Smarter Planet solutions, cloud computing and advanced business analytics.”

Looking ahead, Palmisano added, “We are optimistic about 2009 as we again raise our full-year expectations and we remain well ahead of pace for our 2010 roadmap of $10 to $11 per share.”

Taken together with Intel’s (INTC) latest earnings, which also beat expectations for revenue and profit, IBM’s report provides more evidence that the tech sector recovery is underway.

Could Comcast (CMCSA) be talking to NBC Universal about…something? Could be–that’s what the Los Angeles Times and other outlets reported last night.

And Comcast’s statement says there’s no “deal,” which doesn’t preclude “talks about deals.” Then again, it’s awfully unusual for a company in Comcast’s position to say anything at all.

Clear as mud? Then this won’t help. Check out these comments from Comcast COO Steve Burke at a Sept. 9 conference hosted by Bank of America (BAC) where analyst Jessica Reif-Cohen asked him about his appetite for acquisitions.

Burke said he’d love get more cable channels (like the kind NBCU owns). And he said he didn’t want a really big deal that would require the company to use its shares or take on a lot of debt (like, say, a $35 billion deal for NBCU). He said all this, by the way, in the span of a single answer.

I’ll carve it up and translate for you:

We’ve had plenty of debt, and we don’t want any more right now, thank you very much.

Well, if you look at cable companies over the last 10 or 20 years–I joined the Company 11 years ago. It is really amazing how deleveraged our Company and other cable companies have gotten….We like where we are from a leverage point of view and I think [we] would be uncomfortable if our leverage was significantly higher.

But boy oh boy, are cable channels attractive!

At our core, we believe that content and distribution work well together….I think there are a lot of case studies where content and distribution, particularly in a world where the distribution has technology that can deliver content in new and innovative ways, you really can create a lot of value by putting content and distribution together, particularly if that content is cable content.

And again, when you look at the big media companies, the best businesses that all of us have in the entertainment business I think are the cable content channels and those channels with that dual revenue stream are really good businesses. And I think we wouldn’t be doing our job if we didn’t try to figure out a way to get bigger in those businesses. Those businesses are growing more rapidly than our cable business and if the opportunity came about where we could add cable content to our portfolio, I think we would do it.

But really, we’re not in the market for a mega-deal.

Just to sort of get it right out there, I don’t think that means doing a big deal with our stock. I think all of us think our stock is significantly undervalued. So I don’t think that means doing a big deal with our stock. I also don’t think that means doing a big $50 billion acquisition. I think it is more trying to find opportunities that are complementary with our core business, that don’t take our balance sheet and push it back into a position, which we have worked so hard to get it down.

Never say never!

We are going to try to make sure that we are disciplined and we have high IRRs and good free cash flow generation and we will see if anything comes available. If it does, we will certainly look at it.

Got it? Me either. The only way I can reconcile Burke’s comments with the notion that Comcast is interested in an NBCU deal would be if Comcast was talking about buying Vivendi’s 20 percent stake in the NBCU.

Comcast could swing that one without breaking the bank–the conventional wisdom is that it would cost something in the $5 billion range. And it would technically increase Comcast’s cable network holdings, as Burke says he wants to do. But not really: Comcast would be a minority shareholder with no clear path to control. And it wouldn’t get the “distribution plus content” benefit Burke was talking about last month.

Anyone else have any ideas? Feel free to sound off below.

“As of today, Facebook now serves 300 million people across the world,” founder and CEO Mark Zuckerberg said in one of his typically somnolent blog posts. “It’s a large number, but the way we think about this is that we’re just getting started on our goal of connecting everyone. We’re also succeeding at building Facebook in a sustainable way. Earlier this year, we said we expected to be cash flow positive sometime in 2010, and I’m pleased to share that we achieved this milestone last quarter. This is important to us because it sets Facebook up to be a strong independent service for the long term.”

This is important to us because it sets Facebook up to be a strong independent service for the long term.

Interesting remark. It would seem then that Facebook has no interest whatsoever in selling itself off to Google (GOOG) or anyone else. It would much rather go public.

UPDATE: A couple of quick points courtesy Facebook COO Sheryl Sandberg: Growth is apparently widespread, and while it’s true that 70 percent of Facebook’s user base is now outside the U.S., growth in the U.S. is not slowing.

[Image credit: San Francisco skyline by m.john16/Flickr]

“As of today, Facebook now serves 300 million people across the world,” founder and CEO Mark Zuckerberg said in one of his typically somnolent blog posts. “It’s a large number, but the way we think about this is that we’re just getting started on our goal of connecting everyone. We’re also succeeding at building Facebook in a sustainable way. Earlier this year, we said we expected to be cash flow positive sometime in 2010, and I’m pleased to share that we achieved this milestone last quarter. This is important to us because it sets Facebook up to be a strong independent service for the long term.”

This is important to us because it sets Facebook up to be a strong independent service for the long term.

Interesting remark. It would seem then that Facebook has no interest whatsoever in selling itself off to Google (GOOG) or anyone else. It would much rather go public.

UPDATE: A couple of quick points courtesy Facebook COO Sheryl Sandberg: Growth is apparently widespread, and while it’s true that 70 percent of Facebook’s user base is now outside the U.S., growth in the U.S. is not slowing.

[Image credit: San Francisco skyline by m.john16/Flickr]

The big picture: Even though Facebook’s official valuation has slid from $15 billion–November 2007, when Microsoft (MSFT) invested–to $10 billion, Zuckerberg is OK with that, arguing that 1) that deal was done at the peak of the market and 2) the pact was never really a financial deal, but a way for Microsoft to partner up with Facebook–and, though he didn’t say it, to box out Google (GOOG). That sounds pretty reasonable.

Zuckerberg’s main talking points were that his company didn’t need the money, but it sure was nice to have, both to fund growth and make any M&A easier to pull off. And when it came to his new partners, he argued that DST’s existing portfolio, which includes several other social networks, would provide models/examples for his company as it continued to expand outside the U.S.

Earlier:

Facebook and its newest investors Digital Sky Technologies, are holding a teleconference to discuss the $200 million at 10 billion valuation deal the two parties just announced. I’ll be covering the call live.

Call starting “momentarily.”

On the call: Facebook Mark Zuckerberg, DST CEO Yuri Milner. Also, via phone (from D7!): Facebook COO Sheryl Sandberg and DST’s Alexander Tamas.

Zuckerberg reading statement that more or less tracks press release: “Advertising product” improving, “our business is doing really well” and we’re on track to create a “nice” business, and that’s why investors want in. DST approached us, has interesting profile and experience and insight into social networks. “We found their thinking and their leadership to be really impressive.”

Money provides “cash buffer” to support our continued growth, also possible other moves. No specific plans to talk about “but nice to have flexibility.”

Milner: “I realize not all the participants on the call are familiar with us.” Goes over DST portfolio. “We have now started to actively expand abroad.” We’re a holding company, have raised and invested more than $1 billion since 2005. Rattling off portfolio companies now.

Q&A:

What does this mean for possible IPO? Zuckerberg: “Our approach to financing has really been that we want to take money and work with partners”…”for a lot of start-ups, you get the feeling that the IPO is really the end goal…that’s not the case for us…we’re not rushing toward it…that’s really all I have to say about that today.”

What’s valuation for common stock? Zuckerberg: No comment. “There are different transactions that we’ve structured differently…we hope that there will be different things in the future…probably sometime in the next few months.”

What does this say about Microsoft’s $15 billion valuation? Zuckerberg: We did that deal at the peak of the market. That was part of a broader relationship. That investment was just one piece of it. This is also a relationship that we’re forming with DST…we hope we will work with other things over time.

“We feel really good about the progress we made…we feel this is  a good and fair valuation for us.” The Microsoft deal was at peak of market and was a strategic deal. “The world was in a pretty different place at that time.”

The international audience is 70 percent of our users. How do you monetize that? Zuckerberg: I have a few things to say, but want Yuri to talk, too. Milner: We have invested in five social networks in Europe. They have been able to monetize better than Facebook because they’re further along the curve than Facebook, which is a global company. But we think that Facebook will improve. Money will come from micropayments and advertising.

Zuckerberg: We can do advertising and have been experimenting with payments. Social networks in DST’s portfolio all monetize in different ways. Each is doing well, with a different model. We’re still growing. Online and direct advertising are growing the quickest, but over time, we expect to be able to build out a large number of these things.

What is your ad revenue going to be? Zuckerberg: A couple of months ago, we felt that everyone outside the company was underestimating our performance. We’ve been EBITDA-profitable for five straight quarters coming on six. Revenue growth has been 70 percent. Cash-flow positive sometime in 2010. That’s important because it means this investment is pure buffer. I realize those aren’t absolute numbers, but those are the ones we’re talking about.

Will DST be involved in management? Milner: We have our own businesses to run. We’ll keep in touch.

Questions about micropayments. Zuckerberg: We’ve tested a lot of things. It’s not a big part of our business, could be greater one day. They create a lot of value for users, and there are ways to monetize them. I’m looking forward to learning how these models are working.

Please talk about common stock/employee stock purchase plans. Zuckerberg: Going back to first question re. IPO. We want to make sure that we can continually make it so employees can be focused on the long term. We felt that if we let people have a little bit of liquidity, it can take some of the pressure off and let people focus on making company as good as it could be. We started to do this last year and had to hold off. Now we hope to be able to do it again.

Will that be the only way you are allowing employees or ex-employees to sell shares? Zuckerberg: Still talking about.

Is current Facebook ad business to be the main business going forward? Doesn’t mean it will be main business in the long term. You guys know everything that we’re talking about now.

Why aren’t you running big brand ad campaigns? We’re very interested in it. We have a big ad sales team. Building out offices internationally: U.K., France, a few more coming up. We think the best way to serve advertisers is to create ads that people interact with, that are “social and engaging.” I don’t want anyone to think that this isn’t a big part of our business, because it is.

Sandberg: Heavily engaged with brands. Ads specifically designed for Facebook, so they look different and behave differently than other ads on other sites, and that’s a good thing.

Preferred shares–are these are substantially similar to the ones Microsoft bought? Zuckberg: “I’m gonna duck that one.”

Does the company have any debt? Zuckerberg: [pause] There’s been some information that’s been public about debt we have for operating equipment. Beyond that, we do equity deals.

Will you do other investment deals? How many did you look at? Zuckerberg: He doesn’t really answer this question; instead he goes on to praise DST. Milner: We see things that other people don’t see, which is monetization that other social networks have been able to do. So we “kind of feel comfortable with that valuation.”

Is this largest foreign investment in Facebook? Zuckerberg: Um… [pause]. There’s been some public information about other folks we’ve worked with, but I think from reading some of the records you can get the answer to your question.

Other new deals? Zuckerberg: It was really at our option to find someone we were comfortable with. We didn’t feel like we needed to take an investment, and now we feel like we have the buffer we want.

Working on video chat product? More international products? Zuckerberg Yes. There are lots of things like that that we’re working on now. We want the site to be available in every country. We’re not translating the site. Users translate the site themselves. And a lot of the features are universally applicable.

Call finished.

And it was a nasty decline.

The company ended the quarter with 18.6 million subscribers–up 3.5 percent from a year earlier but down 404,000 subscribers from the preceding quarter. Sirius added 1,338,961 new customers. But it lost 1,743,383.

Given that and the state of the auto industry on which the company is so dependent for new subscribers, how will it ever attain CEO Mel Karmazin’s goal of 20.6 million subscribers by end of ’09? Hard to say, especially when Sirius expects to see another “noticeable hit” to its subscribers in its next quarter. That didn’t stop the company from raising its 2009 forecast to $350 million, adjusted from more than $300 million. Karmazin said that “satellite radio is now a cash flow growth story.”

Tell that to your subscribers.

But COO (and temporary CEO) Tim Cook’s dismissal of the netbook market will continue to spark speculation that the company is readying something that sits in between a laptop and an iPhone (which is itself a computer, of course). Silicon Alley Insider’s Dan Frommer got more of Cook’s response than I did so I’ll reprint his quote here:

“When I look at what is being sold in the netbook space today, I see cramped keyboards, terrible software, junky hardware, very small screens, and just not a consumer experience and not something we would put the Mac brand on. So it’s not a space–as it exists today–that we’re interested in, nor do we believe that customers in the long term would be interested in. That said, we do look at the space and are interested in how customers respond to it. People who want a small computer than does browsing and email might want to buy an iPod touch or iPhone. We play indirect basis. Then of course if we find a way where we can deliver an innovative product that really makes a contribution, then we’ll do that. We have some interesting ideas in this space.”

EARLIER:

Apple (AAPL) just turned in a strong quarter and followed it up with conservative guidance. A fairly typical performance for the company. Now investors will want to know about new product lines, Steve Jobs’s health and other matters. I’ll be covering the call live. Please refresh this page for the most current information. Click here if you want to listen in yourself.

Joining call now. Tim Cook CFO Peter Oppenheimer going over info that’s already in the release.

Mac products: 2.2 million Macs, a three percent decline year-to-year. Tough comparison from last year. But better than the seven percent drop in PC sales overall. “We feel very positive about our Mac performance.” Began and ended quarter with three-to-four weeks of Mac inventory.

iPod: People still buying ‘em! iPod touch selling well, and so are apps. Claims people like the new shuffle player. [Dubious about that]. We own the MP3 player market. [Duh.] Began and ended the quarter with four-to-six weeks of inventory.

iTunes store: 35,000 apps available in store, up from 15,000 a quarter ago. “We are within hours” of one billions app downloaded.

iPhones: Unless I’m missing something, absolutely no new data here. Praising new iPhone 0S 3.0 that’s in the works. Apple delayed the start of revenue recognition of all iPhones sold after the company announced the new OS, which was March 17. Will start up again once OS is released.

Stores: Half our Macs sold to people who had never owned one before. Average revenue per store is down year over year, because the economy is lousy.

Gross margins: Commodity and other component costs lower than expected. Higher-margin sales better are also than expected. Apple also spent less on operating expenses than expected.

Guidance: Forecasting is “challenging” in macroenvironment. Again, noting delay in revenue recognition for iPhones (see above). Excited about new products in pipeline, etc.

Q&A

Outlook for pricing on component supply? Mostly favorable, but some commodities, like NAND, will increase sequentially. Cook does not expect to see the level of reduction seen in calendar Q1. Will it be down? It will be “in a similar range as last quarter.”

Cash flow issues? Not really, for several reasons: 1) Apple made prepayment to…. [sorry, I didn't catch who that was]; 2) accounts payable were down, from holiday quarter to spring quarter, which is standard; 3) at $1.3 billion, tax payments were up “significantly” from last year.

Mac business: Desktops selling well, but average selling price down quite a bit. What’s going on? Sales accelerated in March after Apple announced new product launch. Higher-end Pro products sold to professionals are down a bit, which is related to economy for obvious reasons. Education sales also down a bit, for same reasons. Hoping Federal stimulus funds will help with that.

Back to netbooks–why won’t Apple sell them? Cook is still criticizing netbooks. The ones available today are ”just not a consumer experience and not something we would put the Mac brand on, quite frankly. It’s not a space today that we’re interested in, and it’s not a space we think that customers in the long-term are interested in.” But… a slight hedge with regard to smaller computers, which are, of course, what the iPhone and iPod Touch are. We “have interesting ideas in this space.” Today’s netbooks really shouldn’t even be called computers, really.

App store: What’s the mix between paid and free downloads and the iPod and iTouch mix? Nope. Apple won’t say. Again, Cook notes that we’re just “hours away” from the one billionth download. Cook: One of the keys behind the growth of iPod has been that sales of the iPod touch “more than doubled year-over-year.” The iPod and iPod Touch have reached sales of 37 million units, a big platform for developers. So there’s a virtuous cycle there.

[Sorry, missed two questions here.]

Why is Apple still doing an exclusive with AT&T for the iPhone? And how’s Steve Jobs? AT&T (T) is the best wireless provider in the U.S. “They have done a very good job with iPhone….We’re very happy with the relationship we have and do not intend to change it.” Structurally, we’re using GSM architecture, and Verizon (VZ) uses CDMA, and we wanted a world phone.

And Steve Jobs? Apple CFO Peter Oppenheimer: “We look forward to Steve returning to Apple at the end of June.” [Translation: No news.]

[Yet another question missing here. Apologies.]

Any info on DRM-free/”iTunes plus” sales? Too early to tell.

How much impact did Wal-Mart (WMT) have on Apple sales? Very key partner for the iPod. The company believes Wal-Mart provides extended reach. Pleased with results, but “early going, and not much to report there yet.”

So many iPhone Apps. How can you make them easier to find on iTunes? (Same problem as music.) Any kind of unusual patterns? Nonanswer here.

Please talk about competition for smartphones–i.e., please discuss the Palm (PALM) Pre. “Difficult to comment on products that aren’t shipping. So there’s nothing intelligent I could say on the Pre.” But “we think we’re years ahead.” We see things through software lens and that has benefited us and customers very well. Power of device and ecosystem enormous and we’re now just scratching the surface.”

What about suing Palm re: patents on the Pre, etc.? “We think that Apple’s innovation is leading the industry by years. We think competition is great; we think it makes all of us better as long as other companies invent their own stuff.”