Chambers did his best to put a brave face on things, both on a conference call with analysts and in the interview below with CNBC Asia that aired last night. He said that aside from a glaring weakness in Cisco’s sales to government customers–which are going to be difficult for the next several quarters–and its relatively small consumer business, business is stronger with telecom service providers, as well as with enterprise and service customers.

He also said that gross margins–which came in at 62.4 percent, down from the 63 percent that had been expected–were beset by a batch of new product introductions in the switching business, where sales were notably down by seven percent. The new products all launch with smaller gross margins that improve over time. Meanwhile he’s assembled a working group to study the gross margin problem.

So far, no one seems convinced. At least four analysts have downgraded Cisco’s stock this morning.

But its statement contained a new characterization from CEO John Chambers about the circumstances Cisco finds itself in. Gone was talk of temporary air pockets that emerged in November when Cisco’s outlook turned suddenly, and unexpectedly, sour. Now it’s in a “period of transition.”

One that’s far from over, apparently. Having reported the hard numbers, it saved the bad news, in particular its outlook, for the conference call. And it wasn’t pretty. It fell to CFO Frank Calderoni to deliver the bad news. While Cisco forecast revenue to grow at a rate of 4 to 6 percent in the third quarter over the same period in 2010, profits were forecast at 35 to 38 cents a share, well below the consensus of 39 cents. Gross margins for the full year will be in the 62 to 63 percent range, down from 64 percent in 2010.

Chambers noted weaknesses both in Cisco’s switching business, where sales declined by 7 percent, and in sales to government customers, saying he expected that segment to be problematic during the next several quarters. Sales of set-top boxes were also weak. Summing it up, Chambers said: “I think we will look back on this period of time and wish we could have avoided it and yet it will make us stronger in the long run.”

There was good news. Cisco will pay its first dividend this year, somewhere in the range of 1 to 2 percent.

And then there’s Cisco’s cash position, which stands at $40.2 billion, though only $3 billion or so of it is inside the U.S.

Chambers used the subject to once again complain about U.S. tax policy regarding cash held overseas. “We have a tax policy that is just broken,” he said.

AOL CFO Artie Minson prepped investors for the call with a memo laying out expectations. Short version: AOL thinks HuffPo will earn about $10 million on revenue of $50 million this year (as long as you’re okay with using “adjusted OIBDA” as a proxy for “profit”). It also thinks the purchase will save it $20 million a year, but it’s going to spend around $20 million on restructuring charges when the deal goes through.

I’ll liveblog the call below:

8:02 am: Greetings! About to start now.

8:03 am: On the call: Tim Armstrong, Arianna Huffington, Artie Minson.

8:03 am: Armstrong makes a Super Bowl joke that I can’t quite follow, and I like football. But now praising Arianna, co-founder Kenny Lerer and outgoing AOL CEO Eric Hippeau.

“The Huffington Post is one of the best properties on the Internet.” Armstrong, Huffington and Minson are all BlackBerry users.

8:06 am: On revenue: This gives an opportunity to serve more brand marketers, who are “very interested” in the scale this gives us.

8:07 am: Spending next 30 days on integration. “Really synergies to be had.”

Next steps: Next 72 hours communicating with employees, talking to partners. 1,500 AOL workers on the phone this morning explaining deal to others.

“This may be the smallest disruption” internally of any deal I’ve worked on. Majority of integration done within 35 to 40 days.

8:09 am: We’ve looked at a bunch of companies, though we’re mainly going to concentrate on organic growth. But Arianna is great [many superlatives] and she “also happens to be a woman.”

8:10 am: Here’s Arianna.

8:11 am: “Amazing” how aligned two orgs are.

8:11 am: HuffPo was profitable last year. We were thinking about bringing in additional investors last year, and an IPO down the line. But this made perfect sense.

8:12 am: This deal provides a “dramatic acceleration” for the plans we already had.

8:13 am: Some praise for Patch, AOL’s local strategy.

8:14 am: Can’t wait to start!

8:14 am: Alrighty, then. Here’s Artie Minson with some nuts and bolts.

Actually, it’s some color on the deal. But a lot of it is in the prepared remarks he put out earlier this morning.

8:15 am: Again, $20 million in cost savings here. And again, we’ll have to pay up for restructuring: $20 million for cuts, and $10 million for purchase price.

8:17 am: Still basically reading from prepared remarks. Some bookkeeping talk re: compensation accounting.

8:18 am: Remember, display ad growth coming will finally start showing up second half of this year.

8:19 am: Q&A:

Q: Talk about content strategy. Does HuffPo become hub for content going forward? Does it replace Seed? And how long is Arianna’s contract?

A: “The press” has been talking about our content strategy, so let me be clear–we’re focusing on premium content. Things like Seed and StudioNow are platforms–you can do whatever you want with them, different quality levels, at different types of scale.

And then the other thing that is important about those platforms is the ability they give us to work with advertisers.

One of our main interests in HuffPo is their technology and publishing system. So now we have multiple systems [which he is saying is a good thing]. “Our content strategy hasn’t changed.” The “stuff that was out in the press about the AOL Way” was just one way of doing things. [This is not very convincing]

Arianna, tell us how long you’re going to stay.

8:24 am: Arianna: “I’ve told Tim I want to stay here forever. I want this to be the last act of my life.” Anything I want to do I can do here.

[Sorry, missed next part but it was a defense/explanation of content strategy.]

8:26 am: Armstrong: Arianna has a multiyear contract, but it’s open-ended.

8:27 am: Arianna: By the way, we’re going to bring back commenting to AOL stories, and socialize them.

8:28 am: Q: Why buy instead of partnering? Were there other bidders? Also, how will HuffPo politics affect AOL?

8:28 am: Armstrong: We do partnerships where there is “limited upside to those arrangements” so ” we can really spend time on the areas we want to win”–i.e., we don’t care about sports, we do care about women.

“Arianna is somebody we’d rather have inside our building than outside our building.”

“If there were or weren’t bidders on the other side,” I think we got the right price.

8:30 am: Arianna. “As we’ve said, again and again, Huffington Post was not for sale….Nobody was in a hurry to cash out, everybody believed that we could do an IPO down the road.” It’s just that Tim gave us a great offer. [hrrrm.]

On politics–we used to be all about politics, now we’re not. Just 15 percent of our traffic. We have a divorce section now.

Talking up AOL’s “college” section.

8:33 am: Q: For Arianna: More on Patch, please. What do think about what AOL’s done with it, and what you can do with it?

8:33 am: [Every time Arianna says "local level" I think she's saying "locker level." It's happened at least twice, maybe more, on this call.]

There’s a “greatest person of the day” feature we have, and I think Patch should use that. [Or maybe vice-versa, sorry.] I also like their five percent “giving back” rule, cause marketing, etc.

8:35 am: Armstrong: Again, we can do national and local. That’s important. NFL rights are important, and so are local news stories.

8:36 am: Q: Who’s going to sell what? And can you talk about pricing disparity between AOL and HuffPo?

8:37 am: Armstrong: “We would like to maintain all the people from both sales forces [except for Greg Coleman!]. I think we will end up with a large-scale, large-property organization–I don’t know exactly what that’s going to look like, though.

On sell-through rate: Slightly lower at HuffPo, because they’ve been ramping up traffic, and sales force. On CPM, same story. So we can bring up sell-through rate and CPM, and have a larger sales force. [This is pretty much the best argument for the deal that Armstrong can make.]

[BTW: Good back-channel discussion on Twitter right now about AOL's SEO skills, and the people behind it. None of that coming up during this call right now.]

[Sorry, I meant HuffPo's SEO skills, much of which stem from blueprint BuzzFeed CEO Jonah Peretti set out.]

Q: Why not use equity for this deal?

A: Because our equity is priced too low, essentially. But HuffPo employees did roll over 25 percent of deal consideration into AOL options. So as that equity gets more valuable, they’ll get upside.

8:45 am: Q: In your statement, you talked about OIBDA growth in 2013. More on that please.

Minson–probably going to stick to my prepared remarks on that one.

8:46 am: Last Q: Your acqusitions have been about toolsets or content. As you think about others going forward, what else do you want?

Armstrong: We have long-term vision. On plumbing: We’ve wanted to get platforms and plumbing straightened out, and we’re doing that now. Think about the bones or foundation of a very large property. That’s why we’ve been doing infrastructure, like with video–5Min and GoViral and StudioNow.

Going forward, we’ll be doing infrastructure. And we’ll continue to look at “media properties and media brands” that fit our strategy. [Remember, Web site owners: HuffPo just got 10x revenue.

8:50 am: Minson: But we're very price sensitive and we've walked away from deals.

8:50 am: Arianna: And we like women!

8:51 am: Armstrong sums up: Success "in the Internet space" requires vision and execution. That's this deal. And remember, content and brands become more valuable as tech gets faster, more advanced. And "expect us to stay on strategy and on point" going forward. "We're going to overcommunicate" with both sets of employees as we integrate. [You've been warned!]

And we’re done. Thanks for reading.

[Photo credit: Arianna Huffington]

In a bold and definitive move, AOL is paying $315 million, mostly in cash, to buy the Huffington Post, one of the Web’s most prominent news and opinion sites.

As part of the deal, Huffington Post co-founder Arianna Huffington (pictured here)–who was derided by some when she co-founded the left-leaning site in 2005 with investor and well-known communications exec Kenneth Lerer–will become president and editor in chief of the Huffington Post Media Group within AOL.

The deal was signed late this afternoon, and the board of directors of each company and shareholders of the privately held Huffington Post have approved the transaction.

In an exclusive video interview BoomTown conducted earlier today in Dallas, just before Super Bowl XLV, both Armstrong and Huffington were jovial that the whirlwind deal, begun in November, actually worked out so quickly.

Perhaps giddy, they hit upon a common motto:

“One plus one equals 11.”

Get it? One and one next to each other is the number 11!

Let’s move on, shall we?

AOL said it is expected to close in the late-first or early-second quarter of 2011.

Once culminated, it will put Huffington in charge of all AOL content and other properties, including well-known names such as Engadget, Moviefone, MapQuest and TechCrunch.

She said she plans to move to New York from Los Angeles, although she will also maintain her longtime Brentwood home there.

And content for all these sites will be integrated deeply into the Huffington Post, giving it a huge new infusion of editorial material.

More to the point, the flashy acquisition–which essentially came together in less than two weeks in January–will become the linchpin of AOL CEO Tim Armstrong’s aggressive, if risky, strategy to focus the long-troubled company as a content and advertising powerhouse.

For AOL, the deal gives it a popular branded site that is very good at generating lots of page views and impressions very efficiently–which is the company’s whole thrust these days.

That means lots more ad inventory to sell and an injection of content talent, giving AOL the scale it desperately needs.

The move also obviously gives AOL a much-needed editorial identity and cohesion, which it doesn’t really have.

In fact, many think AOL needs a rallying point to bring clarity to its hodgepodge of recent acquisitions that all center on the notion that a strong company has yet to emerge in the premium content space.

Here is a mock-up of the front page of AOL tonight (click on it to make it larger):

While it all makes for a riveting narrative by the charming Armstrong, AOL still has not delivered the business turnaround promised after its spinoff from Time Warner in 2009.

Wall Street, which has given Armstrong a lot of rope, has become more impatient of late to see results–especially more robust increases in its display advertising business, as its access business dies off–after AOL spun off from Time Warner in 2009.

In its quarterly report last week, AOL reported earnings of 61 cents a share on revenue of $596 million.

But, as MediaMemo’s Peter Kafka wrote:

The bigger picture is that Armstrong’s turnaround is still in progress. Ad revenue was down 29 percent in the last quarter, although that number is worse than it looks. A big chunk of the decline comes from moves AOL has intentionally made that will cut revenue in the short run in return for more profitable sales down the road.

A more representative data set for Armstrong are his display ad sales, which are down 14 percent overall and eight percent in the U.S..

The bad news is that the rest of the Web ad industry is well into rebound mode; the good news is that AOL has trained Wall Street to expect numbers like these. If you’re waiting to see positive sales numbers, Armstrong said during AOL’s earnings call this morning, wait until the second half of this year.

In any case, the move is a good one for the Huffington Post since it will vault it to the next level of growth.

Other companies, such as Yahoo and NBC Universal, had looked at the company as a purchase target, and many expected it to eventually sell out to a larger company.

Sources close to the Huffington Post said that that outcome seemed the most likely, and the recent expansion of the site and its audience made it a good time to do a deal now.

Talks with Yahoo last year went nowhere, sources said, but Armstrong was not as slow to act.

Indeed, the actual deal happened quickly, said Armstrong and Huffington in a video interview with BoomTown earlier today (which you can see here).

The pair started talking in early November of last year at the Quadrangle Conference in New York and continued their discussions through the holidays.

Armstrong made the official offer to Huffington by phone in January, while she was at the World Economic Forum in Davos, Switzerland, and he was snowed in in New York.

Five time multiple to the Huffington Post’s upward of $60 million in expected revenue for the coming year, and nearly 10 times the $31 million for 2010, the offer was accepted quickly.

AOL used cash for $300 million of the purchase and $15 million in stock for the rest.

“The idea of turning a fire hose of traffic onto our content made enormous sense,” said one person close to the situation. “Everything is changing so fast, it seemed like the time was right.”

An IPO was also considered for the Huffington Post, sources said. But since the site only recently moved into profitability–although barely–such an event would have been farther out.

That’s despite the fact that the Huffington Post has seen fast-growing traffic and influence, spurred in part by Huffington’s larger-than-life persona in both the mainstream media and blogosphere.

The wide-ranging site–which has added a number of content areas in recent years beyond its flagship political offering–currently has almost 26 million unique monthly visitors, according to recent stats, moving in close range to established news organizations such as the New York Times.

That kind of success seemed unlikely when the Huffington Post launched on May 9, 2005, positioning itself as as a liberal counterweight to the popular right-leaning Drudge Report.

But the Huffington Post’s heady mix of celebrity bloggers, personality and voice, as well as aggressive curation of links from other sites, quickly caught on.

To fund its efforts, the New York-based online media company has raised $37 million from angel investors such as Lerer–the largest individual shareholder, followed closely by Huffington–and venture firms such as Greycroft Partners, Softbank Capital and Oak Investment Partners.

The growth has not been without controversy around issues such as lack of payments to bloggers who contribute and accusations that the site uses too much content from other Web sources when linking.

And Huffington herself has also been a lightning rod, which has been both positive and negative for the site.

But, there is no question she is one of the Web’s most prominent players, along with writing books, appearing on television frequently and being a fixture at high-profile events in New York, Los Angeles and Washington, D.C.

That includes a never-ending panoply of parties that feature a potent mix of movie stars, corporate poo-bahs, glad-handing politicians and lots of journalists from all over the media.

In fact, full disclosure, I was at one of those parties this past weekend for actor Colin Firth and others involved in the making of the Oscar-nominated film “The King’s Speech.” (Apropos of nothing, actor Helena Bonham Carter is as smart as you would expect, but much more delicate.)

As part of the AOL deal, CEO Eric Hippeau–who has been integral to professionalizing the business and will be joining Lerer Ventures–and Chief Revenue Officer Greg Coleman will leave the Huffington Post.

Ironically, Coleman was replaced by Armstrong as head of ad sales at AOL after he took over as CEO. Coleman got a big payout and will now apparently get another.

But the rest of the 200 Huffington Post employees are moving over to AOL with Huffington, who Armstrong hopes will be the company’s ace in the content hole going forward.

There are likely to be changes to come too at AOL, within weeks, especially in its content-side management and site staffs.

AOL provided some quotes in support of the deal from prominent Internet figures who know Huffington well.

“Arianna is one of the preeminent authors and editors of our time, and Tim has a remarkable track record of business success,” said Facebook COO Sheryl Sandberg. “Bringing them together creates tremendous potential for AOL.”

And Twitter co-founder Biz Stone said:

“Editorial vision and leadership are essential in order to transmute our shared cacophony of voices into a valuable dialogue. Arianna’s expertise, empathy, and entrepreneurial enthusiasm forms a kind of alchemy turning mere words and phrases into powerful expressions of humanity.”

Inter-Internet harmony: How sweet!

Here is the official press release, with all the details, but there is also an 8 am ET AOL conference call tomorrow:

AOL AGREES TO ACQUIRE THE HUFFINGTON POST

Acquisition Will Solidify AOL’s Strategy of Creating a Premier Content Network With Local, National and International Reach

Arianna Huffington To Lead Newly Formed The Huffington Post Media Group Which Will Integrate All Huffington Post and AOL Content, Including News, Tech, Women, Local, Multicultural, Entertainment, Video, Community, and More

The New Combined Media Group Will Reach 117 Million Americans and 270 Million Globally

Group Uniquely Positioned To Redefine the Future of Brand Advertising and Marketing For an Engaged and Influential Audience

New York, NY–February 7, 2011–AOL Inc. [NYSE:AOL] announced today that it has entered into a definitive agreement to acquire The Huffington Post, the influential and rapidly growing news, analysis, and lifestyle website founded in 2005, which now counts nearly 25 million unique monthly visitors*.

The transaction will create a premier global, national, local, and hyper-local content group for the digital age–leveraged across online, mobile, tablet, and video platforms. The combination of AOL’s infrastructure and scale with The Huffington Post’s pioneering approach to news and innovative community building among a broad and sophisticated audience will mark a seminal moment in the evolution of digital journalism and online engagement.

The new group will have a combined base of 117 million unique visitors a month in the United States and 270 million around the world**. Following the close of this transaction, AOL will accelerate its strategy to deliver a scaled and differentiated array of premium news, analysis, and entertainment produced by thousands of writers, editors, reporters, and videographers around the globe.

As part of the transaction, Arianna Huffington, The Huffington Post’s co-founder and editor-in-chief, will be named president and editor-in-chief of The Huffington Post Media Group, which will include all Huffington Post and AOL content, including Engadget, TechCrunch, Moviefone, MapQuest, Black Voices, PopEater, AOL Music, AOL Latino, AutoBlog, Patch, StyleList, and more.

“The acquisition of The Huffington Post will create a next-generation American media company with global reach that combines content, community, and social experiences for consumers,” said Tim Armstrong, Chairman and CEO of AOL. “Together, our companies will embrace the digital future and become a digital destination that delivers unmatched experiences for both consumers and advertisers.”

Armstrong continued, “Arianna is a singularly passionate and dedicated champion of innovative journalistic engagement, and a master of the art of using new media to illuminate, entertain and enhance the national conversation. Arianna is a remarkable person and she will continue to create remarkable outcomes for the combined company.”

“This is truly a merger of visions and a perfect fit for us,” said Huffington. “The Huffington Post will continue on the same path we have been on for the last six years–though now at light speed–by combining with AOL. Our readers will still be able to come to the Huffington Post at the same URL, and find all the same content they’ve grown to love, plus a lot more–more local, more tech, more entertainment, more finance, and lots more video. We are fusing a legendary and powerful new media brand with a vibrant, innovative news organization, known for its distinctive voice, a highly engaged audience, an expertise in community-building, and a track record for demystifying the news and putting flesh and blood on the data while drawing our audience into the conversation.”

Huffington continued, “By uniting AOL and The Huffington Post, we are creating one of the largest destinations for smart content and community on the Internet. And we intend to keep making it better and better.”

Kenneth Lerer, The Huffington Post’s Co-Founder and Chairman, said, “The Huffington Post team has created a potent brand with the proven track record of knowing how to grow traffic, inform and entertain its readers and build a one-of-a-kind online community. Add that to the powerful scale and resources of AOL and you have the perfect combination for today and the future. Together these two companies will be a premier online content provider. From local citizen reporting through AOL’s Patch, to The Huffington Post’s national reporting on politics, business and culture, consumers will have access to everything they want whenever they want it.”

AOL has agreed to purchase The Huffington Post for $315 million, approximately $300 million of which will be paid in cash funded from cash on hand. The Huffington Post is privately owned by its two cofounders, as well as a group of investors. The proposed transaction is subject to customary closing conditions, including receipt of government approvals. The boards of directors of each company and shareholders of The Huffington Post have approved the transaction. The transaction is expected to close in the late first- or early second-quarter 2011.

The Huffington Post over-indexes on educated, affluent users, reaching the key decision makers in C-suites around the globe. The Huffington Post speaks to this influential audience via a host of prominent voices on its group blog. Among those who have blogged on The Huffington Post are: President Barack Obama, Secretary of State Hillary Clinton, Mayor Michael Bloomberg, Larry Page, Diane Sawyer, Buzz Aldrin, Nora Ephron, Bill Maher, Madeleine Albright, Robert Redford, Katie Couric, Neil Young, Rahm Emanuel, Mia Farrow, Senator Russ Feingold, Senator Al Franken, Ari Emanuel, Harry Shearer, Senator John Kerry, Representative Nancy Pelosi, Madonna, Lawrence Summers, Jamie Lee Curtis, Ryan Reynolds, Craig Newmark, Alec Baldwin, Aaron Sorkin, Natalie Portman, Scarlett Johansson, Russell Simmons, Sean Penn, Bill Gates, Norman Lear, Charlie Rose, Elizabeth Warren, Tavis Smiley, Sheryl Sandberg, George Clooney, and former President Bill Clinton. And the audience speaks back, generating four million comments a month***.

The Huffington Post’s affluent, influential audience, that is growing at a rate of 22 percent (December 2009 vs. December 2010)****, when combined with AOL’s massive scale, video offerings and local expertise, will represent an incredibly desirable demographic for a broad range of advertising partners across the board.

And here is Armstrong’s internal memo to the AOL staff:

AOLers,

We are taking another major step in the comeback of AOL. Today we are announcing that we have agreed to acquire The Huffington Post, one of the most exciting, influential, and fastest growing properties on the Internet. We believe in brands, quality journalism, and the positive role of communities in the world–The Huffington Post shares our values and the combination of the two companies will create the premier global and local media company on the Internet.

Co-founded six years ago by Arianna Huffington and Ken Lerer, The Huffington Post has grown to become an industry leader–one of the Web’s most popular and innovative sources of online news, commentary, and information. Arianna and team have created a brand and a destination that focuses on the consumer experience. By combining The Huffington Post with AOL’s network of sites, thriving video offerings, local expertise and enormous reach, we will create a company that is laser-focused on serving our audiences across every platform imaginable–social, local, video, mobile and tablet.

The Huffington Post is core to our strategy and our 80:80:80 focus–80% of domestic spending is done by women, 80% of commerce happens locally and 80% of considered purchases are driven by influencers. The influencer part of the strategy is important and will be potent.

The Huffington Post is a strong influencer brand and it attracts a valuable audience, including a great focus on women’s content. In addition, Arianna Huffington is a world-renowned expert on women’s topics and issues, and has enabled The Huffington Post to grow rapidly by continually developing new audiences.

In the local area, the combination of the two companies will create a scaled connection between global and local communities on one platform. This will create a new way for people to get local and global information in a timely and entertaining way.

The Huffington Post will join the family of AOL Brands that are destinations for an influencer audience, brands like TechCrunch, Engadget, AutoBlog, and Moviefone. Uniquely, The Huffington Post is the platform for influential people–the people that drive trends, commerce, politics, entertainment, news, and information. Adding this strategic platform to our already strong network of sites, including the AOL homepage, has the potential to make AOL the most influential company in the content space.

Arianna Huffington is one of the most successful entrepreneurs in the Internet space and someone that is even more successful in building communities and relationships in every corner of the globe. The Huffington Post and Arianna have created a company that has partnered with the most successful and well-known leaders in all aspects of society that touch important topics to give consumers direct access to the most influential decision makers and community leaders.

This acquisition will create a high-quality and diverse digital ecosystem encompassing local, national and international news, politics, entertainment, technology, fashion, sports, health, personal finance, green, lifestyle, the arts and more. This deal will combine the amazing talent at AOL with the innovative and talented staff of The Huffington Post. Here are just a few high-level points around what this deal brings to market:

* Together, AOL and The Huffington Post will have 117MM unduplicated domestic monthly UVs, and ~270MM monthly UVs worldwide (according to comScore Dec 2010).

* The Huffington Post is one of the fastest growing web properties on the Internet. It grew 22% last year–that’s faster than Twitter, which grew 18% – and 15x as quickly as the Internet grew last year (comScore Dec ’09-’10).

* Both AOL and The Huffington Post count powerful, affluent users among their top loyal visitors, significantly over-indexing in $100K+ income users.

* AOL passed Hulu in unique viewers on video in the fourth quarter of 2010; video views on AOL are up 400 percent year-over-year.

* Between AOL’s innovative Project Devil ad unit, engaging users for 27 seconds longer than traditional display ads, and The Huffington Post’s highly-vocal community, with 4MM+ comments per month, we will marry attention-grabbing content and brand experiences for both advertisers and consumers.

In the local area, the combination of the two companies will create a premier global/local syndication network at scale. This will create a new way for people to get local and global information in a timely, informative and entertaining way.

To maximize the strategic advantage of this great deal, we will be creating a new group at AOL called The Huffington Post Media Group. Within this group will be AOL Media, AOL Local & Mapping, AOL Search and our new friends at The Huffington Post. We will continue operating the towns structure, AOL.com and HuffingtonPost.com.

I’m thrilled to announce that Arianna Huffington will join AOL’s executive team as President and Editor in Chief of The Huffington Post Media Group. We have asked Jon Brod to lead the overall operational integration on the AOL side of the combined entities. Jon will lead the local group integration and work closely with David Eun and the teams in AOL Media. We will work quickly with The Huffington Post to create a combined organizational design to coincide with the deal closing. While we wait for the required regulatory reviews to be completed and the transaction to close before implementing the design, we will move very quickly to plan the details of the integration of the two companies. To this end, we will announce the new organizational structure as soon as possible.

In the meantime, we will continue creating great content and products for our consumers within the town structure and stay laser-focused on the aggressive goals we have set for our winter luge. We are on the right track and will continue our weekly operating cadence and town structure to drive successful results against our company goals.

Here’s a special message for all of you we taped to welcome The Huffington Post and Arianna to our AOL Family:

http://today.office.aol.com/company-news/2011/02/aol-agrees-buy-huffington-post

And of course we wanted to welcome Arianna to our “You’ve Got” video of the day–check her out on AOL.com.

We will be holding a company all hands meeting to address your questions related to today’s exciting news. We will video conference from our New York office on the 6th Floor at 9:30 AM ET and will be joined by Arianna Huffington and key executives from her organization. We will also be holding a call for our west coast offices at 2:00 PM ET and for our Patch offices at 2:45 PM ET. See below for meeting info (conference rooms will be sent out shortly).

AOL is playing to win…and The Huffington Post and AOL will occupy a unique place in the future of the Internet. Let’s go get it done.

–TA

(More full disclosure: As has been previously reported by MediaMemo, All Things Digital had the briefest and most preliminary of discussions with Armstrong about moving to AOL last year, while exploring several other options. All’s well that ended well: We stayed at Dow Jones, which is owned by News Corp.)

“There are clearly some gems upon we will build Nokia’s strategy,” Elop said. At the same time, he said the company must move faster than it has if it hopes to regain lost ground. In particular, Elop said the company must have a better strategy around operating systems.

“The game has changed from battle of devices to war of ecosystems,” Elop said, adding later that “Our industry has changed and we have to change faster.”

Elop hinted at a change in the company’s strategy for the high end, which has focused on the Symbian operating system with a planned shift to the mobile Linux-based MeeGo operating system. He didn’t give specifics, but did draw a distinction between the low and high ends of the markets, suggesting a dual-OS strategy may still be the plan.

At the high end, he talked about the importance of developers and services, while at the low end, he said, the key characteristics are brand, scale, price, distribution and speed. Elop also noted that because of different chipsets, it doesn’t always make sense to serve the lower end of the market with the same operating system as is used for top-end smartphones.

Although Elop didn’t name any names, he did talk about the need for the company to “build or join a competitive ecosystem,” suggesting that it might be open to shifting to a competing platform. And while he wouldn’t confirm such a move, he said that the company could pull off such a switch because of its strong brand and relationship with operators.

Among the possibilities that have been suggested are Android and Windows Phone 7. The company has also canceled or delayed plans for two U.S. smartphones, suggesting that a change may be afoot.

“We made a decision to not proceed as people thought we would proceed,” Elop said.

It has also suffered delays of its E7 smartphone, which was to ship last quarter and now isn’t expected to contribute meaningfully to the bottom line until the second quarter.

The new strategy, Elop said, must be one that can “re-open doors” in markets such as the United States, where the company is weak.

“Clearly there is a pattern of disappointments in the United States,” Elop said.

Earlier in the day, Nokia reported that December quarter profits fell 20 percent as the company “faced significant challenges” and lower margins.

But, when you look at what Apple gets in revenue per unit, Apple now gets slightly more revenue, on average, from the iPhone than it does from the iPad.

On Tuesday’s conference call with analysts, Chief Operating Officer Tim Cook said Apple’s average revenue per iPhone is about $625, while the average iPad revenue is closer to $600.

The figure for the iPhone has been growing in recent quarters and is up from an average of $595 six months ago. By contrast, average iPad selling prices have dropped, from about $640 in the April-to-June quarter to around $600 in the just-reported October-to-December quarter.

It will be interesting to see whether the current trends continue and how the numbers shift around when Apple introduces the next iPad and iPhone.

• Apple’s Cook Aims to Reassure Wall Street on Apple’s Future
• A lot of iSales: Apple sold 7.3 Million iPads, 16.2 Million iPhones in December Quarter
• Apple’s Earnings Insanely Great
• Apple’s Really Good Quarter Was Really, Really Good in China

Earlier on Thursday, RIM reported earnings that topped estimates along with sales that were just about what many analysts were expecting. The company said it expects revenue for the current quarter to be around $5.5 billion to $5.7 billion with per-share earnings in the range of $1.74 to $1.80.

It said that it shipped 14.2 million BlackBerrys, up 40 percent from a year earlier, and added 5.1 million new subscribers net in the quarter. However the company is expected not to forecast those figures for the coming quarter, nor does it plan to continue reporting those numbers in future quarters.

Among the things investors are likely to be interested in is what the company forecasts as far as shipments to Verizon in a quarter during which many expect the carrier to start selling the iPhone. Motorola has already warned that it expects its shipments to Verizon to take a hit.

Mobilized will have live coverage of the conference call starting at 2 pm PT.

1:55 pm: RIM shares, which had been trading lower in after-hours trading are now up around 3 percent.

2:02 pm: Call just getting underway with the usual warnings, caveats, etc.

2:06 pm: BlackBerry Torch now in 75 markets, just rolling out in Latin America.

2:06 pm: BlackBerry Style is one-third of BlackBerry sales at Sprint.

2:08 pm: Our relationship with Verizon remains strong, RIM says. A number of new products coming for Verizon including adding the BlackBerry 6 OS to the curve and Bold lines early in the new year.

2:08 pm: Recap of recent developer announcements, including payment service, launch of WebWorks, etc.

2:10 pm: Now more than 16,000 applications in BlackBerry App World, RIM’s App Store.

2:11 pm: PlayBook tablet expected to ship in first quarter in U.S. and will be Wi-Fi only. Other markets and models with cellphone radios will follow.

2:14 pm: Review of Q3 results. Average selling price for BlackBerry was approximately $315, with half of shipments coming in last month of the quarter as resellers prepared for the holidays.

2:16 pm: Company says it is comfortable with inventory levels.

2:19 pm: On to outlook. No plans for PlayBook revenues, with first revenues not expected until following quarter. Sounds like the availability of PlayBook won’t be until at least March. (RIM’s current quarter goes through Feb. 26)

2:24 pm: On to Q&A.

BB6 will eventually work on QNX operating system, but the company says it hasn’t given any sense of timing.

As for what QNX can deliver, co-CEO Jim Balsillie says “You’ll see more at CES.”

2:25 pm: Sorry, some technical problems here at Mobilized. We got disconnected a couple of times, but have switched to the Webcast and are back on.

Seems like the talk is on average selling prices.

2:32 pm: North America is still performing very, very well but dynamics here are different.

Balsillie says he expects stronger year here next year based on product plans in place.

“I feel very, very good,” he says.

“I feel great about where we are sitting in North America for 2011,” Balsillie says, and the company has “knocked the cover off the ball” in a lot of other markets.

2:37 pm: Question on China market. “I think you should have very positive expectations in China,” Balsillie says.

“China does well,” he says. “You’d always want them to do better….All you can do is keep doing the right things and investing in these places. The market is just so big.” Sometimes markets come faster than you expect, sometimes they come slower, he says. But, he says, “I’ve never seen a market not take off.”

Demand strong, he says, for PlayBook in China and Japan.

2:41 pm: Question on payments. Balsillie says one wouldn’t be going out on a limb to predict Near Field Communications integration.

2:44 pm: A lot of talk on why PlayBook is a good bet for businesses with Balsillie talking about its enterprise strength. Not much new information there.

2:46 pm: Will there be a media strategy to promote the tablet’s media abilities to consumers?

“Oh yeah, yeah,” Balsillie says–again, without giving any new details. Lots of game and media partnerships.

2:50 pm: Everything is fine. Things are great. (That pretty much sums up Balsillie’s statements the last few minutes–Just insert a different question or topic).

2:56 pm: “I think the PlayBook redefines what a tablet should be,” Balsillie says, adding that the fact one can create apps without needing to learn a new language are strengths that RIM’s approach s bringing to the table. “We’re way ahead on that and CIO friendliness, we’re way ahead on that too.”

3:02 pm: Call’s done.

Sales were $8.6 billion, helped mostly by new software license sales that grew 21 percent to $2 billion, while updates and product support revenue grew 12 percent to $3.7 billion. The consensus estimate was $8.34 billion. Sales grew 47 percent from the same period a year ago.

Non-GAAP per-share earnings were 51 cents, beating the 46-cent forecast estimate of analysts surveyed by Thomson Financial. Earnings after one-time items were 37 cents, up from 29 cents a year ago.

Gross margins on Sun-branded hardware increased to 53 percent.

Shares are up almost 4 percent in after-hours trading.

There’s a quote from CEO Larry Ellison, reminding us how fast his new products are, and digging once again at the competition:

“Sun’s new SPARC Supercluster computer shattered the world record for database transaction processing performance by running 3 times faster than IBM’s fastest computer, and a stunning 7.5 times faster than HP’s best ever database performance,” said Oracle CEO, Larry Ellison. “Our new generation of Exadata, Exalogic and SPARC Supercluster computers deliver much better performance and much lower cost than the fastest machines from IBM and HP.”

Here’s another quote, from Oracle co-President (and former HP CEO) Mark Hurd, about the Exadata product line:

“Since joining Oracle I’ve met with and visited many customers that have expressed a high level of enthusiasm around our strategy of engineering hardware and software that works together,” said Oracle President, Mark Hurd. “That enthusiasm translates into an Exadata pipeline that has now grown to nearly $2 billion. That number is a good leading indicator that customers are planning to increase their investment in Oracle technology.”

Yes I would say there’s enthusiasm. It was precisely because of the Exadata line that Macquarie Research upgraded Oracle today.

More from the conference call, which starts at 5 pm ET.

4:53 pm: Seven minutes to go before the Oracle earnings conference call starts. Right now it’s all mellow classical guitar.

Call is running a little late.

5:10 pm: And we’re underway with the safe-harbor statement.

Ellison, Hurd and president Safra Catz are on the call.

Americas grew 32 percent in U.S. dollars.

5:15 pm: Balance sheet: $24.8 billion in cash and short-term investments.

Generated $3.7 billion in free cash flow.

5:15 pm: Safra Catz is now speaking. We exceeded the high point of license guidance. Even excluding a payment for legal fees, we beat guidance by 4 cents.

5:16 pm: All geographies reported double-digit growth.

5:16 pm: “We continue to take share from SAP.”

5:17 pm: With Sun, included operating margins were 44 percent, which is better than SAP. [Another dig.]

5:18 pm: Hardware guidance: $1.1 to $1.2 billion in revenues.

Non-GAAP EPS expected to be 48 to 50 cents, and 34 to 36 cents on a GAAP basis.

Here’s Larry:

5:19 pm: Our goal is to be No. 1 in high-end market for servers. Right now our numbers are behind HP and IBM.

5:20 pm: IBM’s and HP’s servers are slow, and software is slow and expensive and have no software value-add. [Another dig at the competitors.]

5:22 pm: Exadata pipeline continus to grow. We expect our new generation of Sun machines will enable us to win significant share, and position us in the No. 2 position behind IBM very soon. And then we’ll fight it out for No. 1.

5:23 pm: Now Mark Hurd is speaking.

5:23 pm: I want to focus on our opportunities to grow significantly.

5:24 pm: Deal volume was spread across companies of all sizes and strength in the public sector as well.

5:24 pm: All of our customers and competitors are reacting to us.

5:25 pm: 150,000 Middleware customers. We ended the quarter with a record hardware backlog.

5:26 pm: Now going to Q&A:

A question from UBS. Are you starting to see a halo impact on adoption of the Oracle suite?

Larry: Close rates are improving. You’ll see great improvement in Exadata sales from Q2 to Q3. Because it’s new, people were running a lot of benchmarks and trying it out first. We’ll sell a lot more Exadata in Q3 than in Q2.

As for the halo effect, when you buy these servers you buy them to run specific software. Engineer them at the same time and make sure they run well together. We have a huge advantage over IBM and HP. The notion of systems, hardware and software that run well together will dominate the high end of the business.

Q: You clearly have a lot of irons in the fire with Fusion apps coming up and Exadata. Focus on Exalogic. Can you share early feedback from customers and compare that to Exadata ramp.

Mark: Exadata experience benefits Exalogic. We’ve matured the use case, we think we know where the targets are. The Exadata experience is a big deal for us.

5:31 pm: A question about Fusion Middleware.

Larry: We’ve been in the middleware business for a long time. With release 11 everything has been rewritten. It’s a much better user experience, you can patch our entire suite with a single file. We think the fact that we have an integrated suite gives us a huge advantage over IBM.

5:33 pm: A question about Europe. It was better than expected. Apps business was really strong. Look at competitors. You’ve been gaining share against SAP. We are seeing a pickup in general environment.

Hurd: I’m not an economist, but we’re doing well in Europe. It was broad-based. It was not singular to a deal or country. It was broad-based to countries where we have been gaining share. It’s been one quarter after another, a pretty steady beat.

Larry: We had a wonderful set of industry specific applications, in telecommunications and banking and retail, and that’s unique vis-a-vis SAP. that has helped us a lot to establish us in a lot of industries. Also Fusion is right around the corner.

5:35 pm: Q: How frequently is an Exadata deployment resulting in the displacement of a competitor’s product?

Hurd: About 70 to 75 percent of the time. About 20 to 25 percent of the time it’s a consolidation.

We’ve sold Exadata now in 50 countries, and 30 to 35 percent of our customers have made a second purchase. You’re starting to see repeat purchases. We’ve learned a lot about this and so as we launch Exalogic we can accelerate our learnings.

5:36 pm: Q: Margin was also great. What can we expect going forward and what were one-time items?

Catz: In general, it’s the business. The only nonrepeatable thing is the $120 million legal settlement, which we will not repeat. Hardware margins and operating margins, this is something we’ve done for many years.

5:38 pm: Q: What is visibility for database licenses?

Larry: A couple quarters ago, someone noticed database licenses were growing nicely. We think Exadata is going to be a nice turbocharge to our database business. Across the board our database business is going to get strong with Exadata.

I just looked at after-hours trading in Oracle shares and they’re up more than 4.5 percent.

Hurd: “The secret to Exadata is bringing the smarts to the data, versus bringing the data to the smarts.”

5:42 pm: Q: What continues to drive the database business? Is it just core database, add-ons?

Larry: We think our technology is getting faster and more reliable at a faster rate than that of our competitors.

5:43 pm Larry: As far as applications, we think there are lots of reasons we continue to gain share every quarter over the last few years over SAP.

It’s the industry-specific applications. We have telecom companies that are running only Oracle software. We have some banks that are making the same kind of commitments up and down the stack. SAP just doesn’t have that.

5:44 pm: Larry: We’ve got this extremely modern Java-based suite called Fusion that is going to strengthen our competitive stance against Salesforce.com and against Workday.

5:46 pm: That seems to be it. The call is concluded.

On a conference call with analysts, Chambers said Cisco expects revenue to grow by just 3 percent to 5 percent in the current quarter, compared to last year–not even close to the 13 percent Wall Street was projecting. “Our view on this guidance is, we’re disappointed,” Chambers said, adding that sales orders were below the company’s initial Q1 forecast by more than $500 million. “We hit a couple of air pockets,” he said. “We wish we‘d seen them coming.”

Air pockets. Interesting way to describe the challenges the company’s facing these days, which according to Chambers include everything from Cisco’s set-top box to the public sector, service providers and European businesses.

Sounds like Cisco’s flight this past quarter has been a bumpy one, but as Chambers observed, “When you hit an air pocket, that doesn’t mean that what you have been doing strategically is wrong.” I suppose it doesn’t. And keeping that in mind, Cisco will stay the course as it moves forward.

“We are going to power through what we believe to be some short-term challenges in the next several quarters,” Chambers said. “We also believe that the intermediate and long-term growth opportunities far outweigh the short-term challenges. With that in mind we plan to continue to invest in new markets and technology. It is realistic to return to a 12 to 17 percent growth goal in the not too distant future, assuming a return to a good economic growth.”

The “going concern” disclosure, in a Thursday filing with the Securities & Exchange Commission, comes as the company, which is majority owned by Sprint Nextel Corp., said it was taking drastic action to cut costs as it awaits new financing.

Clearwire faces a cash crunch at the end of the year, illustrating the high costs associated with building a brand-new 4G network. As a result, the company is cutting 15 percent of its 4,200 employees, suspending its launch in markets including Denver and Miami, and delaying the introduction of a branded smartphone.
The moves are expected to save $100 million to $200 million this year, and a similar amount through the first half of 2011. Chief Financial Officer Eric Prusch said on a conference call Thursday the company has enough cash to last through the middle of next year.

Read the rest of this post on the original site

Netflix ended the quarter with 16.9 million subscribers, which beats the Street’s 16.6 million consensus, and should please investors. And it has also pushed up its Q4 expectations–it now expects to have between 19 million and 19.7 million subscribers at the end of the year, up from earlier projections of 17.7 million to 18.5 million.

Other guidance: Revenue of $586 million to $598 million, versus $580 million to $596 million. The Street was looking for $592 million.

GAAP net income of $32 million to $40 million, unchanged.
GAAP EPS of $0.59 to $0.74 per diluted share, unchanged.

Two important points deep into the accompanying “management commentary“:

• The company, which moved into Canada this year, is contemplating moving “beyond North America” in the second half of 2011. If it does, it will spend about $50 million on the effort.
• A bit more info on the possibility of a streaming-only option in the U.S., which the company had previously talked about. It is testing one now, and says, “If our results are as strong as we think they will be, then we will look to start this offering later in this Q4.“

Earnings “cheat sheet” via Citi’s Mark Mahaney:

Netflix earnings are getting progressively more interesting, as the company pushes further and further into digital video, which brings it into competition (and/or cooperation) with…everybody: Apple, Google, Amazon, etc. I’ll be back at 6 pm ET for the conference call.

“Some people leave, some get promoted and some good people arrive.”

Yes, indeedy, and this afternoon, it was David Katz’s turn to say goodbye. He was Yahoo’s VP for Mobile, North America. (He is pictured here, and you can read his bio here.)

The move, said sources, is part of a reorganization in the wake of the departure of David Ko, SVP Audience of Mobile and Local, North America.

He was replaced by Raymond Stern, who also heads business development.

If it seems a little confusing, it is because it is.

But there are all kinds of management rejiggering discussions going on after the additional departures of U.S. head Hilary Schneider and Media VP Jimmy Pitaro.

Mobile is an important arena for Yahoo, as Bartz also stressed in the call today.

Let’s hope Dave lands somewhere good, as he seems so nice from this recent video from the CTIA conference just two weeks ago, posted by Yahoo:

BoomTown will begin livebombing, oops, liveblogging the Yahoo third-quarter conference call with Yahoo execs and Wall Street analysts in five minutes.

Until then, please peruse the slides the Silicon Valley Internet giant has provided.

Here is a primer to the just-released results:

Net income: Slightly above investor expectations with operating margins improving nicely to 12 percent from six percent a year ago. CEO Carol Bartz sure can cut costs.

Revenue: Uh oh. Down from downer expectations to $1.12 billion, which is minus traffic acquisition costs. Bartz sure needs to juice the advertising sales team.

Page-view growth: Also down four percent. Time to prod the editorial and products team.

Employees: Up seven percent to 14,100.

Owned and Operated Search Revenue: Down seven percent.

O&O Display Revenue: Up 17 percent.

Big plus: Yahoo’s Japan and China assets ad up to $10 billion in value!

Well, you can crunch away on numbers as well as I can:

Q310EarningsPresentationFinal

Yahoo turned in a much-needed solid quarter in its third-quarter earnings report, with slightly better-than-expected net income, although still weak revenue.

Wall Street has been watching Yahoo’s performance closely this quarter, due to the swirl around the company over takeover scenarios, departed execs and general management mishegas.

Wall Street consensus was that Yahoo’s net income would rise to 15 cents a share from 13 cents a year ago and that revenue would be a flattish $1.13 billion.

Instead, Yahoo’s net revenue was $1.12 billion–which is with traffic acquisition costs taken out–on earnings of 29 cents a share. But net earnings per diluted share for the third quarter of 2010 included a benefit of 13 cents per diluted share related to the gain on the sale of HotJobs.

The revenue weakness is worrisome, as it indicates a lack of search advertising growth at Yahoo, even as competitors such as Facebook expand rapidly as social networking explodes.

In addition, Google also turned in stellar quarterly results earlier this week, along with Apple.

Even more important is a weaker outlook for the fourth quarter.

In addition, the key metric of page views was down four percent in the quarter, while employee growth was up seven percent.

Here is a link to BoomTown’s liveblogging of the analyst conference call, as well as the Silicon Valley Internet giant’s financial slides.

See it all below in the official press release:

YHOO Q310PressRelease Final

After announcing its second-quarter earnings this afternoon after the markets closed, Yahoo (YHOO) CEO Carol Bartz and CFO Tim Morse held the usual conference call.

The results: Net income and margins were up at the Silicon Valley Internet giant, while revenue was meh. Display advertising growth was up, while search ad revenue was down.

Revenue and worries about future direction turned out to be the questions of the day.

2:03 pm PT: While she touted the improved margins with a confident tone, a nice accomplishment, Bartz quickly pointed out the obvious on revenue weakness.

She blamed a combo of issues, such as not monetizing search-share improvements.

“How do we measure our business?” asked Bartz, in her financial soliloquy. Another laundry list of stuff, such as engagement, editorial expertise and scale.

Then it was off to the races with updates on Yahoo’s social, local, video and mobile improvements.

That would be things such as integration with social networking powerhouse Facebook and online gaming phenom Zynga, more video all over the site and other initiatives to spur consumer engagement.

Bartz’s faves are the “Bikini 101″ videos, she said, which apparently get you ready for the summer season.

BoomTown last wore a bikini in 1974.

2:12 pm PT: Morse came on and started going over the numbers.

Yay on costs and margins. Not-so-yay on revenue growth.

You get the picture. Morse had some excuses, all of which seemed reasonable, including a pullback of advertisers in July.

More numbers on the savings from the Microsoft (MSFT) search and advertising alliance, tax issues, guidance, cash status and more.

I like listening to Morse, who always sounds super-competent. But he completely bores my assistant, Ed, just like other CFOs he is subjected to in earnings season, since I blast these calls on my computer’s speakers.

Sorry, Tim!

2:27 pm PT: Bartz was back and talking about display advertising and how Yahoo is working on all kinds of new schemes to improve advertiser experience, as well as to engage consumers more.

Onto search, which has long been Yahoo’s Achilles heel, no matter how Bartz spins it. Revenue per search is down and has been, which is a problem.

“As for search, we remain focused on growing our search business,” she said firmly. We’ll see about that after a year into the deal with Microsoft.

She touched on the controversy around contextual search being counted on comScore (SCOR) and dismissed it–although we will see how that turns out!

Then Bartz gave an update on the Microsoft alliance transition. Nothing new here, and the hope is that it will begin to take place by the end of the year, but only if it can be done with “quality.”

Bartz then touted Yahoo’s performance related to delivering information on the World Cup soccer, which she should as the company’s media arm did a bang-up job.

More on improvements in development and innovation, although it was a little light on deep examples.

Bartz summed up by again mentioning margin improvements, which was a good idea, and then moved onto Q&A.

2:38 pm PT: First question is about revenue lag, natch.

Bartz noted that customers’ marketing budgets are “easy to turn on and off.” The perils of the ad market! But, she said, she felt it was more of an overall market issues, rather than Yahoo-specific.

The next question was about page-view decline. Are these Wall Street analysts actually doing their job?

Morse answered that page views might not be all that anymore, since consumer use of Web technologies has changed.

“What we are trying to do is move toward a more holistic view,” he said.

But he admitted, “It is honestly a bit of a surprise.” Say what?!?

The next question was more on display advertising revenue drop-off and inquired about whether it impacted search.

Bartz said she thought it was because of those nagging on-off switches marketers can use!

The next question was about revenue pick-up on bucket tests of new system with Microsoft and, again, more on where the weakness in revenue is located.

“I will tell you we are pleased with it,” said Bartz coyly about the Microsoft test results.

As to revenue slowdown: No specific category and it was those big knob-turning customers.

More on cost-cutting and advertising revenue, which were essentially the same question over and over.

It is the right question, too.

At one point, Bartz talked about redefining advertiser expectations and how targeting was a better way to get to consumers.

Actually, it is pretty much about that old sales mantra of ABC: Always Be Closing!

More shuffling the papers about what was going on and what was coming next. Bartz noted that consumer confidence is “really weird now.”

Then there was a question about this “science, art and scale” motto that Yahoo has been using and calling SAS for short (internally, many move the letters around to make a naughty word).

The larger point, said Bartz, was that Yahoo is one of the new places that can deliver big results to advertisers in an unusual and engaging way.

True enough, which begs the question again: So what’s with these weak revenues? And, of course, what is Bartz going to do about it?

He didn’t name any of them, but it’s a safe bet that at least one of the devices to which he referred is Apple’s next-generation iPhone, perhaps the last for which AT&T will have an exclusive.

As much as the debut of that device bodes well for the AT&T (T), the carrier’s dependency on it as a profit driver is becoming a worrisome vulnerability.

Consider this: In its first quarter, AT&T activated 2.7 million Apple iPhones. A third of those, about 891,000, were purchased by new subscribers. Which means, as Bernstein Research analyst Craig Moffett observed today, that the iPhone drove about 174 percent of AT&T’s post-paid net additions (the company had about 512,000 post-paid net adds).

That’s an astonishing percentage. But what would AT&T’s post-paid numbers look like if the company loses iPhone exclusivity and Verizon (VZ) begins selling the device, as some believe it soon might?

My guess: They would be quite a bit smaller. And that’s the concern some analysts are voicing today. As Moffett wrote in a note to clients this morning, “The question of what AT&T will do if and when they lose iPhone exclusivity is hard to escape.” Indeed. By some estimates nearly a third of AT&T’s post-paid customers are sticking with the company primarily because of iPhone exclusivity.

But ultimately, what can AT&T do? Not much, unless it manages to score a similar exclusivity deal on another device that rivals the iPhone in popularity. Other than that? Gird itself for the inevitable blow, I suppose. Continue to improve its network, do its best to hold on to the iPhone owners it has and continue signing up new ones.

The truth is that AT&T has known all along that its exclusive relationship with Apple (AAPL) would change someday and has undoubtedly already factored this into its plans.

As Linder told Reuters today, “…at some point [Apple] will, as they have in other countries, make the decision to broaden [iPhone] distribution and move to a non-exclusive arrangement. When that occurs at some point, I fully expect we’ll continue to be a good partner with them, and continue to carry a full range of Apple devices.”

This was a marked improvement from the third quarter, when Sprint (S) lost a net 545,000 subscribers. So Sprint, while clearly not taking market share away from Verizon (VZ) and AT&T (T), is at least it’s doing a better job of holding on to the market share it has–or is at least losing share less quickly than previously (see charts; click to enlarge).

Not that this effort is helping the company’s bottom line all that much. For the quarter, Sprint posted a loss of $980 million, or 34 cents per share, compared with a loss of $1.6 billion, or 57 cents per share a year earlier. Excluding charges, that loss was 23 cents per share–quite a bit worse than the loss of 19 cents analysts had been expecting. Revenue was disappointed as well, falling to $7.87 billion from $8.43 billion. Analysts had been expecting $8.01 billion.

So when can we expect Sprint to return to subscriber and revenue growth? On a conference call with analysts this morning CEO Dan Hesse declined to say.