Here we go with the Yahoo third-quarter earnings call starring CEO Carol Bartz, who has some–in the immortal words of Ricky Ricardo–‘splaining to do.

Yahoo turned in a much-needed solid quarterly earnings report, with slightly better-than-expected earnings, although still weak revenue.

Of course, there are all the takeover rumors, the exec departures and fights with partners such as China’s Alibaba Group.

2 pm PT: First on is the lovely investor relations lady, Marta, saying stuff I never pay attention to.

But Bartz came on right away and she sounded subdued and very much on script.

Good idea!

She began by explaining what she has been up to and–once again with feeling–exactly what Yahoo is.

“The key words are innovative, content, media and communications,” she stressed.

Technology is all well and good, but Yahoo is the “largest digital media, content and communications company.”

She also briefly addressed the departure of execs: “Some people leave, some get promoted and some good people arrive.”

Well, you could put such turmoil that matter-of-factly, I suppose.

Bartz then asked the question: “What have we done to re-engineer Yahoo?”

She reeled off a list she has repeated many times before, the point of which was to let us all know she has been mighty busy cleaning up the big mess she had to deal with on arrival.

So lay off, all you naysayers! It’s kind of like what President Barack Obama is saying these days, as he looks forward to huge political losses in the upcoming election.

It’s apparently a disciplined approach. “First you walk, then you run.” Then, she added, you FLY!

Don’t look down, Carol!

She promised to talk about what’s on all our minds–as in the takeover swirl related to AOL, News Corp. and a passel of private equity moneybags circling Yahoo.

2:15 pm: Time for the numbers from CFO Tim Morse, which you can see here.

He was much jauntier than usual. I wonder if that was in the script. Smile with your voice, Tim!

I mostly did not listen to this spiel, as it was a recount of the numbers I already read. But there are some nuggets.

Apparently, for example, revenue for owned and operated search is down because users are clicking on the really good new results from the Microsoft algorithmic search transition, so they are not clicking on paid search as much.

Hmmm….I wonder what happens when they get great.

Then it was on to earnings and stock repurchases, designed to goose the shares, which Yahoo considers undervalued.

So do investors.

Next, he moved on to the outlook, which was weak.

And Morse also noted the uncertainty that has to do with the search and online advertising alliance transition. “Caution is warranted,” said Morse.

“We’re pleased with our third-quarter results,” summarized Morse, seemingly ignoring the revenue issue.

2:31 pm: Bartz was then back on discussing the search alliance and the rocky relationship with China’s Alibaba Group. Rocky is my word and actually is also Alibaba’s.

At least all is well with Microsoft, Yahoo’s one-time nemesis.

It has been a big transition, of course, Bartz noted. Indeed.

Then Bartz went out of her way in praising Alibaba CEO Jack Ma, whom many sources said she has treated shabbily in the past.

It is “a good productive business relationship,” said Bartz.

Other than that, she politely suggested we all butt out of what Yahoo is going to do with the asset, a 29 percent stake of Alibaba.com worth $3.1 billion, according to the company.

Finally, Bartz said Yahoo had “potential” and promised a payoff to shareholders in the months ahead.

That would be nice.

2:38 pm: Time for Q&A.

The first question was about the search revenue growth. Soon!

The next was about search revenue and display advertising and a left-field query on engagement on smartphones.

Same answer, and also people will use Yahoo on any screen.

Next question was on display growth. Same answer.

Will any of these analysts ask the good questions about takeover rumors and other thorny management issues?

Wait, finally there came a sheepish request for clarification about the rumors–well, they are real, so realmors–about takeover plans by private equity folks, along with AOL’s Tim Armstrong.

“As tempting as it is to tell you what I really think, you know I can’t comment,” said Bartz, who really sounded like she wanted to comment.

Give in, Carol! In the words of Oscar Wilde, which is BoomTown’s operating motto: “I can resist everything except temptation.”

Nope, she will not utter a word about “hypothetical this and hypothetical that.”

Instead, the boilerplate: “We like our strategy, we like our progress, and that’s what we’re focused on.”

Next, more questions about revenue weakness. Bartz blamed it all on the drag of search revenue. “The main drag on our growth has been search revenue,” she noted.

She said it will get better once the whole transition kicks in.

Bartz did sound convincing, especially when she noted it was part of a six-year trend in decline in search. By the end of 2011, she promised, it will all be different.

But, in the immortal words of Clint Eastwood in “Dirty Harry”: “You’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk?”

Now, a question about a “bloated” work force. Yahoo employee count is up seven percent, although costs are down 12 percent.

Morse: “No, we’re not bloated.”

Bartz took a question about competition in the display market, as in Yahoo is going to get smacked by rivals, such as Google.

“There is always competition and competition only makes us better,” said Bartz. “We’re running very fast and not going to give up this leadership in display very easily.”

Given Google’s inroads here, she better run faster than the Road Runner.

The last question was about monetization of mobile.

Lots of pretty, empty words from Bartz, especially since Yahoo does not have a really competitive offering compared to Google and Apple.

It should be added that both Google and Apple smoked it in terms of revenue growth in their quarterly earnings this week.

Also, I hear that Facebook social networking site is growing pretty quickly.

And it ended, with nary a decent question from Wall Street analysts about the clear turmoil at the long-troubled Silicon Valley icon and answers about what Bartz is going to do to address it.

The media is in listen-only mode for these calls, which is a shame, since I for one would love to listen to what Bartz has to say.

I know you’re busy and all, Carol, but perhaps you can talk over dinner soon?

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?

Yesterday, BoomTown posted Part One of an interview with Microsoft’s Greg Nelson and Yahoo’s Mark Morrissey.

The pair (pictured here) are in charge of a two-year effort to coordinate a massive search and online advertising partnership, the result of a deal the companies struck last year.

It is critical they get it right, as Microsoft (MSFT) and Yahoo (YHOO) have a lot riding on the success of the effort, which is an attempt to catch up with search giant and dominant market leader Google (GOOG).

The companies–one from Washington state and the other from Silicon Valley–have a combined share of close to 30 percent, and the hope is that together the partnership is a better offering to both advertisers and consumers.

We’ll see about that, of course, but here’s the rest of what they had to say about the attempt in all its gory details:

MARK MORRISSEY: Let’s talk a little bit about–hopefully this won’t be too boring–but let’s talk a little bit about the execution process, because then this will give you the insight.

So, remember, Greg said we had about 25 people in each of our respective transition teams, that basically there’s a lead, and they’re all mirrored for each of the major elements of the program. Each of them, they all have their own execution structures, right, because they have whole teams of people that are working on their stuff.

So, we basically…Greg and I lead the overall transition. There are three primary areas: The algo transition, the paid search transition, and all sales and marketing. That third part is maybe the biggest of the three.

Then the 25 underneath that group, and then there’s hundreds and in some cases thousands of people underneath them in support of that.

So, they have each of their own weekly cadence of when they get together and how they make their decisions. That rolls all up to Greg and I, and Greg and I are responsible for what we call the plan of record that sets the milestones and locks the scope and the sequence of markets.

We completed our plan of record, except for the sequence of markets, because we’ve not finalized that, but all the rest of it, the scope, the timing, major milestones. We signed that off in what we call our joint operating team that meets weekly up here. And that’s just about 16 people on the joint operating team.

GREG NELSON: Yeah, more or less, all your core leads.

MARK MORRISSEY: We meet weekly. We make basically the scope change control decisions, any changes in milestones.

So, that’s how we control the overall program, keep it on schedule; we look at confidence levels, sign off on road maps, final signoff, that kind of stuff gets handled there.

Then once a month each of us…so, I meet with [Yahoo CEO Carol Bartz]. So, I work for Carol. I meet with Carol’s staff, give her staff a full briefing. Greg meets with the executive steering committee.

And then about every six or eight weeks, Carol wants to get together.

So, we have real, unbelievable top-down support and engagement, and we have a formal decision-making process that goes all the way down from the individual sub-element of the program up to a common place that we guide and make decisions on.

BOOMTOWN: And going forward–what I’m thinking about is things that happen later that you might want. All of a sudden Google is doing search by mental telepathy, for example.

MARK MORRISSEY: I heard about that one, yeah.

BOOMTOWN: Whatever they’re doing.

MARK MORRISSEY: It’s going to take them a long time to get that done.

BOOMTOWN: Well, they’re aliens. I told you, they’re aliens. No one believes me.

So, they decide to do something that you need, or else you like come up with some grand new idea that Google hasn’t thought of. How does that go into place?

GREG NELSON: Well, I mean, it could be…it would probably start informally, right? So, Mark and I either talk or email basically every day.

MARK MORRISSEY: Usually many times.

BOOMTOWN: I’m talking about year four.

GREG NELSON: Yeah, I know, but I’m just saying the strength of the relationship is in large part…you know, this is the pivot point. You’re sitting with the two guys to try and pivot this thing both up and down.

More likely than not, like just before you were coming up here, we were trading notes on a couple different processes that we’re trying to build or checking in on one thing or another.

So, if [Microsoft Online Services President Qi Lu] gets a big brainwave about the next big thing we’re going to do in search, and we’re going to build it into the API, probably what happens, because I get asked to do this 50 times a week, is, “Hey, why don’t you chat with Mark about that and see if Yahoo has got any interest.”

So, you’ve got this really high-frequency, pretty high-fidelity conversation, and then we might say, okay, yeah, that’s interesting, like let’s go activate it in the sales track and in the ops track and let’s pull in some of our leads, let’s brainstorm it, and then you’d push it in both directions.

MARK MORRISSEY: Right, because it has to fit into both companies’ road maps, right, and then what sales and marketing does, and if it’s customer facing it affects what sales is going to do.

GREG NELSON: And then you’d say, okay, we have this plan of record, that’s a big enough one, wow, that’s an amazing idea, let’s change the plan of record, and then we have a formal process to do that kind of change.

MARK MORRISSEY: And four years from now the plan of record won’t be around transition, it will be around what’s the next set of releases, what are our market objectives, how are we going to go.

BOOMTOWN: Let’s talk about that, what the next, when you’re not as you’re thinking this all the time on a daily basis, what is from your perspective the next thing in search or things that are further along.

GREG NELSON: Next big idea?

BOOMTOWN: Yeah.

GREG NELSON: Is that what you mean?

BOOMTOWN: Yeah.

GREG NELSON: Yeah, we can come back to that one. I’ll try and think up something really smart by the time we get back to it.

BOOMTOWN: Okay. So, sales and marketing.

MARK MORRISSEY: Yeah, so like I said, one of, if not the most important area for long-term success, is around sales and marketing. There’s a rather interesting and complicated setup here where we have a larger sales team with a little bit more experience, and then each of the regions, right, will have their sales teams. The sales team will still report to [Yahoo U.S. head Hilary Schneider] to run the overall thing, but the sales teams report regionally. And yet they have to learn adCenter.

So, there’s just a tremendous amount of training, right, to bring the Yahoo team up on adCenter, because I think the most important thing is not the transition, it’s optimizing on behalf of every advertiser after the transition, to achieve their market objectives.

There’s just a humongous amount of training broken up into four courses, huge investment that the Yahoo team is making in the training materials and the man-hours and all that preparation work that they have with their customers. All the customer communications that are happening now, we’re starting to do joint communication events, we had a big search alliance forum in Seattle two weeks ago.

GREG NELSON: Yeah, the search and marketing forum was here, and so we brought customers in a day before to just spend a day with Microsoft and Yahoo to learn about the search alliance.

We got up on stage first and sort of told the vision and took just open Q&A and said, what do you want to talk about, and then we had breakout groups with customers just to say what are you really interested in, what does a successful transition look like to you, what services or kind of information do you need.

This is an area where you could easily be in tension, right, or where you could have conflict between your two sales forces. That’s been so much easier than I would have guessed, because of the maturity and professionalism.

We still handle what we call standard advertisers. So, if you are not a hand-sold kind of premium customer, but you come directly to the platform, then you come to Microsoft, because you’re really just coming to adCenter. Otherwise, you’re with Yahoo and Yahoo is your sales force.

BOOMTOWN: And I assume if you ever got to a display agreement struck, that would be a similar.

MARK MORRISSEY: I can’t comment on display, but there’s definitely a synergy between search and display, as you well know, yeah.

[But] I think I should talk about two things that we haven’t covered. One is about the benefits of the combined marketplace, and then also we haven’t mentioned anything about where we are in terms of the current progress, because it’s actually from my perspective pretty phenomenal in terms of how much we’ve gotten done.

Starting with the unified marketplace, one of the biggest benefits here in a scale business is having a sufficient level of volume in a single buy, with a single campaign, a single set of optimizations, to help advertisers to achieve their marketing objectives.

So, by combining each of our respective share numbers, it now produces really for any sizable advertiser close to 30 percent, plus or minus, right, depending on a couple things in the U.S., and that’s a must buy.

GREG NELSON: Lots of upside.

MARK MORRISSEY: We’ve got work to do.

GREG NELSON: Unlimited potential.

MARK MORRISSEY: Our Yahoo consumers who want to stay on Yahoo search, and we believe that because of the relevance of Microsoft’s results and the rest of the stuff we’re going to put around it, and how we wrap search into the overall experience, we shouldn’t give consumers any reason to go anywhere else to search. That should just lift share in and of itself.

GREG NELSON: The other nice thing, both if you want to look at it that way, is the more lopsided the share, the more enthusiastic advertisers and publishers are about the search alliance.

We have lots of friends all around the world rooting for us and asking how they can help.

MARK MORRISSEY: So, the benefit of a unified marketplace is that advertisers, you know, today they spend most of their time on Google, a little less time on Yahoo, less time on adCenter, and now we’re going to give them one system, one buy, with more clicks, which gives you more consistent performance. Their time is better spent on that optimization.

And not only does that generate just natural lift across the marketplace, but the main byproduct is it produces better ads. Better ads help produce a better search experience, better search experience and all positive…to feed the positive virtuous cycle.

We’ve gotten outstanding feedback, not that every single advertiser is happy, because there are some advertisers that would like to see maybe a non-liquid marketplace, because that was good for them. But, by and large, you look across the base, our customers are very happy.

The biggest thing is they want us to do it with quality, and they want us just to be transparent with where we are along the process.

So, can we switch to talk about where we are?

BOOMTOWN: Okay.

MARK MORRISSEY: So, we signed in December. We have regulatory clearance, commencement in February, and we got to plan of record in May. We’ve been coding like mad, sales, market teams working through their plans. And we are now in the testing phase, which is really significant.

We still have coding to do, there’s a couple more really significant releases that we have to do together before the paid transition can occur. But right now we’re in the testing phase.

We are well into the testing phase for algo, and we’re starting the testing phase for paid. I think what I said at analyst day, because I did show that one example from that, and that was we are continuing to progress right along our testing plan. A huge achievement on Friday, we got to 100 percent of a certain level of testing, and so far so good.

But the hardest work is still in front of us, but if you just think of it, we’re chipping away week by week by week.

That requires all this complexity to work, right, because a query has to come to Yahoo, we’ve got to send it off through Microsoft’s API and we’ve got to get the results, and then we’ve got to put all of our other stuff around it and deliver the whole page experience.

BOOMTOWN: In speed.

MARK MORRISSEY: In speed, that’s right, that’s right.

BOOMTOWN: And you’re also testing the advertiser experience.

MARK MORRISSEY: Right. They’re separate, okay. We are going to run bucket tests of them together and separate, as you’d expect, but the actual traffic switch can be done separate, algo versus paid.

Right now we’re in the testing phase, and it’s going as well…it’s going better than I had hoped it would go. I mean, it’s not to say that we are in the clear on this, but, in terms of ramping up that process, checking off our weekly milestone, the testing process is going really well so far.

BOOMTOWN: And the people at Yahoo in that area are pleased with it? Because they’re again the customers in a weird way.

MARK MORRISSEY: We have a lot of work to do, too. I don’t want to make it sound like we’re all just customers here, but yeah, I mean, like we were skeptical about how quickly some of this work could get done, how quickly the relevance numbers could get achieved. We were confident Microsoft was the right choice. And it’s so far, so good. The things are working as we had hoped. Relevance is really good. I said that at analyst day the relevance is really good, and we’re cautiously optimistic.

BOOMTOWN: And the other thing that’s interesting to me now is the thing that Google can’t search, and neither can you is a lot of the people data in Facebook and all the social networking sites that get very deep and complex.

GREG NELSON: Part of your question about the future of search may be more a cooperation, really driven by consumer demand for those parts of the Web to become more open, which would be great.

There are some companies that don’t necessarily want to participate, but if consumers either vote with their feet or apply enough pressure, that that stuff should open up.

At some point maybe it just becomes overwhelming. You know [Yahoo Chief Product Officer Blake Irving], who’s now at Yahoo. One of the things he worked on really hard here when he was at Microsoft was interoperability between our two messaging platforms.

There is an example where really the consumer value is very obvious, very powerful, and eventually it broke through. You may find the same in the sort of non-crawlable parts of the Web, because when people think of search-oriented, keyword-based navigation of information as something that they expect, if you can’t get to some type of data through that, they may just stop using it, because it’s too inconvenient.

MARK MORRISSEY: I think that’s kind of the point I was trying to make earlier is that the search experience has to evolve significantly.

And I’ll call it the traditional search if the consumer knows exactly what they’re looking for, and they’re going to go through page after page of results. That’s yesterday’s search game. Search is more navigational now, it’s definitely more social, and helping users to find information that they’re looking for in a more natural way, rather than just a query and going through pages of blue links. We think that’s really critical.

By leveraging Microsoft’s huge investments in I’ll call it the traditional aspect of search, that always has to happen, right, the indexing, the crawling and the ranking is huge, hugely important, and useful, absolutely, and then layering on top of that two companies really focused on evolving the future of the search experience, and each of us having our own skills.

GREG NELSON: Just getting back to sort of what people want or what they expect, I assume you saw some of the research that we did when we were designing Bing. It’s something like over 60 percent, something like 65 percent of search sessions are unsuccessful.

So, the future of search is not just improving relevance, but also bringing people the answer so that your percentage of sessions that are successful goes very close to 100 percent, and the amount of time that you spend in that navigational part of the session has to get smaller and smaller and smaller.

The decision engine sort of positioning, the thing that led us in that direction was that very long term bet that you can understand the intent of the user, and then translate that into a different form of relevance, and you can serve up increasingly rich, not links, because links are just a way to end up somewhere else that you may not know anything about, but serve up high quality, credible answers or results or experiences, without having to navigate out of the search paradigm.

MARK MORRISSEY: To me when we talk about experiences, it’s that. It’s not just a query and results, it’s leading the user through the information that they’re looking for.

A big driver for the decision that we made in the partnership with Microsoft is to allow us to focus on that.

GREG NELSON: There are a whole lot of premium opportunities that are available to Yahoo.

We have a lot of things that are in the core API, we have a lot of things that can be put in the API.

And so Yahoo can form their strategy about what they want to do with the user experience, and we have a lot of things to do too.

The thing that’s been fun for me, and you know this by covering MSN, too, is you step into the search discussion at Microsoft at any level of the company, and you feel the level of focus and energy and forward momentum. Because when this company gets really serious about something, you really feel it. I mean, you felt it in Windows and Office and Internet Explorer. And now you feel it in search. Both the product experience like Bing but also at the platform level.

It’s fun. Like as someone that has spent 15 years now, I just had my 15th anniversary a couple weeks ago…

BOOMTOWN: What do you get?

GREG NELSON: You get a big piece of glass.

BOOMTOWN: Really?

GREG NELSON: Yeah.

BOOMTOWN: Like a vase?

GREG NELSON: No, like a big monolith.

BOOMTOWN: Really?

GREG NELSON: Yes.

BOOMTOWN: Nice.

GREG NELSON: Come over to my office and I’ll show you.

BOOMTOWN: Okay. [Laughter.]

GREG NELSON: But, I mean, the focus that you feel there, for somebody that has worked on a part of the business that’s less strategic, has been really fun, really energizing, and just great to work on.

MARK MORRISSEY: And that’s been proven out as we’ve worked through step by step through the things that we’ve needed to do. There hasn’t been a time where they’ve said, no, we’re not going to invest to go get that stuff. There has been clear focus at every level of the organization. And again the quality of what they’ve produced so far–not that they’re done, there’s a lot of work still left to go–but the quality has been fantastic. And I have looked forward to the future stuff that we’ve started to talk about here.

BOOMTOWN: Who do you actually report to?

MARK MORRISSEY: Carol.

BOOMTOWN: Carol, directly.

MARK MORRISSEY: Yes.

We sat down when she asked me to take the job, and she decided she wanted to have direct engagement.

And then clearly because this role spans across each of the different functions, our entire search business is what we’re changing in order to facilitate that.

BOOMTOWN: So, you’re up here [in the Seattle area]. You’re up here, what, every week?

MARK MORRISSEY: I live in southern California, because I started with Panama.

BOOMTOWN: So, you come up every week?

MARK MORRISSEY: Yeah, yeah, at least once a week. And generally it’s Thursdays is when we have our joint operating team meeting.

GREG NELSON: Yeah, if you want to buy airline stocks, like Alaska (ALK) and Southwest (LUV), I mean, between our leads going down and Yahoo’s leads coming up, wow, it’s amazing.

MARK MORRISSEY: When we have a center of operation for decisions tend to be here a little bit more, but that when you get down a level and we’re into each individual team’s discussion, like the algo team, their big meetings are on Thursdays, and they switch back and forth between here and the Sunnyvale area.

GREG NELSON: A lot of what we’re working on right now is engineering migration; we try and put Mark in the rooms with engineering leaders and whatever.

BOOMTOWN: Right, okay. And then you’ll continue to do that right through the…

MARK MORRISSEY: As long as it’s needed.

After months of trying, BoomTown was finally granted an audience with the two key execs who are now responsible for one of the diciest digital jobs going right now: Microsoft’s Greg Nelson and Yahoo’s Mark Morrissey.

The pair’s two-year task is to coordinate the massive search and online advertising partnership the companies struck last year, a job that is perhaps one of the more complex and critical to their businesses going forward.

The deal was finally approved by government regulators in February, and that started the clock for Nelson and Morrissey to get it cooking with gas.

Although it is not as if either Microsoft (MSFT) or Yahoo (YHOO) had a choice but to join together in order to make a dent in the dominant market position of Google (GOOG) in search, the companies are hoping their combined share of close to 30 percent will make a difference to both advertisers and consumers.

The integration will be ongoing, with hopes that the U.S. market will see a unified backend for search technology by the end of the year. Paid search will follow, as will the rest of the global markets.

As part of the shift, some staff from the Yahoo search technology group have either left, been laid off or have been moving over to Microsoft in the transition.

That has meant a Silicon Valley-to-Seattle area back and forth commute for Nelson and Morrissey, both longtime employees who have worked on a variety of other jobs at both companies, including heading MSN and major advertising platform initiatives, respectively.

But this effort is bigger than any of that, since it essentially is the search equivalent of herding cats–by creating a seamless search and online advertising product that works quickly and well across two major Web properties.

Thus, here is the first of two parts of an edited transcript of much of my hour-long interview with both, in which we talked about a range of issues from operations to culture to codependency.

Part Two of of the interview is posted here.

GREG NELSON: So, you want to hear how I got into this thing?

BOOMTOWN: Yeah…explain it to me.

GREG NELSON: So, you know me from the MSN days. And [Microsoft search head Qi Lu] said, “I like what you’re doing with your team, but I have this assignment. And I said, “Qi, I really respect what you’re trying to do. I don’t know if I’m the right guy for you, but go ahead and talk to everybody you want to talk to. And if you come back and ask me to do it, I’ll say yes.”

So, he went out and interviewed a bunch of people and then came back and said, I want you to do it. That was hard, because I loved my MSN team, and I loved what I was doing. But, you know, when Qi asks, you say yes.

BOOMTOWN: Had you been doing any search business?

GREG NELSON: Well, only through the MSN lens. I was a publisher in a way, because I had the responsibility to drive search volume through MSN as a publisher. So, I would work with our editorial staff in all these different markets to think about search experiences in the context of a portal or a media property, and how you turn search into content or how you drive premium content experiences that add value to search, whatever it might be.

So, I thought about it only from that point of view. The algorithmic part of search, like the way that you generate relevance in search, the way that you attach it to advertising in search, that’s sort of my…that’s what I get to learn out of this job, which is great.

MARK MORRISSEY: When he started, both of our executives got our top level teams together. We wanted to be really on the ground running by the time they got regulatory approval.

GREG NELSON: Just to give you a sense of what I walked into, there were hundreds…I don’t remember exactly how many, probably 200 people that had expressed interest in working on that Yahoo partnership by the time that I was asked to take it on. And they were people from all different parts of the company and division; not necessarily all at senior levels, but people that had said, “Wow, I think that’s really interesting, I’d like to come work on it.”

So, I went through a review of all those resumes and all that talent, and then also did additional sort of looking around and picking people one at a time to build what we thought we would be a great team.

BOOMTOWN: And how many people are working on it from Microsoft?

GREG NELSON: All up?

BOOMTOWN: Yes.

GREG NELSON: Thousands.

BOOMTOWN: No, of course, but…

GREG NELSON: Yeah, I mean, there’s about 25 on my team, 25, 30, something like that.

MARK MORRISSEY: But even after you got your team together, one of the things that we’ve continued to do is find some key talent at Yahoo that has moved over to also be part of the Microsoft team.

GREG NELSON: That’s been really key.

MARK MORRISSEY: Yeah. So, we want people that really understand the search business and have extensive experience at Yahoo and can really help bridge not only the cultural differences, but the technical differences and the way we’ve approached the market.

BOOMTOWN: You’ve done a lot of these.

MARK MORRISSEY: So, yeah, about five years ago, they brought me into the product portion of Panama….And then that’s probably the closest comparable effort in the industry, because we did have to move our 400,000, plus or minus, global advertisers over from the platform over to Panama.

When [Yahoo CEO Carol Bartz] came on board, she asked me to be part of a small team that worked directly with Microsoft from the very beginning to figure out what the right thing was for us to do at the company, and obviously then to do…figure out what the right aligned incentives and the right structure would be for a long term, 10-year, global agreement between the two companies.

So, I did that, and that was a big portion of my responsibility last year. And then similar to Greg, as soon as it became clear that we were going to get an agreement signed sort of in the October timeframe, maybe a little bit sooner than that, Carol sat me down. I had another position in the company, and she said, it’s the right thing for you to do, and she asked me to do it.

So, she asked me to take on this role, and I just have had a long term affinity for search and search advertising. I wanted to make sure with all the work that we did on Panama and all the investments we made in search that we really ended up with the right future. Search is critical to Yahoo’s future, and yet we’ve got to make sure that we do this transition in a way that really puts us forward of all of our different customers.

BOOMTOWN: When you say Yahoo’s future, how do you look at it in search?

MARK MORRISSEY: It’s a critical part of our business today, and a critical part of our consumer experience, and it always will be. What the market deserves is it really needs a true alternative to Google. And the best way for us to achieve that is to acknowledge things that we do well, and the things that Microsoft does well, and to leverage those things together, as opposed to us trying to do everything ourselves, particularly in the areas that we’re maybe not so good at.

So, between Microsoft’s experience and focus on delivering great global platforms with true scale, Yahoo’s strength in terms of working with advertisers and understanding of the market, I really believe that in the mechanics we set up from the very beginning of this that by leveraging both of our strengths, that we can really deliver a true competitor to Google.

Not only does our scale combine to really give them much better liquidity that is huge, right, getting up close to 30 percent in the U.S., big, but then the focus that we have really helps out.

[We're not going to be in] the search platform business, the crawling, the ranking and the indexing of the Web. There is a lot of search-related technology that we’re still going to do, because we believe that the search experience…where the market needs to go for search, it’s still a relatively young market, at least from my perspective. But the search experience really needs to evolve significantly.

So, rather than us with less resources than what Google or Microsoft have had in the past trying to do all the back-end platforms and do search experience, now we’re going to take our best talent and focus on search experience and the overall consumer experience.

And then some of our talent is moving over to Microsoft. There’s about 400 people in the products organization between the search technology and paid search that are moving between Yahoo and Microsoft.

BOOMTOWN: And how successful have you been recruiting those [to Microsoft]?

GREG NELSON: Oh, really. Yeah, very successful.

BOOMTOWN: And they’re staying down there [in Silicon Valley]?

GREG NELSON: Yeah, most of them are in India. Some of them are in Silicon Valley, and other places. We’ve had a super-high acceptance rate.

So, we’ve made that quite a big priority, including a lot of executive visits, and a lot of kind of, “Hey, welcome to Microsoft, we’re excited to have you.”

BOOMTOWN: So, then you brought up over about 400, is that right?

GREG NELSON: They come in waves actually, because Mark had talked about Panama, if you want, but they still have to continue to run Panama over a period of time, across all these different markets.

So, as they are closing down Panama in various places, then we’re bringing waves of employees over and training them on adCenter.

MARK MORRISSEY: And that was one of the things that really started to demonstrate and build a lot of confidence in the execution portion of the partnership. There’s two very competing objectives: Get the employees over as fast as you possibly can, because getting that talent into Microsoft not only puts more key talent on developing the things that we need to have done for the future of the platform, but also helps in just the transition itself.

And yet we don’t want to move the talent so quickly that we’re not able to continue to the platform all the way through.

So, we went through a very rigorous…I think it took about five or six weeks with the senior leadership at Microsoft on what employees can go in what locations with what skill sets to allow us to balance between the two, and I thought it went fantastic.

Employees are engaged; the Microsoft team did an excellent job of helping to explain their level of investment and give those employees…because employees, they want to beat Google, and knowing that they have a future at a company that is going to invest significantly to make that happen was a big deal.

BOOMTOWN: And, Greg, when you’re saying, when they move over, there’s not a flipped switch, I understand that, but what’s the time line at this point?

GREG NELSON: I think we’ve brought over 100 or so.

MARK MORRISSEY: A big chunk went last week.

BOOMTOWN: When does it switch over?

MARK MORRISSEY: Beginning of next year.

BOOMTOWN: The U.S. moves first and then…

GREG NELSON: Yeah. Well, U.S. and Canada, North America.

BOOMTOWN: Right, and then? Then the rest of the world?

GREG NELSON: You can kind of do it by size of market. So, Europe next.

MARK MORRISSEY: Basically, there’s 59 total countries and the objective is to get all countries done by Q2 of 2012, the first few markets being U.S. and Canada.

GREG NELSON: It’s 24 months after commencement, which is February 18th.

BOOMTOWN: Right, but it begins next January, correct?

MARK MORRISSEY: The principle is to transition with quality. That’s the overriding factor. And that’s based on the consumer experience and the yield and performance of advertisers and publishers in our owned-and-operated properties, right, because the intent here is make sure that, as we make the transition to going forward, we want the business results to get nothing but better and better.

We set a goal for both of our teams, if we can possibly move U.S. and Canada over before the holiday season, with quality, this year–this year, we want to do so.

BOOMTOWN: Quality, what does that mean?

MARK MORRISSEY: The first one is the experience. For consumers we want to deliver the same quality experience–basically the look and feel before and after the transition.

And the results will get nothing but more and more relevant over time. But the overall experience, the speed, the performance need to be as good or better going forward. For advertisers, there are capabilities that they’ve really enjoyed in Panama that are not in adCenter today. We’re not promising them one-for-one capabilities, but there are investments that we’re making together with Microsoft to bring adCenter up for advertisers and publishers.

In terms of the first one is experience–experience for consumers, advertisers, publishers, and we want the capabilities to be what they expect or better.

Then secondly, it’s around the business metrics….We want to make sure that again for not every single advertiser, not every single publisher, but if you look at in aggregate the groups of major marketplaces, we want the overall performance and business metrics, particularly going into the holiday season, it needs to be as good or better going forward.

So, quality is about the experience itself, measured probably in terms of capabilities, and then there’s the business metrics, and we need to make sure that their yield is as good.

GREG NELSON: And there’s great alignment on that. It’s a 10-year partnership at minimum, hopefully longer, and you want to get off on the right foot with everybody: Consumers, advertisers, publishers. You want them to feel like this is a strong launch, it’s a credible alternative, and we’re in.

So, we’re not going to rush it. If the companies don’t feel ready, like we can really achieve that, then, of course, we’re better to wait.

BOOMTOWN: Well, there is some pressure.

GREG NELSON: The time line that we started to communicate to–publicly, specifically–our advertisers and publishers, is our goal is to have, you know, as pretty confident, algo transition, U.S. and Canada, will happen this year.

We want the paid transition to happen this year, if we can do so with quality, before the holiday season. We’ve got to protect the holiday season at all costs here. And then the next big part of the goal is we have to have it all done by Q2 of 2012.

So, right now we’re finalizing with each of our markets what that sequence will be in terms of the countries, starting in the first quarter of next year, and then we just roll all the way through to that last year.

BOOMTOWN: And how have the cultural changes [been managed]?

GREG NELSON: It’s interesting, because, of course, walking into this I had sort of a point of view and some apprehension, like “Wow, is this going to be really hard.”

It’s been far easier than I had expected, and I think part of that is just that Mark and I get along very well. We’re both kind of pragmatic and it takes a lot to kind of get us ruffled. So, I think we have similar styles. And the people that we’ve hired, we’ve really focused on finding people that are resilient and emotionally mature, and it will sort of steer something of this complexity over a long period of time.

So, I think you often read about, oh, Microsoft has this one culture, Yahoo has another. In practice, at least between these teams, I haven’t found that to be true.

MARK MORRISSEY: Well, right, and the interests here and the incentives that sort of reinforce those interests are very aligned. The way that the partnership was put together, we all have this one big goal, and we’ve hired people that are just really strongly committed to getting that done, and you have support from both companies at the CEO level down. It’s the top priority for both companies. It’s been far easier than I thought.

BOOMTOWN: But in terms of disgruntlement at Yahoo over not being in search technology anymore, how did you cope with that?

MARK MORRISSEY: So, first, we are in search, we’re always going to be in search. There’s an element of that particular part of the search technology that we’re not going to be in. Yeah, there were some disgruntled employees, there always will be when you make a hard decision.

But, in general, employees have responded very well, and the level of commitment that we’ve seen from the Yahoo end, work that we have to do, because this is an extraordinarily complex transition process where we have to connect our front-end to Microsoft’s back-end, and it’s got to work at tremendous scale.

I don’t know if you had a chance to see my presentation from investor day, but one of the things that I showed was some of the screenshots of what we already have in test. February wasn’t that long ago. To have gotten regulatory approval for us, to get through the mountain of requirements and use cases that we had to figure out, to have gotten the API, agreement on the APIs, and to get the coding behind those APIs and get into test by June is phenomenal.

It’s really just a long way of saying that doesn’t happen unless the Yahoos that are working on this are incredibly committed to the future of where Yahoo is going, and the future of working together with Microsoft to achieve this objective.

So, while there will always be disgruntled employees, if you look at the larger population, I mean, we have people that are not just working, they’re working unbelievably hard to make this happen.

BOOMTOWN: Now, the search experience teams are competitive teams.

MARK MORRISSEY: Some are competitive and there are some places that we’re working together. It’s a mix of both.

BOOMTOWN: Such as? Bing has been very impressive in terms of their innovation.

MARK MORRISSEY: Absolutely.

GREG NELSON: Right, and then there’s a separate conversation which is longer term, and, you know, it’s the sort of thing that would feel great to work on if we could do it right now, but right now we’re sort of just trying to ship.

But, both companies have unique assets that we’d love to put into the search alliance, and we want to drive that conversation. And right now we just want to make sure that we get Yahoo to parity of their existing experience, and then we also want to have that conversation about how do we build strength.

MARK MORRISSEY: Another way of looking at it is this is the first agreement in the industry where we have full parity in the platform.

So, as Microsoft invests in innovation around the experience, that’s going to require changes in the platform. As Yahoo invests in things that we want to do in the search experience, that will require changes in the platform. So, we’re always going to meet in the middle at the platform anyway.

Now, that’s not to say that every single thing that we decide to do around entertainment will be the same things that Microsoft decides to do. Some of the things we want to innovate independently, because we’ll discover more things and really move the ball forward. But we already have established a very strong working relationship around how we make those platform decisions, because there are things that Yahoo does today that are quite different than the way Microsoft does them today.

In order for us to get to that comparable experience, this could have been a fight to the death, right? Why would we want to do that in the Microsoft platform? And they’d say, well, “No, we don’t want to do it.”

What we did–and again I think it speaks to the maturity of both of our teams–is we just worked through use cases. Well, what are consumers really trying to do here, how has Microsoft been approaching solving that problem, how is Yahoo doing that. I thought we worked not just agreeable solutions, but ones that moved the ball forward for both of us.

But I’m anxious to get into those future conversations much more. But right now we’ve got to ship.

GREG NELSON: That’s the next chapter. The chapter right now is everybody’s head is down trying to just land Yahoo properly on the platform, and with the great equivalent searching experience.

BOOMTOWN: And when you have complaints? [Microsoft is the] vendor essentially and [Yahoo] the customer.

MARK MORRISSEY: The structure of the agreement, we really worked hard. This goes way back to the very first discussions that we had. We wanted to have aligned incentives where we set up this codependence that kept us really working well together through each of our respective roles. So, by and large, the issues or concerns, why isn’t this working, why don’t I have this capability, you know, it’s Google does it this way…we are going to be a major voice of the customer to the Microsoft teams.

In the structure of the agreement we have both this operational rigor of how do we bring those things in, how do we make marketplace decisions, which are really important. They have the technology, we have the customer-facing piece–and then how do we make road map decisions.

So, throughout transition I have approval authority in Microsoft’s platform road maps, and then going forward then we have a way of we keep providing that type of input.

It’s not a typical vendor-customer complaint process, it’s much more of a partnership, but we each have respective roles where one of us is more the vendor and one of us is more the customer.

So, for the platform they’re more the vendor, we’re more the customer. For sales we’re the vendor, they’re the customer.

And that keeps us again this kind of healthy codependence. And again to leverage–that aligns with each of our strengths.

BOOMTOWN: Is there such a thing as a healthy codependence?

GREG NELSON: Just watch.

If you did not have the fortitude to listen to Yahoo’s annual investor day, which took place much of today at its Silicon Valley HQ, you can read all about it in the five detailed decks presented by top execs.

For your viewing pleasure, BoomTown has embedded them all below, so you too can pretend you are a gullible, oops, canny, Wall Street analyst or institutional investor and start formulating some theories about the future of Yahoo (YHOO).

To its credit, what I heard of the presentation–by phone, since the media were barred from the event itself and the video was messed up–was pretty well done, if a little too kitchen-sinky (as in, here’s everything!).

The day did feature sharp performances from peppy new Chief Products Officer Blake Irving (he voted with his feet, apparently, by coming to Yahoo) and head social dude Cody Simms.

Here are Irving’s slides on products, as well as slides from Scott Burke, VP of Data and Analytics, with the numbers; Mark Morrissey, SVP of Search Alliance Transition, on the nascent partnership deal with Microsoft (MSFT); Hilary Schneider, EVP of Yahoo Americas, on advertising; and Tim Morse, CFO, on moolah.

Enjoy:

Blake Irving

Scott Burke

Mark Morrissey

Hilary Schneider

Tim Morse

Either way, the deal is likely to officially close in early February.  And when it does, Oracle (ORCL) and Sun (JAVA) will be well prepared. “The integration team have been working very hard to complete all of the planning and executives on both sides of the merger believe that deal will be approved,” one source told me. “The majority of the hiring decisions have been made and the bulk of the product decisions and organization structure is completed.”

As part of its preparation, Oracle has written three email announcements, which it plans to distribute to Sun employees. The first, a congratulatory note for employees who will keep their jobs after the transition. The second, a notice of termination alerting employees who will lose their jobs. The third, an offer of a temporary position working through the transition is most likely to be distributed to employees in finance and human resources.

For rank-and-file Sun employees, the second notice is obviously ugly news. Not so for executives: The cash payout at the VP and officer level for being let go is quite generous, and I’m told a certain number of “howls of whoopee” can be expected from those in senior positions hoping for a pink slip.

And just how many pink slips are to be distributed? That’s unclear. I’ve heard from some sources that a significant reduction in workforce is almost certain. Others tell me “layoffs are not going to be anywhere near predictions.”

For the sake of Sun’s long-suffering employees, let’s hope it’s the latter.

Reached for comment, Sun declined to offer on”. “Sorry, we do not comment on rumors or speculation,” a spokesperson told me.

Rob Glaser is stepping down as CEO of Real Networks, the company he founded in 1994. Sources say the move was instigated by his own board, but that he cooperated with the decision and was involved in the transition.

Glaser will be replaced by Robert Kimball, a well-liked executive who most recently served as general counsel and executive vice president of corporate development at RealNetworks (RNWK).

Glaser, who will remain chairman of the Seattle-based Internet company, owns 38.4 percent of Real’s shares, making him by far the largest investor.

His move follows other significant news at Real: Last week, a federal judge dismissed its claims against Hollywood studios in the RealDVD case.

A few days earlier, COO John Giamatteo said that he would step down; the company announced that news yesterday afternoon.

But it is Glaser’s departure that is most important, given that he has been an innovative, pioneering and high-profile Internet leader for so long. Nevertheless, he eventually had to answer for problems with performance.

In fact, Glaser and the board had been talking for some time about making these changes, although it came much more suddenly than Glaser preferred, according to several sources. He had wanted to do a search for a new CEO before he left and make the shift less abrupt.

But the board–with the message coming from director Jonathan Klein, co-founder and CEO of Getty Images–felt a quicker change was needed.

“It’s a typical case of a founder and Internet visionary who can’t convert it to the bottom line. There was a great deal of admiration and respect for Rob, which delayed the decision, but eventually you can’t ignore the results,” says a person familiar with the company. “This move was a long time postponed, because he always had another good idea. But you have a staff whose options are all underwater, and the conversion of gross into net profit was not happening.”

It’s unclear when Glaser’s board informed him of the decision, but sources say that after processing the news, Glaser cooperated with and helped in the transition. He represented the company in a series of meetings at last week’s Consumer Electronics Show without letting on that he was on his way out.

He did, however, post an untypically melancholy message on Twitter yesterday:

Some Real employees and investors have had grievances with the company’s founder for years. A long string of former Real employees, for example, describe Glaser as a cantankerous boss, and Real’s stock price has withered since 2006, when it nearly broke the $12 mark.

The stock is now trading below $4.

And while Real was a genuine pioneer in Web video software and an early player in Web music services–the company was originally called Progressive Networks after Glaser’s political bent–it has been idling for many years.

For a while, for example, it was investing time and money in Web-based “casual games” and had filed to spin off that unit in 2008. But those plans were iced by the recession.

Meanwhile, RealNetworks split its Rhapsody music service into a joint venture with Viacom (VIA) unit MTV, but that service has also stalled, and the two partners have been trying to renegotiate the terms of their partnership.

Real’s crowning achievement of the past few years: The whopping $761 million antitrust settlement it won in 2005 from Microsoft (MSFT), Glaser’s former employer.

Here’s Glaser’s memo to his staff, followed by a note from Robert Kimball, and, finally, the company’s press release.

From: Rob Glaser
Sent: Wednesday, January 13, 2010 1:35 PM
To: All RealNetworks Employees
Subject: Important Personal News

Team,

Today we’re announcing something that I’ve been thinking about for a long time. Nearly 16 years after founding RealNetworks in 1994, I’ve decided to step aside from day to day operations. Accordingly, we’re announcing today that I am relinquishing my CEO job and will focus on my role as Chairman of Real’s board.

A decision of this magnitude produces a complex bundle of feelings. First, profound gratitude for the amazing colleagues I’ve had the opportunity to work with during a chapter that has turned out to be a third of my life. I am incredibly proud of the creativity, persistence, and commitment to excellence that our teams around the world bring to the table every day.

Second, deep appreciation for the billions (yes, billions!) of consumers that use or have used our products, the hundreds of millions of consumers that use our products every year, and the tens of millions of consumers that use our products and services every month. I am also grateful for the trust placed in us by our fantastic carrier and other distribution partners. Very few companies get to have the global reach and impact that we do.

Third, great confidence in the team that will be running the company day-to-day. As we kick off a search for my permanent successor, Real will be led by Bob Kimball as Acting CEO. Bob is one of the most passionate, hard-charging, and lucid executives I’ve ever had an opportunity to work with, and given his decade of leadership at Real, I am confident that the company won’t skip a beat.

Fourth, the bittersweet feelings that come from closing the book on a 16 year labor of love, emphasis on both labor and love. I feel very fortunate that as Chairman I will still get to carry the torch for everything that has made and will continue to make our company great.  And with 2 small children and a third on the way, I feel very lucky that the rhythm of my life can now change, at least for a time, to allow our family to do some things that might not otherwise have been possible. I also look forward to spending more time on civic and other projects outside of Real.

While there’s never an ideal time to make a change like this, this is as good a time as any. We’ve weathered the brunt of the Great Recession and have done what we said we wanted to do, which was to keep our core solid while also building for the future. We’ve also undertaken an extremely rigorous strategy review and have a very exciting road map for the future that you’ll hear about in the days and weeks ahead. And the start of a new decade is a good time, poetically, to pass the baton.

Thanks again for everything, and I hope to see all of you soon.

Rob

From: Robert Kimball
Sent: Wednesday, January 13, 2010 1:07 PM
To: Real@real.com
Subject: Important News

Dear Team,

Rob Glaser, our founder, has resigned as CEO effective today. Rob is sending out a separate note discussing his decision. While Rob will no longer have an operating role, he will continue to serve as Chairman of the Board. We look forward to continuing to work with Rob and I want to thank him for making RealNetworks what it is today and leaving us with a strong foundation upon which to build.

The Board has asked me to assume Rob’s executive responsibilities and has appointed me President and acting CEO. The Board of Directors will consider candidates for the permanent CEO role in the coming months. The senior executive team is galvanized and committed to making RealNetworks a company where customers love our products, employees are excited about being here, and we create value for our shareholders. We want RealNetworks to be a more focused, faster growing and profitable company. We are going to simplify the way we do business, empower employees to do their jobs, and hold people accountable for their results. I look forward to working with all of you to transform RealNetworks as part of this next chapter.

As part of transforming RealNetworks, I am personally committed to providing you with candid, clear and frequent communication so you know where we stand and where we want to go. In the coming weeks, we will be sharing with you changes in the way we operate and organize our business. And we want you to talk to us. Tell us when we are succeeding and when we are failing to make the changes necessary to transform. We plan to hit the ground running and we will need your help and input to succeed.

As you learned yesterday, John Giamatteo announced that he will be leaving in April to pursue another opportunity. John has built a great team here are Real and is completely supportive of the executive team going forward and will be working closely with all of us to ensure a smooth transition. Finally, I want to thank all of you for your contributions to RealNetworks. Our employees are our greatest asset and I humbly ask for your support and commitment to build our company into the great company we all know it can be.

Best to all,

Bob

REALNETWORKS’ FOUNDER ROB GLASER STEPS DOWN AS CEO

Company appoints Robert Kimball President and Acting CEO

SEATTLE–January 13, 2010 Digital entertainment services company RealNetworks, Inc., (Nasdaq: RNWK) announced today that founder Rob Glaser has stepped down as CEO. He will remain chairman of the board of directors of RealNetworks. The company also announced that its board of directors has appointed Robert Kimball president and acting chief executive officer. The board also appointed Mr. Kimball to the board of directors.

“After nearly 16 years, I’ve decided it’s time for me to step away from day-to-day operations,” said Glaser. “I’m grateful to all of our stakeholders–customers, partners, shareholders, and most of all, employees–for the support and commitment they’ve given to RealNetworks. I remain committed to the company and look forward to continuing to serve in my capacity as board chairman.”

In February 1994, Mr. Glaser founded what was then known as Progressive Networks, a pioneer in the field of digital audio and video technology for the Internet. Under his leadership, Real has grown into a multinational company, providing digital entertainment products and services to hundreds of millions of consumers around the world.

“Few people have changed an industry and created a unique experience for billions of people,” said Jonathan Klein, a board member of RealNetworks and the co-founder and CEO of Getty Images. “Rob has changed the face of digital entertainment with RealNetworks’ streaming media products. At the same time Rob has had a profound impact on politics and philanthropy. I’m sure he will continue to do this extraordinary work as well as spending time with his wife and young children. We are grateful for all he has done for the company, the industry and employees, and are pleased that he will continue to serve on the board.”

Bob Kimball joined the company in 1999 and has been a member of the senior executive team since 2003. He most recently served as general counsel and executive vice president of corporate development at Real. “In the decade he’s been at Real, Bob has proven to be an outstanding business executive and leader, and under his leadership the company won’t skip a beat,” said Mr. Glaser. “Our board has great confidence in Bob, and he will be a candidate for the permanent CEO position as part of a formal search process that will begin soon.”

“I look forward to the opportunity ahead,” said Mr. Kimball. “Real has a great team in place, a strong financial position, close customer relationships and fantastic products. We plan to transform Real into a more focused and more profitable company that delivers value to our shareholders.”

[Peter Kafka contributed to this report.]

Greg Nelson (pictured here), who has had the thankless job of running MSN for Microsoft, has left that position and been given the even more thankless task of running the integration of the complex search and online advertising partnership struck by the software giant and Yahoo.

Microsoft (MSFT) sent out an internal email to staff about the move for the GM of MSN’s Global Media Group, which has already taken place.

MSN U.S. head Scott Moore is now reporting directly to MSN Corporate VP Erik Jorgensen. So will Brett Wayn, who has been working under Nelson on international coordination and who has taken over MSN’s international business on an interim basis.

Nelson’s counterpart at Yahoo (YHOO), according to sources, will be Mark Morrissey (pictured here), who is currently SVP of Products at the Internet giant.

The pair will have their hands full in what will ultimately be a two-year effort, sources estimate, to try to improve their competitive edge against Google (GOOG) in the search arena.

BoomTown’s title for the relationship: A Couple of White Geek Guys Sitting Around Arguing!

The role includes coordinating a massive shift of engineering talent from Yahoo to Microsoft, making sure ad systems are copacetic and most of all, smoothing over what is likely to be a number of bumps in the partnership.

To help make the frustrations less frustrating, there is a $50 million annual payment to Yahoo by Microsoft for three years, for unspecified “transition and implementation costs.”

At least 400 Yahoo employees will be hired by Microsoft, which will also provide funds for retention packages to keep 150 more Yahoos motivated during the transition.

The “Definitive Agreement” between the Silicon Valley company and the Redmond, Wash.-based Microsoft, which had been slated to be signed by Oct. 27, 2009, is about to be completed.

Then, as soon as regulatory approvals are in place, it will be showtime for Nelson and Morrissey.

Quincy Smith, the high-profile CEO of CBS Interactive, is planning on leaving his job at the media giant in January to start an advisory firm in Silicon Valley, according to several sources.

But, in an interesting twist, Smith (pictured here) will remain an adviser to CBS (CBS) under a multiyear contract, sources added, making it his first client.

UPDATE: CBS confirmed the move BoomTown earlier reported, in a press release below.

Apparently, Smith will focus intently on video monetization, authentication and other digital issues for the company. CBS is calling it a “transition to a new role,” in its official statement.

CBS Interactive President Neil Ashe will take over Smith’s duties, but without the CEO title, which was a relatively new one for Smith.

CBS is television’s most popular network again this season and its interactive properties are among the top ten in aggregate in both traffic and video.

“I’m very pleased to extend our relationship with Quincy, who is one of the finest minds working in Interactive media today,” said Leslie Moonves, president and CEO of CBS Corporation, in a statement. “Quincy helped put CBS Interactive on the map and we are now a Top 10 presence in premium content.”

Said Smith: “It’s a huge honor to count CBS as my first client. In three years, this company has grown its Interactive profile immeasurably, and yet there is so much more to be done. I love CBS and its people and I look forward to working closely with them to help CBS become the premier video content company, regardless of platform or screen.”

MediaMemo’s Peter Kafka wrote in May about the possibility of Smith departing CBS, where he has worked since late 2006.

As Kafka wrote, Smith has long wanted to start a new media consultancy and has also wanted to return to Silicon Valley.

In fact, the man BoomTown has dubbed the “Energizer Bunny of the Web” was an early employee at Netscape Communications in the Web 1.0 heyday, tried his hand at venture capital and worked on tech deals for media banking firm Allen & Co.

At CBS during the Web 2.0 era, Smith has been aggressively guiding the company into a series of transactions, including the $280 million acquisition of Last.fm in 2007 and the $1.8 billion purchase of CNET last year.

Smith has also been involved with digital issues related to CBS’s strong television assets. He has championed–unlike other media giants–widely distributing CBS content online and keeping control of its advertising sales.

People close to Smith say he often talks of trying to emulate Dan Case, the late brother of AOL founder Steve Case and the former CEO of Hambrecht & Quist, one of the more influential among Silicon Valley investment banks during the first Web boom.

Sources said that the time has now come and that the move is expected to be announced very soon.

It is also likely that Smith’s top business development exec at CBS, Mike Marquez, will also leave to join him at the still unnamed firm.

BoomTown suggestion for a name: Q 3.0.

Here’s Smith in a cameo for a video spoof after he paid $5 million for Wallstrip, the funny business video site which has since been severely sidelined:

QUINCY SMITH SIGNS MULTI-YEAR ADVISORY AGREEMENT WITH CBS CORPORATION

CEO of CBS Interactive to Depart in January 2010 but Will Continue Working with Company on Video Content Monetization, Among Other Projects

CBS Corporation announced today that Quincy Smith, Chief Executive Officer of its CBS Interactive division, will transition to a new role with the company beginning January 2010 as he starts an independent advisory business. In this new role, Smith will advise CBS on strategies and opportunities for growth across the Company’s interactive businesses. Smith, who had led CBS Interactive since November 2006, will remain with CBS Corporation as the division’s CEO through the end of 2009. Neil Ashe will continue as President of the division.

Smith will continue to be closely involved in CBS’s initiatives related to next-generation monetization of video, including oversight of the Company’s effort to explore authentication as a new, additive method of distribution. He will also advise on partnering with technology companies to expand CBS’s interactive presence, as well as explore new growth opportunities related to content, services and applications.

“I’m very pleased to extend our relationship with Quincy, who is one of the finest minds working in Interactive media today,” said Leslie Moonves, President and CEO of CBS Corporation. “Quincy helped put CBS Interactive on the map and we are now a Top 10 presence in premium content. His entrepreneurial spirit and his passion for the business have helped this Company attract some of the most creative minds working in digital media. I know he will continue to be successful in all he’s yet to do, and we’re very happy to have Quincy working with us in this new role at CBS.”

“It’s a huge honor to count CBS as my first client,” said Smith. “In three years, this company has grown its Interactive profile immeasurably, and yet there is so much more to be done. I love CBS and its people and I look forward to working closely with them to help CBS become the premier video content company, regardless of platform or screen. I especially want to thank Leslie for his leadership and counsel, and for giving me this opportunity to continue working with CBS.”

Smith came to CBS Interactive in 2006, and in three years helped build a division that has become a top ten property in terms of worldwide visitors and video views. CBS’s acquisition of CNET in 2008 added industry-leading Web sites like CNET.com, GameSpot, TV.com, chow.com and BNET.com to a portfolio that had already included top ranking properties like cbs.com, cbssports.com and last.fm. Today, CBS Interactive sites span nearly every category of premium content on the Web, across news, sports and entertainment.

Previously, Smith was an executive with Allen & Company, where he was involved with multiple transactions and advised companies such as Comcast, Google and CBS. Prior to Allen & Company, Smith was a Founding Partner of The Barksdale Group, a venture capital firm. Previously, Smith spent five years at Netscape where he ran Investor Relations and Corporate Development and played a role in over 20 joint ventures, investments and acquisitions including Netscape’s ultimate sale to AOL. Prior to that, Smith was an investment banker for Morgan Stanley.

Goodness gracious, make it stop!

You must know by now how much BoomTown loves internal Yahoo (YHOO) memos. But this is getting ridiculous.

It’s been like a flash flood after a long drought at Sunnyvale HQ today, as Yahoo CEO Carol Bartz turns on the fire hose of a whole lot of communicating.

A lot. A real lot.

“I know you guys have reorg fatigue,” wrote Bartz, in the latest email to employees about the management reorganization finally announced this morning.

Also memo fatigue at All Things Digital HQ, if you can believe it.

Okay, I give, Carol! Well, for now, until another juicy internal memo you aren’t handing out freely lands in my inbox, for example, such as one about a search deal with Microsoft (MSFT). I’d like one of those to go, please!

But, in a gesture of a leak-free peace (can the drop-kick bounty be suspended for just today?), I am posting this last memo about the management reorganization from Carol “Chatterbox” Bartz.

(Although, I wish she would stop insulting the press, as she does below again. We are just doing our job–and very accurately, as it turned out–yet the jibes continue. Which is odd, frankly, given that Bartz has had mostly glowing coverage in the media her entire career.)

But Bartz did seem to leave a little mystery in the email still, as if even more rearranging were to come.

Writes Bartz (my bolding):

“As soon as decisions were made, I wanted you to know about them–even if that means we don’t have all the details nailed down yet”.

Wait, are the deets all nailed by Bartz’s productive hammer or aren’t they?

At least, thankfully, the note is capitalized properly, unlike the quaint no-caps stylings of former CEO Jerry Yang.

In any case, if you just can’t get enough, here is Bartz’s reorg blog from this morning and her new management structure memo too.

And here is her entire email on the reorg to employees:

From: Carol Bartz
Reply-To: Carol Bartz
Date: Thu, 26 Feb 2009 09:02:49 -0800
To: “all-worldwide@yahoo-inc.com”
Subject: Our New Organization

Yahoos,

As I’ve gotten to know Yahoo! over the past several weeks, I’ve developed a point of view on how our organization should be structured to set us up for success.

Our goal is simple: to consistently deliver awesome consumer and advertiser experiences, everywhere in the world we do business. Delivering great customer experiences is everyone’s job at Yahoo!–and each part of our organization will have a clear role in making that happen every day.

The timing of this announcement is important. As soon as decisions were made, I wanted you to know about them–even if that means we don’t have all the details nailed down yet. Yes, there’s been a lot of speculation in the media over the past few days…that’s been a little frustrating, but I’m not willing to speak publicly about decisions before they’re final. Today, they are–so I’ll lay out our new organizational structure for you now.

I know you guys have reorg fatigue. Hang in there–our intention is to leave this structure in place for two to four years. We’ll continue to make adjustments as needed, but we expect this core structure to stay put.

The structure outlined below will enable us to make big improvements in our product quality and operational efficiency. Part of that is simplicity–I’m frankly amazed at how complicated some things are here! We’ll have much clearer decision making and accountability. Product and regional teams will share responsibility for revenue targets and expense management, but we’ll have one P&L, for which I’m accountable.

We will also be in a better position to really listen to and understand our customers–both consumers and advertisers. I think we’ve gotten into the habit of focusing internally too much and we sometimes forget who we’re here to serve. You’ll notice that our management structure puts a renewed focus on the customer, with stronger feedback loops across the company…and they all come through me.

Also, as you know, no organizational structure is a substitute for collaboration, communication and trust. We’ll all need to evolve our behavior a bit–as teams and as individuals – to make this structure work the way it’s designed.

So here’s the overview, with the roles that will report directly to me. As you’ll see, some of our leaders are still to be determined. I know you’ll
want more detail than what’s below–you can learn more on Backyard: http://backyard.yahoo.com/ourorg .

Products: We’ve combined Tech and Product groups under one roof, led by Ari Balogh as EVP Products & CTO. Ari’s charter is to deliver global products that enable extraordinary consumer and advertiser experiences. Ari’s direct reports now include one leader for each product group–we’ve taken care of the “two in a box” problem.

One important note: The Connected Life team has been integrated into various parts of the new organization. Our mobile strategy remains a key part of Yahoo!’s focus going forward and all of our product groups will own mobile innovations. After leading Connected Life for four years, Marco Boerries has resigned from the company to spend more time with his family in Europe. We thank Marco for his important contributions at Yahoo!.

Regions: There are now two: North America and International. As I’ve said before, international growth is critical for Yahoo!, which has become too reliant on its U.S. business over the years.

The regions deliver Yahoo!’s products, programming and services to consumers, partners and advertisers in local markets. They will partner closely with the newly formed Regional Solutions & Products group in Ari’s organization to help drive a significant shift in how Yahoo! develops products for different geographies. The goal is to have global platforms on which regional product offerings are based.

The North American region–comprised of the U.S. and Canada–is led by Hilary Schneider. The leader of our International region, to be hired soon, will be responsible for a cohesive Yahoo! global strategy and seizing our international growth opportunities. Until we determine who’ll lead the International region, Rose Tsou (Asia), Rich Riley (Europe) and Keith Nilsson (Emerging Markets) will continue to report to me.

Marketing: Elisa Steele will be joining Yahoo! as our Chief Marketing Officer (CMO), effective March 23. Elisa joins us from NetApp where she was SVP, Corporate Marketing. Previous to NetApp, she held executive positions in marketing at Sun Microsystems. Elisa will oversee our global marketing strategy and provide direction for our marketing function. She’ll bring together the various Yahoo! marketing teams that have been spread across the company. Reporting into Elisa will be Brand Marketing, Audience Marketing, Corporate Communications, Insights, Policy & Privacy, Community Affairs and related central teams. I’m delighted to have Elisa joining the team.

Customer Advocacy: As I said, we can do much better in hearing the voice of the customer across Yahoo!, and incorporating what we hear into all of our work day-to-day. We have opened a search for a leader, who will oversee Customer Care and Ad Operations globally with the goal of improving how we support Yahoo!’s users and advertisers. In the interim, these teams will continue to report to Hilary.

Service Engineering & Operations: This new team is responsible for delivering common technology services at scale, including application management and infrastructure. No matter how cool our products are, the customer’s experience won’t be great unless our applications consistently deliver. Note that we’re bringing Service Engineering together as one group because these engineers bring expertise that is best applied horizontally. Leading this organization is David Dibble, who joined Yahoo! in December. David’s team also will be accountable for delivering more effective corporate IT systems.

Corporate Functions: Blake Jorgensen will be leaving Yahoo! and I am searching for a new CFO. Blake will remain through a transition with his successor, and I want to thank Blake for all of his great contributions to Yahoo! over the past two years. Mike Callahan will continue to lead our Legal team, and David Windley leads our Human Resources function. Joel Jones joins the team as my Chief of Staff.

So that’s the high-level view. These changes are effective immediately, but we’ve got more work to do in filling out the structure of each group. In the short term, this transition will be challenging for many of our people. My executive staff will be working with their organizations as quickly as possible to create further clarity. For example, we’ll need to recast budgets and adjust work areas so we have the right people working side-by-side.

I want to thank all of you who’ve shared your ideas and views with me since I arrived. Several leaders across Yahoo! came together to design this new structure–I’ve been very impressed with their dedication to the right outcomes, particularly how they’ve embraced the need to eliminate the silos that have been a drag on this organization for so long.

I think this organizational structure has the potential to solve many of the issues you’ve helped me better understand. Of course, new issues will emerge. But I know we’ll be aligned and nimble in tackling them together.

This is a tremendous, proud company with a powerful brand, great products and a bright future. Now’s the time to get more focused than ever on delighting our users and advertisers. Let’s show them how great Yahoo! can be.

Carol

Pages, Apple’s word processing application, is also getting a bit of an update. Pages ’09 offers a full-screen view for the easily distracted writer, dynamic outlining, mail merge with Numbers–Apple’s spreadsheet program–and 40 new templates. Not the most exciting stuff, here, but decent additions nonetheless.

In Numbers, Apple (AAPL) has added some new categorization features–Table Categories, and, answering user requests, some 250 new formulas and functions. New charts, trend lines and other advance reporting options as well.

iWork is also migrating from the desktop to the cloud–in a sense. Via iWork.com, users can easily upload documents and share them with collaborators. Docs are viewable online. They can be downloaded. And collaborators can comment on them online. iWork.com is cross-platform (Mac and PC) and cross-browser. The online suite looks very much like the Mac-based suite.

iWork will run you $79, $49 if you purchase a new Mac. “This is the beginning of a new service,” Schiller noted, adding that it’s a beta and launches today, solo and as part of a $169 box set that includes iLife and Leopard.

Is it just me or does the fact that President-Elect Barack Obama is broadcasting his weekly address on YouTube not seem like it should be the very biggest deal in the world?

Still, when an article in the Washington Post reported late last week that he would put his weekly Democratic address online in video–on YouTube and his own transition site, Change.gov–as well as the regular radio, the squeals from tech were louder than at a mall appearance by the Zac Efron of “High School Musical.”

While it is a first for the Commander-in-Chief, I am more depressed that it is a first–after all, skateboarding cats made it to YouTube eons ago–than utterly thrilled that he is doing it.

But, when it come to the glacial movement related to politicians and tech issues, disappointment seems to be a better stance than hope.

I could begin with the fact that the U.S. has poor broadband and wireless coverage compared with most comparable nations (Softbank’s Masa Son once told me in an interview that this country was the “third world of broadband”).

Ironically, the price of high-speed access ranks at the top, by really gross margins.

Or that the federal government remains unfocused on a number of important digital issues, from immigration to privacy to net neutrality.

Perhaps because of his more obvious use of Internet tools, from communicating to supporters to raising money to targeting voters, Obama has felt like the first true Internet candidate, well beyond the ultimately unsuccessful inroads made by Howard Dean in 2004.

And now with even more YouTube videos, the Twitters, a much more interactive Web site at Change.gov and, best of all, the possible appointment of a CTO for America, it has been a general lovefest that the Obama presidency has engendered from the Internet community, simply for the focus the sector is now getting.

And more interactive communications are promised, such as regular video interviews with senior members of the Obama administration.

“This is just one of many ways that he will communicate directly with the American people and make the White House and the political process more transparent,” spokeswoman Jen Psaki said to the Washington Post.

It’s not that BoomTown does not think this is a great thing, but to me, this kind of transparent communication should be as normal as it has become throughout the rest of society as a matter of course.

Also, it would be nice if the Obama videos were also distributed on many other video services besides YouTube, which is the largest, but owned by Google (GOOG), whose CEO Eric Schmidt is a prominent supporter of the new administration.

Still, the four-minute video that Obama released yesterday is a good first step, along with a previous one from transition Co-Chairman Valerie Jarrett, who recorded a two-minute video earlier in the week.

Both are below:

President-Elect Barack Obama

Transition Co-Chairman Valerie Jarrett