Qtrax’s Jackass Move, Mideast Net Blackout, VMware’s Hangover

It’s a tactic that professional party promoters have used for years: Tell everyone that all the big-name celebrities are going to be at your party, even if they haven’t promised anything. Work up the hype, get people excited, and pretty soon it won’t matter that they never committed, because they’d be crazy not to come. Sometimes that works, but when it doesn’t, it tends to make you look like a real jackass. Qtrax put that strategy to the test, and it fell flat on its face. Qtrax is an ad-supported music-download service that lets users get a lot of songs for free. It announced that all the major record labels had signed on as partners: EMI, Universal, Warner and Sony BMG. Problem is, those record companies denied that any actual deals had been reached — some said they were in talks but nothing had been nailed down. This doesn’t necessarily mean Qtrax is dead in the water, but jumping the gun can’t possibly go over well at the negotiating table.

Egypt and India were hit with massive Internet and phone outages when undersea cables were severed just off the coast of Alexandria. The accident knocked out about 70 percent of Egypt’s available bandwidth and cut international phone access by 30 percent. About half of India’s capacity was knocked out, though it was able to reroute its traffic through a backup system. That’s still an imperfect solution, though, because of the bandwidth strain on intact connections. Egypt’s problems could last for two weeks, government officials estimated.

Listen to the podcast (11:49 minutes).

Expensive Airwaves

Which is more important: maintaining control over your network or having access to a chunk of airwave real estate that reaches the entire nation? That’s the $4.7 billion question — or one of them. Another is this: Who submitted the $4.7 billion bid? There’s a lot of speculation that it was Google, which approached the Federal Communications Commission last year with a proposal to tweak the rules governing its wireless spectrum auction. Create a mandate, Google asked, that whoever wins the coveted C Block of airwaves has to maintain that block as an open network, accessible to any device. The FCC agreed — provided the bid reached a minimum of $4.6 billion. Since then, Google has announced its Android platform — a stack of Linux-based middleware for mobile phones — and it has formed the Open Handset Alliance, which is developing that platform. The next logical step is that Google will become a wireless network operator, right? Maybe, but we won’t know for sure until — well, we don’t know when we will know. At some point, the FCC will let the public know who won the auction, but for now all we know is that the winning bid has been submitted. And that’s all we know.

With Amazon breathing down its neck, eBay is making some moves to shore up its bottom line, but they aren’t proving very popular with the auction site’s seller community. To encourage more auctions, eBay lowered the upfront listing fee — the price a seller pays whether or not there’s a sale. Then, eBay raised its commission rate on the lowest-priced items listed on the site, prompting sellers to reach for their calculators. The move is the first major change implemented by eBay’s incoming CEO, John Donahoe, who replaces departing Meg Whitman.

After several days of speculation, Jerry Yang confirmed that Yahoo will cut employees from its payroll — specifically, 1,000 of them, about 7 percent of its workforce — in a reinvigoration attempt. At the same time, Yahoo announced its fourth-quarter earnings, which showed that its net income was down 23 percent from the year before even though revenue rose 8 percent. Yahoo was done in by its outlook, which fell below analyst expectations, and its share price slid on the news. Company cofounder Yang, who took the CEO reins midway through 2007, said plenty of challenges remain ahead as the company faces “headwinds” in 2008. Yahoo’s restructuring is part of a larger strategy to align it around three objectives, Yang said: one, to become the starting point for consumers using the Web; two, to become a must-buy outlet for advertisers; and, three, to attract more third-party developers to its Web and mobile platforms.

Party’s Over for VMware

VMware woke up with a hangover Tuesday. Its mile-high stock price kept it partying since last summer, and now it’s finally come down to Earth, though I’m sure some of its investors wished it hadn’t had such a violent reality check. Shares fell 30 percent in half a day after the company reported fourth-quarter earnings that failed to meet expectations. Its parent company, EMC, made a killing on Wall Street last August when it put VMware up for an IPO, and its rapid growth contributed a significant amount to EMC’s overall valuation. So when the bottom fell out of VMware this week, EMC went down with it, dropping seven percent. For its part, though, EMC’s own performance was better than expected, according to Avian Securities analyst Matt Bryson. The plunge is a market correction and should work to return EMC’s core business to a larger portion of its overall valuation, he said. As painful as the near-term fallout is, it’ll make EMC stronger in the long term — and VMware more rationally priced, Bryson said.

Amazon’s latest shot at iTunes could be heard round the world. The online e-tail giant is taking its digital music store international — a necessary move if it hopes to compete with Apple in the music download arena. Amazon MP3 will roll out globally later this year, offering music free of DRM copy-protection technology. The music store already has a library of 3.3 million DRM-free MP3 songs from 270,000 artists available for download. It is presently the only retailer that offers DRM-free MP3s from all four major music labels — as well as more than 33,000 independent labels.

The European Court of Justice has ruled that file-sharers must remain anonymous, meaning Internet service providers are prohibited from turning over the identities of alleged file-sharers. In the past, the music industry has used such information to file lawsuits against those it believes are swapping copyright-protected music files without authorization. The ruling deals a major blow to the music industry’s worldwide campaign to crack down on copyright infringement.

Fish-Wrapper Woes

Newspapers, which have been losing subscribers and advertising revenue to online outlets for years, are now finding themselves beneficiaries of the Internet. While fewer people each year read their printed products, newspapers are seeing more online readers than ever before. Problem is, they don’t know how to convert those eyeballs to cash. Some papers, notably The New York Times, have experimented with a subscription model for select content — and abandoned it. Rupert Murdoch, who recently bought The Wall Street Journal, is said to be looking at an advertising-supported model that gives readers free access to its content. Newspapers also are experimenting with message boards, blogs and video to give readers a reason to stick around. This much is for sure: Until someone comes up with a better way to line bird cages and wrap fish, there will always be at least a few people willing to buy the old-fashioned paper kind of news.

How many times has it happened to you? You know you took copious notes, but you just can’t make out what you wrote or remember exactly what was said. Now, there’s a new smartpen from Livescribe with audio-recording functionality. When used with special paper imprinted with a pattern of dots, it can play back the exact portion of a recording that corresponds to a particular note. The Pulse smartpen comes with a gigabyte of memory, enough to record 100 hours. The device uses a high-speed infrared camera that orients itself with the dots on the paper, allowing it to synchronize what’s being recorded with what’s being written. The company offers a software developers kit, and some applications are already in the works, including a Spanish translator, a personal organizer, games and interactive books.

Like most things in life, when it comes to e-mail, you generally get what you pay for. That should scare the pants off a lot of people, since so many of them get their e-mail service for free from companies like Yahoo and Google. Then there’s Charter Communications, which recently deleted the e-mail accounts of some 14-thousand customers when a software glitch occurred during some routine maintenance. Everything those customers thought was safe and sound in their online in-boxes — photos, messages, contacts, etc. — is now gone. Charter is hoping the $50 apology it’s offering to bereaved customers will calm some tempers. Technically, the e-mail that Charter provided was free — a service given out at no extra charge to everyone who subscribes to the company’s Triple Play Internet, cable TV and phone service. That’s one way of looking at it. Another way of looking at it is that it was part of a package, and that package cost money, so it wasn’t free e-mail at all. Those burned by Charter can take their business to a truly free service like Yahoo or Google, but of course there’s no guarantee the same thing won’t happen again.

Those Dell kiosks that started appearing in shopping malls about six years ago were meant to drive people to the Dell Web site. They let you play around with a Dell computer for a while and decide whether you like it before placing an order. But for people who like to, you know, take something home when they decide to buy it, the kiosks are kind of a sick joke, because they have no inventory. All they have is a computer connected to the Dell Web site, where you can order one, then go home and wait a few weeks. But now that Dell is putting its computers in places like Best Buy, Staples and Wal-Mart — you know, real stores where you can buy something and then take it home — it apparently sees no need for the kiosks and is now shutting them down. They won’t be missed.

Also in this episode: Amazon doubles its profits; Microsoft remains on antitrust probation; Vista, Office and Xbox sales lift Microsoft profits.

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