Necessities We Can Do Without

Burlingame, Calif. -Charles Darwin would have had a field day with today's technology.

When he touched down in the Galapagos Islands in September 1835, Darwin scooped up a menagerie of finches, iguanas, rocks, plants and such. His data gathering was quick and dirty: He spent only nine days stuffing his crates with Galapagos samples and neglected to label them precisely. But he wound up with a powerful idea: Any species could mutate and evolve in response to their environmental conditions. Within the past few decades, other scientists have painstakingly documented how changing levels of food, water and other elements could cause finches to mutate in just a generation or two.

Technology, by contrast, mutates even more quickly, and we're adapting right along with it. The things we couldn't live or work without only a few years ago are now only valuable for their scrap metal. And get ready for more change. Think your laptop is essential? Guess again. Chances are that before long, you'll be tempted to give up that five-pounder for a nifty ultra-mini PC that slides into a satchel or your purse

In Pictures: 12 Necessities We Can Do Without

The managers of Xerox's famed Xerox Palo Alto Research Center back in the 1970s were among the first to articulate what brought about spurts of innovation and change in technology: Pick the biggest "resource constraint"--or the most expensive component in a system--and imagine what would happen if that became virtually free. Once upon a time, transistors cost at least a few pennies apiece. Now Intel stuffs close to a trillion transistors onto a chip that sells for only a few hundred dollars. Remember when long-distance telephone calls were expensive? Voice-over-Internet Protocol has made those chats free too.

Those kinds of innovations have meant that the gear once considered essential can be scrapped. Ready to say goodbye to your old desk phone? Even your answering machine, once an absolutely essential element of modern life, is giving way to services that companies administer in the computing "cloud"--meaning that companies are willing to store your information in enormous computer farms that you'll never see and serve it up just when you need it.

Instead of paying for a word processing system, Google Docs will let you write files and save them into the great Google cloud, where you can collect them later or send them to others. Google has even added software that lets you synchronize your Google Docs on your laptop so that you can use them in places where a network doesn't yet reach--say, on a plane.

Semiconductors continue to stuff more electronics--and thus, more processing power--onto their chips. That means that the overall devices themselves can shrink. Apple's latest generations of iPods, for instance, can be even slimmer than the original because the company no longer needs to use even a tiny disk drive but can instead stuff all those digital songs and pictures into semiconductor chips.

Novel software applications can also help cut down on the number of devices that you need, or at least, that you need to manage. Many people who carry around a cellphone haven't quite given up their office phone or even their home phone. That means technology hasn't simplified their lives; it's just multiplied the number of machines they need to answer or check for messages. Here's where software can come in: The founders of GrandCentral, a Freemont, Calif.-based start-up that was acquired by Google in 2007, created a service that redirects calls from multiple phones to a single number. No matter which of your many numbers someone calls, the calls are redirected to one number. That means you only have to worry about one phone number--and one voice mail.

Other companies are trying to apply that kind of shrink mentality to software too. For instance, to find the location of a local coffee shop, you can go to your PC, pull up your Web browser, and in a half-dozen clicks or so on a search engine, you can find a nearby coffee shop. (It helps, of course, to know your own location.)

Mike McCue, who runs Mountain View, Calif.-based TellMe, now a division of Microsoft, thinks that's too many clicks. Instead, TellMe has been developing voice recognition software that uses global positioning technology to find locations. Here's how it works: Call TellMe and ask for a Starbucks. The service starts by figuring out where you are. Then it searches Web directories for what you want. Finally, it gives you a list and a map of the nearest Starbucks. No clicks involved.

From McCue's point of view, devices should have just one button--and no stacks of menus that you have page through. "You say what you want, and we'll get the information you need," McCue says.

And that's how you really reduce the number of gadgets that you once thought that you needed.

In Pictures: 12 Necessities We Can Do Without

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Yahoo!'s Striptease

BURLINGAME, CALIF. -
Will it be Google or AOL? Yahoo! executives are willing to team up with competitors to craft a new future for their company--provided those competitors don't include Microsoft. But Microsoft CEO Steve Ballmer still has a card to play: He's enlisted the support of Rupert Murdoch to create a partnership that would involve combining Yahoo!, Microsoft's MSN and News Corp. social-networking site MySpace.

The news marks a surprising twist in the 2-month-old acquisition saga. What's clear: Yahoo! will soon be a different company. But precisely which industry leaders will become its partners is still very much up for debate.

On Wednesday afternoon, Yahoo! issued a terse announcement that it was launching a two-week "trial advertising" partnership with Google. The arrangement is a clever way of testing two separate ideas: the financial implications of letting Google's powerful ad-serving engine take over Yahoo!'s search ads, and just how politically explosive a deal between Yahoo! and Google might be. (See: "Yahoo! Gets In Bed With Google")

That news was followed by reports that Yahoo! may also be close to striking an arrangement that would combine the search engine company with AOL, the struggling Internet division of Time Warner.

Industry pundits believe Yahoo!'s latest moves will help preserve--and even increase--its perceived share value in the face of bluster from Microsoft that it could lower its bid from the $31 per share it offered for the company Feb. 1.

In after-hours trading, shares in Yahoo! and Microsoft moved a few pennies: Yahoo! edged down by 3 cents to $27.77; Microsoft fell 18 cents to $28.71. Google rose $1.81 to $464.19.

Since Microsoft made its bid, Yahoo! executives have been considering a dizzying array of relationships with a slew of potential alternative partners to avoid a takeover: News Corp., Time Warner, AOL, Google.

Ballmer hasn't been twiddling his thumbs, either. He has reached out to News Corp., according to industry sources familiar with the companies.

Although Yahoo! has staunchly asserted it is worth more than the $31 a share cash-and-stock offer made by Microsoft, Ballmer has been reluctant to sweeten the deal. Paying more than $40 billion for Yahoo! would already send Microsoft to the credit markets to borrow money. Crafting a deal with News Corp. could lighten that financial burden as well as add the nice touch of a vibrant social-networking site, namely MySpace.

In February, Murdoch asserted he wasn't interested in acquiring Yahoo! But he didn't rule out partnering with Microsoft.

Spokespeople for the companies declined to comment.

None of this was quite what Ballmer expected would unfold when Microsoft launched its bid for Yahoo! on Feb. 1. Ballmer had hoped to quickly lock down a deal with a company that seemed adrift. However, he didn't seem to factor in the fierce antagonism that Microsoft still sparks in Silicon Valley, particularly among industry veterans including Yang and Google's chief executive, Eric Schmidt.

Microsoft executives consulted with former Hewlett-Packard executives who had led the integration of HP and Compaq for advice on how to orchestrate a clean deal. Start talking right away with managers, counseled the HP veterans. The countdown to carrying out a smooth merger starts from the time the deal is announced--not just from the time it is formally approved.

But Yahoo! executives had little interest in taking part in any kind of pre-merger discussions with Microsoft. Instead, they launched wide-ranging conversations with possible white knights who could keep the company out of Microsoft's grasp. Yahoo! also adopted measures aimed at making a hostile takeover expensive, including promising executives two years' severance if they left Yahoo! "with good reason" within two years following an acquisition.

Microsoft and Yahoo! managers have met at least twice since February. Ballmer has described the talks as "limited" and "not substantial." Yahoo!'s Jerry Yang and Chairman Roy Bostock, in a retort Monday, said the conversations were "constructive" on topics "including integration and regulatory issues." (See: "Yahoo! To Microsoft: Go Away") But maybe Yahoo! executives were simply listening for clues about how to skirt antitrust hurdles if they chose to work with Google instead of the Redmond software giant.

The trial advertising relationship announced Wednesday signaled that Yahoo and Google could be close to finalizing such a relationship.

Here's how it is likely to work: Over the next two weeks, Web surfers based in the U.S. who plug a search term into Yahoo!'s search engine will, as they always do, see a series of ads running alongside those search results. The overwhelming majority of those ads will still be served up by Yahoo!'s in-house system. But "no more than 3%" of the advertisements will be generated by Google's AdSense for Search service.

What the two companies will learn from the test is how to set a value for either an allowance that Google might promise to Yahoo! or how to structure a revenue-sharing deal.

In either case, the test will involve swapping far more information about sensitive advertising mechanics and revenues than Yahoo! has been willing to share with Microsoft.

As recently as October, Yahoo!'s Yang was reluctant to even consider turning over Yahoo!'s ad systems to Google. In a conference call last October with analysts, Yang said: "We believe having a principal position in both search and display advertising is critical to creating ... long-term shareholder value." Last year, Yahoo! generated 87% of its total revenues from "marketing services," the combination of so-called "banner" advertisements as well as search advertising

In its annual report, Yahoo! lists Google as first among its competitors: "Google’s Internet search service directly competes with us for Affiliate and advertiser arrangements, both of which are key to our business and operating results." The report also lists Microsoft and AOL, as well as other publishers, as competitors.

Antitrust experts on Wednesday were quick to note that there are no regulatory problems with the carefully limited test outlined by Yahoo! and Google. "If Google controls Yahoo in some way, it would lessen competition in the market and that's what the laws are concerned about," notes Lande, professor of anti-trust law at University of Baltimore Law School. "But of course, that's not what they've announced."

If Yahoo! chose to let Google handle a bigger chunk of advertisements, regulators might take a closer look. "A search engine is searching and advertising, and if you merge advertising, that's very much like a merger," Lande suggests. "A joint venture is evaluated under the same anti-trust laws as a merger."

"Should there be moves to make this agreement permanent, we will examine it closely in the Antitrust Subcommittee to ensure that it does not harm competition," said U.S. Senator Herb Kohl (D-WI), chairman of the Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights in a statement. "Following closely on the heels of Google's acquisition of DoubleClick, this Google-Yahoo alliance would represent even further consolidation in the internet advertising market," Kohl said.

Large Yahoo! shareholders are clearly weighing the price of the deal and how much it would help or hurt mixed portfolios that include both Microsoft and Yahoo! holdings. (See: "Ballmer's Secret Weapon")

David Hilal, associate director of research at Friedman, Billings, Ramsey & Co., told Forbes.com that he was betting that Microsoft might still be tempted to raise its bid. That move could appease a few Yahoo! executives and some big institutional investors.

Wendy Tananka and Andy Greenberg contributed to this report.

See Also:

No More Mister Nice Guy

Stop Wasting Time, Microsoft Tells Yahoo!

The Yahoo! Deal

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