All Things Digital

As BoomTown reported on Tuesday, The Wall Street Journal is now reporting that Microsoft (MSFT) and Yahoo (YHOO) have been chatting away informally, after a week of faux-wrestling.

It’s been like WrestleMania, except without the excitement and anticipation. Also, no cool names or outfits.

As I posted on Tuesday:

While it is true, as we and everyone else have posted, that Yahoo and Microsoft still have not entered into or even scheduled any formal talks, even after the software giant’s threat to launch a hostile bid came and went over the weekend without action, it is also not true that there are no talks going on.

According to sources close to both companies, there are informal discussions now taking place between Yahoo and Microsoft–via bankers, board members, shareholders and others close to both companies–to try to prevent a hostile takeover scenario or the sudden withdrawal of Microsoft’s offer.

Both options are unattractive for a number of reasons to pretty much everyone and, in BoomTown’s opinion, an excellent example of how juvenile this takeover battle has become (or “amateur hour,” as one source close to both companies described it to me).

A hostile bid by Microsoft, for example, is profoundly distracting to both parties and could result in an exodus of Yahoo staff, along with being risky in terms of certain success for Microsoft.”

And from the Journal this afternoon:

The two sides and their advisers have had informal discussions over the past week, but have been stymied by a divide on the price Microsoft should pay to acquire Yahoo, say the people. Microsoft has been weighing whether to drop its bid or go hostile, and has promised to announce its decision this week. As of Thursday night, Microsoft was leaning toward going hostile, but the situation remained fluid, according to people familiar with the matter.

Now, people close to the two sides are attempting to avert that prospect with discussions they hope could lead to a negotiated outcome, say the people. Microsoft has wanted to avoid a hostile takeover battle, which could drag out and result in distraction and the loss of key Yahoo employees.”

Lots of people were bellyaching about the lackluster nature of Bill Gates’s final performance at CES last night–long on deals and stats and short on the futuristic predictions Gates often makes.

Digital Daily’s John Paczkowski was unimpressed, as were Duncan Riley of TechCrunch and ZDNet’s Mary Jo Foley, for example.

But, to my mind, giving the Microsoft co-founder and chairman a hard time at this point is sort of like razzing Celine Dion, who coincidentally also just completed her own longtime run in Las Vegas in her Caesars Palace show, “A New Day.”

In other words, let’s just all admit that–as irksome as both have sometimes been–they do kind of grow on you after a while.

While that may be still debatable with Dion, I know, it is squarely the case with Gates, who has had the longest-running and most complicated relationship with the tech industry, even as he has dominated it for most of the past two-plus decades.

Gates’s impact will surely be chewed over in the history books in centuries hence–likely as not, always with the Yin to his Yang, Steve Jobs of Apple.

And, despite all the controversy his tenure has engendered (most especially the bullying antitrust behavior), as he transitions from his day-to-day role at Microsoft in July in what will likely be one of the longer goodbyes in the digital arena (including his sixth appearance at our D6 conference in May), I am guessing his influence will be seen as a net plus in the years to come.

While many level charges at Microsoft as a hindrance to innovation over the years, via the overwhelming dominance of its Windows operating system, the fact of the matter is that the digital industry has never been more fast-moving and quick-changing, and it remains one of the brighter spots in the pantheon of businesses worldwide.

While that is not because of Gates and Microsoft alone, it is also not in spite of them either. In fact, it’s quite bracing to see Gates attempt to make quick shifts over the years as technology has raced past him, an indication of just how powerful change is compared to the world’s richest man.

Very powerful, as it has turned out, and watching Gates try to keep up has been a perfect metaphor for all those who labor in the tech sector.

His famous December, 1995 sleeping-giant-has-awakened speech about the Internet was a case in point, as were his aggressive moves in later years into a wide range of arenas such as gaming, search, online services, social networking and even an attempt to take on the iPod hegemony with the Zune.

It is clear that most of Microsoft’s efforts outside of its core software business–and a great business it remains, by the way–have been less impressive. But it points to a key factor that never changes throughout the tech arena that even the giants are always vulnerable.

Now, going forward, what Microsoft will do post-Gates, of course, is all that matters.

Will it try to vaunt ahead in the search and portal arena and catch No. 1 Google by attempting to acquire Yahoo?

Will it use its popular Xbox to finally move successfully into the home-entertainment space, as evidenced by announcements Gates made last night at CES about deals with media giants like NBC Universal and others?

Can its MSN ever be more than just an also-ran portal?

What will happen to software in the years ahead as applications inevitably move to the Web?

Gates will not be the one to figure it all out, as he will be off, focused on his laudable philanthropic work when these questions and more get answered.

But even he could not have made an accurate guess onstage last night, as much as pundits wanted him to.

In fact, one of the more tiresome things to endure at CES–aside from the long lines–is always having to listen to the spate of predictions of what is to come, when, the truth is, no one really knows how it will all turn out.

It was always thus. After all, reaching way back in history: Wasn’t the launch of the Titantic supposed to herald in the age of high-tech super-boats? Of course, no one figured in the tragic results from its encounter with an iceberg.

But it did make for a pretty good song, so let’s enjoy a bit of Celine to send Bill Gates off on what one hopes is a much safer journey:

Even with Abu Dhabi buying up shares of tech firms like Advanced Micro Devices and the bubbly euphoria in Silicon Valley’s Web 2.0 sector, the tech picture is getting less pretty, according to a report by Barron’s Eric Savitz on the downgrading of software stocks by Goldman Sachs.

Noting a softening in capital spending, Savitz quotes Goldman’s report that said, “with software a typically back-end loaded sale, if there is any concern on budgets in the early part of 2008, we would expect CIOs to hold off their purchases until later in the year.”

So Goldman cut estimates slightly on Adobe, Autodesk, BEA, BMC, CA, Check Point, Citrix, Cognos, CommVault, Informatica, Macrovision, McAfee, Oracle, Quest Software, Red Hat, RightNow, SAP, Secure Computing, Symantec and Tibco.

Could ad-supported or commerce-driven Web sites be next? To say nothing of the spate of pre-revenue–our kind way of saying none to speak of–Web 2.0 start-ups.