Microsoft put forth an offer to buy Yahoo! for $44.6 billion or a 62% premium over the closing price on Jan 31. Yahoo! formally declined the deal today. Google denounced the merger and later appeared to have offered a deal in which Google would take over Yahoo!’s search function in exchange for some revenue sharing and perhaps guaranteed payments like their deal with MySpace.

What’s at Stake?

A Microsoft/Yahoo! combination would combine their search market share, but would still lag Google’s. The combination would yield a 31.7% market share still behind Google, but not as far behind.

Microsoft has not managed to pickup much steam in its online efforts. As a result they are ready to buy it.

What’s the Trade?

Yahoo!

This could be risky. If Microsoft doesn’t step up with a higher offer either friendly or hostile then Yahoo! stock will tank back to the $20 level and perhaps lower. On the other hand Microsoft is very determined. A potential higher bid could give some short-term gains.

Microsoft

This buyout would drain Microsoft’s cash, but they have plenty of cash cows to replenish their stash. Microsoft from a valuation point is already cheap. This deal would be a difficult one to digest. Buy out Yahoo and have all the talent jump ship and you’ve got a marriage of 2 dogs.

Google

Google received a harsh reaction after news that Microsoft and Yahoo might hook up. Google shares will be under pressure because its earnings came up short of the consensus and now because its two key rivals may get together. In my opinion Google may actually benefit as the MS/Yahoo combo would have a difficult time integrating, would lose much talent, and could lose further market share as they try to regain their footing against Google.

I’m Buying

First let’s look at Google. I’ve been watching for some time for an entry point and I think this is it. The turbulence with Microsoft/Yahoo will only help Google as it is laser-focused on search. I believe Google is right at an inflection and will snap back to its 3 year trend line at around the $550 mark and higher. Tomorrow I’ll be looking at buying June 21 $600 calls @ $20.25. I’m targeting a 1 month gain of 30-50% on this trade.

Towards the end of trading today I picked up some Yahoo! April $30 Calls at $2.35. I’m targeting a 1 week trade with a gain of 25%.

MoneyRelations.com has a nice post about buying on rumor and selling on fact in regards to this deal. I recommend you check it out. I have another stock I’m buying on rumor that I’ll post tomorrow. We’ll have a real-world test of the theory.

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There has been much hype about Google developing a phone – the G Phone as it has been dubbed. Well there is no one G-Phone. What Google has done is chosen to develop a platform upon which handset makers and developers can create their own applications. They have released the SDK to developers as open-source.

So what does Google get out of this? What do members of the alliance that developed the platform gain? Well Google will likely get more users of its web services. Google Search is an obvious one, but also other services such as maps, and even yet to be created services which in turn drives advertising revenue. Since the platform is open, any handset maker can use it. Any developer can develop to it. This openness should prod innovation.

The Android Developer Challenge

To encourage development, Google has launched the Android Developer Challenge. The contest will reward winners for their developed applications. A panel of judges will pick 50 winners from entries received from Jan. 2 through March 3, 2008. In the first phase of the competition, those winners will each get $25,000 and be eligible for ten awards of $100,000 and another ten $275,000 awards. The second phase of the competition will feature another $5 million in prize money.

I for one am very excited about the G-Phone. HTC is one of the handset partners and they make excellent devices such as the HTC Mogul (my wife’s phone). It has features my paltry Treo 650 doesn’t have such as a 2mp camera with flash and a much larger screen. I’ve posted some videos below so you can see Android in action. These are of course just demos to show you what it is able to do. What it does in the future will be determined by the creative developers that choose to create applications for it. Notice how some of the cool features of the iPhone are there such as dragging a website around on the page and “flicking” through contacts. It won’t be long before all the cool features of the iPhone are emulated on this platform.

Sergey Brin and Steve Horowitz discuss the availability of the SDK, that it will be open source in the future, and demo applications on the Android platform.

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The creators of Android talk about their new open platform for mobile phones and the Open Handset Alliance.

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A first hand look at building an Android application
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Location Based Services for All

Having a common mobile platform to develop to (that is free) should boost the development of location-based services. For example there will be a proliferation of both pull and push services. Below are some examples of both.

Pull services: user requests information based on his current location such as: calling a taxi, or searching for a restaurant.
Push services: Information delivered to the user that was not requested such as: shopping coupons, weather warnings sent to users in the current location.

Opportunities exist for ad-based or subscription based services. Google should benefit from both. I would imagine an extension of Google Adsense integrated with your GPS would enable Adsense to direct ads for local resteraunts for example. Imagine how effective it would be to be walking towards a Starbucks when an ad for $1.00 off a Gigantuan Mocha Frappe appears on your screen, good of course at that location only. We could see a whole new ad market develop that has huge potential.

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Sans Excel, I went ahead and used Google Sheets and created the spreadsheet. I was finished and was about to email the sheet to my brother. Then I saw that my brother was online in my left pane in Gmail (GTalk). So I went to my finished spreadsheet and clicked on the “Share” tab in the document and sent the sheet to my brother.

He then clicked on the link he received and we were both viewing the same document. I knew this because I saw him as “viewing” in the “Share” tab. I then clicked on the “Discuss” tab to get a dialog going.

We were both in a chat room now on the sidebar while viewing the sheet. His cell focus was shown in Green, mine in Blue. We could talk via chat while pointing to cells and collaboratively making changes to the sheet.

In an ah hah! moment my brother said what I thought “This is cool!” Yes it was. It was the perfect collaboration tool for what we were doing. Another great feature of Google Sheets is that it revisions your documents. In our document we made some minor changes. The changes are viewable via you guessed it – the “Revisions” tab.

My hat goes off to Google for this excellent tool. I tried Google Sheets before, but it is quite a different thing to actually use it. MS Excel is the most used application on my typical computer second only to Firefox for web browsing. Though I used Sheets before, it appears that they have since made it more responsive and easier. I could barely tell I was using an online application. Perhaps the best part is knowing I won’t get a .dll error from my spreadsheet program (MS Excel).

The next step that will take Google Sheets dangerously close to challenge MS Excel is to integrate Google Gears. Google Gears allows web apps to have offline functionality and sync back when online again. I believe this will be Google’s killer little tool in years to come. It is the one enhancement I’m pining for.

Related Posts:

• Google Launches Google Gears
• Remember the Milk Adds Offline Support

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A small bullet going accross the bow of  Microsoft.  At some point this will become like an army of underdogs attacking the mighty Goliath.  At some point something has to give.  Microsoft will sink or evolve into something better.  My bet is they’ll buy something better.  )

Right now my biggest hurdle from using Google Apps spreadsheets is that working offline is not that easy.  I don’t want to export it out then work with it with my local spreadsheet software.  I’m just waiting for Google Gears to be supported by Google Apps fully.

Related Posts:

Google Launches Google Gears

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Google launched Google Gears today. Per their website,

” Google Gears (BETA) is an open source browser extension that enables web applications to provide offline functionality using following JavaScript APIs:

So you may be wondering what does this mean? Take Google Spreadsheets for example. Right now it is annoying if you are offline. When you are online editing your sheets, you need to remember to export it to a physical file on your machine so you can continue working on it. When you are online you have to upload it again. Google doesn’t know that it is the same doc or a new one. How nice would it be to simply open your sheet, work on it, synch online (if you are online) or keep it offline when you are offline? Tremendously easier and transparent.

This is big. This is another shot across the bow of Microsoft. The code is expected to be under 1MB!

The software itself has three components–a local Web server which runs in the browser, the open-source database SQLite for storage, and browser extensions that will allow multiple JavaScript jobs to run in parallel.

No doubt this is going to lead to new startups around this technology. Bad news yet again for Microsoft. The entire Office Suite is under attack. I use activeCollab, an open-source project management tool that is web-based. The biggest downside is I have to be online or have the entire thing running on my laptop. If someone took the software and extended it to a web/desktop model I would be tremendously happy.

Related Posts:

Some activeCollab Style

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Needless to say I highly recommend you check out this firefox extension.

Here are some of the features the extension adds:

• adding saved searches
• attachment icons
• label colors
• keyboard macros
• a filter assistant
• right-click conversation previews

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• Green: > 50 miles per hour
• Yellow: 25 – 50 miles per hour
• Red: < 25 miles per hour
• Gray: no data available

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*Update* Google Responds to Logo Confusion

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