HP Executive Vice President Vyomesh Joshi isn't as close to Hurd as colleagues Livermore and Bradley are. Photo: HP.

If HP CEO Mark Hurd does merge the PC and printing businesses, what will that mean for printing chief Vyomesh Joshi?

A few months back, I spent some time at Hewlett-Packard (HPQ) headquarters with Joshi, who’s known around HP simply as “VJ.” We talked about how he led the printing group to become a sales and profit powerhouse, the how the slowdown in printer sales growth is unfolding, and how he’s trying to get things going again. And we talked about how he’s doing under Hurd, an unsentimental numbers guy who hasn’t been shy about saying the printing business needs to shape up.

For example, Hurd arrived at the company in 2005 and quickly identified large corporations as a growth area for the printing business. Hurd told Joshi that his printing executives didn’t have the right experience to win corporate customers, and brought in new talent including sales exec Bruce Dahlgren. That wasn’t an easy experience, Joshi said, but HP culture has enough humility to admit when it’s time for outside help.

Hurd has also pushed the printing unit to cut costs from profitable but slow-growth product lines like single-function printers, and invest the savings in promising areas like multi-function printers, commercial printing, and managed print services. Again, Joshi said it wasn’t easy to cut some of the businesses he had helped to build, especially when they were still profitable. But he insisted that Hurd’s approach makes sense.

So I wasn’t exactly shocked earlier this week when the Wall Street Journal reported that Hurd might merge HP’s PC and printing units into one giant entity – a move that would almost certainly put PC division chief Todd Bradley in charge of the combined operation, and leave Joshi’s future up in the air. It’s not that Joshi and Hurd don’t get along – the two clearly respect each other’s talents. But Hurd doesn’t have the same kind of rapport with Joshi that that he has with Bradley and enterprise chief Ann Livermore. And it doesn’t help that Joshi’s business has been going through a tough time over the past few years while the enterprise and PC units have improved.

If Hurd does merge PCs and printing, there would be some precedent. He has already folded outsourcing unit EDS into the enterprise technology group run by Ann Livermore, giving her dominion over a portfolio that includes servers, software and services – a staggering 47% of HP’s revenue.

Similarly, putting printing and PCs under one executive could simplify some things. Just as Livermore is the go-to person for corporate relationships, the PC and printer executive would manage retail, small business and consumer; under the current structure, the PC and printer units have sometimes jockeyed for control of the overall consumer strategy and retail approach. It could also yield some financial benefits; analyst Doug Reid at Thomas Weisel Partners estimates that combining the units could boost operating margins by up to 60 basis points by fiscal 2012.

Whatever happens, Joshi will be fine. He has spent nearly 30 years with HP (his big anniversary is next summer, I believe), including nine as a top executive. He serves on the board of Yahoo (YHOO). Perhaps most important, he’s not only loved inside HP, he’s loved among executive recruiters as well. If Joshi does leave HP in a management shuffle, and a high-profile Silicon Valley CEO job opens up, there’s a good chance he’ll be on the short list. (AAPL) (DELL)

User-generated video goes mobile – and live

Ramu Sunkara was at home in Silicon Valley three years ago, chatting with a friend in Moscow, when inspiration struck. He didn’t just want to hear about his friend

Sunkara: inspired by a Moscow snow frolic. Photo: Qik

playing in the snow with his kids. He wanted to see it, live.

Now he can. Soon after that phone conversation, Sunkara and two friends started Qik (pronounced "quick"), a company whose software lets cell phones broadcast video live to the Internet.

Today, Qik and other mobile video services are still in their infancy. But consumers finally have an excuse to try them, now that they have access to 3G networks and a new crop of video-equipped smartphones. According to Nielsen VideoCensus, Qik has so far attracted just a tiny audience, though its popularity seems to have spiked recently. Since its iPhone app began working over 3G networks in August, viewers have stayed on the site six times longer.

"When we launched, only two phones were capable of doing live video," says Sunkara, Qik's CEO. "Now practically every new phone can."

Cell phone video in general is a fast-growing category. Google (GOOG) says that YouTube's cell phone video uploads increased fivefold just a week after the release of the latest video-capable iPhones (AAPL). Facebook has begun adding video capture to its cell phone apps. And sites like Ustream and Flixwagon are experimenting in the same live mobile video niche where Qik is making a name for itself.

Mobile video's appeal lies in its simplicity. Whereas standalone camcorders typically require that you plug into a PC to edit video or share it with friends, video-equipped smartphones are always connected. Shoot a short video clip on a smartphone, and seconds later your friends can view it on YouTube, or on social networking sites. (This assumes, of course, that you can get a reliable 3G signal, or find a WiFi hotspot.)

More lame, amateur video?

Live cell phone video is a neat trick, but the jury's still out on whether it's more than another excuse for amateurs to flood the Internet with bad video. Just as YouTube brought us boring webcam monologues and dancing babies, Qik.com is brimming with video of conference presentations and people driving around in their cars.

And sometimes the footage is even more oddball than that. Recently on Qik.com, a user in Benahavis, Spain used the service to stream shaky video of his hotel room, and the pool outside. Another in Bielefeld, Germany filmed himself sitting quietly. Over at Flixwagon, many of the clips were similarly puzzling; one person used the service to display the milk aisle in a grocery store in Greece.

All of which suggests that users have no idea what to do with this new live video technology. On the bright side, though: it can only get better.

Billionaire Oracle CEO Larry Ellison doesn't expect the U.S. economy to significantly improve until halfway through the next decade – a gloomy scenario he dubbed an L-shaped recovery.

"The American consumer is so deeply in debt, this is not going to come back, certainly for five years," he told a packed ballroom at a Churchill Club event in San Jose. "I believe we're going through some fundamental changes."

In a wide-ranging and humor-filled chat with former Motorola (MOT) CEO and Sun Microsystems (JAVA) executive Ed Zander on Monday night, Ellison riffed about the state of innovation in the technology industry, Oracle's (ORCL) acquisition of Sun, his sailing hobby, and the cloud computing trend. The event was a rare opportunity to hear Ellison talk off the cuff – he tends to be guarded with the press, and lately has done few interviews.

Ellison, 65, said that even after 32 years at the helm of Oracle, he doesn't see retiring anytime soon. He intends to develop Oracle into a technology powerhouse that provides not just software, but computing, storage and networking gear. The company recently started mapping out its five-year plan, and he intends to continue at the helm at least long enough to execute it. "We'll see how I feel after five years," he said.

Below, some more gems from Ellison.

On the value of Sun to Oracle:

"If, just for one dollar, if we could buy IBM (IBM), HP (HPQ), Sun or any of these tech companies, I'm not sure we wouldn't pick Sun."

(As Ellison later pointed out, Sun is losing $100 million a month, while IBM makes a couple billion dollars a month. I think we know which he would actually buy for a dollar.) Ellison said he has no intention of spinning out MySQL, and said he feels confident that European regulators will approve the deal.

On his frustrations with how cloud computing has become a trendy term:

"Cloud? Clouds are water vapor. My objection to cloud computing is the fact that cloud computing is not only the future of computing, it is the present and the entire past. Google's (GOOG) now cloud computing. Everybody's cloud computing. … All it is, is a computer attached to a network. What are you talking about? What do you think Google runs on? It's databases and operating systems and memory and processors! What are you talking about?"

On Microsoft's (MSFT) relevance:

"They make a lot of money. I think they're clearly relevant. I divide the computer industry into two groups. And I know for a long time I was constantly picking a fight with Microsoft. Now Oracle's constantly picking a fight with IBM. Because you've got to pick your enemies very carefully, because you're destined to become most like those enemies you select."

"Microsoft, culturally now, is a very consumer-centric company. They've got the Xbox. They've got Zune. … I think they are obsessed with Apple (AAPL). They're obsessed with Google. … Under the new administration at Microsoft, I see all of their energies going into being successful in the consumer space."

On the Obama administration:

"I don't know anyone who's against universal healthcare coverage, but it's going to be very expensive."

"I voted for President Obama, and I'll kind of confess to that right now. And I am surprised at how much spending there is. I am surprised that there are so many huge spending programs."

On net neutrality:

"I think it's very dangerous for the government to engage in pricing for companies. So I'd be a little bit worried if the government came in and did all the pricing for Safeway, priced food, even though food's essential. I think net neutrality, or having lots and lots of government regulation about how the phone companies can price their network, which they built and they own, is very interesting. Now, it's great for Google. And it's really bad for the phone companies. In general I believe in free markets, and I think this is a case where government regulation is not necessary."

On Oracle's culture:

"We are the largest employer of MIT and Caltech engineers in the world. We are the largest employer of Stanford and Harvard, CMU mathematicians in the world. We are overwhelmingly dominated by engineering at Oracle. The idea that we are a sales and marketing company, which people will write about quite often, is ludicrous on the face of it. … The company is all about engineering. It's the only thing that works. "

Computer makers hope that stylish new laptops like Hewlett-Packard's Pavilion dm3 will lure shoppers away from low-cost netbooks. Photo: HP.

There’s going to be a PC retail showdown this holiday season. Let’s call it the netbook vs. the nymph.

In the netbook corner: the cheap, small, underpowered laptops that are all the rage lately. Asian manufacturers like Asus first introduced them, and consumers love them because they handle documents, e-mail, and web surfing for as little as $300. The big PC makers offer their own models, but also secretly hate that netbook fever is sucking the profits out of the industry.

In the nymph corner: a newer class of svelte yet powerful laptops that could steal some attention from netbooks. (The industry calls them “thin and light,” but hey — nymph is more fun.) Like their competition, nymphs are slim — some of them less than an inch thick — and they often eschew extras like DVD drives for the sake of portability. Perhaps best of all, they do a solid job running Microsoft’s eagerly anticipated Windows 7 operating system, which arrives next month.

Today PC heavyweight Hewlett-Packard (HPQ) is the latest to unveil several eye-catching additions to the nymph category, including the Pavilion dm3 at $550 and the Envy 13 at $1700. Both use the latest mobile processors from Intel (INTC) or Advanced Micro Devices (AMD) and deftly handle tasks like 3D gaming and video editing.

What’s at stake here? Just the near-term health of the PC business.

Like most other categories, PCs have had a rough year. Penny-pinching businesses have been slow to spend on technology in a tough economy. Consumers have been shopping mainly for bargains. Meanwhile many global PC makers have cut prices to drum up sales. “The battle for market share is being fought on the price front, which will ultimately hurt the whole industry,” as First Global Research put it in a recent note.

If shoppers continue to bargain shop for netbooks this holiday season — and analysts expect they will — end-of-year growth at companies like HP, Dell (DELL), Intel, and AMD won’t look so hot. For the holiday season, says NPD Group analyst Steve Baker, “unit sales are going to be up big double digit percentages — above teens, I would think. Dollars will be pretty much flat.”

That is, unless the industry can convince consumers to spring for more powerful machines.

Leslie Sobon is trying to do exactly that. Sobon, marketing chief at AMD, has redrawn the sales pitch for computers like HP’s dm3 and Acer’s Aspire 5538, which contain her chips. Rather than emphasize stats like gigahertz, bus speed, dual-core, and the like, the new VISION strategy focuses on telling customers what the PCs can do — an approach that AMD’s research showed is sorely lacking at retail. “We’re focused on entertainment — things like photos, like Blu-ray, Hulu,” she says. “See, share, create.”

Customers are more likely to buy a better-equipped laptop, Sobon’s market research suggests, if they have a clear sense of what they’re getting for the money.

Folks like J.P. Morgan analysts Mark Moskowitz and Anthony Luscri don’t sound too optimistic about how the upsell will go over this year. “With consumers seeming to flock to low-cost netbooks, we do not expect a shift back to standard notebooks to run Windows 7 en masse,” they wrote recently.

Indeed, netbooks are getting more attractive — and more powerful — all the time. Along with the rest of its PC lineup, HP introduced two $400 netbook standouts of its own: the Mini 110 by Studio Tord Boontje, which features a lace-like, three-dimensional look; and the Mini 311, which can handle 1080p high-definition video NVIDIA’s (NVDA) Ion graphics processor.

With products like that hitting the market, there won’t be a huge shift away from netbooks anytime soon — but PC makers will take any upsell they can get.

The view from inside the Yerba Buena Center for the Arts. Photo: Jon Fortt.

Will we get new iPods with video recording? Will Steve Jobs show or won't he? Refresh this page during the event for live updates. It all begins at 10 a.m. PT, 1 p.m. ET. The presentation is about to begin.

Steve Jobs walks out on stage to a standing ovation. He clearly appreciates the reception. He still looks quite gaunt — much like he did before he took his leave. Applause lasts a good 45 seconds.

He says he has the liver of a person in his or her mid-20s who died in a car crash and donated organs. He asks everyone to consider organ donation. He thanks the Apple community, and Tim Cook and the rest of the Apple executive team.

Steve Jobs announces sales of 30 million iPhones.

Users have downloaded more than 1.8 billion apps, not including updates.

Today there’s something new for iPhoen and iPod Touch owners: OS 3.1. The new stuff includes:

Genius technology. The same recommendation technology that works on songs in iTunes now works for apps in the App Store. He’s showing it in slides. There’s a Genius button there with recommendations.

Ring tones: Adding ring tones to the iTunes store for $1.29. (These are pre-made ringtones, unlike the ones you can make yourself in iTunes now.)

3.1 is free for both iPhone and iPod Touch owners.

He says iTunes is now the #1 music retailer in the world. More than 8.5 billion songs have been sold, and there are more than 100 million accounts on iTunes, all with credit cards.

Today: iTunes 9.

He's quoting my "iTunes Genius is pure genius" review. Cool.

Now there are new genius features. Now there are Genius mixes.

There's also improved syncing. You can be more specific about what you want to sync – photos, but specifically events and faces.  You can also be more specific in movies.

The best thing, though: A new way to manage apps on the iPod Touch and iPhone. You can arrange them how you want, and then automatically change them around. (There was a jailbroken app that did this already, but it's nice to have it official.)

He's also announcing Home Sharing, a feature that allows you to more easily move files from one computer to another, or to stream it from one to another.

Now, the iTunes Store. There's better navigation with cleaner layout, bigger image display.

Now, iTunes LP. Jobs says he misses LPs, which came with essays, liner notes, pictures. He's showing iTunes LP for American Beauty, the Dead album. Dylan, Doors, Norah Jones, Pearl Jam, DMB.

Someone's up on stage to demo iTunes 9.

He's showing app organization. It shows all the pages, and you can rearrange the apps by drag and drop. You can even select more than one app at a time. In a list to the left, it shows all the apps. You can even rearrange pages. When you're done, click apply and the changes are made.

Now he's demoing Home Sharing. He enters an iTunes account and password. it loads his wife Laura's library. He can see everything, including apps. And he can stream things from there. He can also select items and drag them to his own playlist. (The confusing thing — I can't tell if he has his wife's computer here, or if he's doing it remotely. Big difference.)

Now, the iTunes Store. There's a new navigation bar at the top that makes it easier to jump from one category to another. There's now a quick view within iTunes that pulls up album information and lets you browse songs. You can also post information about songs and albums directly to Facebook. Clearly an attempt to use social media to spark viral buying. It will be interesting to see if it works out that way.

iTunes LP: Showing The Doors. The lyrics are in there, too. Awesome photos. Very interesting. It would be really great if this stuff synced over to iPods and iPhones; not clear yet whether that works. Now he's showing Dave Matthews Band LP, with art Matthews drew himself. Looks pretty cool on the screen, but I wonder whether seeing it on the screen is as cool as having something tangible.

There are also iTunes extras for movies, like the special features in DVDs. He's showing the extras for WALL-E. Cool – probably going to give some in Hollywood migraines, but cool.

Phil Schiller is up to talk about the iPod.

Apple has sold 220 million iPods to date and has 73.8% market share. Apparently more than half of iPod buyers are new to the iPod. The iPod touch is the fastest growing. Apple has sold more than 20 million of them so far, in addition to 30 million iPhones. He's reviewing features of the iPod touch. WiFi, now Genius, Genius Playlists, Genius Mixes.

It's also a great pocket computer. He's talking about apps, e-mail, Twitter, Facebook. "It really fits in your pocket. Not everybody can say that." He shows a picture of someone trying to shove a Dell netbook into their back pocket and ripping it.

It's a great game machine. He's comparing the touch to the PSP and DS, saying it's better. (Some gamers would call this a stretch; the DS is one of the best-selling gaming titles of all time.) Now he's showing how many game and entertainment titles are available for each platform, with the DS showing just under 4,000 and the iPod more than 21,000. (While that may be true, it doesn't account for quality; there are a lot of free games on the iPod, and a lot that are just junk. So, not a very fair or relevant comparison.)

Some developers are coming onstage to talk about games. First, Ubisoft's Ben Mattes, producer of Assassin's Creed. He's talking about Assassin's Creed II, Discovery. Very interesting graphics – not so great by console standards, but great for mobile. You can put your own face on the wanted faces around town, which is a nice use of the platform. Arrives November 11.

Next, Bart Decrem from Tapulous. He says they wanted a million users in the first year, and got them in three weeks. Now, Riddim Ribbon. You race down a ribbon and try to stay on it. If you slip off, your mix gets stripped down to basics and you have to build it back up. Very cool – exciting to watch, and it must be really engrossing to play. Reminds me of a mobile version of Dance Dance Revolution. The crowd is really excited about this one.

Next, Mark Hickey from Gameloft. He's showing a first-person shooter called Nova. You're a space marine defending the world from an alien attack. (The graphics are VERY nice.) You can listen to your iPod within the game, which is a nice touch. There's the option to switch guns, zoom in with a sniper rifle. It ships later this year.

Last, Travis Boatman from Electronic Arts. Madden 10 is coming to the iPod. All 32 teams. He's showing 49ers vs. Steelers. Defense has a deep playbook. You can tap on defenders to switch, and he picks one and intercepts. Wow — a feature called hot routes lets you re-draw routes right on the screen. He uses the feature and throws a touchdown pass. Hot.

Schiller's back onstage. He calls the iPod touch the most affordable gateway to the App Store. (Side note: I think I might see Google CEO Eric Schmidt in the audience. That would be especially interesting since he's no longer on Apple's board.)

The iPod touch's price is coming down today to $199 for the 8GB version. The $299 and $399 versions get upgraded to 32GB and 64GB. The higher-end versions will be 50% faster, and will have OpenGLs. He's showing an ad now. It's a quick showcase of some of the most popular games, a few of which I recognize.

Now, iPod classic. They're keeping it. They're bumping up the capacity to 160GB from 120GB. But that's all.

iPod shuffle: now there will be more headphones that work with it, and there will be an adapter that lets you use any headphones. Also, colors: black, silver, pink, green and blue. $59 for 2GB, 4GB at $79. Also, a special edition make of polished stainless steel for $99. (Interesting for a penny-pinching holiday season.)

Jobs is back onstage to announce one more thing: a video camera. YouTube serves up 1 billion streams a day. He shows the Flip, which has 4GB at $149. Apple will have 8GB for … free, he says. There will be a video camera built into every iPod nano. (So, not exactly free, but, you know.) It's a fifth as thick, and a tech the volume of competitors, he says. He's showing video from it. Looks pretty good – but I wonder what the specs are. You have to sync video to your computer to upload it to YouTube, of course, because there's no connectivity in the iPod nano.

There is also an FM radio built into the nano, and a voice recorder app and a pedometer. (With the pedometer you can sync up to Nike+, which is a nice touch.) It also comes in polished anodized aluminum with nine colors. Two models, available today. He shows a commercial that basically (and effectively) shows that the nano shoots video.

He's now showing the now-obligatory environmental checklist that establishes the Green Cred of the lineup.

Now he’s bringing Nora Jones onstage to perform. She says she thinks it's the earliest she's ever performed. She's on a red electric guitar with another guitarist, a bassist and a drummer. Next, a song called Young Blood from her album that's out in November.

Steve Jobs comes out and kisses and shakes Nora's hand, gives her a kiss on the cheek. That's a wrap.

The Interact S605, Lexmark's new high-end home office inkjet, comes with a touchscreen. Image: Lexmark

In this era of Kindle books, text messages and Facebook photos, printed information is taking it on the chin – and perhaps no company has been hit harder than Lexmark. The Kentucky-based printer company is one of the worst performing stocks in the hardware sector this year, down about 30%.

But Lexmark (LXK) CEO Paul Curlander hopes a new line of printers will help him climb off the canvas.

The eight new machines for small and medium-sized businesses, which Lexmark is launching today, sport eco-friendly features designed to conserve paper and ink. Some have touchscreens. And they should get more attention than usual, thanks to expanded distribution deals Lexmark signed earlier this year with retailers like Staples (SPLS), Office Depot (ODP) and OfficeMax (OMX).

“We’re trying to make inkjet a bigger piece of the business market,” Curlander tells Fortune. “We want to move down from the enterprise space into small and medium business, and get device prices down into the $199 to $399 range.”

Even with these fresh products, Curlander is in for a bruising battle. Last year Lexmark’s nemesis, printing giant Hewlett-Packard (HPQ), shipped about six times more inkjet printers, and nine times more laser printers.

Under the unique economics of the printing business, that size difference can be particularly significant. Companies like HP and Lexmark often sell printers at a loss, expecting to make profits later from sales of ink and toner.

So Lexmark’s market share disadvantage hurts more than just its pride; lower volumes make it tougher for the company to keep costs low on money-losing hardware, and to later milk those customers for profitable ink sales.

In part because of those economics, Lexmark’s business has suffered over the past few years. Sales shrank from $5.1 billion in 2006 to $4.5 billion in 2008, and its share has continued to slip this year; industry leader HP’s sales rose from $26.8 billion to $29.4 billion over a similar period.

Now Lexmark has a comeback strategy that’s focused not on the low-end consumer market but on businesses, who are likely to buy color laser printers and multi-function inkjets that fax and copy as well as print. Those customers, the thinking goes, are more likely to bring in healthy ink sales down the road.

Most on Wall Street are not convinced that Lexmark's strategy will work. Bank of America has an underperform rating on the stock, saying it’s too soon to tell whether Lexmark’s strategy has legs. Deutsche Bank has a hold, saying it’s skeptical that Lexmark can grab market share without simply slashing prices.

Still, Curlander sounds upbeat. The company has survived thus far by cutting expenses in proportion to declining revenues, and it has held on to niche customers like pharmacies and bank branches, where its printers are popular.

Now Curlander is talking up Lexmark's push into managed print services, industry lingo for consulting on how businesses can get their printing done with less waste and less money.

He waves off the observation that Lexmark isn't alone on the services bandwagon; HP and Xerox (XRX) are saying many of the same things about helping customers print less. "We're actually doing it," he says. "I'm not convinced they are."

One of the things Lexmark does have going for it, ironically, is that investors have punished the stock rather mercilessly of late  – enough that a few investors are banking on a rebound. Among the Lexmark bulls is respected Bernstein Research analyst A.M. Sacconaghi, who has an outperform rating on the stock.

His bullish case: Lexmark's sales have actually held up pretty well considering the overall doldrums in the printing market, which Sacconaghi believes are due more to the battered global economy than to an Internet-fueled decline in printing.

Lexmark’s failure to hedge against currency fluctuations makes its cash flows look worse than they are. Its laser business is healthy. And in early August, Lexmark stock was at $16.70 – so cheap that investors were valuing its still-sizable inkjet business at basically zero.

Others might be starting to come around on Lexmark; the stock is up 13% since Sacconaghi made that case in a note last month. Even so, Sacconaghi has a lofty price target of $25 on the stock – which means if Curlander wants to prove his supporters right, these new printers had better be good. (AMZN)

I'm sorry, Microsoft. On behalf of Silicon Valley, I’m sorry.

We cursed you, mocked you, labeled you the Evil Empire. Your crime: trying to control the technology world. Sure, we had reason to be upset. During the dawning of the PC era, the Windows operating system made you the most powerful company in tech, and it went to your head.

Your detractors say you intimidated PC makers, crushed Netscape, and tried to turn the web into an extension of the Windows platform. As it turns out, local darling Apple (AAPL) probably would have done the same thing.

Just look at how Apple is behaving today with a fraction of the power you had.

Apple's iTunes has an estimated 87% market share in music downloads, a beachhead it is using to expand its influence in much the same way you used Windows to expand yours. What has Apple done with its dominance?  It has refused to let other media players sync with iTunes. It has tried to strong-arm Hollywood into selling content on terms mostly favorable to Cupertino. It has tightly controlled the iPhone ecosystem, insisting that its own iTunes app store serve as the only way to broadly distribute software.

And now, in the Google Voice episode (more on that here), we see Apple blocking perfectly good software that competes with its ideas. When you tried this sort of thing, Microsoft, we called you a bully and went to the feds. Now that Apple’s doing it, we’re calling it … well, we’re not sure what to call it.

The most disturbing thing about the Google Voice (GOOG) dustup is Apple’s Orwellian claim that it didn’t reject the app. Apple did. Google submitted it and waited several weeks before Apple said it wouldn't be adding it to the app store. In the wake of the rejection, Google is working on a web-based version of the app that won't work as smoothly. Yes, Apple can always change its mind and accept the app, but that won't change the initial nixing. Note to Apple: Time Machine is an awesome feature in Mac OS X, but you can't use it to rewrite actual history.

So again, Microsoft (MSFT), I’m sorry we gave you such a hard time. Your sins weren’t unique after all. Yes, you pushed some people around. You trampled some ideas. Now, though, we can see the truth: We’ve been living the Silicon Valley version of Animal Farm all along. Like Napoleon the pig in the classic story, Apple promised us beautiful technology that would set us free to express and innovate.

Apple’s technology is gorgeous all right. But as Apple gets more power, a funny thing is happening on the farm. Innovation and expression on Apple’s iPhone platform are beginning to suffer, even as Apple insists that its restrictions are for our own good. And as we gaze out at the titans of the tech landscape, it’s getting difficult to tell which are the humans and which are the pigs.

Yahoo CEO Carol Bartz said two months ago that Microsoft would have to cough up “boatloads of money” to get Yahoo’s search business. In the end, it took nothing of the sort.

Apparently, all Microsoft (MSFT) CEO Steve Ballmer had to do was let Yahoo (YHOO) take the lead in selling search to premium advertisers, and promise to supply Microsoft’s Bing search technology on the cheap. Under the terms of a 10-year deal announced Wednesday, the software giant will take a slim 12% cut of the search revenue Yahoo makes from its huge network of sites.

The modest pact marks the end of a Silicon Valley soap opera that began early last year when Microsoft CEO Steve Ballmer launched an unsolicited $45 billion bid for all of Yahoo in an effort to challenge Google's (GOOG) search dominance. Yahoo’s board criticized the offer as too low, then watched the company’s value tumble to less than half what Microsoft put on the table. And now, Microsoft has what it wanted all along – the scale to take on Google – and at a fraction of the price.

Any way you slice it, Ballmer walks away with the better end of this deal. For no money down, he triples his market share, eliminates a search competitor, and scores Yahoo’s endorsement for Microsoft’s long-suffering efforts online. What does Yahoo get? It gets to preserve its revenue, bow out of an expensive search war, and free up time and cash to hunt for the next big thing. Or, if you subscribe to the harsher view that Web entrepreneur Jason Calacanis blogged on Wednesday: “The once-proud warrior of the Internet space laid down its sword, knelt at the feet of Microsoft and gutted itself today.” Ouch.

Wall Street wasn’t impressed with Yahoo’s dealmaking chops, either. Some analysts, including SG Cowen’s Sandeep Aggarwal, expected an upfront payment as high as $2 billion. Others wanted to see savings flow to the bottom line more quickly than the 24-month timeframe Yahoo offered. Investors voiced their disappointment Wednesday by sending the stock skidding 12%, down to $15.14. The punishment continued early Thursday, with the stock starting the day off more than 4%.  (That’s still well above the year’s lows, near $11 in January.)

Bartz and Ballmer are making no apologies. In an interview with Fortune shortly after they announced the deal, the two CEOs seemed surprised at the Street’s ho-hum response. “What we’ve got here is virtually all of our revenue at no cost,” Bartz said of the outsourcing arrangement. Ballmer chimed in: “I’ve gotta say, I’m surprised. If you said to a man from Mars who just arrived: Somebody gets 88% of their revenue, close to 100% of gross margin, and they’re going to get rid of R&D operating expense – it sounds like a lot of money to Yahoo and to Microsoft. So, the man from Mars would think this is a pretty good deal.”

While a Martian would love this deal because it’s about Yahoo saving money, Yahoo’s Earthling investors are justifiably more interested in how the company will make more money. Those investors will be happy to know that dealmakers in the advertising community expect that more search cash will eventually flow to Yahoo and Microsoft, so long as they can quickly put out a good product after getting regulators to bless the deal. (The companies hope to close the deal in early 2010.) Rob Norman, CEO of WPP’s ad buying giant GroupM, said the scale of a combined Microsoft and Yahoo could lure more advertiser dollars away from Google. And David Kenny, managing partner of Publicis Groupe’s VivaKi, said Bartz is “really focused, and she’s making the right calls about which battles can they fight alone, and which ones they’ll need to leave to others.”

Perhaps. But unless Yahoo starts serving up some mind-blowing new products, it risks becoming a dowdy media company that outsources all the most interesting battles to bigger players. That’s honest work, but it's tough to make boatloads of money doing it.

Google's location-based Latitude service is coming to the iPhone within hours, Google mobile VP Vic Gundotra said at the Fortune Brainstorm Tech conference this morning.

Gundotra said the latest iPhone OS update, which enables location-based services in the browser, paved the way for Latitude.

UPDATED: Google's blog post on the news is here.(AAPL) (GOOG) (RIMM)

Jon Fortt of Fortune, Jon Swartz of USA Today and Scott McGrew of NBC chat with Mozilla CEO John Lilly about the future of Firefox. (AAPL) (GOOG) (MSFT)