By Michael V. Copeland

The last time Microsoft walked away from a major acquisition was more than a decade ago. It was 1995 and a $2 billion bid to buy financial software company Intuit fell apart under scrutiny from the U.S. Department of Justice. While there are clear differences between Microsoft’s Intuit deal and its failed attempt to buy Yahoo, a look at what happened within Microsoft after the Intuit bid collapsed offers a preview how things might play out now.

Intuit (INTU) makes Quicken, the leading personal financial software program. And before trying to buy Intuit, Microsoft had tried to beat it with its own software program, Microsoft Money. Microsoft (MSFT) launched Money in 1991 as a way to get a bigger chunk of the consumer software business (Microsoft Office was yet to come to market), and specifically to get a piece of computerized banking. Personal finance was one of the tasks that helped drive personal computer sales. Think back: in the pre-Internet era of the early ‘90s, a PC let you write documents, build a spreadsheet, and track your spending - that was about it.

Microsoft Money did not capture the hearts and checkbooks of anyone, and became a perennial also-ran (not unlike Microsoft’s web effort MSN). Quicken captured about 90% of the market, the rest was divided among three or four other players including Microsoft’s Money. By 1994, Microsoft was done playing around. Rather than try to beat Intuit, it would simply buy it. Here’s how it went down according to several former Money folks.

On a morning in October1994 everyone on the Money team received a phone call at around 7 a.m., telling them to be at a work by 8 a.m. No explanations. At 8 a.m. an unmarked bus rolls up to the Microsoft campus, and the money team is told to get in. No explanations. The team is deposited in a drab conference room at a Bellevue, Wash., hotel and told to wait. No explanations. About 45 minutes later Bill Gates walks in and explains that Microsoft is about to announce its intention to buy Intuit, and answers a few questions. The Money team waits at the hotel until the market closes.

But Gates and his team knew that there might be anti-competitive flags raised. The weirdest part of whole day was the explanation that not only did Gates want to replace the Money product with Quicken, but to do that Microsoft needed to sell off a new version of Money to Novell and therefore sidestep what were likely be complaints from the Justice Department. So the Money team had to get back to work on a product that Microsoft didn’t really want, to buy a company it did want. (Again, what are you thinking if you are hunkered down at MSN?)

Unlike Yahoo (YHOO), Intuit Chairman Scott Cook agreed to the purchase. (Though according to some on the Money team, it was implied that if had not he and Intuit would face the full Microsoft Death Star fury, that is, they would put everything they had smarts-wise and money-wise in to beating Quicken if he didn’t acquiesce.) It was left to the Department of Justice to raise enough questions that it became obvious to Gates and his team that fighting a protracted battle to buy Intuit might ultimately fail, and in the process kill off whatever audience Microsoft Money had. So Gates bailed on Intuit.

That didn’t mean he bailed on the space, and here is where you are likely to see a similar push post-Yahoo (if it is indeed over). Microsoft took all its focus and much of its money and doubled down on Money. The product improved dramatically. Money 1995 actually found an audience, and all the sudden it was a two-horse race with Intuit. Money grabbed about 35% to 40% of the market, Quicken the rest.

MSN in many ways is like Microsoft Money - it has never been on top. But the culture at Microsoft has always been one of intelligence if not arrogance. It doesn’t matter if MSN isn’t on top, there is a belief that Microsoft’s bench will figure out a way to put it there. “People at Microsoft still believe that they are smarter than everyone else,” says one former Money team member who asked not to be identified. “So just because the current team hasn’t unlocked the door to the Web, doesn’t mean another team won’t. And if they do, they’ll be heroes.”

If the Yahoo deal is indeed dead, you can bet that MSN will get the people and the resources it needs to make a run at Yahoo and in the grander scheme, Google (GOOG). Microsoft has already shown its commitment - $46 billion worth in the Yahoo bid - putting up a real contender in the fight for the web. As with Microsoft Money it’s likely to double, quadruple down it’s own efforts. But as one former Money team member points out, the question is, can Microsoft win or just put up a good fight?

“The epilogue is, as good as we all thought it was, as much progress as we made, Money never became the dominant player,” says Jan Miksovsky, the lead designer on Money 1995 and part of the Money team through 2000. “Intuit remained the market leader and has gotten stronger in other areas. When I look back I was personally gratified to see the Intuit deal fall apart, says Miksovsky, who went on to co-found online calendaring startup Cozi. “But my sense now is that Microsoft would have been in a much stronger position had the deal gone through and they acquired Intuit.”

The question for Microsoft now is, can MSN battle Google with the team and the audience it has or does it remain an also-ran. You will see Microsoft make a move within MSN to catch its competition - it has to. But it needs to be at a pace that will allow the software giant to catch up, and fast.

By Michal Lev-Ram

Churn, or the rate at which customers defect to rival carriers, is one of the most important metrics for measuring the success of a wireless carrier.

Unfortunately for Sprint (S), it has one of the industry’s worst churn rates. On Monday it revealed that 1.09 million of its subscribers decided to take their business elsewhere in the first quarter as the company reported a net loss of $505 million, or 18 cents a share, compared to a loss of $211 million, or 7 cents a share, a year earlier. Revenue dropped 8% from a year ago to $9.33 billion. Excluding a number of one-time charges, such as job-cut costs and merger-related expenses, Sprint’s adjusted profit slid to 4 cents a share from 19 cents a year ago.

Meanwhile, rivals Verizon (VZ), AT&T (T) and T-Mobile (DK) saw their churn rates for postpaid accounts fall during the same period, and their customer base grow. Verizon added 1.5 million wireless subscribers, and 1.3 million new customers signed up with AT&T. Even T-Mobile, the smallest of the top four U.S. carriers, added nearly a million customers the last quarter, tipping its total subscriber base to slightly over 30 million for the first time.

Many of Sprint’s recently-departed subscribers also happen to be some of its best customers. That means that a large percentage of defecting Sprint users are the type of people likely to pay for higher-priced data plans, pay extra fees for text messaging and downloading ringtones or buy more expensive phones. That is a big part of the reason Sprint’s average revenue per customer declined by about $2 compared to the first quarter of 2007.

“We continue to place the highest priority on reducing churn by improving the customer experience,” CEO Dan Hesse said in a statement Monday.

He told analysts on a conference call Monday that he is investing to acquire new customers as well as to keep existing ones from fleeing.

Improving customer service and simplifying rate plans are two ways Sprint is trying to keep retain subscribers. Later this summer, the company will also launch an iPhone competitor it hopes will provide an incentive for customers to stay - current customers, as opposed to new subscribers, will have first dibs on a Samsung touchscreen called the Instinct.

But it will likely be some time before those changes turn around Sprint’s churn rate. Hesse, however, is optimistic. On Monday he told analysts that in March, “We began to see improving trends in churn.”

By Scott Moritz

Research in Motion (RIMM) takes the stage this week to preach to a gathering of its faithful in Florida during the Canadian company’s annual Wireless Enterprise Symposium. But just as the BlackBerry maker seems to be reaching the height of success, its flock may well start to stray.

Not only will followers be tempted by new devices like Apple’s (AAPL) forthcoming business-friendly iPhone, other sect members will face excommunication as cost-cutting initiatives sweep through the office ranks.

For now, however, it’s party time for RIM. A few highlights ahead for the week in Orlando include a performance by John Mayer, and even hotter, the unveiling of the company’s first 3G phone, the BlackBerry Bold.

These have been very good times for RIM. European sales have taken off as has the stock, up 81% over the past year, and hovering close to a one year high.

It’s been a good run, but now come a new set of threats.

Due to delays first reported by Fortune, the dazzling BlackBerry Bold will not be available in the United States until as late as August. This means Apple will beat RIM to the market in June with its 3G iPhone.

The hotly anticipated, speedier successor to the original iPhone will also have a deep price cut thanks to a planned subsidy by AT&T (T). The new iPhone is also designed for the sweetspot in smart phones - BlackBerry’s business e-mail niche. Apple says it will license software to allow the iPhone to work with Microsoft’s (MSFT) Exchange platform for office e-mail as well as calendar and contact syncing.

And according to Cisco (CSCO), the iPhone business plan seems to be marching along. On an earnings call with analysts last week, Cisco chief John Chambers said the new iPhone has some of Cisco’s office network security system loaded on. “The upcoming software version 2 for the iPhone incorporates Cisco’s VPN technology,” Chambers said.

Having the networking giant involved with Apple’s business play certainly can’t be comforting to RIM.

Another potentially unsettling development is Nokia’s (NOK) upcoming plan to offer a series of BlackBerry lookalikes through AT&T. The new phones, starting with the E71, will also work with Microsoft Exchange and use a Nokia managed e-mail server, a delivery and security system akin to the BlackBerry approach, says one source familiar with the plan.

BlackBerry fans have seen threats like this before. Good Technology had a popular business e-mail system favored by Palm (PALM) Treo users. Motorola (MOT) acquired Good in 2006, and so far has failed to make much added headway against RIM. If anything, RIM’s one-trick killer-app ability to deliver instant, secure e-mail has been extended beyond professionals to consumers attracted by the sleeker phone designs, GPS navigation, music players and cameras.

On Monday, RIM announced a plan to start a $150 million venture capital fund to spur development of applications on the BlackBerry platform. The move - made along with RBC and Thomson Reuters - is similar to the $100 million venture effort that Kleiner Perkins Caufield & Byers announced in March to develop software for Apple’s iPhone.

A good part of RIM’s success is reflected in the stock’s rise, which has so far defied the slowing economy and sluggish corporate information technology spending. But the new product delay coupled with arrival of Apple and Nokia’s BlackBerry killers, may challenge RIM’s perennial winner status.

To be sure, a lot can be made of BlackBerry’s huge sales opportunities overseas where RIM has a very good chance of repeating the business e-mail success it had in the United States. And some RIM analysts see some big promise in the a crop of new BlackBerries coming out in the coming months.

TD Newcrest analyst Chris Umiastowski points to two phones in the works that should help restart the BlackBerry sales cycle. One is a flip or clamshell styled phone code-named KickStart that will launch with T-Mobile this fall, Umiastowski wrote in a report. And the long awaited touchscreen answer to the iPhone, which is apparently dubbed Storm, is due out in late fall, he notes.

But there is a different sort of storm on the horizon, in the form of spending pressure. It used to be common practice amoung businesses to hand out BlackBerries to an entire staff of go-getters. But the devices are not cheap, about $200 and up, and the monthly service contracts, and revenue sharing payment to RIM are large numbers on the business expense list. Some companies looking to attack costs have targeted the BlackBerry line item.

Here’s one example: Honeywell (HON) has recently taken its belt tightening efforts in a notch and told employees in some units to prepare to turn in their BlackBerries.

Honeywell, an aerospace and electronics giant, isn’t exactly under the gun in terms of immediate economic pressure - the company increased it profits by 22% last quarter on 10% sales growth. The point being, if the strong players are looking for places to cut the fat, one can imagine how the budget police in industries like banking, airlines, autos might be viewing BlackBerries these days.

By Michal Lev-Ram

When Sprint Nextel CEO Dan Hesse joined the wireless company last December, he inherited a backlog of problems. Among them: The logistical nightmare of managing two different networks formed by Sprint’s merger with Nextel, a high rate of subscriber defections and a bad (okay, horrible) reputation for customer service.

At his first conference call with analysts in February after Sprint (S) announced disappointing fourth-quarter earnings, Hesse himself admitted that “the issues we face are more difficult than what I had expected to find.”

But that didn’t stop the former AT&T (T) executive from quickly implementing some much-needed changes. Within five months, Hesse has cut costs by closing 8 percent of Sprint’s retail stores and laying off nearly 7% of the staff. He also made senior management changes, launched a new unlimited voice and data plan, and just this week inked a joint WiMax venture with Clearwire (CLWR) and a slew of high-profile investors.

Now, as Sprint prepares to release its first-quarter earnings results Monday, investors are looking to Hesse to see what he’ll do next to turn the wireless carrier around.

“So far the read on him is cautiously optimistic,” says RBC Capital Markets analyst Jonathan Atkin. “He’s taken prudent steps to evaluate what the issues are, and made progress on his checklist - including the critical item of how to move forward with WiMax.”

Sprint’s investment in WiMax - a next-generation network that promises faster speeds well-suited for data services like web browsing and music downloads - has been a main point of contention among investors. Under former chief executive Gary Forsee, the company poured about $5 billion into the technology, only to find its cutting-edge service bogged down by delays and an inability to seal a WiMax partnership with broadband Internet provider Clearwire.

But last Wednesday the two companies announced they had finally come to an agreement and would combine their wireless broadband operations to create a $14.55 billion venture. Intel (INTC), Google (GOOG) and a handful of other companies have agreed to invest $3.2 billion in the new company.

In an interview with Fortune earlier this week, Hesse said the upcoming WiMax service will give Sprint a “differentiating advantage.”

“This allows us to be the only company to offer 4G [fourth-generation network] services,” said Hesse. “WiMax as a technology is available now and it works now.”

Of course, it’s still not clear exactly when the new service will be available to Sprint customers, though the Clearwire joint venture is expected to close by year-end. Sprint rivals AT&T and Verizon (VZ) have said they are committing to a competing fourth-generation network technology called Long Term Evolution, or LTE, which is expected to become available around 2010.

With its increasingly narrower time-to-market advantage, WiMax is still far from a guaranteed success. And in the meantime, Hesse has his hands full trying to put out other fires.

Come Monday, investors will be looking for news regarding Sprint’s core business, selling voice and data services on its CDMA network. In contrast to the globally used GSM standard, CDMA has been bleeding customers. Subscribers have also been defecting from the iDEN network the company inherited when it merged with push-to-talk service provider Nextel in 2005.

“We are still looking for evidence that Sprint is generating positive momentum around its postpaid marketing to return back to positive postpaid subscriber growth over time,” Citigroup analyst Michael Rollins wrote in a recent report.

In an effort to retain and attract customers, Hesse has already embarked on a new brand campaign that aims to position Sprint as the “superior network.” But Rollins says that the company hasn’t “gone far enough to differentiate its message on network quality perception or price.”

Hesse has also said that improving Sprint’s customer service is one of his top priorities.

“Not only are we not attracting enough new customers, but our existing customers are leaving us at too big a rate,” Hesse had told Fortune in an interview last February, after Sprint posted a fourth-quarter loss of $29.5 billion and a continued decline in subscriber numbers.

There’s no question Hesse has his work cut out for him. But if his first five months in at the company’s helm are an indication of what’s to come, you can count on seeing more changes at the number three mobile operator - for better or worse.

By Yi-Wyn Yen

Take-Two Interactive’s management is rallying behind the videogame company’s impressive release of Grand Theft Auto IV last month, but its $500 million opening week may not have been good enough to impress shareholders or ward off a hostile takeover from EA.

Take-Two’s popular franchise, which was released on April 29, crushed Halo 3 in video game sales records and even surpassed movie ticket sales for Spider-Man 3, the blockbuster movie with the highest grossing opening week.

But investors haven’t been inspired to value the company any higher since Grand Theft’s results were released Wednesday morning. Take-Two’s shares shot up 55% after EA announced its unsolicited $1.9 billion offer on Feb. 25, and have remained relatively steady since then. Prior to the bid, Take-Two’s stock traded in the mid-teens.

“Take-Two is totally justified in being very proud of Grand Theft Auto, but this goes to show you that the company is not worth any more today than it was on Feb. 25,” said WedBush Morgan analyst Michael Pachter. “The first-week results have changed nothing.”

Take-Two is banking on its best bargaining chip, GTA IV, to show how valuable the company is to potential buyers. GTA IV sold more than 6 million games in its opening week for more than a half billion worldwide. Halo 3, a Microsoft (MSFT) Xbox 360 exclusive, was the previous record holder with its $300 million first-week launch. Spider-Man 3, the No. 1 box office opener, brought in roughly $382 million worldwide in roughly the same time frame, according to Box Office Mojo.

The box office comparison isn’t “apples to apples” since videogames cost about six times more than a regular movie ticket, but that didn’t stop Take-Two (TTWO) from vigorously bragging about its new record. “This is the largest entertainment release for a first week launch,” Take-Two CEO Ben Feder told Fortune. “What it says about Grand Theft Auto is nothing less than remarkable.”

Analysts expect Take-Two to rake in more than $1 billion in GTA IV revenue by selling roughly 18 million copies through 2009.

There are concerns that without GTA, Take-Two is simply a one-hit wonder. “Every couple years it has a windfall product launch based on a really valuable [intellectual property] and it’s really lean in between those years,” said John Taylor of Arcadia Research. “For Take-Two so much depends on when the next shipment of Grand Theft Auto releases.”

Feder says the company is not just about the GTA franchise. “Take-Two is uniquely positioned in the industry and has the broadest array of intellectual property,” he said.

EA (ERTS) went hostile with its all-cash offer when Take-Two’s management rejected its bid in late February. It has given Take-Two shareholders until May 16 to consider its tender offer.

However, that doesn’t mean that EA and Take-Two’s management aren’t in negotiations. Take-Two’s chairman Strauss Zelnick said he would be willing to talk with EA or any other interested buyers the day after GTA IV’s launch. Last month Zelnick said at a shareholder meeting that he refused EA’s offer prior to that date because it was “highly opportunistic and poorly timed” to get the most out of Grand Theft Auto.

Feder and an EA spokesman said they had no comment on whether the parties are currently in talks

The alternative for EA is to simply walk away from the deal. But analysts say that is an unlikely scenario. They still anticipate the deal to go through, though at a slightly higher share price between $26 to $28. A dilution of shares awarded to Take-Two’s management has reduced the value of Take-Two’s original offer price by 26 cents to $25.74.

“Will EA go higher? Of course they will. But if Take-Two sits down and they want $30, that’s not possible,” said Pachter. “Are EA and Take-Two talking? Of course they are. The question is, will the two sides come up with a reasonable compromise.”

By Yi-Wyn Yen

Google may be getting cold feet. In a last-ditch effort to avoid a merger with Microsoft, Yahoo said it was considering teaming with Google in a search advertising deal. But some Google executives are now questioning whether that’s a good idea, the Wall Street Journal reported Thursday.

One major hurdle: A Google-Yahoo tieup could face tough scrutiny from regulators in Washington and the European Union. Last month Yahoo (YHOO) ran a two-week test displaying some of Google’s (GOOG) search ads on Yahoo’s homepage. Both Yahoo and Google executives said the experiment went well. The two are reportedly in talks to outsource Google’s search technology in a non-exclusive arrangement.

Spokespeople from both Google and Yahoo declined to comment.

Google may have wedged its way into the mix in order to break up Microsoft (MSFT) and Yahoo. Microsoft CEO Steve Ballmer admitted that Google was a factor when the software giant walked away from its $47.5 billion offer last Saturday. In a letter to Yahoo CEO Jerry Yang, Ballmer said his company would not be willing to deal with the “host of regulatory and legal problems” that it would inevitably inherit if Yahoo partnered with Google.

Last month Microsoft’s general counsel Brad Smith lashed out at the two big Internet sites for partnering even in a limited test. He argued that a Google-Yahoo combo would give Google a 90% share of online search advertising and that “this would make the market far less competitive. It would be fair to say that Microsoft would aggressively lobby against a long-term partnership between Google and Yahoo.

Microsoft was one of Google’s biggest detractors when the search giant said it was going to buy DoubleClick, the top firm in online display advertising. Google got approval from both the Federal Trade Commission and the European Committee to acquire DoubleClick, but the approval took the big G nearly a whole year.

Both the FTC and the European Committee ruled that text-based search advertising and display advertising, which is the preferred way that big brands like to advertise, are two different markets, and therefore the merger was not anticompetitive. But regulators may be more wary if the two biggest players in search want to team up.

“Google has incredible chutzpa,” said Jeffrey Chester, the executive director of the Center for Digital Democracy. The public interest group had opposed Google’s DoubleClick deal because it would give Google an overwhelming lead in online advertising.

Chester said both Microsoft and Google have approached him to support their political message on the Hill. He has not yet endorsed either party, and is waiting for a deal - whether it’s Microsoft and Yahoo or Google and Yahoo - to be announced.

However, Chester said he is wary of a Google-Yahoo tieup. “Whatever happens, we don’t want Google to operate Yahoo out of its back pocket,” Chester said. “Whether or not regulators do something about it, we’ll do something.”

By Yi-Wyn Yen

In the aftermath of the Yahoo and Microsoft dust up, News Corp. says it is staying out of the mess.

News Corp. (NWS) had previously been linked to Yahoo (YHOO) and then switched camps to join Microsoft (MSFT) in its pursuit to acquire Yahoo. Microsoft eventually went it alone and four days ago, the behemoth walked away from its $47.5 billion offer with plans to look into alternatives to beef up its online ad unit. News Corp., which owns social networking site MySpace, shot down any rumors that it will partner with Microsoft.

“We’re not in discussions with Microsoft. There are no discussions,” said Peter Chernin, chief operating officer of News Corp. during an earnings call Wednesday with shareholders.

Chernin said that the company holds “regular conversations with everyone in the space,” but has not held any talks with Yahoo or Time Warner’s AOL (TWX) in the last “couple weeks.” Added CEO Rupert Murdoch, “Nor have I.”

In an effort to stave off Microsoft’s unsolicited bid, Yahoo said it was pursuing other deals like partnering with AOL or Google (GOOG). At one point, Yahoo also considered a tie-up with News Corp.’s MySpace. With its massive and highly-engaged audience, a MySpace partnership was seen as way to attract advertisers and help bring economies of scale for either Microsoft and Yahoo. Though Microsoft has a minor stake in Facebook, neither have developed a major social networking presence.

MySpace may generate millions of page views and visitors to its site, but it continues to struggle with growing its sales. News Corp’s Fox Interactive Media, which includes MySpace and other online properties like gaming site IGN and photo-sharing site Photobucket, will miss its $1 billion revenue target for its 2008 fiscal year that ends June 30. Chernin said the company will fall short of its projections by 10%.

Fox Interactive relies on online advertising to generate revenue. MySpace, which makes up the bulk of Fox Interactive’s revenues, generated $66 million in its fiscal third quarter from an ad-sharing deal with Google.

Chernin explained that there’s a learning curve to make money off of social networking sites. “Social media has only been around for a few years,” he said. “It’s still difficult to quantify the economic value of a friend. We’re working with major brands and agencies to educate and experiment with social media.”

Fox Interactive is still in its growing phase, Chernin said. “We will continue to invest. We’re already invested in [third-party] applications, MySpace Music, and new development tools for the homepage,” he said. “It’s too soon to be milking for margins right now. We need to focus on growth.”

By Scott Moritz, writer

Cisco (CSCO) eased slowdown anxieties slightly by setting its sales target below its long-range forecast, but in line with expectations.

The San Jose networking gearmaker posted better than expected adjusted earnings of 38 cents a share up from 34 cents in the year-ago period. Sales for the quarter were $9.79 billion, up from $8.86 billion last year.

Analysts were looking for pro forma earnings of 36 cents on $9.75 billion in sales, according to Yahoo Finance.

Looking ahead, CEO John Chambers told analysts on an earnings call that he expected sales in the fourth quarter ending in July to grow in the range of 9.5% over year-ago levels. That is in line with the 9.2% year-over-year growth expected by analysts.

Chambers said the company still expects its long term growth to be in the 12% to 17% range, but the current quarter was coming in below that pace due to cautious spending in the United States and Europe.

Chambers called the spending caution and sluggish economy a “relatively short-term challenge going forward.”

In March, Cisco fed slowdown fears with a belt-tightening move, asking managers to limit travel expenses and use accumulated vacation time. Those moves may have help contribute to the 2 cent expectation-beating bottom line performance.

Cisco’s solid results helped send the stock up 2% in after-hours trading Tuesday.

By Scott Moritz

WiMax is facing a now-or-never moment as Sprint (S) and Clearwire (CLWR) try to finalize terms of a multi-player joint venture.

Nearly five months into his job as Sprint chief, Dan Hesse has a chance to set Sprint free from an expensive network buildout commitment, and simultaneously spark the WiMax revolution. Sprint and Clearwire are set to announce the formation of a WiMax joint venture involving Comcast (CMCSA), Time Warner Cable (TWC) and funding from Intel (INTC) and Google (GOOG). The announcement could come as early as 6 a.m. Wednesday, according to one source familiar with the plan. Sprint and Clearwire shares surged 7% Tuesday afternoon on raised expectations of an announcement.

It is also possible that the deal could come later, or never, if the parties can’t ultimately agree on who controls the network. Google, for example, has been a uneasy participant, say people familiar with the company. The other players would like to attach Google’s winning name to this ambitious project, but apparently the Net giant has waffled in recent weeks, backing out at one point, then opting back in.

Those watching the unsteady progress of WiMax can’t be brimming with confidence after watching other tech deals disolve. As Microsoft’s three-month failure to woo Yahoo proved, lots of big egos, some forceful approaches and a weakening economy don’t add up to easy negotiations.

Once heralded as the next big thing in mobile broadband, WiMax was to be the successor to WiFi, an untethered Net connection that would usher in a new generation of mobile devices and portable applications.

There have been a couple bumps along the road to WiMax success however. The development of a national network operating on a unified standard has largely been in the hands of two disappointing tech shops: Sprint and Clearwire. The second setback is that the two largest wireless players, AT&T (T) and Verizon (VZ), are pursuing a different technology, called long term evolution or LTE.

The WiMax move would also help move Sprint further down the split-up path. Hesse, with the urgings of some of Sprint’s bigger investors like Ralph Whitworth of Relational Investors, has been mulling a breakup of the No.3 wireless shop. Among the options is the sale of Nextel’s iDEN network, reported to have caught the interest of former Nextel co-founder Morgan O’Brien who runs a public safety networking venture called Cyren Call.

Another step would be the sale of Sprint’s long-distance business, the Global Markets Group. While some analysts say separating the company’s seemingly core network would be nearly impossible, others argue that Sprint is not in a position to turn down any offers at this point.

But the first piece of the splinter strategy for Sprint is WiMax. Hesse inherited the WiMax business, known as Xohm when he took over the CEO job left by Gary Forsee. Forsee staked the company’s future on the promising mobile wireless broadband technology. But the $5 billion cost to build a WiMax network was too much for Sprint, already beset by massive customer defections stemming from its failed merger with Nextel.

The pairing of Sprint’s spectrum and WiMax technology with Clearwire was proposed last year. Sprint needed to get the costs off its books and Clearwire needed a big partner to help make WiMax happen and lend some financial support.

Intel Capital holds about a 25% stake in Clearwire. Clearwire founder Craig McCaw is the largest single shareholder, with a majority of the outstanding shares.

Comcast and Time Warner Cable have identified wireless broadband as a huge opportunity to deliver services like video and calling to a new generation of mobile devices. Last week Comcast raised $2 billion in a bond sale that analysts say signals the Philly cable giant’s readiness to jump into the WiMax venture.

Intel and Google have high hopes that a new national network would open up a mass market for their products and services.

Without this bold joint venture alliance, WiMax faces a bleak future, as other fourth-generation technologies gain ground. The deal could save WiMax from being another promising yet soon forgotten new next thing.

By Scott Moritz

Yahoo (YHOO) chief Jerry Yang has lost a deal and gained some enemies.

Yes, Microsoft (MSFT) walked away from the proposed blockbuster merger - but no, the new enemy is not Microsoft CEO Steve Ballmer.

Instead, it’s Gordon Crawford of Capital Research Global Investors, a holder of 6% of Yahoo’s shares.

Crawford voiced his extreme disappointment in Yang in press reports, including a piece in Tuesday’s Wall Street Journal taking direct aim at Yang and his hamhanded treatment of the Microsoft offer. “I think he overplayed a weak hand,” Crawford told the Journal.

He’s not alone. Other Yahoo investors have taken issue with the way Yang tried to hardball his way to a higher bid.

“This $37 price was ridiculous,” said one Yahoo investor referring to Yang’s deal-breaking counter offer to Ballmer in Seattle on Saturday. “I would have had no problem taking the thing at $31,” the investor said.

Yang has since protested that the $37 pitch was merely a starting point to get the talks going. But after three months, two rejections and a ad outsourcing pact with rival Google (GOOG), Microsoft’s Ballmer decided to use Yang’s starter as an end to the discussions.

The move puts Yang under the spotlight as big investors and small watched Yahoo’s value shrink - on Monday, the stock closed 15% below its closing price Friday.

“This is a clear example where the management didn’t have the best interest of the shareholders at heart. I think a lot of shareholders would have been very happy to do this deal at $33,” said Jacob Internet Fund manager and Yahoo shareholder Darren Chervitz, in Fortune Techland story Monday.

Another big stakeholder, Bill Miller of Legg Mason, whose firm swung to a $256 million loss in the first quarter on bad bets in Countrywide and Bear Stearns, is also feeling the pressure of having more than a 6% position in Yahoo. Miller told Bloomberg that he’s holding out hope that Microsoft and Yahoo can rekindle the discussions.

“There’s probably a lot of people jumping up and down today,” Miller told Bloomberg.

He expects Microsoft to come back. “If I’m sitting in their shoes, I’ll go away and see what happens,” Miller said . “I can come back and the worst case is, I’ll pay six months more of my free cash flow.”

For Microsoft, while the software giant may have averted overpaying for Yahoo, it hasn’t solved the bigger problem: How to compete with Google for the Internet advertising bounty.

Meanwhile, Yang and Yahoo will have a chance to feel some of the investor blowback at the annual shareholder meeting scheduled for July 3.

Observers such as Fortune’s Go West columnist Adam Lashinsky ask: “What will happen to Yahoo’s board? Will angry shareholders kick out its value-destroying board?”