By Yi-Wyn Yen

Yahoo’s fate is becoming more convoluted every day. Just two days after the Times of London reported that talks between Microsoft and Yahoo were back on, the the Wall Street Journal says former AOL chief executive Jonathan Miller is trying to raise money from private equity and sovereign wealth investors to buy the struggling Internet company.

Shares of Yahoo (YHOO) spiked 11% to $12.50 in mid-day trading on the news that Miller wants to raise between $28 billion to $30 billion to buy the company at $20-$22 a share.

Calls to Miller’s office were not returned.

Some are skeptical that Miller will be able to succeed. Wrote Standard & Poor’s Internet analyst Scott Kessler in a note, “We think YHOO is attractively valued, but that Miller would have difficulty raising this amount of capital, given the state of the global economy, of capital markets, and of YHOO itself.”

Miller has close ties with Yahoo and activist investor Carl Icahn. Miller was nominated to Yahoo’s board last August as part of a settlement which gave Icahn three seats. However, Miller withdrew because former employer Time Warner (TWX) (which also owns Fortune) would not waive a non-compete clause. Miller, who runs venture firm Velocity Interactive Group, was a consultant to Microsoft (MSFT) and Yahoo during their negotiations earlier this year.

Last week Icahn doubled down on Yahoo by spending $67 million for another 6.8 million shares. The corporate raider’s move fueled speculation that a search deal with Microsoft was inevitable. Icahn has lost roughly $1 billion since buying 69 million Yahoo shares at $25 a pop.

By Scott Moritz

It was a tale of two techs Tuesday. Hewlett-Packard (HPQ) surprised Wall Street on Tuesday with a fourth-quarter earnings report that beat analysts’ profit and sales targets. HP shares soared nearly 14% in early trading.

Meanwhile, glass maker Corning (GLW) warned of a sales shortfall in the current quarter as demand for its flat-screen TV and computer panels drops faster than anticipated. Shares fell nearly 12%.

HP posted preliminary adjusted earnings of $1.03 a share, which compares with 84 cents in the year-ago quarter and beats analysts estimates by 3 cents. Sales for the quarter ended Oct. 31 were $33.6 billion, an 19% improvement from revenues of $28.3 billion in the same quarter last year. Analysts were looking for sales of $33 billion, according to Thomson First Call.

The recent acquisition of IT service shop EDS so far has helped HP dodge the full impact of the impending recession. “Our ability to execute in a challenging marketplace differentiates HP, enabling it to increase share, expand earnings and emerge from the current economic environment as a stronger force,” CEO Mark Hurd said in a statement.

Looking ahead, HP predicts pro forma profit of about 94 cents a share on sales of $32.25 billion in the first quarter ending in January. Analysts expected adjusted earnings of 93 cents a share on $33.7 billion in sales. HP says it will release its October quarter earnings Nov. 24.

Corning, however, continues to struggle with order cuts as flat-panels and big-screen TV inventories pile up. The company, the largest maker of liquid crystal display screens for televisions and computers, says fourth-quarter sales will fall below its guidance of $1.1 billion to $1.2 billion. It warned that profits will be at the low end or below its prior guidance of $0.20 to $0.28 a share. Corning did not offer revised financial targets.

By Scott Moritz

U.S. regulators on Monday charged Dallas Maverick owner and outspoken blogger Mark Cuban with using confidential information in 2004 to sell his stake in Mamma.com, a Montreal search engine now known as Copernic (CNIC). His sale of all 600,000 shares helped Cuban avoid a 10% dive in the stock, or about $750,000 in losses, the government contends.

The Securities and Exchange Commission filed a civil lawsuit against Cuban on Monday. No criminal charges were filed.

Cuban, the biggest shareholder in Mamma.com, was allegedly angered by plans for a private sale of discounted Mamma.com stock, according to the lawsuit filed in U.S. District Court for the Northern District of Texas.

Mamma’s CEO had contacted Cuban to see if he was interested in participating in the so-called PIPE, or private investment in public equity, according to the SEC complaint. Selling the stock at a discount effectively dilutes the stakes held by existing shareholders. Cuban allegedly responded: ”Well, now I’m screwed. I can’t sell,” according to information provided by the Mamma CEO to regulators.

But sell he did, according to the SEC. One minute after hearing the full details of the private investment offer for Mamma.com shares, Cuban allegedly called his Dallas broker and said: “Sell what you can tonight and just get me out the next day.”

The SEC wants Cuban to pay back the $750,000 he avoided in losses after Mamma.com’s shares fell as well as a potential fine of $2.25 million.

Cuban issued a statement Monday saying the charges had no merit. “The government’s claims are false and they will be proven to be so,” he said.

Cuban’s net worth has been estimated to be $2.8 billion. His big jackpot came in 1999 when he sold Broadcast.com to Yahoo (YHOO) for nearly $6 billion, one of the largest cash-outs of the Internet boom.

As the owner of the Mavericks and Internet soapbox Blog Maverick, Cuban has displayed a fiery temperament at times. After a few shouting matches with Mavericks head coach Avery Johnson earlier this year, Cuban fired Johnson, the most successful coach in franchise history, at the end of the NBA season in April.

If skirting securities laws to avoid losing a relatively insignificant amount of money sounds strange, it isn’t, says Scott Friestad, deputy director of enforcement for the SEC.

“It’s not uncommon that the amount of the transaction is not correlated to a person’s financial wherewithal,” said Friestad. “We’ve seen sales worth $15,000 by people with $1 million-a-year salaries.”

By Scott Moritz

Nortel (NT) plans a major restructuring and another round of job cuts as demand for tech gear plunges.

The Toronto networking equipment giant said Monday it would trim 1,300 jobs on top 1,200 cuts previously announced. Nortel had 32,550 employees at the end of 2007.

The company also said four top executives, including its head of sales and its chief technology officer, would leave at year-end.

The news comes as Nortel posted third quarter earnings that met lowered targets. The company warned, however, that 2008 sales would fall 4% — at the lower end of its previous guidance of 2% to 4%.

Like other tech shops that have lowered forecasts, including Qualcomm (QCOM), Cisco (CSCO), Microsoft (MSFT) and Intel (INTC), Nortel cited a sudden slowdown in orders that started in September and has shown no signs of letting up. Corporate spending cuts, tight-fisted phone companies and a weaker consumer demand have sent the tech sector into a deep slump.

In September, Nortel slashed guidance and said it would look to sell or eliminate some business units. The news shocked investors who sent the stock down 43% in a one-day selloff Sept. 17.

In addition to plans to cut a total of 2,500 jobs, Nortel has shuffled its management. Marketing chief Lauren Flaherty, technology chief John Roese, head of global services Dietmar Wendt and head of sales Bill Nelson will leave the company at the end of the year, Nortel announced.  

For the third quarter, Nortel took a one-time charge of $3.2 billion ($2.1 billion in writedowns for tax adjustments, and $1.1 in goodwill charges) putting the net loss at $3.4 billion, or $6.85 a share. Excluding those charges, pro forma profit was 30 cents a share, well below the 8-cent adjusted profit last year but in line with analysts expectations.

Sales for the third quarter were $2.3 billion, down 15% from year-ago levels but meeting Wall Street expectations.

Looking ahead, Nortel cut its full year sales projection to about $10.5 billion or about 4% below 2007 levels. Analysts had anticipated a 4% full year slide in sales for Nortel.

The Roadster goes 0 to 60 mph in 3.9 seconds. Image: Yi-Wyn Yen

By Yi-Wyn Yen

SAN FRANCISCO – How much is Tesla Motors worth?

Tesla CEO Elon Musk won’t say, but it’s at least too expensive for General Motors to buy. “I’m not sure they can afford Tesla right now,” he said during a 30-minute talk Friday at the Web 2.0 Summit.

The South African-born entrepreneur talked candidly with host John Battelle about the failures of the auto industry and Tesla’s own troubles. Battelle had asked why GM (GM) doesn’t buy the electric car startup.

GM reported a $2.5 billion loss in the third quarter Friday and also warned that it could run out of cash soon. Said Musk, “There’s an issue with organized labor and trade and management still acts like it’s 1955. There are too many country club memberships, and [GM] management has focused on the wrong thing. “

Tesla has been plagued with its own problems. In mid-October Musk, who has helped bankroll Tesla, became its third CEO in less than a year, announced layoffs and delayed the debut of its forthcoming electric sedan, the Model S.

Musk explained why Tesla had to let go 10% of his employees last month. “Before market Armageddon occurred, the point was to raise $100 million. And we intended to get going with that in full force before the market collapsed,” he said.

The company settled for cutting costs and raising $40 million from its existing investors. Musk says he’s backing half of the $40 million round. He has already poured $55 million of his own money into the company.

Despite the tough economic climate, Musk felt confident that Tesla could have raised the $100 million. However, he said that would have meant giving up more control of the company.

Production of the Model S has been delayed six months to mid-2011. Musk says the company is churning out 10 of its Roadster sportscars a week and by early next year, will make 30 cars per week. He says Tesla will be profitable when it sells its expected lot of 1,200 Roadsters.

Said Musk, “I may be optimistic with the schedule, but I can deliver.”

By Michal Lev-Ram

SAN FRANCISCO – Last year Facebook CEO Mark Zuckerberg showed up at the Web 2.0 Summit in sandals and dodged questions about Microsoft’s then-rumored $240 million investment in the company.

This year, he showed up in tennis shoes and told the crowd of techies that Facebook doesn’t need any more funding, despite recent rumors that the Palo Alto-based social networking site is looking to raise another round of financing. Zuckerberg also said that instead of a hiring freeze or layoffs (which have plagued many local companies in recent weeks), Facebook is actively looking for more “really good technical people.” The company currently has about 700 employees.

Microsoft’s (MSFT) infusement of cash brought Facebook’s valuation to $15 billion late last year, shocking many in the industry. Web impresario John Battelle, who interviewed Zuckerberg on stage, asked the young CEO if he thought Microsoft is happy with the price they paid.

“The deal was about more than the investment,” said Zuckerberg, who emphasized the two companies are working together on ad placement and search functions. “I think a lot of people obsess over the price that they paid.”

Facbook says it now has over 120 million users. But despite its popularity, the site has been criticized for not having a proven revenue model. Zuckerberg said some have misunderstood his emphasis on growing the site to mean that the company doesn’t have a strategy for making money. Facebook, he noted, has several revenue strategies — including brand sponsors and ads. (Battelle added a third — Microsoft).

“They are both strong and growing quickly,” said Zuckerberg, who would only say revenues are in the “hundreds of millions.” As an example, he cited a New York Times ad that prompted more than 200,000 people to pass around an article on Barack Obama’s presidential victory.

Zuckerberg also discussed Facebook Connect, a new iteration of the company’s platform which will allow developers to create applications outside the site. But he admitted the first version, reportedly launching later this month, won’t be a direct source of new revenue.

By Scott Moritz

Dell (DELL) is trying unpaid vacations (for starters). 

The No.2 PC maker, already grappling with a massive turnaround strategy, is taking a closer look at expenses and has informed employees of a company-wide cost cutting plan that includes voluntary five-day unpaid leaves for everyone.

According to an internal memo confirmed by a company representative, Dell has frozen its hiring and is considering a range of cost-reduction plans.

In addition to the unpaid furloughs, the company is offering buyouts and cutting some of its contract workers. Dell already completed a 10% staff reduction plan this year that was put in place in May.

Sales, particularly in the company’s PC business, started slumping in September, and Tuesday’s move shows they haven’t bounced back yet. Dell is scheduled to release its October earnings results November 20. Some observers are bracing for a shortfall warning before then, given the slumping demand and overall decline of the economy.

Dell has been particularly vulnerable to the slowdown, having started its shift to a retail sales strategy and away from its famed buyer-direct, made-to-order manufacturing scheme. The company had boosted its staff levels for the transition.

In 2005, Dell had 72,000 employees, and by the end of 2006, the company had about 90,000 workers. Dell had 88,000 employees at the end of last year. “These were mostly white-collar workers brought in to build the business,” says Cowen analyst Lou Miscioscia. “Things have gotten a lot more challenging,” says Miscioscia, who doesn’t see the other PC makers like Hewlett-Packard (HPC) or IBM (IBM) having as bad a problem right now.

The big problem for Dell says UBS analyst Maynard UM, is that “they are unfortunately retooling during the backdrop of a weak end market. “

By Scott Moritz

Free. That’s Vodafone’s (VOD) recently-unveiled price for the hotly-anticipated touchscreen BlackBerry Storm from Research in Motion (RIM) in the United Kingdom.

In a sign of just how desperate phone companies are to lock customers in to lengthy contracts, Verizon’s (VZ) wireless partner is willing to subsidize the Storm – which sells for about $500 without a calling plan – in order to lure subscribers in England.

Though a final decision has yet to be made, Verizon is considering the same strategy for the Storm’s U.S. debut next month, according to an industry source familiar with the discussions. Another person close to the company says it’s unlikely the Storm will be free.

Verizon declined to comment on its pricing plan for the Storm.

The fact that Verizon is even considering a free phone highlights the competitive pressure created when AT&T (T) started selling a heavily-subsidized Apple (AAPL) iPhone for $199.

Most industry analysts expect the Storm, which has received favorable reviews, to be priced at or below the iPhone.

While Verizon would like to use its exclusive Storm deal to gain an edge in the smartphone market, selling it for free “would be breaking new ground for Verizon,” said Roger Entner, an analyst with Nielsen IAG’s . “It’s likely that they will put it at $150 and maybe $99 if they want to ship massive volumes during the holiday.” At either price, the Storm would be heavily discounted.

Verizon has come up short on blockbuster phones over the past year and a half as the iPhone has become the icon of the smartphone market. AT&T has been a driving force in the U.S. wireless market thanks to the iPhone, which pulls in an average $95 per month. But that drive has also come at a steep price to Ma Bell, which forks over $375 upfront for every iPhone sold. That cost the company $900 million in the third quarter.

For RIM, the Storm represents its biggest step yet into the consumer market as it tries to derail the success of the iPhone. One major challenge is to get devotees of BlackBerry’s physical keyboard to embrace the clickable touchscreen keypad on the Storm. The iPhone’s onscreen keyboard has presented some difficulties for many typists.

So far, Verizon hasn’t had much success with its touchscreen devices. But the Storm, if it’s a hit, could finally establish Verizon as a player in the red-hot touchscreen market. What’s more, it could not only entice new customers, but also convert old lower-paying customers to more expensive contracts. Each Storm subscriber will have to sign up for a BlackBerry e-mail and calling plan, which currently starts at $80 a month.

By Scott Moritz

Motorola on Thursday said its plan to break up into two companies is on hold, leading the head of its mobile phone business to outline a new plan for reviving the company’s ailing handset business.

Part of the restructuring plan includes the loss of 3,000 jobs, most from the mobile phone division, a company representative confirmed.

Motorola (MOT), which reported third quarter earnings that beat profit estimates but missed sales targets, said the split up called for by activist investor Carl Icahn will not happen in the third quarter next year as planned. Icahn wasn’t immediately available for comment.

Motorola was down 5% Thursday and has seen its stock fall 72% in the past year as the lack of a successor to its once-hot Razr phone wiped out its sales volume and profits amid a declining economy.

Sanjay Jha, who took over as head of the handset business in August, blamed the economy, the credit freeze and “changes underway” in the mobile phone unit for the breakup delay. Analysts have been critical of the costly breakup plan, seeing it as a distraction that failed to address the underlying problems at the world’s third-largest phone maker.

On a conference call with analysts after earnings were announced, Jha said the company would cut the total number of phones models it produces next year and focus less on its own mobile operating system in favor of systems developed by other companies, including Google’s (GOOG) Android and Microsoft’s (MSFT) Windows Mobile.

Some analysts who have been critical of the company welcomed the new plan.

“Sanjay nailed it,” said Ed Snyder, an analyst with Charter Equity Research. “It was a perfect description of the big problems facing the handset business and an intelligent plan for fixing them. Unfortunately it will be painful.”

By Michal Lev-Ram

SANTA CLARA, Calif. – First Apple rolled out its App Store, a mobile storefront where consumers can download games, social networking services and other software programs for their smartphones.

Starting Wednesday, Google will offer similar services through its Android Market, which coincides with the launch of the first Google-powered mobile phone.

Now comes Research in Motion (RIMM). The BlackBerry maker announced Tuesday that it too will launch a mobile storefront – this one dubbed Application Center.

“This is a new channel to market,” RIM co-CEO Mike Lazaridis told some 700 mobile developers attending the BlackBerry developer conference here on Tuesday. “The opportunity is larger than ever, from enterprise to consumer.”

Mobile applications have been around for years, but never gained traction until Apple started offering consumers the user-friendly, one-stop shopping App Store in July. Almost overnight, the race for consumer dollars — not to mention the advertising dollars attached to mobile software — was on. Apple says its customers have downloaded more than 100 million applications to date. Now companies like RIM are scrambling to compete.

The three stores, while essentially similar, have some key differences. Unlike Apple (AAPL) and RIM, Google says its applications will be available for free. RIM will take a 20% cut of the revenue generated from download fees, while Apple pockets 30% of its developers’ revenues. Also, Apple and RIM must approve software applications before they can be sold — a level of control that critics say should be left to users, not the companies. Google, meanwhile, insists developers can sell any programs they want through Android Market.

This isn’t the first time RIM, the leader in the U.S. smartphone market, has gone after Apple. The two companies became rivals when the iPhone launched last year, but it didn’t get serious until Apple started courting BlackBerry’s business customers with the new high-speed iPhone 3G and App Store. RIM, for its part, is now chasing after Apple’s core customers – tech-savvy consumers - with flashier devices that emphasize multimedia and social networking features. The Canadian mobile device maker plans to launch an iPhone-like touchscreen device called the Storm later this fall.

But the iPhones assault and some unexpected product delays are worrying RIM investors as the crucial holiday season nears. ”We believe the next 30-45 days are a critical window for RIM,” Citigroup analyst Jim Suva wrote in a recent report.

And while Apple and Google’s (GOOG) application stores are already live, RIM’s Application Center won’t be up and running until March 2009.

Still, RIM’s 31% share of the U.S. smartphone market will be hard to crack. Apple trails in fourth place  — behind HTC and Palm (PALM) – with about 12%, according to Nielsen Mobile. But RIM isn’t alone in its pursuit of Apple. Samsung, Nokia (NOK) and just about every other handset maker is now looking to catch up too.

By Scott Moritz

Texas Instruments (TXN) on Monday slashed its sales forecast as demand slumps.

The Dallas microchip giant posted an adjusted profit of 43 cents a share, below the 52 cents reported in the year-ago period and a penny below analysts estimates. Sales for the third quarter ended last month were $3.39 billion, which is up from $3.66 billion last year and in line with estimates.

But feeling the pinch of a spending slowdown among wireless network builders,  TI says fourth quarter sales will likely fall 13% below third quarter levels to about $2.95 billion. Analysts had expected sales in the range of $3.34 billion.

“We entered the third quarter with a cautious view of the economy and its impact on our markets,” TI CEO Rich Templeton said in a press release. “Revenue was weak, as expected, because consumers and corporations reduced their spending in this uncertain economy.”

Shares fell 5% in after-hours trading.

The company outlined a few moves to adjust to the sales shortfall. TI says it plans to reduce its inventory and the supplies sitting with its distribution partners and the company will make cuts in its cellular baseband chip business for wireless devices and networks.

TI says it will take about $110 million in charges related to the restructuring in the coming three quarters.

By Michael V. Copeland

Maybe Tesla chairman Elon Musk flipped through the “R.I.P. Good Times”  slide deck that Sequoia Capital showed its startup CEOs last week about the tough road ahead. Whether he did or didn’t, Musk pulled a few pages from it, as he announced Wednesday on the Tesla blog that not only would there be layoffs at the electric car  startup, he would be taking over as CEO from  Ze’ev Drori and delaying the company’s next vehicle.

Drori, in the top spot for less than a year, will stay on in some capacity as vice-chairman of the Tesla board. “With SpaceX now having reached orbit and about to enter its third year of profitability, I can afford to increase time allocated to Tesla,” Musk wrote on his blog.

What he will do with that time is refocus the car company’s business on two areas of revenue: making and selling the $109,000 Roadster and building electric powertrains for other car companies. “Our goal as a company is to be cash-flow positive within six to nine months,” Musk wrote. “To do so, we must continue to ramp up our production rate, improve Roadster contribution margin and reduce operating expenses.”

The last bit means people will be losing jobs at the San Carlos, Calif.-based company – what Musk calls bringing a “Special Forces philosophy” to the business. It’s not exactly clear what that means (push-ups? tattoos?), but it doesn’t sound like a party.

The really big news for all of us that can’t afford $109,000 two-seaters – and the ranks are growing daily – is that production of Tesla’s next car, the not too, too expensive electric sedan dubbed the Model S, will be delayed six months to some time in mid-2011.

Once again, Musk offered to put his own personal wealth on the line if money gets tight. “We are not far from being cash flow positive, but, even if that threshold ends up being further than expected, I will do whatever is needed to ensure that Tesla has more than sufficient capital to get there,” he writes.

Wonder where Musk keeps his money?

MySpace on Monday launches MyAds, a do-it-yourself service that lets anyone create their own banner ads, target those ads and distribute them for as little as $25.

Say you’re a pizza maker in Chicago. You follow easy-to-use prompts to make an advertisement and send it to football fans in Chicago on Sunday evening, setting the price you are willing to pay if a fan clicks on your ad and the dates you want the ad to run. These ads will compete for space with large creative campaigns sponsored by corporate MySpace (NWS) advertisers.

It’s a tough time to launch a new advertising product. With the economy in free fall, the rate of online advertising growth has slowed considerably. It even dipped slightly in the second quarter compared to the first, according to a report from the Interactive Advertising Bureau and PricewaterhouseCoopers.

But MySpace CEO Chris DeWolfe insists the site has so many new offerings, like MySpace Music, that he hasn’t seen demand slacken. Research firm eMarketer estimates advertisers will spend $755 million on the site, up from $505 million a year ago.

DeWolfe explains his “cautious optimism” this way: “A year and a half ago we were in the social networking category …. Now we’re considered to be a competitor with the portals.” In fact, comScore reported in June that MySpace had surpassed Yahoo in the amount of display ads it showed.

It’s true, the site has been on something of a tear. It has recently hired a number of former Yahoo employees, including Valeh Vakili, who was the company’s director of U.S. sales operations. And developers like RockYou’s Jia Shen report focusing more of their energies on developing applications for the site.

In August, MySpace’s 120 million users spent an average 164 minutes on the site. In tough economic times, an entertainment site like MySpace could see a bump in traffic as people cut back on pricier attractions like concerts and movies. But as social networking begins to mature, it’s not enough to get attention; MySpace will need to continue making money. And in the next few months, that may be tricky for everybody.

By Jessi Hempel

It’s week two of the Bloggers’ Challenge to raise money for school kids through DonorsChoose.org and the Internet’s best-known bloggers are playing rough.

For her opening salvo, All Things D’s Kara Swisher filmed a call to action from Yahoo CEO Jerry Yang and included a partially nude photo of fellow blogger Robert Scoble. As of Wednesday morning, she had raised $6,329, just a few hundred dollars more than her nemesis, Fred Wilson (avc.com). And both of them have been left in the dust by last year’s winner: Brooklyn blogger Sarah Bunting, author of TomatoNation.com, has raised $38,441 so far. She has promised her readers that if she wins, she’ll dress as a tomato and tour the monuments in Washington, DC.
 
Last year, DonorsChoose.org raised $420,000 during the month-long philanthropy showdown. This year, the Web 2.0 charity plans to top that. The site is part tech and part business with a strong do-gooding bent. Started by former teacher Charles Best in 2000, it has grown from a New York City experiment to an efficient alternative funding source for teachers nationwide.
 
Here’s a quick reminder on how it works: teachers register with the site and upload projects they want sponsored. Recent examples include podcast equipment for a high school journalism class in Newton, Kan. ($582 needed), basic art supplies like paint and magic markers for a fourth-grade class in Brooklyn ($370), and a bass guitar for an after-school music program in Los Angeles ($723). DonorsChoose acts as the middle man, purchasing the materials and shipping them and a disposable camera to the teachers who made the requests. Donors later receive thank-you notes from the students along with photos.

During the month of October, bloggers are competing to fund the most projects. Sure, it’s all for the kids, but their antics have grown entertaining. Check out this twitter from Net celebrity Julia Allison (nonsociety.com): “Actually, how about this? You specify a prank I must do for a set $$ you donate & I’ll actually consider doing it.” Anything, she later specifies in her blog post, in which her clothing stays on.
 
Engadget is “taking a break from the Mac and PC wars” to support classroom technology requests. BoingBoing is participating for the first time this year, as is Ars Technica, which declared “we think we can beat those guys.” Other first-time participants include O’Reilly Radar and This is Going to Be Big, which taunted, “Help me prove that my blog readers are just better people than TechCrunch readers… shouldn’t be hard.”

TechCrunch’s Erick Schonfeld focuses on the obvious economic imperative: “The economy might be about to tank, but why should the children have to suffer?” That may be the biggest reason to dig deep this year.

By Scott Moritz

Three of tech investors’ favorite horses - Google (GOOG), Research in Motion (RIMM) and Apple (AAPL) - which led the stampede out of the Nasdaq Monday, came rushing back a bit Tuesday.

Panic sellers who sent the Nasdaq down 9%, its steepest one-day drop since the Internet bubble burst in 2000, were replaced by bargain hunters Tuesday. In mid-day trading Google shares were up 8% and RIM’s stock bounced 10%. Apple was up 5%, while the Nasdaq as a whole rose 3%.

Apple was one of the biggest losers Monday, falling18% after two analysts downgraded the stock on fears that Mac sales were going the way of the rest of the PC market. FORTUNE’s Philip Elmer-Dewitt, however, pointed out that some of the gloomy predictions were based on a survey of business IT buyers, not quite Apple’s core market.

Other analysts came to Apple’s defense Tuesday. Goldman Sachs’ David Bailey reiterated his buy rating  saying the stock was oversold.

“We think yesterday’s 18% decline more than captures the concerns over Mac growth in a weakening spending environment, making Apple shares attractive at current levels,” Bailey wrote.

Monday’s broad selloff, and in particular the Nasdaq’s plunge, kicked into high gear after lawmakers failed to pass a Wall Street bailout bill. Amid fears that the current credit crunch could push the economy into a deep recession, not even the tech sector’s lack of debt and strong cash position were enough to keep panicky investors from bailing.

Tuesday’s rebound offered some solace, but as Monday’s collapse showed, tech is along for Wall Street’s ride, like it or not.

By Jessi Hempel

The charity smackdown was intense – and attracted some of the biggest stars of the blogosphere. Michael Arrington of TechCrunch offered to match reader donations. If he won, Fred Wilson, a renowned New York venture capitalist and author of tech blog avc.om, promised to give the grand prize – a lunch with Yahoo’s (YHOO) Jerry Yang – away to a reader (quipped Arrington: “Fred Wilson must be stopped.”). And Allthingsd.com’s Kara Swisher videotaped her two young kids asking for cash.

In the end, an obscure blog called TomatoNation left them in the dust. With just 100,000 readers, author Sarah Bunting raised more than $100,000 in donations. In all, the site that hosted the contest last year, DonorsChoose.org, raised $420,000 to help fund education.

Now comes the second philanthropic showdown. Starting Oct. 1, bloggers will compete to raise funds for DonorsChoose.org, which lets donors school projects to fund. Arrington, Wilson and Swisher are back in the ring along with Net celebrity Julia Allison (nonsociety.com), former Microsoft tech evangelist Robert Scoble (Scobleizer.com), and a host of others. It’s not just A-listers, though. Any blogger can join, and as Bunting demonstrated, sometimes a small group of passionate people can outgun a massive audience.

As media sponsor, Fortune will keep you updated on who’s ahead - and what crazy and creative tactics bloggers are using to raise money.

There’s a good reason techies love Donorschoose.org. As Fortune wrote in February, the site is part tech and part business with a strong do-gooding bent. Started by former teacher Charles Best in 2000, it has grown from a New York City experiment to an efficient alternative funding source for teachers nationwide.

Here’s how it works: teachers register with the site and upload projects they want sponsored. Recent examples include podcast equipment for a high school journalism class in Newton, Kan. ($582 needed), basic art supplies like paint and magic markers for a fourth-grade class in Brooklyn ($370), and a bass guitar for an after-school music program in Los Angeles ($723). DonorsChoose acts as the middle man, purchasing the materials and shipping them and a disposable camera to the teachers who made the requests. (Donors later receive thank-you notes from the students along with photos.)

Last year, with the help of an $11 million “investment” (read: donation) from Web heavyweights like eBay (eBay) founder Pierre Omidyar, Yahoo cofounder David Filo, Silicon Valley venture capitalist Vinod Khosla and Netflix (NFLX) founder Reed Hastings, the site moved beyond a dozen or so states and geographic areas to offer services to every school in the country. So far, Donorschoose.org has raised $24 million to get support to 1.4 million students in 50 states. Nearly 60,000 projects have been funded. And that’s only the beginning of Best’s vision for the organization.

Here’s where you come in. Starting Wednesday, check out the Blogger Challenge on Donorschoose.org/bloggers. Make a donation – and help your favorite blogger win. Or if you’re a blogger yourself, join the challenge, and see if you can best the blogging A-list in your fundraising. The winner gets a good old-fashioned dose of media attention, a priceless prize for any blogger.

The competition is bound to get rough, and hilarious. Here at Fortune.com, we’ll keep you updated on Techland.

By Scott Moritz

Ned Hooper, head of Cisco’s (CSCO) consumer business has a big challenge: Find new sales for a technology that’s reached its limit.

As the top seller of home Wi-Fi routers – those Internet-connected boxes that broadcast wireless signals throughout your house – Cisco needs a big new innovation now that the market is saturated.

Hooper’s solution: A network application that will control the connections to a variety of hardware devices. The aim is to make home communications networks more manageable, and keep Cisco on the forefront of key trends like digital media delivery, and of course, social networking. Think: YouTube to your TV, iPod tunes to your in-home sound system, MySpace on your GPS device, etc.

As an executive on Cisco’s M&A strategy team, Hooper helped the company acquire Linksys, the No.1 home router maker, in 2003. Other notable acquisitions under his watch include set-top box maker Scientific-Atlanta and video teleconferencing specialist WebEx. In June, Cisco acquired Pure, a home networking software developer. That purchase has given Hooper more of the tools his team needs in its home networking management platform Cisco calls LELA, short for Linksys Easy Link Advisor, which will debut at the Consumer Electronics Show in January.

The shift by the San Jose networking hardware giant toward a software approach is a significant move toward “owning the engineering,” Hooper said during an interview Wednesday.

The LELA system requires electronics makers like Sony (SNE), Apple (AAPL), Samsung, Dell (DELL) and Hewlett-Packard (HPC) to install compatibile software so their devices can talk to the network. Hooper calls it a partnership process that would support free licensing of an open standard application. In theory, TV, laptop and phone makers will feel compelled to add the software to their products in hopes consumers will gravitate to the networked capabilities.

Hooper says stay tuned for some partnership announcements on this front.

The LELA system will also give owners a picture of all the devices connected to their network, including those that may not be authorized. And through a WebEX application, Cisco can offer live technical assistance if people need help with tasks like syncing their router to their PC.

Sounds huge, certainly, but will people buy it?

Probably not, says Telecom Pragmatics analyst Mark Lutkowitz.

“People don’t want to manage networks, they just want to flip a switch,” says Lutkowitz. “Multimedia home networking has yet to takeoff. That’s true not just for Cisco, but for others as well.”

To some degree, Cisco’s aim is to offer an elegant solution to a problem that may not require these high-level refinements. For example, there are simpler devices like Slingbox that send TV programs to PCs and phones. And Roku, for instance, transmits Netflix (NFLX) video from the Internet to your TV. Even more simple perhaps are HDMI cords that physically connect PCs to TVs for high-definition media viewing.

The demand for sophisticated new network management systems may not be enough to offset the inevitable slide in Cisco’s home router sales.

“The product line has reached the point where everyone has a box,” says David Gross, also with Telecom Pragmatics. “Cisco hopes the new applications will allow them to maintain the prices on these Linksys boxes. The problem,he says, is that the box has been upgraded to the point were it does everything people asked it to do – provide big bandwidth.”

For all those of you waiting for the news-as-popularity-contest site Digg to get bought by Google (GOOG), Microsoft (MSFT), CBS (CBS), or (insert your favorite rumored media company here), looks like you will have to wait. Digg is announcing a $28.7 million venture capital round today, led by Waltham, MA-based Highland Capital and with return appearances by prior investors including Greylock Partners, Omidyar Network and SVB Capital. The round brings the total capital raised by the company to $40 million over three rounds.

Digg is one of those original Web 2.0 companies that, now four-years-old, has been rumored to be in talks with just about every plausible acquirer. Whether it was the price – widely discussed as between $200 and $300 million – the business, or both, no one pulled the trigger on a deal that suited both sides. Digg CEO Jay Adelson wouldn’t comment on any of the past rumored deals, but made it clear that the present round of funding gives Digg a war chest to super-charge growth and the value of the company. “My investors expect an ROI at some point,” Adelson says. “The plan we presented from the beginning was many year, and involved the kind of international growth and world domination that we are going after with this round. We would be leaving a lot of cash on the table if we didn’t fulfill that opportunity.”

The cash will be used to double the number of employees at San Francisco-based Digg by the end of the year, Adelson says, to better roll out features and expand agressively around the world. About 40% of Digg’s traffic, some 30 million unique visitors a month according to the company, already comes from folks outside the United States.  One of the issues Digg faces is there have been clones of the company’s service around the world, which allows users to suggest and vote stories to the top of the online site’s news pile, or bury them at the bottom. Putting the service into different languages, and pushing it into new regions ought to give’s Digg’s growth a big boost, but the company needed the funding to do it quickly. “There is getting there, and getting there with gusto,” Adelson says. “This is the rocket fuel the company needed.”

The privately-held company does not make revenue figures available. Adelson says revenue from the ad-supported service tripled this year. While it is not profitable yet, it was on the path toward cash-flow break even, Adelson says. “It’s not that this round of funding was critical to getting to profitability,” he says. “Before this round we were fully-funded.”

In raising a large round for the Web 2.0 company,  Adelson says DIgg was influenced by other Web 2.0 startups like Slide and Ning that both raised very hefty rounds earlier this year. “We all agreed that the opportunity for raising capital was a 2008 thing,” Adelson says. “If you are going to try and raise capital, do it this year.

“There is no question we are going to have some degree of a downturn in the next couple of years, if you have the opportunity to invest money and grow your business in times like that, it’s a great time to go out and conquer while the other guys are hurting. How much do you need to get through the times ahead? The number we raised is $28.7 million. It’s more than enough to get us through any downturn.”

By Michal Lev-Ram

Here’s a novel invention: A thin, portable piece of hardware that stores digital music. No, it’s not a compact disc – it’s a microSD card, a fingernail-sized memory device that fits into that tiny slot on the side of your cell phone.

On Monday flash memory maker SanDisk (SNDK) announced an initiative called slotMusic, which will store songs on the small cards. Top record labels EMI Music, Sony BMG, Universal Music Group and Warner Music Group (WMG) are also backing the new music format. While microSD cards are nothing new, this is the first big push to put pre-loaded content onto memory cards, which SanDisk and its music industry partners are hoping will help revive the ailing music industry.

The DRM-free, mini-devices do have more going for them than CDs, whose sales have been declining. For starters, microSD cards can be plugged into a range of devices, including cell phones, MP3 players, PCs and even some personal navigation devices. The 1GB (gigabyte) cards will be able to hold an entire album, in addition to liner notes, videos and album art. But in an age when more and more people are getting their tunes online, will consumers want a new version of the CD?

Daniel Schreiber, general manager of SanDisk’s audio and video division, says a company-sponsored survey showed 74% of people still value a tangible form of music they can stack and carry around with them. What’s more, says Schreiber, slotMusic will appeal to people who don’t want to deal with creating playlists online and downloading songs to devices. “It’s incredible how high a barrier these [online music] services have for taking music on the go,” says Schreiber, adding that slotMusic was made to be as easy as slipping a disc into a CD player or “buckling a belt.”

But Michael McGuire, an analyst at research firm Gartner, says he’s not sure bundling albums into a physical format makes much sense as a long-term business model, given the direction music consumption is heading. “Consumers are getting used to controlling their music [through online playlists],” says McGuire. “But the industry is still trying to push this concept of bundling more stuff into a physical package.”

And like any new digital music initiative, success will at least partly depend on getting the price right and being able to offer a wide enough selection of artists – SanDisk refused to provide details on both of these questions, saying only that more information would be revealed in coming weeks.

SlotMusic cards will be available in Wal-Mart and Best Buy stores later this fall.

By Scott Moritz

Big tech is putting its cash to work to appease investors.

Microsoft and Hewlett Packard say they will throw weary shareholders a cash treat. Microsoft created a new five-year $40 billion share buyback plan and an 18% dividend boost. And HP has set aside $8 billion for share repurchases. The top PC maker had $3 billion of buyback money still in its budget under an $8 billion program it started in November.

The buybacks are aimed at restoring investor interest in companies that have had very little to show in terms of growth amid a sluggish tech spending environment. Using some of the mountains of cash also helps discourage activist investors from forcing the companies to make a similar move on somewhat different terms. 

The move comes less than a week after Microsoft shares hit a two-year low on a broad credit-crisis selloff on Wall Street. The No.1 software shop says it has recently completed a previous $40 billion stock repurchase plan and by Microsoft’s tally, the company has now spent $115 billion on stock buybacks and dividends in the past five years.

Microsoft will pay a dividend of 13 cents a quarter, or 52 cents a share. That is up 2 cents from the prior dividend of 11 cents a quarter, and up 8 cents annually from the 44-cent level.

Microsoft’s board has also authorized up to $6 billion in debt financing including a new $2 billion participation in the commercial paper market.

“The company’s strong credit quality coupled with investors’ current appetite for high quality paper provides a unique opportunity for the company to establish its first-ever commercial paper program and enhance its capital structure,” Microsoft treasurer George Zinn said in a press release.

The company says it may use the financings to help fund operations and buy back stock.

Shares of Microsoft rose 5% and HP was up 2% in premarket trading Monday.