A few weeks ago we reported on speculation about a split between Amazon.com and Target. Well, it turns out the two are headed for a divorce. Target this morning announced it will take the reins of its own ecommerce operation starting in 2011. That would be a big loss for Amazon’s ecommerce platform business, which runs web operations for third-party retailers.

Here’s more from Target’s press release:

“Amazon has been an important strategic partner since we re-launched Target.com in 2001, and the strength of Amazon’s technology and fulfillment services has been a contributing factor in Target.com’s success,” saidSteve Eastman, president, Target.com. “However, to deliver a customized multi-channel experience for Target’s guests, we believe it is in Target’s best interest going forward to assume full control over the design and management of Target’s e-commerce technology platform, fulfillment and guest services operations.”

Previously, Target and Amazon extended their contract to 2011. Amazon and Target will continue to work together during the next two years to optimize performance of the existing platform and fulfillment services.

“We are grateful to have been able to work with Target for the last eight years, and we wish Target the very best as they go forward,” saidSebastian Gunningham, Senior Vice President of Seller Services for Amazon.com, Inc.

Target said it plans to launch its own platform ahead of the 2011 holiday season. With Target out, Amazon’s biggest known customer for the ecommerce platform business will be U.K.-based Marks & Spencer.

In recent years, Amazon has lost other big enterprise customers, Toys "R" Us and the Borders book chain. Amazon may be shifting to a more middle-market strategy with the ecommerce platform business. The company has been working on a secret project code-named Vitamin C to build ecommerce tools for mid-sized retailers.

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and Amazon’s A9: Rumors of its death are greatly exaggerated  

It’s been three years since Amazon.com’s effort to match Google with its own internet search engine, called A9, crashed and burned. Since then A9 has largely fallen off the technology industry’s radar. But the unit is still around, and playing an active role in Amazon’s efforts to improve product search on its network of ecommerce websites.

“People say things like, ‘Oh, you used to work there. What happened to that?’” said Barnaby Dorfman, a veteran of A9 whose online recipe startup, Foodista, secured an investment from Amazon in April. “The public-facing experiment did not work out, but the other piece worked out quite well for them. They’re helping to maximize sales across all Amazon’s sites.”

While A9, based in Palo Alto, has been extremely quiet since Amazon pulled back on its web search efforts in 2006, its name has popped up repeatedly in recent months, providing a glimpse of Amazon’s evolving strategy with the search unit.

In June, A9 acquired a mobile startup called SnapTell that lets people take photos of items with their smartphones and match them to corresponding product images — technology that is central to Amazon’s efforts to let shoppers browse and buy items from their iPhones and BlackBerrys.

Amazon is also reaping a harvest of patents that were germinated during A9’s early years as a would-be Google rival. For example, Amazon on July 21 was granted a patent for a “System and method for providing search results based on location.”

That kind of broad patent could potentially have a huge impact on the mobile market, given that so many iPhone and BlackBerry applications today have location-based search features, using built-in Global Positioning System technology to direct users to local sights, restaurants, etc.

While it’s not clear what Amazon plans to do with the patent, it’s a sign that A9’s early work on search technology has resulted in some interesting intellectual property that could benefit Amazon in the future, giving it leverage in negotiations with other tech companies, for example.

Amazon spokesman Drew Herdener declined to make A9 executives available for an interview and declined to go into much detail about the search unit, saying only that it does “product search for Amazon.com sites and mobile applications.” He said Amazon does not comment on patents.

A9, on its website, says its product search efforts include Amazon’s Search Inside the Book feature that lets people search for terms within the text of books. The unit also works on the Clickriver Ads program that lets advertisers put sponsored links on Amazon sites (the A9 website also lists OpenSearch, an Amazon-inspired effort to create a standardized format for sharing search results).

Product search is a critical element of the online shopping experience. When someone searches for a product on Amazon.com, the speed and relevance of the results can prompt people to buy more and generate more sales. Amazon is also keen to adapt its product search to the iPhone and other smartphones, where more consumers are doing their shopping these days.

A9 has "moved from this very ambitious vision to something that’s a better fit for Amazon’s needs, which is searching for products,” said Oren Etzioni, a University of Washington computer scientist who founded Farecast, an airfare prediction tool. Farecast was acquired by Microsoft last year and its technology was incorporated into Microsoft’s new search engine, Bing.

A9 never made a big dent in the internet search market, which continues to be dominated by Google. For June 2009, Google had a 65 percent share of the U.S. search market, followed by 19.6 percent for Yahoo sites and 8.4 percent for Microsoft sites, according to internet measurement firm comScore (the data came out before the recently announced Microsoft Bing-Yahoo search partnership).

Amazon, which launched A9 in 2004, essentially dismantled the public-facing part of the search engine in Oct. 2006, removing its maps and block view function, its instant reward program, and search history feature.

The A9 unit is headed by Bill Stasior, a veteran of the AltaVista search engine. The A9 site says the unit is hiring for 10 positions, mostly in software engineering.

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We’ve certainly seen our fair share of "down rounds" in recent months, venture capital deals in which the valuation comes in at a lower price point than previous rounds. That recalibration is certainly part of larger economic forces as VCs and entrepreneurs re-think the values they placed on startup companies from a year or two ago.

A survey released today by Fenwick & West points out just how prevalent "down rounds" are becoming — at least in Silicon Valley where the law firm analyzed recent financings for 89 companies.

According to the report, 46 percent of the deals were down rounds while 22 percent showed "flat" valuations. More interestingly, Fenwick notes that the past two quarters are the only two quarters where down rounds have exceeded up rounds since the fourth quarter of 2003.

And the tide has shifted rapidly. During the second quarter of 2008, just 13 percent of deals were down rounds while 68 percent were up rounds.

Furthermore, Fenwick’s Venture Capital Barometer shows an average price decrease of six percent for those companies receiving venture financing during the quarter. That followed a decline in the first quarter — the only two negative quarters since the firm started tracking price movements in 2004.

What does it all mean?

The New York Times’ Brad Stone offers his insights in a story headlined "Falling Valuations: Poison for the VC Industry."

But there are other things at work here too, highlighted by my story yesterday on DevHub which gave up on venture financing earlier this year in order to focus on reaching profitability.

Those stories may become more common as startups try to make their previous venture round last as long as possible or learn to exist on their own cash flows, rather than butt their heads up against tough terms in a new venture deal. (Seattle-based iLike is another example of a company that’s living off its venture reserves and own cash flows at the moment).

Prominent Seattle venture capitalists — speaking in good times — have told me that you should only take venture capital as a last resort. In tough times like these, that’s probably even more important.

The Fenwick report also discusses liquidation preferences, corporate restructurings and other topics.

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and Marchex’s sales; Richrelevance scores cash; CTI; and more  

Seattle online local advertising company Marchex could see its revenue further eroded due to the recently announced advertising partnership between Microsoft and Yahoo, with CFO Michael Arends pointing out potential issues in a conference call this week, reports Domain Name Wire.

Onvia, which provides an online service to connect businesses with government contracts, said that its revenue increased 21 percent during the second quarter to $6.2 million as its clients base grew five percent to 8,500. The Seattle company also trimmed its net loss for the second quarter to $197,000.

In a story from TheStreet.com titled "Honey I Shrunk the Tech Sector," Seattle entrepreneur and venture capitalist Martin Tobias predicts more tech M&A deals in the near future.

Bothell biotech Scolr Pharma saw revenues decline 17 percent to $230,789 during the second quarter as royalty payments from Perrigo fell. The company — which finished the quarter with $3.1 million in cash and cash equivalents on the books and is looking at ways to reduce the burn rate — saw its net loss decrease 26 percent to $1.6 million.

Comcast said it plans to begin reselling its WiMax broadband Internet service — dubbed HighSpeed2Go and currently available in Atlanta and Portland– in Washington state, Philadelphia andChicago this year.

Rosetta Inpharmatics founder Stephen Friend — who is in the midst of creating the new Seattle non-profit Sage Bionetworks — is the subject of a detailed Xconomy profile in which he describes how the life sciences non-profit is taking cues from the open source software movement.

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and Zappos parties it up after big Amazon acquisition deal  

Things have been pretty festive over at online shoe retailer Zappos since the company announced it was getting acquired by Amazon.com. First, Zappos CEO Tony Hsieh said he would hand out bonuses and Kindles to staff. Then the company threw a 10-year anniversary party complete with disco lights, carnival games and an open bar. Here are some video highlights of the over-the-top party. Check out the human hamster ball about 35 seconds in.

Previous coverage:
Amazon and Zappos: a good fit?
A blow-by-blow account of the Amazon-Zappos deal
Zappos CEO: ’Nobody was forced to sell to Amazon’

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Kindle users flock to freebies  

Amazon.com has raised the ire of some in the book publishing industry for pricing Kindle versions of best-sellers and new releases at $9.99. But what about Kindle books that cost, well, nothing? The Associated Press reports that free books have become top "sellers" in the Kindle store, a development that could hold promise — or peril — for publishers.

AP writes:

Publishers and authors have been nervous that the standard cost for electronic editions of new releases, just under $10, will take away sales from the more expensive hardcovers and set an unrealistically low price for the future. They are concerned, but open-minded, about free books, which present a chance and a challenge: Readers may buy other books, or, they may simply seek more free titles.

Scott Shannon, publisher of the Del Rey/Spectra imprint at Random House, tells AP that free Kindle books are "a huge hot-button topic we’ve been discussing within our division and at the corporate level." He said free books can prompt people to buy other titles, but "in the long term, we have to guard the market. We have to make sure people understand that time and energy goes into writing a book."

Right now the top three bestsellers in the Kindle store — "The Angel Experiment" by James Patterson, "The Briar King" by Greg Keyes, and "Paranoia" by Joseph Finder — are all free. In fact, half of the top 20 Kindle bestsellers are listed at $0.00.

Amazon isn’t the only company offering free e-books. Sony and Barnes & Noble have tapped Google’s huge book-scanning project to add free public domain books to their collections. But Amazon appears to be the only one including free titles in its bestselling e-book list — giving them broad exposure.

Interesting side note: Amazon’s Kindle store is now heavily promoting its recently announced collaboration with Shmoop. The new Shmoop Classics for Kindle are a mashup offering, combining literary works with an interactive guide of "smart, fun analysis." Kind of sounds like electronic CliffsNotes. More from the Amazon Kindle blog.

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David Pogue heads to the beach to "curl up with a good electronic book." In the video, The New York Times tech columnist points out that Barnes & Noble’s new electronic book store of 750,000 ebooks is not exactly what it seems.

Pogue also notes that Amazon.com still has a better selection of books you actually may want to read, not to mention cheaper prices on books such as "Dune" and "Freakonomics."

But Pogue does like the fact that you can read ebooks from Barnes & Noble on a Mac or PC, and notes that company’s iPhone app is ‘very nice" since it allows you to change the colors and font and perform other tasks not possible on Amazon’s app.

"So, even if Barnes & Noble’s 1.0 ebook store is a little flawed, it is a good enough start, and competition is always good," says Pogue as he puts on suntan lotion.

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and MRI startup Confirma purchased by Merge for $22 million  

Bellevue-based Confirma, a maker of MRI imaging analysis products, has been acquired by Merge Healthcare in a stock deal valued at $22 million.

Confirma’s CADstream product — with 1,200 systems implemented at facilities throughout the world — provides more detailed analysis and reporting for MRI studies related to breast and prostate cancers.

Last year, Confirma scored $17.5 million in venture financing from Telegraph Hill Partners, Fluke Venture Partners, Northwest Venture Associates, Prism Ventureworks and Versant Ventures. The company — which has partnerships with McKesson, GE Healthcare and Philips Medical — is led by Wayne Wager, a former venture capitalist at Encompass Ventures.

“By combining our patented CAD applications with Merge’s broader health IT solutions and global presence, we can better take advantage of current and future growth opportunities and, thus, extend our solutions to more clinicians,” Wager said in a release.

John Cook is co-founder of TechFlash. Follow on Twitter @johnhcook.

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and Scout blazes trail with Windows 7  

Some aspiring Eagle Scouts clean up parks, run safety campaigns, or refurbish hiking trails to complete the leadership service project required to achieve the Boy Scouts of America’s highest rank.

David Browning, of Troop 600 in Bellevue, is installing Windows 7.

To be sure, this is no simple project. The 16-year-old technology enthusiast, who happens to be the son of a Microsoft employee, is overseeing the deployment of Microsoft’s new operating system across 67 computers at Eastside Christian School in Bellevue — managing a team of fellow Boy Scouts and overseeing a complex software duplication process to help the school make a much-needed technological upgrade.

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First glimpse of a Microsoft store  

Through its official Twitter account this afternoon, Microsoft released this photo of the location of one of its first retail stores. The company announced previously that it would open stores in Scottsdale, Ariz., and Mission Viejo, Calif., this fall. There are no big secrets in the picture — the brands on the sign are the ones you’d expect the company to promote — but it’s notable nonetheless.

As noted by TechCrunch, leaked renderings of the insides of the stores were published by Gizmodo recently, but the company said at the time that the designs weren’t final.

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Amazon is making progress getting the major college textbook publishers on board with its Kindle electronic reader. Today, McGraw-Hill Education said it will begin offering 100 higher education titles on the Kindle. McGraw-Hill joins the other major textbook publishers, Cengage Learning, Pearson, and Wiley, which are already selling Kindle editions. Amazon is positioning its new large-screen Kindle DX reader as a replacement for physical textbooks — and needs to get as many titles as possible into electronic form.

When Amazon announced the Kindle DX in May, it said Cengage Learning, Pearson, and Wiley were all part of the project, but McGraw-Hill’s name was conspicuously absent. Now, with McGraw-Hill in the lineup, the Kindle DX can offer titles from the four biggest textbook publishers. According to Subtext, a monthly newsletter covering the book publishing industry, the top four college publishers by 2008 annual sales were Cengage ($1.7 billion), Pearson ($1.6 billion), McGraw-Hill ($610 million), and Wiley ($230 million).

McGraw-Hill said the textbook titles will be used in on-campus pilot programs with the Kindle DX this fall. Amazon and a handful of universities (including the University of Washington) are providing Kindle DXs to some students to test as a textbook replacement.

"The modern student body increasingly requires digital access and capabilities, and we are pleased to be strengthening our partnership with Amazon to help meet these critical needs," said Ed Stanford, president of McGraw-Hill Higher Education, in a statement.

Will students take to the Kindle DX? The devices would be certainly easier to lug around than a pile of books. Students spend a lot of money on textbooks today, though the Kindle DX, currently priced at $489, isn’t cheap either.

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and T-Mobile adds subscribers at a slower pace as revenues fall  

T-Mobile USA, the fourth largest wireless carrier in the U.S., said that it netted 325,000 new customers during the second quarter as revenues fell slightly to $5.34 billion.

T-Mobile also has been struggling to hang onto customers, with a contract churn rate that increased to 2.2 percent from 1.9 percent for the same period last year.  The number of new subscribers also has slowed, with 415,000 net additions in the first quarter and 668,000 in the second quarter of last year.

T-Mobile, with 33.5 million subscribers, boosted its operating income before depreciation and amortization (OIBDA) to $1.6 billion. That was up 16 percent over the first quarter and up 1 percent over the same period last year. Full press release here.

Meanwhile, T-Mobile plans to introduce its new myTouch 3G — built on Google’s Android operating system — today in by having 100 skydivers form a "T" as they fall from the sky above San Francisco. (Cnet has a photo gallery of the extravagant launch ceremonies here).

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and John L. Scott Real Estate unveils new mobile site for the iPhone  

Zillow.com grabbed some buzz — not to mention users — when it introduced a slick iPhone application in April that allowed home buyers to pull up information while on the go.  Not to be outdone, John L. Scott Real Estate today unveiled a new mobile service that’s optimized for the iPhone and other smartphones.  

Instead of creating an iPhone app that is downloaded, the Seattle real estate firm opted to create a service that automatically detects the device and provides enhanced features. Those include the ability to pull up nearby for-sale listings based on the phone’s GPS capabilities. It also creates easy shortcuts to contact a John L. Scott agents and nearby offices.

“There’s no assembly required; just switch on your iPhone and our website will do the rest,” said CEO J. Lennox Scott in a release. 

Of course, there’s one big difference between John L. Scott’s new service and Zillow’s app — other than the fact that it doesn’t require a download. While you can search for nearby sale listings on the new service, it doesn’t show every home in the neighborhood as Zillow’s offering does. 

That’s especially helpful for home buyers — not to mention real estate professionals — since they can conduct research on nearby properties as they look at homes for sale in a specific neighborhood.

John L. Scott has been trying to push the envelope when it comes to new technologies, working with Microsoft to create a new social network called JLSconnect and incorporating enhanced online mapping technologies on its Web site.

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Report: Publicis heads the pack to buy Microsoft’s Razorfish  

Microsoft has been looking for some time to unload Razorfish, the digital ad agency that it acquired as part of its $6 billion acquisition of aQuantive two years ago. Now the pack of potential suitors appears to be narrowing down.

French ad agency Publicis is currently in the lead to buy Razorfish, and has bid between $500 million and $600 million for the agency, according to a report today in the Wall Street Journal. Microsoft wants the buyer of Razorfish to commit to purchasing "hundreds of millions of dollars" in ads across its various web properties, an issue that’s now being "hammered out" by Microsoft and Publicis, the Journal reports.

That kind of ad commitment — if Microsoft can nail it down — could boost Microsoft’s newly minted partnership with Yahoo as it takes on Google in the internet search market. According to the Journal, Japanese ad giant Dentsu also made a bid for Razorfish, and Omnicom Group and WPP expressed early interest in the agency.

Many observers believe Microsoft was primarily interested in aQuantive’s technology units, the online advertising platform Atlas and website ad network DRIVEpm, and picked up Razorfish as part of the deal. Razorfish, which has been hit hard by the economic downturn as clients cut back on ad budgets, has undergone several rounds of layoffs over the past year.

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Microsoft this afternoon released an update for Mac Office 2008 that the company says will fix a file-format problem encountered by users after the July 20 release of Service Pack 2 for the Mac Office suite. You can download the fix here.

Mac PowerPoint users originally brought the problem to our attention, saying that the previous Service Pack 2 update prevented them from opening PowerPoint files previously saved with the ".pptx" extension. However, the accompanying support document indicates that Mac Office and Excel files were impacted, as well.

If you were experiencing the problem previously, let us know if the update fixes it for you.

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and Seattle company introduces automatic pancake machine  

Americans have created some pretty cool high-tech gadgets over the years. The iPhone. The Xbox. The Kindle.

Now, get ready for some real innovation. A Seattle company has introduced the ChefStack, a $3,500 automatic pancake machine that creates "perfect panless pancakes" in a matter of seconds. In fact, the machine can spit out fat-free flapjacks at a rate of 200 per hour.  Ah, you gotta love America.

ChefStack was formed earlier this year by R.J. Selfridge, a long-time food executive who spent the past 10 years as head of operations at Tully’s Coffee. The device — about the size of a small microwave oven — has been sold in Australia and New Zealand where it has been deployed in Marriott Hotels and the airport lounges of Qantas airlines.

The company — which also is targeting sales in coffee shops, schools and hospitals — writes in a press release:

Presentation and vending options to end customers are limited only by the creativity and menu selection of the ChefStack partner. From traditional restaurant-style three pancake stacks with butter and maple syrup, to mini-pancake “shooters” with eggs and meat, to fruit-filled pancake turnovers, the possibilities for customer satisfaction and profits are virtually limitless.

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and Blue Nile earnings down, but in line with analyst estimates  

Online diamond and jewelry retailer Blue Nile reported a dip in second-quarter earnings, but the results were in line with analyst expectations. The Seattle-based company said Q2 net income was $2.8 million, or 19 cents a share, compared to $3.2 million, or 20 cents a share, the same quarter a year ago. Analysts had expected earnings of 19 cents a share.

Sales for the second quarter totaled $69.9 million, down from $73.7 million in the year-ago quarter, a drop of 5.2 percent. International sales were $7.1 million, down 12.3 percent, primarily due to the impact of foreign currency exchange rates.

Blue Nile said that excluding the impact of currency exchange rates, international sales would have declined 1.2 percent, but the company also said it "experienced continued economic weakness in key markets, particularly the U.K."

"Blue Nile delivered excellent financial results in a challenging retail environment, with strong profitability and market share gains,” saidCEO Diane Irvine, in a statement.

In an Aug. 4 preview of Blue Nile’s second-quarter earnings, McAdams Wright Ragen analyst Dan Geiman wrote:

We continue to believe that NILE is relatively well positioned within the jewelry market given its competitive price points, relatively affluent and educated customer base, and strong supplier relationships, which should allow the company to outperform its peers. Longer-term, a reduction in store capacity within the jewelry industry should be a plus for NILE as well.

Blue Nile said its inventories were $15.7 million at the end of Q2, a decline of 6.3% from a year ago. The company said it had $48 million in cash and cash equivalents at the end of the second quarter.

Blue Nile Chief Financial Officer Marc Stolzman said expects sales to be "flat to slightly down" in the third quarter. He said he projects full-year net sales of between $288 million and $295 million, and diluted earnings per share in the range of 78 cents to 82 cents.

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RealNetworks cuts 12 more jobs, or 9 percent of its music division  

One week after a tough earnings report, RealNetworks today moved to further reduce its expenses by cutting 12 more positions, totaling 9 percent of its music division, a spokesman confirmed this afternoon. The latest layoffs follow the elimination of 130 jobs last year, and a smaller round of cuts a couple months ago.

The jobs cut today involved employees of RealNetworks and its Rhapsody America joint venture with MTV Networks. The layoffs represent about a half-percent of the company’s overall workforce, said Bill Hankes, a RealNetworks spokesman. He said the company is putting greater emphasis on its mobile and web businesses, and reducing the resources it’s putting into editorial projects and PC client software.

The cuts come despite the fact that music was the only one of the company’s main business units to see an increase in revenue in the second quarter, rising 9 percent to more than $40 million. Revenue in the company’s games unit and media software and services business declined by 15 percent and 34 percent, respectively.

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Oncothyreon Inc., which is developing drugs for the treatment of cancer, said that it has received commitments from investors to purchase stock and warrants valued at $15 million. The Seattle company also named Diana Hausman  — formerly of ZymoGentics — as vice president of clinical development.

Seattle’s Walk Score gets a positive review from Opposing Views, with Kaid Benfield writing that "it’s great fun, and highly useful in generating a rough approximation of how "smart" a location is." The review also mentions how the site integrates with real estate sites such as Zillow.com and Estately. 

Speaking of real estate, DocuSign today introduced enhanced features for its electronic signature which are specifically geared toward real estate professionals. The service –which starts at $19.95 per month — is designed to eliminate the printing and faxing of real estate documents when a transaction is nearing completion.

The University of Washington Bothell MBA Program is launching a Leadership MBA program this fall at its Eastside Leadership Center in Bellevue. Information is available here. Demand for the LMBA program has been high, despite the recession, but there are still slots open, says Sandeep Krishnamurthy, director of the UW Bothell Business Administration Program. UW Bothell also offers a Technology Management MBA Program at its Bothell campus.

Getty Images today introduced a new set of products designed for those seeking images to display on Web sites and mobile devices. Andy Saunders, vice president of creative imagery at the Seattle company, said that images will allow customers to get "high quality imagery quickly, easily and at the appropriate price points."  Images in the collection range from $5 to $49, which compares to some of the free images offered in the creative commons section of Flickr.

The Life Sciences Discovery Fund — which was established by Washington state to support cutting-edge life science research — today announced grants totaling $300,000 for two University of Washington researchers. The UW’s Kenneth Schenkman and his team received $150,000 "to test a new instrument for the diagnosis and monitoring of shock" while the UW’s Philip Fleckman received $150,000 "to test the ability of a percutaneous catheter to resist infection."

Boston venture capitalist Jeff Bussgang explains why it’s tough to say "no" all of the time.

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and Marchex sales take a big hit  

Revenue at Marchex fell to $21.1 million during the second quarter, down from $37.4 million for the same period last year. Meanwhile, the company swung to a net loss during the quarter as it struggles with a tight online advertising market.

"While there are some signs of stabilization in the economy, we continue to experience an uncertain economic environment that is impacting our near-term revenue outlook. Additionally, while we made significant progress in lowering our exposure to certain financially challenged customers, conversations with these customers are still ongoing. As a result, we believe it prudent to not issue guidance at this time," said CEO Russell Horowitz in a press release.

The company’s net loss for the quarter was $1.2 million, which compared to net income of $509,000 for the same period last year. The stock has lost about 29 percent of its value so far this year.

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Is Amazon’s Kindle store about to lose a bunch of content? News Corp. CEO Rupert Murdoch is making noises about breaking ties with Amazon over its pricing terms for Kindle books. That could be significant, given that News Corp. owns publishing giant HarperCollins, the Wall Street Journal and a bevy of other newspapers.

Here’s a report that just came out of Dow Jones Newswires (also part of News Corp):

News Corp. (NWS) may break ties with Amazon (AMZN) over pricing terms for the Kindle e-reader, News Corp. Chairman and Chief Executive Rupert Murdoch said Wednesday in a conference call, according to a report on Fox Business Network. Murdoch also said News Corp. is in talks with Sony Corp. (SNE) about making content available on that company’s upcoming e-reader, which aims to challenge the Kindle.

Sony just announced it will soon start selling two new electronic readers, including a $199 version that would be significantly cheaper than Amazon’s $299 Kindle.

Murdoch has grumbled in the past about Kindle and dropped hints of investing in a rival reader.

More to come.

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and InfoSpace profit, revenue up, surprising analysts  

Bellevue-based InfoSpace reported a jump in second quarter profit and revenue, surprising analysts. The internet search company’s shares rose more than 11 percent in after-hours trading.

InfoSpace said Q2 net income increased to $2.9 million, or 8 cents per share, from net income of $1.9 million, or 6 cents per share, the same quarter a year ago. Second-quarter revenue was $43.8 million, up 14 percent from the year-ago quarter. Analysts polled by Thomson Reuters First Call expected a Q2 loss of 2 cents a share and $38 million in revenue.

InfoSpace CEO Will Lansing pronounced himself "extremely pleased" with the results. "We achieved revenue growth and greater profitability in a tough economy. At the same time, we continue to invest in new product initiatives including the launch of two new metasearch sites in the quarter," Lansing said in a statement.

InfoSpace yesterday unveiled an upgraded metasearch engine at InfoSpace.com — though it faces a long uphill climb to compete against the likes of Google and Bing-Yahoo for a piece of the search market. Last month, the company launched a charity search engine called DoGreatGood.com — which will donate half its net revenue to various charities.

InfoSpace shares were up more than 11 percent in after-hours trading to $8.13.

The company said it ended the second quarter with $208.3 million in cash, cash equivalents, and marketable securities, including $8.2 million of auction rate securities. The company said it had no debt obligation at the end of Q2.

InfoSpace gave guidance for the third quarter, saying it expects revenue between $47 million and $49 million and operating results to be between a net loss of $500,000 and net income of 500,000, or a net loss of 1 cent per share to net income of 1 cent per share.

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and Microsoft moving Azure from WA data center, citing state tax policy  

Microsoft today told early users of its Windows Azure cloud computing platform that it will shift applications and storage away from its Pacific Northwest data center in Quincy, Wash., prior to Azure’s commercial launch. Microsoft cited "a change in local tax laws," referring  to a controversial decision that excluded data centers from a rural manufacturing sales tax exemption under Washington state law.

"Due to a change in local tax laws, we’ve decided to migrate Windows Azure applications out of our northwest data center prior to our commercial launch this November," the company says on the Windows Azure blog. "This means that all applications and storage accounts in the “USA - Northwest” region will need to move to another region in the next few months, or they will be deleted."

That doesn’t bode well for Grant County, Wash., the home of data centers for Microsoft, Yahoo and others. Despite Intuit’s recent opening of a data center in Quincy, the big data center operators have been reevaluating their plans in the region since Washington state Attorney General Rob McKenna determined in 2007 that they didn’t qualify for a major sales tax deferral program.

The Data Center Knowledge blog says the Azure services in Quincy will shift to San Antonio, Texas, where Microsoft has another large data center. The Oak Leaf Systems blog has more details and background, as cited by ZDNet’s Mary Jo Foley in a post on the topic.

The potential impact on the rest of Microsoft’s operations in Quincy isn’t clear. We’ve asked Microsoft for more information about its plans for the data center, and we’ll update this post depending on the response.

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Concur CEO ‘very pleased’ with company’s 63% net income gain  

Concur Technologies, which earlier this week announced the purchase of France’s Etap-On-Line, today reported a 13 percent increase in revenues and a big increase in net income that beat company expectations. Shares jumped nearly four percent in after hours trading. 

The Redmond software company, which helps corporations streamline travel and entertainment expense forms, posted fiscal third quarter revenues of $62.2 million. Its net income increased to $7.2 million, or 14 cents per share. That compared to net income of $4.5 million for the same period last year.

Chief Executive Steve Singh said he was "very pleased" with the results and noted that new customer growth in the quarter was among the strongest in the company history.

“Against the backdrop of an environment that is beginning to stabilize, our ongoing ability to execute well, and the large-scale opportunity in front of us, we are beginning to reaccelerate our investments across the business while we continue to execute on our core objectives of expanding distribution, driving innovation in our industry, and setting the bar for service excellence," he said in the release.

For fiscal 2009, Concur expects earnings per share of 49 cents and cash flows from operations of $64 million to $66 million.

Year-to-date, the stock is up five percent.

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Seattle startup EnerG2, a University of Washington spinout that is developing a longer-lasting alternative to the battery, has scored $21 million in federal funding to build a manufacturing facility in Oregon.

The grant is part of a $2.4-billion U.S. stimulus package to accelerate the next generation of U.S. batteries and electric vehicles. EnerG2 will use its funding to build a facility in Albany, Oregon, for "production of high energy density nano-carbon for ultracapacitors," according to information put out today by the U.S. Energy Department.

EnerG2 has raised $11 million from investors, who include OVP Venture Partners, Firelake Capital. EnerG2 CEO Rick Luebbe did not immediately return a message seeking comment.

Here’s how EnerG2 describes its technology on its website:

EnerG2 is currently focused on customizing electrode materials to enhance energy and power density in ultracapacitors, one of the essential engines of the new energy economy. Ultracapacitors, which are dependent on the performance of their materials, store and release more energy faster than conventional batteries. The size and make-up of the electrodes’ surface area helps ultracapacitors store and supply large bursts of energy; the materials also effectively enable limitless cycle life.

Ultracapacitors containing EnerG2 materials will be increasingly embraced by the automotive industry for hybrid electric vehicles, by electronics manufacturers for enhancing the life and usability of consumer goods, and by a variety of industrial customers to deliver an ever-increasing breadth of new ways to improve energy efficiency.

In the future, EnerG2 materials may be used to improve natural gas, methane and hydrogen storage as well as lithium-ion batteries.

My colleague John Cook explored EnerG2’s technology in a report last November.

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and With Jaech in charge, Verdiem’s green IT business surges  

Shortly after Jeremy Jaech was tapped as CEO of Verdiem last year, the serial entrepreneur said he was excited by the opportunity to take the green IT business and "scale it."

Well, today we’re getting some insights into Jaech’s handy-work after nine months on the job. The 8-year-old company, which helps government entities and corporations save money and electricity by powering down computers when they are not in use, said that the software has now been installed on more than one million desktops.

It also announced that its business customer base has more than doubled in the past 12 months. One of those new customers is Cox Communications, which recently deployed Verdiem’s Surveyor software on 15,000 networked computers. That has resulted in PC energy savings of 40 percent, the companies said.

Jaech has been known to build big companies before — namely Aldus (sold to Adobe) and Visio (sold to Microsoft). In an interview with TechFlash earlier this year, Jaech said there’s a lot of momentum right now behind the idea of reducing energy costs in a corporate environment.

"Whereas a couple years ago it was pretty hard to make a corporate sell of a green IT product or service, that has completely switched," he said. "Part of it is corporate responsibility, but another part of it is with the Obama administration coming in."

Verdiem has raised about $27 million from Kleiner Perkins Caufield & Byers, NCD, Phoenix Partners and others.

John Cook is co-founder of TechFlash. Follow on Twitter @johnhcook.

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DL BYRON, BikeHugger.com: At a summer cocktail party last week, a developer of Windows Mobile applications asked me which apps I use on my iPhone. His company was considering getting into the iPhone business. Actually, not that many, I explained, because so many of them are just not that good. I work on my iPhone — tweeting, blogging, emailing and organizing — and don’t have time for every new "there’s an app for that."

The developer was a cyclist, as well, and eventually asked me which bikes apps I use. My phone is in my jersey pocket on rides and I’ve got other computers on board for my miles, speed, and power. They work very well. I had installed REI’s recently released Bike Your Drive on my iPhone (iTunes link), even though I hadn’t used it yet. The app lets cyclist track, view, and share their bicycling experiences. I pulled out my phone and demoed the app for the developer. Together we discovered it’s also not that good.

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and Microsoft Research’s SkyFinder searches the horizon by keyword  

One of the challenges for image-search tools is making sure the photos are accompanied by the right metadata or tags, making them easier to find in an online database. A newly unveiled Microsoft Research project uses an algorithm that analyzes images of the sky and automatically extracts key attributes — cloudy sky, blue sky, sunset, horizon, etc. — to help people search for specific types of photos.

The project, dubbed SkyFinder, is one of several Microsoft is presenting this week at SIGGRAPH 2009, the annual conference of the Association for Computing Machinery’s Special Interest Group on Graphics and Interactive Techniques.

SkyFinder is a research project, not a Microsoft product, so the online interface isn’t publicly available. But the company’s research can often end up making its way into Microsoft products. And given Microsoft’s need to innovate in Internet search, we wouldn’t be surprised to see this type of approach surface sometime soon in Bing or some other Microsoft offering.

In the meantime, Microsoft has released a video demo and a paper explaining the technology.

The research was conducted using hundreds of thousands of images of the sky, downloaded from Flickr and user groups.

"In an offline indexing process, a set of semantic sky attributes (e.g., category, layout, richness, horizon, sun position) are automatically extracted from each image," the researchers explain in the paper. "Then in an online search, the user can interactively search sky images based on any combination of preferred sky attributes."

Examples of possible search attributes include "a sky covered with black clouds, the horizon at the very bottom” (which returns the image set ‘b’ above), or “a clear blue sky with a flying object” (which returns image set ‘f’ above).

Researchers on the project were Litian Tao of Beihang University, Lu Yuan of the Hong Kong University of Science and Technology, and Jian Sun of Microsoft Research Asia.

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and InfoSpace looks to claw its way back into the search business  

Given all of the buzz around Bing and the market dominance of Google, is there really a chance for another search engine to emerge? Bellevue-based InfoSpace — which today unveiled an upgraded metasearch engine at InfoSpace.com — is trying to find out.

The company’s new offering compiles results across various search engines (Ask, Yahoo, Bing and Google) and incorporates recent Tweets on the subject at hand. In tests this morning, the site — which is clean and easy to navigate — performed well and the Twitter search function is quite nifty. But InfoSpace — which didn’t even register in comScore’s June search rankings — has a long, long way to go to become relevant in search. It also has something else working against it.

One has to wonder if there is really any value anymore in metasearch now that the market has essentially boiled down to two players (Microsoft and Google) who together hold more than 90 percent of the market. (Factoring in Microsoft’s recent deal with Yahoo.)

Rather than do a metasearch across what amounts to two powerful search engines, users simply can go direct to Google or Bing to find what they need.

InfoSpace has another thing working against it. In a strange move, the company abandoned the InfoSpace.com domain name as part of a business transaction nearly two years ago.

That forced the company — which continued to operate under the name InfoSpace Inc. — to invest in its other properties — including the DogPile search engine. (Can you imagine someone saying, ‘I just DogPiled it?’)

The company said today that it is excited to have the InfoSpace.com brand back in the fold, but the damage of having the flagship Web site operated by someone else for nearly two years is done.

And now InfoSpace — which was a contender in the search business in years past — essentially has to start over again.

“We’re thrilled to have InfoSpace.com back during an emerging time in search technology,” said John Rodkin, the new general manager of search at InfoSpace. “We added pioneering features like comprehensive Twitter search capabilities and configurable results to our latest search service, and we’re working on enhancing the site to meet our users’ interests even more.”

I’ll probably give InfoSpace a try based on what I’ve seen so far, but without a huge marketing effort to compete with the likes of Bing, I imagine it will be tough to gain a foothold.

InfoSpace did have $205 million in cash and cash equivalents on the books at the end of the first quarter, so it could turn up the marketing engines.

But is that money well spent given that Microsoft has promised to spend $80 million to $100 million promoting Bing?

Here’s a look at what InfoSpace is up against:

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Amazon.com launches shopping application for Google Android  

Amazon.com is continuing its march through the smartphone market. After launching shopping applications for the iPhone and BlackBerry earlier this year, the online retail giant is rolling out an app for Google Android phones. The Android app comes equipped with the "Amazon Remembers" feature that lets people snap photos of products and get pricing information. Amazon has also added a new function to Amazon Remembers, letting people use their Android phones to scan product barcodes.

I wonder if Amazon incorporated technology from its recent acquisition, SnapTell, into the new version of Amazon Remembers?

Here’s how Amazon describes the Amazon Remembers feature for Amazon App for Android:

Using the Amazon App for Android, customers can snap a photo of a product or scan a barcode for a fun and easy way to build a list of photographs showing products they want to remember for later, make price comparisons across multiple merchants, and purchase products from Amazon.com and thousands of other retailers on the Amazon.com site – without ever using the keyboard.

Amazon also has a Kindle application for iPhone to let users buy electronic books. But it’s not clear if Amazon will put the Kindle store on Android phones as well, given the tensions between Amazon and Google over the emerging e-book market.

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There’s been plenty of rumor and speculation over the past few months that one of the tech titans — Amazon, Apple, Google or Microsoft — will buy Twitter before it gets any bigger. (Click on each link for the speculation). If any of that chatter is to be believed, Bezos, Jobs, Schmidt or Ballmer may want to step up sooner rather than later.

The latest comScore numbers reported by TechCrunch indicate that the short form communications phenomenon continues to attract users at a rapid clip. It posted 44.5 million worldwide visitors in June, up 19 percent over the previous month.

TechCrunch says that Twitter now is bigger than ESPN.com and slightly smaller in audience than the BBC and Craigslist. Not bad for a company that’s got minimal revenue and only a few dozen employees.

At some point, it seems someone will want to tap that traffic base. But who will it be?

Of course, Amazon.com’s Jeff Bezos — an investor in Twitter — has his hands full with the recent purchase of Zappos. Microsoft too has its own integration issues ahead with a recently announced 10-year advertising pact with Yahoo.

So that leaves Google — whose CEO Eric Schmidt downplayed the possibility — or Apple. Or, there’s the possibility that another wild card could emerge. In fact, given the media’s fascination with Twitter it wouldn’t surprise me to see a buyer come out of those ranks.

Rupert Murdoch of News Corp. said earlier this year that he’s not interested in buying Twitter. But others out there may want a piece of the fast-growing service.

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and Zymo boosts sales, cuts net loss  

ZymoGenetics, which announced plans to cut its work force by 32 percent in April, reduced its net loss during the second quarter as it benefited from licensing deals and sales of Recothrom. The Seattle biotech lost $27 million, or 39 cents per share. That compared to a net loss of $37.4 million, or 54 cents per share for the same period last year.

Revenues came in at $22.6 million, an increase of $10 million over the second quarter of last year. The company finished the quarter with $118 million in cash and cash equivalents on the books.

That figure does not include a $25 million milestone payment from Bristol-Myers Squibb from July or an additional $70 million from the PEG-Interferon lambda collaboration agreement.

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and Report: Amazon vulnerable as e-reader market matures  

If Amazon.com ever wants to make the Kindle truly ubiquitous, it will have to find some other sales channels beyond its own website. At least, that’s the upshot of a new report on the electronic reader market from Forrester Research. The report says the first wave of tech-savvy e-reader adopters were an "easy sell" for Amazon. But the online retailer "isn’t well positioned" to keep control of the market as it matures, opening the door to rivals like Sony, Borders, and even Wal-Mart to grab the next wave of e-reader consumers, the report concludes.

Here’s how Forrester analyst Sarah Rotman Epps describes her conclusions in a blog post:

While early adopters of eReaders were a perfect storm of demographics for Amazon (they could afford the device, they have a need for the device in business travel and urban commuting, they like technology, and they buy lots of books online), future prospects for the devices look completely different. They’re more likely to be female, less tech optimistic, and they read a lot (on average, 5 books per month) but they buy and borrow books from multiple sources, as opposed to buying lots of books online.

The big takeaway is that this could spell trouble for Amazon, if competitors can move in to better serve the later waves of adopters who don’t have as strong a relationship with the eCommerce giant.

The Forrester report estimates the number of e-readers sold in the U.S. will top 3 million by the end of this year, and hit 13 million by the end of 2013.

Could Amazon ever team up with a brick-and-mortar retailer to sell Kindles, or even establish its own outlets?

Amazon has set up a website connecting Kindle enthusiasts with people thinking about buying a Kindle, and it’s developed a Kindle app for iPhone users, but so far its marketing and distribution efforts have remained online.

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It’s Bill Clinton as David and a Seattle non-profit as Goliath  

Bill Clinton is a master vote getter, so it’s no surprise that his non-profit Clinton Foundation is leading an online election to receive what could be a sizeable donation from the creator of Google’s Gmail. But the tiny Seattle non-profit Literacy Bridge — which has developed a small, portable audio device called a "Talking Book" — is at least staying in the race against the 42nd president.

The competition was created by Gmail lead developer Paul Buccheit, who two months ago wrote in a blog post: "I’m going to donate a bunch of money, but I want random people on the Internet to decide where it goes."

The PSBJ’s Clay Holtzman has details on the race — being conducted on Google Moderator – noting that The Clinton Foundation had almost twice as many votes (520) as Literacy Bridge (270).

It is a true David vs. Goliath battle. The Clinton Foundation had revenue of about $130 million in 2007, while Literacy Bridge (created by former Navy Officer and Microsoft employee Cliff Schmidt) had about $79,000 in revenue last year.

And it turns out that Literacy Bridge was actually the front runner until recently when the Clinton Foundation ramped up efforts, reports Holtzman. (You can’t count out Clinton who has been called "The Comeback Kid" before).

The Talking Book is currently being tested in Ghana. The nonprofit says the low-cost device is designed to "improve literacy skills for children and adults, while also enabling knowledge to be shared with those who do not have access to text."

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