It’s no secret that iPhone and iPod Touch owners like to play games. On average, iPhone and Touch owners have 10 games on their devices.

How will the portable gaming giants respond?

Over the weekend, Japan’s Nikkei Business Daily reported that Sony planned to develop a new product that combined the functions of its portable game player, the P.S.P., and Sony Ericsson’s mobile phones. The Nikkei said the move was an effort to better compete with the iPhone and iPod Touch, which have become popular platforms for games among their owners.

On Monday, a spokesman for Sony Ericsson, Sony’s phone-making joint venture, dismissed the report as “purely speculative,” and said the company did not comment on rumors, speculation or future product announcements.

The Nikkei’s report follows the release of the third-generation iPhone and the latest upgrade to its mobile operating system, which are appealing to game developers in particular. The newest software enables in-application purchases, which could easily be applied to unlocking new weaponry or additional gaming levels. In addition, many game developers have expressed excitement over the new graphics capabilities of the iPhone 3GS, which allows for better 3-D graphics.

Analysts agree that traditional gamers aren’t likely to give up their big-name titles and D-Pads for a cellphone, but the wildfire successes of Apple’s App Store is having an effect on the gaming industry. In October, Sony plans to release a new version of its flagship portable gaming device called the PSPGo that won’t use cartridges at all; rather it will deliver software directly to the device — just like an iPhone.

In May, Reggie Fils-Aime, president and chief operating officer of Nintendo of America, told my colleague Matt Richtel that the company did not have plans to add phone functionality to the Nintendo DS or any of its hand-held game devices.

Neil Young, a veteran of the gaming industry and founder of ngmoco, a publishing company that creates titles solely for the iPhone, thinks the iPhone one-ups the hand-held as a gaming platform.

“For the most part we sort of feel like the iPhone and the iPod Touch have all the necessary pieces to be a killer gaming platform — a unique blend of inherent device capability coupled with usability,” Mr. Young said.

Recommend this article...

Edward Snyder, a cellphone industry analyst with Charter Equity Research, often plays the role of cautious pessimist. For instance, he questions whether smartphones or data services will catch on as much as carriers hope, and he unreservedly criticizes what he characterizes as their underperforming cellular networks.

So the report he issued Monday bears notice. Mr. Snyder said that his sources in the manufacturing and retail channels indicated that Palm had sold 300,000 phones — considerably higher than some estimates by analysts — and that the company was struggling to keep up with demand. Mr. Snyder estimates that the company now is producing 15,000 units a day and will ship one million phones to Sprint in the first full quarter of production.

Mr. Snyder wrote in his report that he believes Palm will rapidly seek to expand its market — despite the exclusive contract it struck with Sprint for the Pre. Mr. Snyder notes that the deal doesn’t preclude Palm from selling other devices that are built around the Pre’s underlying operating system WebOS to competing carriers. Mr. Snyder predicts Verizon will sell a WebOS device built by Palm in early 2010 and AT&T will introduce one shortly thereafter.

But would AT&T introduce a device that could be seen as competing with the iPhone? Complicated question. So far, Palm’s marketers have sought to position the Pre not as an iPhone Killer but as a device that can succeed without taking on Apple’s iconic device head-on.

Recommend this article...

YouTube confirmed on Tuesday that Steve Chen, a co-founder and most recently YouTube’s chief technology officer, was no longer working at the company. Mr. Chen left some time ago to work on unspecified engineering projects at its parent, Google.

In an e-mail, YouTube spokesman Ricard Reyes said: “Steve shifted his focus to help with some Google engineering projects. He’s still involved with YouTube and invested in its success.”

Mr. Chen co-founded YouTube in 2005 with Chad Hurley, who remains chief executive, and Jawed Karim who left the company early on to attend graduate school. Little more than a year later, Google purchased YouTube for $1.65 billion, turning the three founders into millionaires many times over. Mr Hurley’s holdings were worth more than $345 million in February of 2007, Mr. Chen’s more than $326 million, and Mr. Karim’s more than $64 million.

Mr. Chen’s move, which was first reported by the industry blog AllThingsD, was never officially announced. In fact, the company’s Web site still lists him as chief technology officer.

Recommend this article...

Over 1 million units of the iPhone 3G S have been sold since Friday's launch, Apple claims. The millionth phone is said to have been sold by the end of Sunday, beating even optimistic early forecasts closer to 700,000. The figure also trumps the sales performance of the iPhone 3G, which sold a million units on its opening weekend, but required 21 countries instead of just eight.

Although underestimating sales figures by 250,000 to 500,000, Piper Jaffray analyst Gene Munster notes that based on in-store traffic in New York City and Minneapolis, some 28 percent of people were switching to AT&T to pick up an iPhone this year. If accurate, the number is a decline from 38 percent in 2008, and 52 percent in 2007. AT&T's ability to draw people through the iPhone is shrinking, Munster comments.

Some 56 percent of those surveyed were said to have been upgrading from an older iPhone however, a jump from 38 percent last year, potentially indicating high brand loyalty. 43 percent were buying a 32GB 3G S, as compared to the 66 percent who opted for the previous highest capacity (16GB) with the 3G, and 95 percent who chose 8GB over 4GB with the first iPhone. 16GB appears to be the ideal capacity for many people, Munster suggests.

Also notable is that among the people buying their first iPhone, 12 percent were switching from a BlackBerry, up from 2008's 6 percent. Apple may be slowly gaining ground with business users, amongst whom BlackBerries are standard. Figures on Android, Palm, Symbian and Windows Mobile use have not been published.

In a tangential note, Apple comments that over 6 million people have downloaded the iPhone 3.0 firmware in five days.

Recommend this article...

Silicon Valley entrepreneurs are known for their eternal optimism, which prevails even when their start-ups face near-death experiences. Elon Musk, the chief executive of electric car start-up Tesla Motors, is one such entrepreneur.

After each major bump in the road for Tesla, rumors swirl that the company will not make it. In the last year, it has kicked out one C.E.O., given up on raising $100 million in venture capital and delayed production of its next car, the Model S sedan.

Yet in a letter to customers and potential customers on Wednesday, Mr. Musk said Tesla is right on track. The company will be profitable by mid-year, unveil a prototype of the Model S in March, open new showrooms for its Roadster sports car and likely get a loan from the federal government to produce the Model S, Mr. Musk wrote.

He also signaled that Tesla is growing its side business of building electric powertrains for other car companies. That has been the only part of Tesla’s business that is profitable. In January, the company signed on to build battery packs for Daimler electric Smart cars. “The deal is likely to be the first in a series of strategic partnerships between Tesla and other auto manufacturers to engineer and produce electric cars,” Mr. Musk wrote.

Despite all the hype around Tesla, it has so far delivered only 200 Roadsters and has been losing money. Still, Mr. Musk insisted that the Roadster business will also be profitable by the summer. Though some people have canceled their orders because of financial difficulties, Mr. Musk said Tesla has orders for 1,000 more cars and a wait list through November.

Tesla originally estimated that each Roadster would cost $65,000 to produce but later determined that it actually cost $140,000 to produce. Tesla has since decreased the production cost, and it has increased the price tag for buying one to $109,000.

Tesla raised $40 million in convertible debt in December. “It appears highly likely that Tesla will meet the goal promised to those investors of becoming profitable by mid-year,” Mr. Musk wrote.

The comparatively affordable Model S is having more trouble. Its production has been repeatedly delayed and is now slated for 2011, but that is dependent on a $350 million, low-interest Department of Energy loan, for which Tesla has applied. Mr. Musk wrote that the D.O.E. informed Tesla that it expects to disburse funds in four to five months, but Tesla has not yet gotten confirmation that it will receive any funds, said Tesla spokeswoman Rachel Konrad.

Even if the money comes through, Tesla does not have a place to build the Model S plant. Though it announced in September that it would build the plant in San Jose, Calif., Tesla is now negotiating with other cities. That is because the D.O.E. gives preference to companies building plants on previously developed land, and the space in San Jose does not meet that criteria, Ms. Konrad said. Once Tesla raises money and finds a site, it will take 24 to 30 months to start producing the car, she said.

Mr. Musk is convinced that once people see and drive Tesla cars, they will be eager to become customers. Tesla has signed leases to open showrooms in Chicago and London later this year and is finalizing leases in four other cities. “After all, what’s the point of driving another exotic sports car when it is slower than a Tesla and damages the environment?” he wrote.

Recommend this article...

If Microsoft doesn't purchase all of Yahoo or at least their search business by 2010, they'll be getting out of the online ad business, according to analysts at Cowen and Company.

In a research note released today, analysts Kevin Kopelman and Jim Friedland have concluded that Microsoft's respectable third quarter earnings are still troubling for Microsoft's online ad business:

None of Microsoft's online initiatives have gained traction and we do not believe the company's current strategy will result in a change in the status quo. We estimate that the OSB unit will have a 7-8 percent drag on Microsoft's earnings in FY2009. As the economy slows, we believe pressure will increase on the company
to focus on profitable initiatives.

Microsoft's online services business (OSB) grew 15 percent in the third quarter (compared to Google's 31 percent growth and Yahoo's 9 percent), but the company's OSB is operating with a loss of $480 million on revenues of $770 million.

After Microsoft's offer to purchase Yahoo this summer was rejected, Microsoft has stated that it is no longer interested in the portal. However, as Yahoo's search partnership with Google languishes in a Justice Department antitrust investigation, Yahoo's prospects are looking more grim. If the deal fails, Yahoo may be available at a price far lower than Microsoft originally offered. And Friedland and Kopelman seem to think that Microsoft's online advertising hopes are contingent on some sort of Yahoo partnership.

As they see it, Microsoft has three options over the next 18 months: they can purchase a 100 percent stake in Yahoo, acquire Yahoo's search business, or exit the online ad business. Even the company's exit is tied up in Yahoo. They see a possbile exchange of MSN/Live.com for a minority stake in Yahoo.

Recommend this article...