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CONFIDENTIAL: INTERNAL ONLY
GOOGLERS ONLY (FULL TIME AND PART TIME EMPLOYEES)

I’m pleased to share some very, very good news with Googlers worldwide. But first let me say, on behalf of everyone on the management team, that we believe we have the best employees in the world. Period. The brightest, most capable group of this size ever assembled. It’s why I’m excited to come to work every day–and I’m sure you feel the same way. We want to make sure that you feel rewarded for your hard work, and we want to continue to attract the best people to Google.

So that is why we’ve decided…to give all of you a 10% raise, effective January 1st. This salary increase is global and across the board–everyone gets a raise, no matter their level, to recognize the contribution that each and every one of you makes to Google.

There’s more. We’ve heard from your feedback on Googlegeist and other surveys that salary is more important to you than any other component of pay (i.e., bonus and equity). To address that, we’re moving a portion of your bonus into your base salary, so now it’s income you can count on, every time you get your paycheck. That’s also effective January 1st. You’ll be receiving an email shortly with further details about these changes to your compensation. And one last thing…today we’re announcing that everyone will get a holiday cash bonus, too.

Googlers, you are what makes this company great, and our goal here is to recognize you for your contribution, in a way that’s meaningful to you. Thank you for all that you do, and for making Google a place where magic happens.

Eric

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diapers.com

By Dan Primack, Fortune.com

[excerpt]

A Zappos like purchase for the e-commerce giant.

“What Amazon fears most: Diapers” declared the cover of BusinessWeek earlier this fall. Now it’s clear that Amazon didn’t fear diapers, it just wanted them for itself. Fortune has learned that Amazon.com on Monday will announce that it has agreed to acquire Quidsi, the parent company of websites like Diapers.com and Soap.com. The purchase price is $540 million in cash, with Quidsi’s co-founders agreeing to multi-year employment contracts with Amazon (AMZN). The price tag is $200 million over what Quidsi was valued at in its latest round of venture financing.

The site, launched in January 2005, was started by Marc Lore and Vinnie Bharara, who grew up together in New Jersey. A source says that this is not Amazon’s first offer for their company, which had raised over $78 million in venture capital funding. The source says the company also received a (presumably lower) buyout offer from Wal Mart (WMT). (Messages left for Lore at home and to Bharara, Amazon PR, and Wal-Mart PR by email and phone weren’t returned by time of posting.)

So what do these giants want with a diaper and soap dispenser? A rapidly growing company with a devoted base of customers that has figured out how to warehouse and ship commodity items quickly and profitably. Another company with that same premise: Zappos.com, which Amazon snapped up for nearly $900 million in 2009.

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Below is the transcript:

First, let me discuss iPhone. We sold 14.1 million iPhones in the quarter, which represents a 91 percent unit growth over the year-ago quarter, and was well ahead of IDC’s latest published estimate of 64 percent growth for the global smartphone market in the September quarter. And it handily beats RIM’s 12.1 million BlackBerrys sold, in their most recent quarter ending in August. We’ve now passed RIM. And I don’t see them catching up to us in the foreseeable future.

They must look beyond their area of strength and comfort, into the unfamiliar territory of trying to become a software platform company. I think it’s going to be a challenge for them, to create a competitive platform, and to convince developers to create apps for yet a third software platform after iOS and Android. With 300,000 apps on Apple’s App Store, RIM has a high mountain ahead of them to climb.

But what about Google? Last week, Eric Schmidt reiterated that they are activating 200,000 Android devices per day, and have around 90,000 apps in their app store. For comparison, Apple has activated 275,000 iOS devices per day, on average, for the past 30 days, with a peak of almost 300,000 iOS devices per day, on a few of those days. And Apple has 300,000 apps on its App Store.

Unfortunately, there is no solid data on how many Android phones are shipped each quarter. We hope that manufacturers will soon start reporting the number of Android handsets they ship each quarter, but today that just isn’t the case. Gartner reported that about 10 million Android phones were shipped in the June quarter, and we’ll wait to see if iPhone or Android was the winner in the most recent quarter.

Google loves to characterize Android as “open,” and iOS and iPhone as “closed“. We find this a bit disingenuous, and clouding the real difference between our two approaches. The first thing that most of think about when we hear the word “open” is Windows, which is available on a variety of devices. Unlike Windows, however, where most PCs have the same user interface and run the same apps, Android is very fragmented.

Many Android OEMs, including the two largest, HTC and Motorola, install proprietary user interfaces to differentiate themselves from the commodity Android experience. The user’s left to figure it all out. Compare this with iPhone, where every handset works the same.

Twitter client TwitterDeck recently launched their app for Android. They reported that they had to contend with more than a hundred different versions of Android software on 244 different handsets. The multiple hardware/software iterations presents developers with a daunting challenge. Many Android apps work only on selected Android handsets, running selected Android versions. And this is for handsets that have been shipped less than 12 months ago. Compare this with iPhone, where there are two versions of the software, the current and the most recent predecessor, to test against.

In addition to Google’s own app marketplace, Amazon, Verizon, and Vodafone, have all announced that they are creating their own app stores for Android. So there will be at least four app stores on Android, which customers must search among and find the app they want, and developers will need to work with to distribute their apps and get paid. This is going to be a mess for both users and developers. Contrast this with Apple’s integrated app store which offers users the easiest-to-use largest app store in the world, preloaded on every Apple iPhone. Apple’s app store has over three times as many apps as Google’s marketplace, and offers developers one-stop shopping to get apps to market easily, and to get paid swiftly.

You know, even if Google were right, and the real issue is closed versus open, it is worthwhile to remember that open systems don’t often win. Take Microsoft’s Plays For Sure music strategy which used the PC model, which Android did as well, of separating the software components from the hardware components.

Even Microsoft finally abandoned this open strategy in favor of copying Apple’s integrated approach with its Zune player, unfortunately leaving their OEMs empty-handed in the process.

Google flirted with an integrated approach with their Nexus One phone. In reality, we think the open versus closed argument is just a smokescreen to try and hide the real issue: which is, what’s best for the customer – fragmented versus integrated.

We think Android is very, very fragmented, and becoming more fragmented by the day. And as you know, Apple strives to the integrated model so that the user isn’t forced to be the systems integrator. We see tremendous value at having Apple, rather than our users, be the systems integrator. We think this a huge strength of our approach compared to Google’s: when selling the users who want their devices that just work, we believe that integrated will trump fragmented every time.

And we also think that our developers could be more innovative if they can target a singular platform, rather than a hundred variants. They can put their time into innovative new features, rather than testing on hundreds of different handsets. So we are very committed to the integrated approach no matter how many times Google tries to characterize it as closed. We are confident that it will triumph over Google’s fragmented approach, no matter how many times Google tries to characterize it as open.

Second, I’d like to comment on the avalanche of tablets poised to enter the market in the coming months.

First, it appears to be just a handful of credible entrants, not exactly an avalanche. Second, almost all of them use 7-inch screens, as compared to iPad’s near 10-inch screens. Let’s start there.

One naturally thinks that a 7-inch screen would offer 70 percent of the benefits of a 10-inch screen. Unfortunately, this is far from the truth. The screen measurements are diagonal, so that a 7-inch screen is only 45 percent as large as iPad’s 10-inch screen. You heard me right – just 45 percent as large.

If you take an iPad and hold it upright in portrait view, and draw an imaginary horizontal line halfway on the screen, the screen on the 7-inch tablets are a bit smaller than the bottom half of the iPad’s display. This size isn’t sufficient to create great tablet apps, in our opinion.

Once you increase the resolution of the display to make up some of the difference, it’s meaningless unless your tablet also includes sandpaper, so that the user can sand down their fingers to around one-quarter of their present size. Apple has done extensive user testing on user interfaces over many years, and we really understand this stuff. There are physical limits on how close you can put elements on a touch screen before users can not reliably tap, flick or pinch them. This is one of the key reasons we think that 10-inch screen size is the minimum size required to create great tablet apps.

Third, every tablet user is also a smartphone user. No tablets can compete with the mobility of a smartphone. It’s the ease of fitting into your pocket or purse. Its unobtrusiveness when used in a crowd. Given that all tablet users will already have a smartphone in their pocket, giving up precious display area to fit a tablet in their pocket is clearly the wrong tradeoff. The 7-inch tablets are tweeners – too big to compete with a smartphone, and too small to compete with an iPad.

Fourth, almost all of these new tablets use Android software, but even Google is telling these tablet manufacturers not to use their current release, Froyo, for tablets and to wait for a special tablet release next year. What does this mean when your software supplier says not to use your software in their tablet, and what does this mean when you ignore them and use it anyway?

Fifth, iPad now has over 35,000 apps on the App Store. This new crop of tablets will have near zero.

And sixth and last, our potential competitors are having a tough time coming close to iPad’s price point, even with their far smaller, less-expensive screens. The iPad incorporates everything we’ve learned about building high-value products… for iPods and Macs. We create our own A4 chip, our own software, our own battery chemistry, our own enclosure, our own everything. And this results in an incredible product at a great price.

The proof of this will be in the price of our competitors’ products, which will likely offer less, for more. These are among the reasons that we think that the current crop of 7-inch tablets are going to be DOA: Dead on Arrival. Their manufacturers’ will learn the painful lesson that their tablets will be too small, and increase the size next year, thereby abandoning both customers and developers who jumped on the 7-inch bandwagon with a …product. Sounds like lots of fun ahead.

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[article excerpt]

That’s just on Verizon Wireless. An additional 20 or so phones running Android are available in the United States, and there are about 90 worldwide.

But if your preference is an Apple-powered phone, you can buy — an iPhone.

That very short list explains in part why, for all its success in the phone business, Apple suddenly has a real fight on its hands.

Americans now are buying more Android phones than iPhones. If that trend continues, analysts say that in little more than a year, Android will have erased the iPhone’s once enormous lead in the high end of the smartphone market.

But this is not the first time Apple has found itself in this kind of fight, where its flagship product is under siege from a loose alliance of rivals selling dozens of competing gadgets.

In the early 1980s, the Macintosh faced an onslaught of competition from an army of PC makers whose products ran Microsoft software. The fight did not end well for Apple. In a few years, Microsoft all but sidelined Apple, and the company almost went out of business.

Can Apple, which insists on tight control of its devices, win in an intensely competitive market against rivals that are openly licensing their software to scores of companies? It faces that challenge not only in phones, but also in the market for tablet computers, where the iPad is about to take on a similar set of rivals.

“This is a really big strategic question,” said Toni Sacconaghi, an analyst with Sanford C. Bernstein and Company. “No one knows whether openness will ultimately prevail as it did on the PC.”

Apple declined to comment on the issue.

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AOL considering offer for Yahoo

By JESSICA E. VASCELLARO And ANUPREETA DAS, Wall Street Journal

[excerpt]

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[excerpt]

AT&T Inc. is about to lose its lock on the iPhone.

Apple Inc. is making a version of its iPhone that Verizon Wireless will sell early next year, according to people familiar with the matter, ending an exclusive deal with AT&T and sharpening the competition with Google Inc.-based phones.

Walt Mossberg and Marcelo Prince discuss the possible benefits and drawbacks of having the iPhone on Verizon’s wireless network, including whether it will suffer some of the same problems that have plagued AT&T. Plus, Verizon readies 4G service.

While Apple is on track to sell 40 million iPhones across the globe this year, the touchscreen handset is facing pressure in the U.S. from phones running Google’s Android software, which have been heavily promoted by Verizon Wireless, the biggest U.S. carrier by subscribers.

Apple plans to begin mass producing the new iPhone by the end of the year, and it would be released in the first quarter of 2011, these people said. The phone would resemble the iPhone 4 currently sold by AT&T, but would be based on an alternative wireless technology used by Verizon, these people said.

The new iPhone spells the end of the exclusive arrangement that AT&T has had since 2007, when Apple Chief Executive Steve Jobs introduced the original iPhone. Since then, the iPhone fueled much of the AT&T’s growth.

Verizon Wireless has been meeting with Apple, adding capacity and testing its networks to prepare for the heavy data load by iPhone users, according to one person familiar with the matter. The carrier is seeking to avoid the kind of public-relations hit that AT&T took when the boom in data-hungry iPhones overtaxed its network, especially in New York and San Francisco.

Walt Mossberg and Marcelo Prince discuss the possible benefits and drawbacks of having the iPhone on Verizon’s wireless network

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