Microsoft still has dreams to the contrary, but Google has won the search game. With an estimated 70 percent market share worldwide and nearly $25 billion of revenue, the company has left the rest of the industry in the dust.

But what's next? Search growth is slowing, and there's not much more market share to gain. So unless Google wants to have all the sexiness of a utility, it needs to find another growth engine.

There are three possibilities, says Ken Auletta, author of the new book Googled: The End Of The World As We Know It:

• YouTube
• Mobile
• Internet-based applications (like email)

None of these businesses is as profitable as search, and Google has been trying to build all three for years.

But YouTube's new emphasis on professionally produced content has radically improved the unit's financial performance.

And as evidenced by the advertising blitz accompanying Motorola's new "Droid" phones, the mobile business is finally gaining traction.

Again, neither if these businesses currently have economics that look anything like those of the search business. But people didn't think much of search economics in the early days, either.

It's difficult to deny Google's transformative -- and disruptive -- power on many traditional businesses from newspapers to book publishing. Now a decade after its founding by two Stanford University students, Larry Page and Sergey Brin, the digital media behemoth is experiencing growing pains -- while reaching for even more.

"And they're not always well-equipped for those challenges," says our guest Ken Auletta, author of the new book "Googled: The End of the World as We Know It." Based on more than a dozen visits to the tech campus, Auletta had access to the founders, CEO Eric Schmidt and about 150 present and former employees for the book.

Challenges ahead.

From The Business Insider, Oct. 28, 2009:

Google is about to make life trickier for GPS mapping companies, and could make its Android platform more attractive: It's releasing a new, free turn-by-turn GPS mapping service, which will launch next week on Motorola's Droid phone.

It will follow on more Android 2.0 phones, and could eventually follow on Apple's iPhone. According to Gizmodo, "Google implied they are working closely with Apple now on it."

This is potentially bad news for GPS companies such as TomTom and Navigon and telcos like AT&T, which charge up to around $100 per year for this sort of service.

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From The Business Insider, Oct. 23, 2009:

Microsoft delivered a solid third quarter. The stock is up 7% in the pre-market.

EPS of $0.40 fell 17%, but beat Street estimates of $0.32 EPS.

Revenue was $12.92 billion, a 14% drop from a year ago, but it beat estimates of $12.32 billion.

Microsoft's web properties continue to sputter. Online services division revenue is $490 million versus $520 million a year ago. The operating loss on Online services is $480 million versus a $321 million loss a year ago.

The Entertaiment and Devices Division had $1.9 billion in revenue, which is flat year over year. The operating income for the division soared to $312 million from $159 million a year ago.

Here's the numbers

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From The Business Insider, Oct. 22, 2009:

Amazon just came out with a great Q3, soundly beating expectations. The stock is popping 9% after hours.

EPS was $0.45 versus Street estimates of $0.33. Revenue came in at $5.04 billion vs. estimates of $5.03 billion.

Importantly, Amazon also raised Q4 guidance. Net sales are expected to be between $8.125 billion-$9.125 billion. The Street was expecting $8.11 billion.

In the release, Jeff Bezos says the "Kindle has become the #1 bestselling item by both unit sales and dollars – not just in our electronics store but across all product categories on Amazon.com."

Here's a quick take from JP Morgan's Imran Khan:

• The revenue growth rate accelerates to 28% Y/Y from 14% in 2Q09. We had modeled 17% growth....

  Click "more" to view the full post.

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The last few years for Microsoft have been tantamount to abject humiliation.

Windows Vista bombed, once-declared-dead Apple roared back to steal computer-and-mind-share, Windows Mobile disappeared, and a decade of futility on the Internet continued.

But now, for a day, Microsoft is king again.

Windows 7, an operating system that even Redmond skeptics describe as "great", launches with enormous fanfare. So eager are customers to get their hands on the thing that it's already the best pre-order selling product on Amazon.

And then there was yesterday's Twitter-Bing integration. Not only was Microsoft the first major search engine to take this obvious and important step, the announcement forced an embarrassingly lame response from search giant Google: A blog post promising that, someday, it would offer Twitter integration, too.

Will Bing's Twitter integration allow Bing to gain real share again Google?

Unlikely.

But this and Windows 7 demonstrate that, at least for a day, Microsoft's competitive mojo is finally back again.

From All Things Digital, Oct. 19, 2009:

Apple’s September quarter saw, among other things, the release of Snow Leopard, the latest upgrade to its OS X operating system andthe first public appearance of CEO Steve Jobs, who’d been on a medical leave of absence for a liver transplant. It was also the first full period since the company launched the iPhone 3GS, in late June.

No wonder it was a blowout quarter.

After market close Monday, Apple reported a fiscal fourth-quarter profit of $1.67 billion, or $1.82 a share, on revenue of $9.87 billion. That topped the estimates of analysts surveyed by Thomson Reuters, who’d expected the company to earn $1.42 a share on revenue of $9.2 billion.

The company sold 3.05 million Macs during the quarter, a 17 percent increase over last year. It sold 10.2 million iPods, eight percent decline from a year-ago quarter.

And iPhones? It sold 7.4 million of those — seven percent more than it did during the same period last year. So much for those supply-chain issues that some analysts warned might undermine iPhone sales.

“We are thrilled to have sold more Macs and iPhones than in any previous quarter,” said Steve Jobs, Apple’s CEO. “We’ve got a very strong lineup for the holiday season and some really great new products in the pipeline for 2010.” [Editor's Note: "...really great new products"--is that a euphemism for tablet?]

Apple shares, which closed at $189.86 today, are spiking as I write this. At $203.90 they’re up more than seven percent in extended trading as I write this...

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From All Things Digital, Oct. 19, 2009:

When Apple reports its fourth-quarter earnings today, investors are hoping–actually, expecting–that the iconic computer company will look a lot now as it always has.

In other words, don’t go changing and it will please us.

Wall Street is anticipating, as it has throughout the econalypse, another estimate-beating performance from Apple.

While Apple has signaled it would be making up to $1.23 a share for the quarter, the “whisper” number for the quarter is much higher.

Revenue is also expected to rise strongly to upwards of $9 billion.

The reason for all this happy talk? Strong sales of all of Apple’s innovative hardware products, including iPods, iPhones, computers, as well as big, fat profit margins that come with the upgrades this past quarter by consumers to its new Snow Leopard operating system software.

And, of course, the stock has been showing all this investor love by–as BoomTown has noted recently–defying gravity.

Apple shares are up just above 120 percent since the beginning of the year.

It closed at $188.05 on Friday, giving it a market valuation of $168.5 billion.

Whether it will continue going up is a big question of investors, although Apple is entering the holiday season, which is one in which it typically does well.

Plus, many are expecting the company to goose excitement for 2010 with the announcement of its secret-but-everyone-knows tablet offering.

That said, Microsoft also officially is launching a new operating system out this week–Windows 7–which is expected to give Apple some clear competition.

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From The Business Insider, Oct. 5, 2009: 

With business expansion a risky proposition for many companies given the uncertain future, acquiring  established companies looks pretty compelling.

Many potential acquisition targets are doing fine in this downturn, yet are arguably trading at historically discounted levels.

Some are sitting on mountains of net cash, which can total as much as 60% of their share price.

Other companies have already rejected recent buy-out offers and are very much in-play.

1. Cephalon

Cephalon is a leading biopharmaceutical company developing treatments for sleep-related disorders, cancer, and pain.

While its shares have been under pressure due to the threat of generic competition for its key narcolepsy drug Provigil, these concerns may be overblown.

The company already has a next generation narcolepsy drug Nuvigil set up to replace Provigil. This new drug might even be approved to treat jet lag as an additional indication.

Cephalon's cancer and pain portfolio is both promising and already adding value, contributing to over 35% of the company's revenue.

All-in-all, consensus expects the company to earn over $6 a share for 2010, putting it at 2010 PE of under 10x. CEPH's balance sheet also has more cash than debt, thus is net cash.

Cephalon recently raised money and could be looking for acquisitions itself, yet it looks appealing to a larger pharmaceutical company in need of growth as well.

Acquiring CEPH is probably less risky and cheaper than doing R&D from scratch.

2. Activision-Blizzard

Establishing a hit video game is difficult, but once achieved, they tend to become repeatable cash cows.

That's why Activision-Blizzard could be an appealing industry-consolidation target for someone larger and cash-rich like Electronic Arts or even, we'll go out on a limb here, Microsoft.

The company owns Guitar Hero, which became so popular with gamers that there's a South Park episode dedicated to it.

It also owns hit franchises such as Call of Duty and World of Warcraft. Christmas is usually kind to video game sales, and ATVI's latest Call of Duty: Modern Warfare 2 is expected to be a top-seller this year.

Without even considering income from the upcoming Christmas season, ATVI already has net cash totaling about 20% of its market cap. Strip away this net cash from the company's market price and ATVI trades at about 12x 2010 earnings.

While recent insider selling requires scrutiny, ATVI could be cheaper than developing hit games from scratch.

3. Dolby Labs

Dolby has been blowing our minds since 1965 and is one of the best known brands for sound technology.

While the economic downturn may have stagnated the company's earnings growth, this brand isn't going anywhere because it is:

A) Extremely well established as a leader.

B) Essentially debt free.

C) Sitting on half a billion dollars of cash.

D) Highly cash-generative and profitable with near-50% operating margins.

These days, when growing a new line of business is harder than ever, Dolby presents an interesting alternative for an electronics company looking to put money to work.

Thing is, would Ray Dolby ever sell his controlling stake? Maybe for the right price...

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Considering the recession and fickle consumer tastes, these are awfully difficult days to be a retailer. For video chain Blockbuster, already no stranger to tough times, it just keeps getting harder.

With the rise of competitors such as movie-mailer Netflix and Redbox, whose flick-dispensing machines can be found in grocery stores all over, Blockbuster is being forced to reset, saying it may close nearly 1,000 stores by the end of 2010 as its once-certain dominance continues to be threatened by rivals.

According to a regulatory filing Tuesday, Blockbuster expects to shut between 810 and 960 locations by the time next year wraps up, a number that would exceed more than one-fifth of its current U.S. shops.

That's quite a step up, or back depending on your perspective, from Blockbuster's previous plan, which anticipated 380 to 425 closings in that time frame. Here's how the corporate office sees it: Blockbuster characterizes 35% of its stores as "core," while saying 47%, or nearly half its total, are profitable, but still "non-core." The remaining 18% aren't turning a profit.

Ugh. That about sums it up at this point. Earlier this year, there were worries that Dallas-based Blockbuster might have to consider bankruptcy before it diffused that crisis. How about 2008, though? Another close call. Back then, it looked at a merger with Circuit City -- the electronics seller that did end up bankrupt. Now, store shutdowns...

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