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EarthLink CEO Rolla Huff said last week when the company announced its second-quarter earnings that it is interested in buying AOL’s dial-up business. He didn’t give specifics, but he said that AOL’s 8.7 million subscribers would provide a big revenue boost to the company. EarthLink currently has only 2.2 million dial-up subscribers.

Time Warner has been talking about splitting the company into two different entities for a while now. And it’s been a main focus of Time Warner Chief Executive Jeff Bewkes, who took over as CEO seven months ago. AOL has long been viewed as a problem for Time Warner, as its dial-up business declines and its advertising business struggles to compete.

Even though dial-up is a dying business, it still generates cash and a predictable revenue stream, which makes AOL’s dial-up business particularly attractive to EarthLink and potentially other dial-up providers.

But separating the business hasn’t been as easy as it sounds as the company tries to figure out how to divide revenue, staff, and liabilities. Earlier, Bewkes had said he expected to have the process completed by the end of the second quarter. Time Warner will announce second-quarter results on Wednesday.

In the past few weeks, the hubbub of an AOL-Yahoo, or AOL-Microsoft deal has quieted down, following a truce between Yahoo and its investor activist Carl Icahn, who was waging a proxy battle with the hope of pushing Yahoo and Microsoft to do a deal.

Time Warner is expected to announce Wednesday that it has completed the internal process of separating AOL’s dial-up Internet access business from its advertising business, the newspaper said.

Time Warner has taken a step closer to splitting up AOL’s business, The Wall Street Journal reported Monday.

Once the separation of AOL’s advertising-content and dial-up businesses is concluded, it may aid potential suitors like Yahoo and Microsoft in sizing up an offer price.

CNET News senior writer Dawn Kawamoto contributed to this report.

And in the latest AOL-Yahoo turn of events, Time Warner nixed any plans for former executive Jonathan Miller to serve on Yahoo’s board, citing his no-compete clause.

AOL has continued to talk with Yahoo as the on-again-off-again Yahoo-Microsoft buyout talks plodded along, and later expanded to involve a potential AOL-Microsoft deal.

Yahoo reportedly turned to Time Warner and its AOL division as a potential white knight, after Microsoft announced its unsolicited bid for the company in February.

Time Warner has been examining several options with respect to splitting up the company, including selling off both pieces of the business or partnering with other companies.

After months of incubation as a mere preview download, Yahoo Messenger for Vista is now a full-fledged…beta. No matter, let the feedback loop continue with this dark and gleaming desktop chat application that elevates certain aspects of the instant messaging experience while falling a step behind in others. The new look and feel is certainly impressive, and beloved avatar and emoticons take center stage alongside the tinted display. But the multiprotocol IM client Digsby is snapping up a loyal following, and its adoption of Facebook chat adds strength to strength. Is Yahoo’s effort strong enough to win back Vista defectors?

We do know that Apple has applied for a patent on a clamshell-style iPhone, so it might be heading in that direction before it tackles slider phones. There’s certainly plenty of room for several different styles in the fast-growing smartphone market, and Apple might be wise to hedge its bets.

Could Apple have a slider-style
iPhone up its sleeve?

Since the iPhone was released last year, there has been a noticeable uptick in phones with touch-screen interfaces from other phone makers and carriers. Still, as The Register notes, an awful lot of slider-style phones are sold every year because people still like keyboards.

But Apple has invested so much in the software that runs the iPhone that I would be surprised if it changed the game so early in the life of the product. Apple CEO Steve Jobs has said several times that the beauty of the touch-screen approach is that any button you need can be simply programmed with the software, rather than having to develop the software around the buttons.

The lack of a hardware keyboard is said to be a detriment for business users who are hooked on their BlackBerrys, and the iPhone’s touch-screen keyboard certainly does take some getting used to in the first couple of weeks. The report suggests that a hardware-keyboard iPhone will be out around this time next year assuming Apple can work out the kinks.

(Credit:
CNET Networks)

I can’t decide what I think about this notion. It’s not completely out of the question that Apple would at least be thinking about a slider-style phone; some designs are quite popular with young and old alike. And we’ve long expected Apple to eventually release a family of iPhones similar to its strategy for the
iPod product line, with different form factors and capabilities targeted at different groups.

Next year's iPhone might be hiding a keyboard underneath that touch-screen, according to a report.

That’s what The Register thinks, reporting Monday that Apple has shown off prototypes of an iPhone with a hardware keyboard to certain executives at wireless operators. The current iPhone famously comes with only one hardware button that returns the user to the home screen, with the rest of the buttons enabled in software.

Troubles at two major Wall Street securities firms will have ripple effects that could stifle mergers and acquisitions in the technology industry and further dampen the market for initial public offerings. Or so say financial pundits who are examining the potential fallout of Lehman Brothers’ bankruptcy, the $50 billion sale of Merrill Lynch to Bank of America, and the $85 billion loan to insurance giant American International Group in order to avoid its own financial crisis.

ZwinkyCuties.com is a spin-off of IAC’s teen Web site for kids 13 years old and older called Zwinky.com, a 2-year-old Web site the company says has more than 16 million registered users globally and 6 million unique visitors per month. It’s clear from the Zwinky Cuties launch that the company is gunning for another big media company, Disney. Zwinky Cuties will compete head to head with Disney’s Club Penguin, another virtual world designed for kids in a similar age range.

Google’s chief economist, Hal Varian, said “flawed assumptions” and “questionable methodology” undermine a SearchIgnite study that predicted a 22 percent ad price increase resulting from the Yahoo-Google deal.

He reiterated Google’s position that the partnership with Yahoo, signed in August, doesn’t require approval–though, of course, regulators could raise objections after the fact. Some are concerned that the partnership, under which Yahoo will show some Google search ads, could undermine Yahoo’s independence and give even more of market power to Google.

Cell phones have become almost as important to American teens as the clothes they wear, according to a nationwide survey of teenagers. The survey found that teens feel that cell phones have become a vital part of their identities. They also believe that they can gauge a peer’s popularity or status by the phone he or she uses.

In a statement, SanDisk said the offer undervalues the company and charged Samsung with “an opportunistic attempt” to exploit a depressed stock price, as well as “the uncertainty resulting from the unresolved patent cross-license agreement renewal with Samsung, and general equity market conditions.”

In one of the first nationally representative studies of its kind, Pew’s research also asked whether teens are being spoiled for community engagement and politics with video game play, something educators have feared as gaming’s popularity has skyrocketed. The short answer: not any more than they already were.

But not all merger proposals go so “smoothly.” Samsung Electronics, the world’s biggest supplier of flash storage cards, confirmed earlier rumors and disclosed that it had made an unsolicited $5.8 billion cash offer to buy SanDisk after what it said were four months of inconclusive talks. SanDisk was quick to rebuff the offer as inadequate.

Meanwhile, Electronic Arts abandoned its $2 billion bid to acquire rival game maker Take-Two Interactive Software, ending a seven-month takeover effort that turned hostile before the two companies entered private talks last month.

The credit crunch is spreading from banks to Wall Street and industries beyond–and Silicon Valley may not be immune.

Venture capital and finance experts compared the news to the late 1990s, when the Big Eight accounting firms shrunk to the Big Four. Consolidation and financial uncertainty at the nation’s largest securities firms will close some doors to tech companies aiming to go public, slow the process for M&A deals, and generally add more worry lines to tech investing.

According to the survey, about 28 percent of all teens and 34 percent of kids 13 to 15 years old said that having the latest cool cell phone is absolutely essential. A mother of a 14-year-old boy said the social pressure to have a “cool” phone is intense.

Barry Diller’s InterActiveCorp is so interested in this demographic that it is thinking even younger. The company launched a new Web site for “tweens”–the age group of 6- to 12-year-old girls–that allows users to dress up avatars, decorate virtual bedrooms, and shop in virtual malls.

Meanwhile, Google’s search market share experienced yet another increase. Internet users performed 11.7 billion searches in the United States in August, choosing Google 63 percent of the time, according to ComScore’s monthly analysis, released Thursday. That’s an increase of 1.1 percentage points from 61.9 percent in July.

And despite increasing scrutiny from regulators, Schmidt showed no signs of being deterred from its plan to put into effect its search advertising deal with Yahoo less than a month from now.

HP announced plans in May to acquire the computer services firm for $13.9 billion. The deal closed in August. The company said that, once it has finished with the cuts, it expects the moves to save $1.8 billion in costs annually.

Virtually all American teens play video games, regardless of race, income, or ethnicity. That’s the verdict of a new study from the Pew Internet and American Life Project that renders the digital divide almost nonexistent when it comes to video games, including computer, console, and mobile games.

Varian took issue with several elements of the study, but he led off with this one: “ad prices are not set by Yahoo or Google, but by advertisers themselves,” through the search advertising keyword-bidding process. Varian also said the study assumed that Yahoo will show Google ads for as many searches as possible, which indeed Yahoo has said isn’t its intent.

“Time is money in our business,” Schmidt said in a meeting with reporters at company headquarters, and in the absence of an opinion from regulators, the company plans to go ahead with the deal. “We do not know their position,” whether it’s a great deal, a poor deal, or whether regulators will want changes, he said.

Also of note
Republican vice presidential candidate Sarah Palin’s Yahoo Mail account was hacked this week, using little more than social engineering, the process of acquiring personal information through social manipulation…The Electronic Frontier Foundation filed a lawsuit against the Bush administration to halt what it called the “massively illegal” warrantless surveillance of Americans’ Internet and telephone communications…The Wall Street Journal’s Web site got a makeover, borrowing a page from social networking.

Consolidation in the tech arena is already pretty rough, as Hewlett-Packard employees learned this week. Hewlett-Packard announced plans to eliminate nearly 25,000 jobs over the next three years as it digests its recent purchase of EDS. The company expects to replace roughly half of these positions over the next three years to create a global workforce that has the right blend of service delivery capabilities to address the diversity of its markets and customers worldwide.

“Young people out of Stanford and Berkeley–they’re able to get money early. Google is one of a long procession,” he said. “I think it’s completely due to the weather,” he quipped, saying people get hooked on Silicon Valley’s nice climate.

Google: What, me worry?
The national and global economy is suffering something between a setback and a meltdown, but Google’s top executives said they’re bullish about Silicon Valley’s economic prospects. Google CEO Eric Schmidt specifically said the venture capital community is more sophisticated and that a Northern California start-up can reach scale more easily.

The teen beat
If teens aren’t your target audience, chances are that they soon will be. So here are some tech tidbits about teens:

Microsoft on Monday released a near-final “release candidate” version of
Internet Explorer 8, the next version of its Web browser.

In an interview, IE General Manager Dean Hachamovitch said there will be little change between the release candidate and the final version, though he declined to say when the final version will be released.

(Credit:
Microsoft)

On the security front, Microsoft is adding a cross-site scripting filter, as well as protections against a type of attack known as clickjacking.

“Windows 7 enables unique features and functionality in Internet Explorer 8 including Windows Touch and Jump Lists which require additional product tests to ensure we are providing the best Windows experience for our customers,” the software maker said in a statement. “Microsoft will continue to update the version of Internet Explorer 8 running on Windows 7 as the development cycles of Windows 7 progress.”

However, the IE code in Windows 7 is a pre-release candidate version.

Internet Explorer 8 will work with Windows XP (Service Pack 2 or later) and Windows Vista. A version of IE 8 is also being built into
Windows 7.

With IE 8, Microsoft is hoping to regain some lost ground by adding features such as private browsing, improved security, and a new type of add-ons, called accelerators.

The software maker plans to say more on its Web site around noon, but, as noted by enthusiast site Neowin, the code is already available from Microsoft’s download center.

Among the new features in IE 8 is a browsing mode known as InPrivate, designed not to leave fingerprints on a PC.

“The ecosystem should expect the final candidate to behave like the release candidate,” Hachamovitch said.

“Given the lengths to which prominent New Yorkers go to control their public profiles, you’d think they would have purchased their domain names by now,” the site explained. “It’s a $4 investment, which we’re pretty sure billionaires like Jonathan Tisch, Steve Feinberg or Edgar Bronfman, Jr. can afford, even if this is the greatest depression ever.”

In what’s probably one part prank and one part ironic statement, New York society-pages site Cityfile announced Friday that over the past few months it has been quietly snapping up domain names corresponding to the people it covers.

Three words: Ha, ha, ha.

You may not have heard of many of the people on the list: the obsessively name-dropping Cityfile’s terrain is more focused on Gotham’s business and media leaders than the likes of Britney and Paris. But among those on the list are Warner Music chief Edgar Bronfman Jr. (Cityfile now owns edgarbronfmanjr.com), Greycroft Partners’ Alan Patricof, and Nerve.com founder Rufus Griscom.

Domain name speculation has been the subject of much debate for over a decade now, but the gossip site doesn’t plan to simply hoard them (and there’s no indication yet as to whether the site plans to sell them back to the notable people in question at a premium). The domain names now redirect to the celebrities’ Cityfile-created profiles, which are rather comprehensive listings of all sorts of both savory and unsavory details pertaining to the person in question. That means more traffic–and ad revenue–for Cityfile itself. Quite shrewd of them. But there’s also an ironic twist to it.

A look at the new Dropio home page.

Feature-wise, it’s pretty much the same, but Dropio’s team has said that it’s “about a thousand times more customizable and useful” thanks to a newly reorganized dashboard. They also say that the speed of the site should also be a notch higher.

(Credit:
Dropio)

Dropio, a file-sharing start-up that lets you easily toss anything from photos to phone calls in a “drop” (kind of like a virtual storage cabinet), has launched a new look.

The redesign makes the site look a little slicker, and certainly accentuates Dropio’s “easy to use” mantra. It’s also clearly a consumer-oriented product now–in comparison, the old design looks like a back-end content management system. That’s good, because the company hopes to appeal to Luddites as well as techies. (For a business model, Dropio offers premium accounts that get rid of the 100MB free account storage limit.)