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Now we know it wasn’t just a rumor all these months. Microsoft (MSFT) has been seriously thinking about swallowing up Yahoo (YHOO) since way back in 2006. In what would be by far its largest acquisition ever, the software behemoth Friday morning abruptly offered $44.6 billion in cash and stock to absorb the Internet’s Number 2 brand and all that goes with it. The offer - made when Yahoo’s share price had reached a two-year low - will be hard for Yahoo’s board to resist because the company’s financial outlook doesn’t instill much confidence. Luckily for Microsoft, it is probably paying half what it would’ve had to shell out a year ago, which is the main reason we’re seeing it happen now.

Still this will be a new experience for Microsoft and will bear watching. Back in the early ’90s, the last time Microsoft tried to acquire a household name - Intuit Corp., the maker of Quicken and Turbo Tax personal financial management software - the deal got shot down by government regulators because it would have effectively snuffed out competition. This time the competitive landscape includes Google (GOOG), the greatest high-tech sensation since, well, Microsoft. If anything, the combination of Microsoft and Yahoo will likely enhance competition for Web services and online advertising placement, so don’t look for the Feds to throw up a roadblock.

The end of MSN?

If the deal goes through, Microsoft will absorb a well-known brand as well as many tens of millions of users in one fell swoop. (Granted, most of them are already Microsoft customers by virtue of using PCs.) It’s sort of like when Hewlett Packard acquired Compaq. Most likely one of the brands will have to go, and one would think that in this case Microsoft would have to jettison its MSN Network, which has always been an also-ran even as other Internet brands rose from nowhere.

Yet the Yahoo that Microsoft is acquiring is in many ways a shell of what it once was. Not only has Google redefined the business of Internet search and ad-supported web services, it has accumulated financial resources that the slower-growing Yahoo could only dream of. And in this day and age, competitive advantage on the Internet depends as much on how much computer capacity you can amass as it does on new website bells and whistles. Microsoft and Google are locked in the equivalent of an “arms race” building up computing and storage capacity to accommodate more and more of the world’s web-based computing activities. Yahoo simply couldn’t compete on this scale all alone. Indeed Yahoo needs Microsoft’s protection and resources simply to survive as a brand, while Microsoft needs Yahoo’s Web-savvy to help it keep up with the ever quickening metabolism of high-tech.

Some grouchier geeks than me predict the transaction will turn out to be the equivalent of Time-Warner’s disastrous “merger” with AOL. But it really is a deal of a different color. Microsoft already participates in many of the businesses that Yahoo is in, while AOL broadened Time-Warner (TWX). And given how rudderless Yahoo appears to be, there’s absolutely no chance it would take over the management of Microsoft, much less displace the stock symbol as AOL did to TWX. Finally, Microsoft is buying when Yahoo is at its nadir rather than when it was ridiculously overvalued. Besides, when you think about it, what other company might make Microsoft’s short list to buy to stay in the game with Google. AOL? Spare me.

Most of what you read about this deal talks about the extraordinary $15 billion valuation it implies for this latest Internet/Web 2.0 sensation. But there have to be reasons beyond price and greed for Facebook’s decision to go with Microsoft (MSFT).

An important one might be cultural, in the technological sense. Facebook has aspirations of becoming a software “platform” for web applications. Microsoft, the purveyor of Windows, knows the software platform business model inside and out, and knows just as well the technical and political imperatives for supporting independent application developers. That had to be a factor if Facebook is truly serious about its stated ambition. Google (GOOG) talks a good game, but it doesn’t really have much experience supporting independent application software developers.

As a Facebook user myself, I know that the applications are a big part of the attraction of the site, and certainly make it a more alluring advertising medium than a simple, social network. Because it is so versatile, it’s the kind of site that people spend lots of time with, and it refreshes constantly, which makes it an especially rich target for new kinds of interactive advertising.

And don’t forget that Microsoft just recently introduced its new Unified Communications strategy, which will integrate in software the phone, conferencing, email and IM communications that previously have been handled by separate applications and infrastructures in a corporate network. Think about it. What is a typical company today, but a specialized kind of social network? There is tremendous potential for a company like Microsoft, which already provides the productivity tools that most corporate workers use, to try to merge useful aspects of social networks into tools for workgroups and into new kinds of HR applications for controlled social environments.

And the new “unified directories” that Unified Communications strategies propose which, minute-by-minute, are able to recommend the best way to contact someone among the many means available, function a lot like a social network. Addresses and phone numbers will become of secondary importance, because the unified directory will know who’s available and by what means. Implement that in a “corporate” social network that includes both employees and customers, and you can eliminate a lot of wasted time and effort in that most basic of business activities — communicating.

In other words, there is enormous potential for synergies between Facebook’s so-called “social graph” and Microsoft’s ubiquitous involvement in the everyday activities of most office workers; much more so than Facebook would ever have found with Google, which looks at the social network primarily as one more billboard for its advertising.

Oh, and as long as we’re talking about cultural affinities, there is also that Harvard drop-out connection. . . .

Do you think Google (GOOG) is overstepping its bounds in its attempts to influence the FCC’s radio spectrum auction, as Brent Schlender argues in today’s column?

Did you ever sit down and add up how much you shell out in subscription fees and monthly service bills to maintain your digital lifestyle? Recently, I did just that for a column I was writing for the latest issue of Fortune and after tallying it all up I was, to quote myself, “shocked and awed. . . .stupefied. . . . then queasy.” You’ll have to read the column to find out what that number is, but the good news is that CNNMoney.com (which includes fortune.com) is free.

Anybody else out there getting weary of paying a monthly bill for what seems like every little thing? Just wondering.

The current state of the technologies and business models for getting Hollywood movies onto your TV set at home “on demand” via the Internet is sort of like the weather in Kansas. Wait another day and things will be completely different. Take for instance Apple (AAPL), the one company beyond the cable providers that seems to have gotten some traction in figuring out this inevitable business.

Yesterday, and I mean that figuratively, Apple’s strategy was all about selling movies much like they sell music, rock videos, and TV shows on the iTunes Music Store. But the selection of movies Apple could sell was limited, and the price was pretty steep (up to $14.99) given the quality of the product you download — less-than-DVD resolution, no menus or ancillary features, no multiple languages, and no closed captions or subtitles. Part of the reason for selling stripped down versions is that the bandwidth of existing broadband services isn’t fat enough to efficiently deliver a limitless quantity of digital bits. But also it’s as if the studios were afraid that selling full-featured, full-quality downloads would cannibalize their very lucrative existing DVD sales and further encourage outright piracy, much like how the music industry business model has been discombobulated by downloads and the sharing of “ripped” music. It’s a legitimate fear.

So today, according to published reports, Apple is trying to persuade Hollywood to experiment with renting movies on-line, sort of like a virtual Blockbuster (BBI) or Netflix (NFLX). For $2.99 a pop. It’s more than kind of interesting, because in the past, Steve Jobs has pooh-poohed the notion of renting digital content via a subscription service. He has always preferred the idea of simply selling content outright so that there are no strings attached.For now renting movies from Apple would still be a somewhat cumbersome process, requiring lots of digital storage space at home and time-stamp and locking technologies to limit the life and usability of the films you download. Apple TV, the company’s half-baked first stab at bringing digital media to the living room, still needs some work before it is the ideal online video delivery mechanism, and, of course, the whole concept depends on cable and DSL companies providing enough bandwidth to create an aesthetic experience that equals popping a disc in the DVD or Blu-Ray or HD-DVD player.

But still, this is big news. The rental of videos is a proven business model — to wit Blockbuster and Netflix and the cable carriers’ own video-on-demand services. (Netflix already offers a limited video download rental service, only for Windows PCs.) Besides, practically speaking, most people get enough out of one viewing of a movie. If you aren’t a collector or an obsessive, do you really need to own your own copy of a movie? It just makes sense to offer rentals. And it would seem to be good for Hollywood, too.

Of course, we’ll have to wait and see if Hollywood will buy into this, because, with the exception of Disney, Apple hasn’t had much whole-hearted support even for selling movie downloads online. The movie studios, arguably, are run by more sophisticated business people than those who run the music companies. Their products are more complex to finance and make and market and distribute in a timely fashion. And they’ve been pretty adept so far at finding ways to benefit from exploiting subsequent new recording formats sell people new copies of what they already own. These people aren’t dumb.

But once everything is available to be streamed or downloaded in all its HD glory, that will be the last format change for a long, long time. The studios know this and don’t want to screw up the transition as the music industry has. They also know that by every other measure, this should be the heyday for both industries, with hundreds of millions of new people around the world each year becoming prosperous enough to afford digital entertainment as the economies of countries like China and India boom. If they botch it, it will have been their own fault. Allowing Apple to help them make renting movies online a routine process would be a giant click in the right direction.

Yesterday I noted that Bill Gates was giving the commencement address at Harvard today, and a transcript of that speech is now available here. A video feed of the event also will be available from the same page, but at this moment isn’t up yet.

I haven’t even had time to read the speech or view the video myself, but my colleagues at Time worked with Gates to prepare a couple of special stories related to the event. The founder of Microsoft (MSFT), who had been knighted by Queen Elizabeth in 2005, finally gets to claim he has that Harvard degree.

Here’s something to watch for today (that’s Thursday, June 7). Bill Gates, perhaps the world’s most famous Harvard dropout — and certainly the richest — will be the principal speaker at the afternoon exercises of Harvard’s 356th Commencement. Over the years the Microsoft (MSFT) founder and his wife have given millions of dollars in gifts, campus buildings, and grants to his almost-alma-mater, and now he’ll have the chance to give a fresh crop of graduates a piece of his mind.

It will be interesting to compare what Bill tells the Harvard grads with the avuncular advice offered by Steve Jobs, another famous dropout, when he addressed Stanford grads in June of 2005. Will it be the commencement speech equivalent of one of those Mac vs. PC ads?

Likely not. The biggest thing in Gates’s life these days isn’t a business rivalry with Jobs or the Google Boys; it’s the Bill and Melinda Gates Foundation. With an endowment of $30 billion and the promise of nearly that much more gradually coming in as Warren Buffett liquidates his Berkshire-Hathaway (BRK.A, BRK.B) fortune, Gates has the opportunity to change the world all over again. Talk about a second act.

Next year, he plans to step aside from any operating involvement in Microsoft and focus his attention on the foundation, so the Harvard grads are catching Gates at a pivotal moment. Sort of like the time he decided to go ahead and drop out and start a company, back in 1975. I’m sure his comments will be both heartfelt and enlightening.

June this year seems loaded with symbolic anniversaries. Paul McCartney turns 65 and finally can say he has outlived his cutest song. “Sgt. Pepper’s Lonely Hearts Club Band,” the Beatles’ album that Rolling Stone calls the greatest of all time, was released 40 years ago last Friday, and still sells millions of copies a year.

And today marks the 30th birthday of two unforgettable tech icons–the Apple II , the world’s first million-seller computer, which began shipping on June 5, 1977; and the first appearance on a product of the winsome, rainbow-colored Apple logo (AAPL).

Apple would go on to sell nearly 6 million of the machines –which were also the first consumer-oriented computers to sport color graphics — effectively inventing the PC industry. Another young company called Microsoft supplied the most popular programming language for the device. So far ahead of the curve was Apple that it had the PC market practically to itself for more than four years, until IBM finally entered the fray with its monochromatic Personal Computer in August of 1981. Even then, it would be several years before the IBM PC could support color graphics.

As significant as the Apple II was, the distinctive Apple logo with its missing bite was a masterstroke of marketing design that was loaded with subtle symbolism. Previously, the company — which only had been in business for about 14 months and sold a much more rudimentary computer called the Apple 1 — used a logo that looked like it could grace the cover of a rock concept album, or perhaps the frontispiece of a 19th century history book. It was an engraving that showed Sir Isaac Newton sitting under the tree, with a glowing apple poised above his head. The marketing slogan that went with it was just as quaintly pretentious: “Newton…’A Mind Forever Voyaging Through Strange Seas of Thought…Alone.’

To his credit, Steve Jobs realized that Apple needed a flashier, more poignant and modern logo, so he asked the company’s publicist, the Regis McKenna group, to come up with a new one. A young artist named Rob Janov created the design that would become one of the world’s most recognized trademarks, once Jobs was finished fussing with it.

Now, of course, the rainbow colors are gone, but the floating silhouette in white hovers like a harvest moon as the backdrop to every Apple publicity event, and a steely gray version is the first thing that greets you when you turn on a Mac. It remains one of the most memorable logos since Coca-Cola’s stylized script.

Has it really been 30 years?

It’s all too easy to read too much into a deal, but still, you gotta wonder about Elevation Partners’ big investment in Palm (PALM). The $1.9 billion private equity firm ponied up $325 million to buy 25% of the maker of the Treo smart phone. But more interesting was the fact that Elevation partner Fred Anderson, the one-time chief financial officer and director of Apple (AAPL), and Jon Rubinstein, Apple’s former head of hardware engineering, will join Palm’s board as part of the deal.

Even more interesting is the timing — Elevation’s investment comes just a few weeks before the much hyped launch of Apple’s iPhone, a product that Steve Jobs is touting as the company’s most insanely great new product since the Macintosh. Elevation’s investment also comes just weeks after Anderson reached a settlement with the SEC over his alleged role in backdating stock options while still at Apple (AAPL). Anderson, who denied any wrongdoing, paid a fine, and also issued a vaguely antagonistic statement disputing Apple CEO Steve Jobs’s account of the options backdating. Clearly Anderson felt he had been thrown under the train.

Rubinstein, meanwhile, who was instrumental in developing the iMac, the PowerBook, the Power Macintosh, and the iPod, retired quietly a little over a year ago, on April Fools Day, 2006 — the 30th birthhday of Apple. Interestingly, about six months before that, he gave a rare interview to the Berliner Zeitung in which he threw water on the idea of converging a cellphone and an iPod media player into a single device — basically what is now the iPhone. “Is there a toaster that also knows how to brew coffee?” he asked. “There is no such combined device, because it would not make anything better than an individual toaster or coffee machine,” Rubinstein argued. “It works the same way with the iPod, the digital camera or mobile phone: it is important to have specialized devices.”

Strange words, considering that Apple’s iPod group was already working on what would become the iPhone. Stranger still, when you look back and see that Apple publicly announced Rubinstein’s upcoming “retirement” less than three weeks after that interview. I think you can safely surmise that Ruby, who had been with Jobs for more than 15 years at both NeXT and Apple, wasn’t on the same page with his boss.

And now we find both Anderson, who without a doubt is disgruntled by his treatment by Jobs, and Rubinstein, the mastermind of Apple’s hardware strategy, are both throwing in their lots with Palm, one of the companies most threatened by the iPhone. That’s like Roger Clemens and Derek Jeter retiring from the Yankees, and then turning around signing on with the Red Sox, just so they can torment their old teammates. Well, maybe that’s a slight exaggeration. Palm is more like the Kansas City Royals.

I’m not saying Anderson and Rubinstein are necessarily joining Palm just to help it try to torpedo the iPhone. Neither one is taking an operating role. But still, it feels like there has to be more to this deal than meets the eye.

On Wednesday during an appearance at the Wall Street Journal’s D 5: All Things Digital conference, Steve Ballmer, the CEO of Microsoft (MSFT), took the wraps off the company’s latest incarnation of the Windows PC. I’m talking about “Surface,” a table-top PC introduced this week that resembles more than anything one of those old sit-down Ms. PacMan video games that were the rage in bars 30 years ago. It’s another new “form-factor” that Microsoft’s skunkworks cooks up every few years or so in hopes of creating a new genre of Windows-based computer hardware — like the tablet computer around 2000, or more recently, the Origami project to define a handheld PC that is bigger than a smartphone, but half the size of a laptop. I haven’t seen very many of either of those out in the real world, but, well, let’s just say they are interesting ideas.

Surface is a user-interface marvel employing a horizontal touch screen about the size of a small desk, on which you use your hands to physically manipulate objects in much the same way that you use your fingers to navigate around Apple’s iPhone. You can mess around with a virtual stack of photos, or point with your finger to locations on a map to trigger pop up information, or use hand gestures to navigate through 3-d lists of just about anything. It’s fun to fool around with, especially if you like digital finger painting. Come to think of it, I think it would be a great addition to any kindergarten classroom. But, initially, at least, it’s targeted at the hospitality industry — more specifically hotel concierge desks and slot machine salons in casinos.

One of the demo applications was a moving, video jigsaw puzzle. Well, jigsaw is a bit of an overstatement–all the pieces are shaped like square tiles, but because the image is constantly changing it’s easy to lose track of what piece goes next to which. Consequently it is a clever and surprisingly challenging concept for a parlor game. And as everyone knows, Bill Gates loves to play parlor games. Especially bridge.

Seeing that puzzle stirred recollections of another bit of Gates lore that I came across while reporting a cover story for Fortune back in the mid-1990s. This was shortly after Bill got married to Melinda French, but before they had kids and moved into their rambling post-modern computerized mansion on Lake Washington — the one with the trampoline room. That house has always been off limits to reporters, but for this story we managed to arrange a photo shoot on a Sunday evening at his previous home, a more modest lakefront Colonial not far away.

The photographer and the Microsoft PR people and I arrived while Bill and Melinda were away at some fund raising event so we could scout out photo-shoot locations. While the house manager escorted us around, I noticed a couple of identical, partially assembled jigsaw puzzles on the breakfast bar. “What’s the purpose of those?” I asked. The house manager, a hip-looking guy with a Master’s degree whose duties included maintaining all the computer gear, and supervising maintenance and renovations, and managing the rest of the household staff, let out a little chuckle. “C’mon. Why are you laughing?” I asked.

“Take a wild guess,” he said, clearly not wanting to violate the privacy of his employers, but unable (or unwilling) to just change the subject. I thought about it for a minute, and then asked: “I know Bill’s a competitive guy, but do they race at making identical jigsaw puzzles? Aren’t you supposed to cooperate when you do that?” The house manager chuckled again, and then obliquely allowed that, yes they did race. “I think Melinda usually wins,” he added.

Let me pause for moment to wipe the tomatoes from my face, so I can give an example of why I love Apple (AAPL), despite its occasional missteps. Just today, at The Wall Street Journal’s D 5 - All Things Digital conference in Carlsbad, California, Steve Jobs demoed a great new feature from what soon will be the first software upgrade for the Apple TV, a product that I critique pretty severely in a column in the current issue of FORTUNE. Once users install this upgrade, they will be able to use the Apple TV box to go directly to youtube.com and browse and play the entire library of videos on that site on their TVs. It’s a great addition that I believe finally begins to demonstrate some of the real potential of Apple TV. In fact, I think this feature may do for Apple TV what the motion-sensitive game controller did for the Wii game machine from Nintendo. I guess you might call it a killer feature (as opposed to a killer “app”).

We’re talking about genuine, streaming video delivered straight from Google’s (GOOG) servers over the Internet to your living room, without making a side trip to your computer. A lot of it is of very poor quality, especially when viewed on a big screen, but in this case who cares? YouTube (which is owned by Google) is in many ways an online, interactive version of America’s Funniest Home videos, so the production values often leave a lot to be desired.

But really, the whole point of YouTube video is to share it. So the wonderful thing about making it accessible via Apple TV is that it will allow a whole roomful of people to hoot and guffaw together watching oddball Japanese aerobics routines, or British senior citizens singing the Who’s “My Generation.” The user interface for the YouTube feature is clean and easy to navigate, and while it’s a little cumbersome to use the Apple TV remote to peck out searches, letter by letter, it’s still pretty easy to find what you’re looking for. Jobs didn’t give a precise date of when the update will be available.

Apple also announced that it would begin selling a 160 gigabyte version — that’s a 4x improvement over the initial model, although it will cost $100 more ($399 vs. $299). But the new YouTube capability is a qualitative rather than merely quantitative leap forward, mainly because it gives the user a direct link to a motherlode of free video on the Web (other than movie trailers and porn) and it presents it in a nice clean way on the TV screen. Putting YouTube on the tube really does give TV a whole new dimension, because it’s something we couldn’t easily do before.

This is why I love Apple, even though I have no compunctions about criticizing it too. It’s a company that never stops trying to improve its products, and isn’t really happy unless it offers capabilities no one else can. I still think Apple TV has a ways to go, for a lot of the reasons I mentioned in the other posts. But this is reassuring. Now if they could just persuade the movie companies and TV networks to give them permission to stream full-featured, full-resolution content, they might really have something.

(Here is a subsequent post with new information about YouTube on Apple TV.)

I’m not a high-tech product reviewer by trade. But my latest Technology column in Fortune seems to be, on the surface at least, a review of Apple TV, Steve Jobs’s latest consumer electronics gadget. It’s not a positive article. I call Apple TV a dud, and liken it to the Zune, Microsoft’s ham-handed attempt to steal the march on Apple’s ubiquitous iPod portable digital music player. I came to this conclusion after using it for six weeks, and realizing that I was using it less and less each week.

I’m flagging my column here so that people who disagree or want to critique my critique or laud my perspicacity or otherwise comment or vent have a public place to do so. Apple (AAPL) zealots are a passionate bunch. I know, because I am one. (You can even call me names if that makes you feel better, but be forewarned, if you submit something in poor taste, we reserve the right to censor what you say, just to keep things civil.)

I don’t really consider the column a review, because I only skimmed over just how limited Apple TV really is, at least for now. Instead, I wrote it to point out that even Apple can bungle a product from time to time. Another thing I probably should have said in the column was that in a broader sense, flubbing is actually a good thing, because it shows that Apple is genuinely trying to raise the state of the art of consumer electronics. As the old Silicon Valley saying goes: “If you don’t launch a dud now and then, it means you aren’t trying hard enough.” Finally, I also wanted to show how even Apple can sometimes make the same kinds of mistakes that Microsoft does.

Mainly, however, with the launch of the much ballyhooed iPhone looming in June, I thought it was important to point out how Apple TV demonstrates that Steve Jobs, the ultimate control freak, is not in total control of all the production values of his new consumer electronics products; at least not as much as has been the case in the past with his computers and the first few generations of the iPod and iTunes. That’s not his fault, but instead is because Apple, as it ventures further afield, no longer “builds the whole widget” to the extent that it has in the past. It must rely on capricious movie studios and TV networks and record companies for content of course, and it increasingly will depend on stubborn telecom carriers for cellular and broadband connectivity and for marketing help.

Steve Jobs loves music, and the much celebrated iPod clearly was not the product of someone with a tin ear. “Elegant” really is the appropriate adjective to use to describe it, because every little nuance seemed right. But Apple TV makes you wonder if Jobs paid any attention at all during the birthing process. Or maybe it betrays how his well-known disdain for broadcast television might have left him with a blind spot when it comes to TV-related products. Or perhaps this is just what happens to a company when it develops the makings of a high-tech monopoly that it wants to preserve and extend, in this case the market for digital downloads. Speaking as a long-time Apple fan, I sure hope not.

But the irony to me is that Apple TV didn’t have to be a revolutionary product to be a great product. With just a little tweaking, it could have been so much more than what it is. Had it incorporated a 100 Gig or 200 Gig hard-disk and a built-in standard DVD drive, Apple TV could’ve been a versatile transitional product that not only would make it easier for people to use their computer-based content in the living room, but also would help us declutter our home entertainment systems. You could use the DVD drive to watch Netflix (NFLX) or Blockbuster (BBI) rentals, or your own home movies, and toss that ugly old oversized DVD player with the crappy remote. You could use the larger hard-drive to time-shift your favorite shows a la Tivo, and to accommodate more higher-resolution downloads. And as broadband services improve and the content providers get braver, the horsepower is already there to enable full-fledged HD TV streaming capabilities directly over the internet with a mere software upgrade.

After all, Apple TV is basically a computer — it sports an Intel (INTC) microprocessor and a variation of Mac OS X inside and both wireless and ethernet Internet connectivity. Yes, it would’ve been a little more expensive to add the DVD and bigger hard drive, but it would have been so much more useful right out of the box than it is now. And you’d at least be able to get half-way decent picture quality from recorded movies and TV shows between now and when the iTunes Music Store is capable of delivering true and full-featured HD content sometime in the future.

Here’s another big irony: True genius in high-tech comes from navigating around performance constraints with clever technology, and then making those constraints seem irrelevant — in other words, making something that is very complicated and intimidating look easy. It’s a kind of technological sleight-of-hand, and Steve Jobs is the master of the form. Unfortunately, with Apple TV, the constraints are the first thing you notice. So, as much as I’d like to give Apple the benefit of the doubt, it really does make me wonder whether some of the many sexy features of the iPhone might also disappoint.

One last thing. Just so you know that I really don’t have an anti-Apple bias, check out this quasi-review I wrote back in November of 2001 when Steve Jobs unveiled the very first iPod. The minute I held and heard an iPod, I knew that the music business, and more importantly the way people consume music, would change forever. And I said so. Sadly, I can’t get that excited about Apple TV. We’ll have to wait and see about the iPhone.

The big Web 2.0 business news of the week has been Facebook’s provocative announcement that it plans to morph into what founder Mark Zuckerberg calls “the social operating system” for the Internet, or to put it another way, a “platform” upon which other tech companies can build innovative software and services. It’s an ambitious strategy that could take Facebook far beyond its roots as a social networking site for adolescents to keep track of each other, and into the realm of online commerce, corporate HR and PR departments, advertising and the media and just about any kind of social group you can think of. My colleague David Kirkpatrick has posted what is by far the most lucid, detailed, and insightful analysis of Facebook’s plans, plus an exclusive video interview with Zuckerberg and an expanded version of a story to be published in FORTUNE after Memorial Day.

When I read through all the reports and blogs, it dawned on me that right now Facebook is experiencing the pivotal “rite of passage” that all the truly great consumer/user-oriented technology companies go through. It’s that moment when they recognize that their original idea, when put to use by real people, is far bigger than they themselves even thought it was. Microsoft (MSFT) went through this epiphany twice; first when Bill Gates woke up in his Harvard dorm room in 1975 and realized that software had such value that it could and should be its own, money-making industry. (Previously, in the mainframe and minicomputer eras software was a bundled afterthought, and hence wasn’t very good and didn’t improve very fast.) His second realization, which in hindsight seems like a natural progression from the first, was that the software operating system is what really defined the character of a computer, more so than the hardware design, and that if a consistent version was made available to anyone, innovation and applications for personal computers would grow by leaps and bounds. Hence, MS-DOS, and then the Windows PC architecture near-monopoly, which of course, led to Gates’s enormous wealth. It was way back then when we first started hearing the term “platform” get tossed around. In fact, Gates might have been the one most responsible for popularizing the term in the context we use it today.

Yahoo! went through a similar epiphany. Jerry Yang once told me about the night that he and his co-founder David Filo, first realized that Yahoo (YHOO) wasn’t really a search engine or map to the Internet, but a mechanism for collecting very fine-grained market research data about Internet users. They had a big debate over whether it was “right” and whether their handiwork had taken too commercial of a turn. But they went where the idea led them, and Yahoo became the first of a new kind of media company that they didn’t even intend to create, nor would they ever have thought of independently. It became a platform for understanding who did what while looking at the Web, and was one of the first prototypes of how a Web site could generate revenue and deliver value without really selling anything tangible.

Google (GOOG), too, had a moment when its founders realized they had invented something beyond what they set out to build. They might swagger about now, claiming to have invented context-based advertising, but that was a secondary, emergent characteristic that they recognized only after a very Yahoo-like epiphany. Google now, of course, is in fact a giant platform both for search technology that teaches itself to get more accurate, and for plopping relevant and targeted ads into almost every page view of every Internet user anywhere in the world.

Other examples are now household names: Ebay (EBAY) started life as an exchange for Pez candy dispenser collectors. Amazon.com (AMZN) thought it was simply a bookstore. Heck, back in the early 1970s, Intel (INTC) thought it was in the business of making computer memory chips. They all became much bigger ideas than their founders ever would’ve imagined. They all became platforms, of sorts, that wound up supporting giant business ecosystems.

Facebook is acting on its own platform epiphany, which, of course, is the result of a lot of hard work, brilliant technology, and trial by error, just like Microsoft, Yahoo, Google and the others. They are smart enough to recognize what the BIG idea of social networking really is, which is what they define as that online social operating system platform. The terminology is hopelessly geeky, but the concept is huge, and once it becomes an “infrastructure” people will wonder how the world ever operated without it. What Facebook is doing, then, is what all the breakout companies do: They’re redefining an entire business model to bring economies of scale and accelerated innovation something that previously seemed amorphous and sort of random.

So yes. This is probably a big deal. But like all big deals, we won’t really see the full consequences of it for a while. As Paul Saffo, a research fellow at Silicon Valley’s Institute for the Future, always said, “Don’t mistake a clear view for a short distance.”

Two events made especially big news in business last week - the bid by Rupert Murdoch’s News Corp. (NWS) acquire Dow Jones (DJ), the publisher of the Wall Street Journal, and the sudden customer revolt against Digg, a popular online community that vets the zeitgeist. While very different in nature, these two stories demonstrate how the power to determine the fate or operations or the ownership of a company doesn’t always reside where you think it does.

Take the Dow Jones case. A two-tiered stock ownership structure allows the Bancroft family to “control” the company despite holding only 25% economic interest. So even if shareholders of the majority of equity in the company want to take Rupert’s money, the Bancrofts can thwart it. The management of Dow Jones, which of course “runs” the company, can convey their preference to the family, but it’s the Bancrofts’ call. But it isn’t even really in the hands of the Bancrofts either. The Dow Jones board, which represents all shareholders, chose not to act upon the offer. It didn’t say yes, but it didn’t say no, leaving the door open to either a competing bid or perhaps higher bid from News Corp. that might be too rich to turn down. So however it works out, the Dow Jones board - not the shareholders, nor the Bancrofts, and least of all company management - has the most power during this period of limbo. Their job now is to induce a merger offer that the family and the other shareholders can’t refuse, and the wheels are turning. But it was Rupert Murdoch that set them in motion. Who’s really in charge here?

The Digg story also is about control. In this case it’s something more akin to editorial control than financial leverage. On May 1, irate members of the online community rose up in not-so-civil disobedience after the management of the Digg.com site pulled down posts that revealed the software key to unlock HD-DVD movies. The key enables an owner to make unlocked copies of a movie, which in turn could lead to rampant piracy. Lawyers for Hollywood studios had warned the operators of Digg that leaving the key on their site could result in the company being hauled into court and that the site possibly even be shut down. The owners blinked, and removed the offending material. But the capitulation triggered a fusillade of protest posts from Digg’s members claiming censorship and accusing Digg of knuckling under to pressure from evil giant corporations. Many of the posts also ingeniously disguised the key as part of the message. Within hours, the operators of Digg blinked again, saying their users had convinced them of the errors of their ways. So first it seemed that the legal teams representing Hollywood studios were dictating what could and couldn’t be posted, not Digg management. And then the mob prevailed. Who’s really in charge here?

Word is Microsoft (MSFT) is trying to cook up a deal with Yahoo (YHOO) . . . again. Did you ever wonder why a huge, rich company like Microsoft has had trouble pulling the trigger on a big deal like this? It recently lost out to Google (GOOG) in the contest for Doublclick. Before that it got outbid, again by Google, when Time Warner (TWX) offered up a chunk of its AOL unit. It seems odd because many of its peers in the computer hardware business have consolidated. Remember Digital Equipment Corp. which merged with Compaq Computer, which in turn was absorbed by Hewlett Packard (HPQ)? Or how about networking leviathan Cisco Systems (CSCO), which is an agglomeration of acquisition after acquistion after acquisition? And even a fellow software company — Oracle(ORCL) — has revived its own growth by behaving much like Cisco as it broadened the scope of its product offerings with nine major acquisitions in three years.

Sure Microsoft has acquired lots of little, low-profile software companies over the years whose headcounts number in the tens and whose products usually wind up as a feature or two in either Office or Windows. Or it acquired the company just to get hold of a superlative programmer like Ray Ozzie or Nathan Myhrvold. The exception was the acquisition of Great Plains Software, a maker of small business accounting programs in Fargo, ND, for $1.1 billion in 2000, which helped Microsoft immediately enter a new market. The only other time I can recall that Bill Gates tried to make a really big acquisition was way back in 1995, when he made a run at Intuit, the maker of financial and tax software for consumers. That time he was tripped up by federal regulators who thought combining Intuit’s Quicken and Microsoft’s Money software would create a monopoly, a decision that heralded the beginning of Microsoft’s ongoing tussles with trustbusters.

In general, Microsoft has always preferred to do things itself, rather than go to the expense and trouble of integrating another company’s employees, stand-alone products, technologies, marketing strategies and customers. It’s the nature not only of Microsoft, but of the software business (with the obvious exception of Oracle). In that industry, too many cooks can all too easily spoil the soup. Yet because software is so malleable, it is tempting for the acquiring company to monkey with the code to make it conform with its way of doing things, which leads to conflicts among engineering teams, which yields bugs, and which ultimately discombobulates or angers customers. Aside from being notoriously stingy, Bill Gates has always known this. So the company has never really developed the institutional skills to make an acquired company mesh with the Microsoft Way.

This is just a long way of saying that it seems pretty unlikely that Microsoft would really want to acquire Yahoo lock, stock and barrel. Yahoo has its own very distinctive way of doing things, as does Microsoft, and there would be so much duplication of both technology and business that putting the two companies together would require a serious bloodletting. Microsoft’s MSN and Yahoo both offer their own instant messaging, email, search, advertising placement, and the list goes on, and redundancy is a dirty word to a programmer like Gates. My colleague Adam Lashinsky thinks the market just might force Microsoft’s hand this time. That too would be an uncharacteristic move. The company, for all its fame, has never really played to the crowd. But you never know. . .

Yesterday, Sony Corp. (SNE) announced the resignation of Ken Kutaragi, the iconoclastic chairman and CEO of Sony Computer Entertaiment and the architect of its phenomenally successful PlayStation business. Kutaragi was one of those brilliant, occasionally reckless and often self-absorbed prodigies that change the world with their obsessive genius. There was a time when it looked like he might one day run all of Sony. But over the years it became clear that, despite his technological acumen, he didn’t always play well in the sandbox with others. And apparently, that, along with the delayed and disappointing introduction of the PlayStation 3 this past winter, led to his departure.

That’s too bad, because Kutaragi was one of the most fascinating figures in all of high tech, not just Japan. The business he built for Sony was remarkable in so many ways. The original Playstation - which Kutaragi designed in a fit of frusration after a futile stint designing Sony’s first stab at high-powered desktop computers for engineers called workstations, hence the name PlayStation - came out of nowhere to practically destroy Nintendo and Sega. Just as importantly he built a company outside of Sony’s bureacracy, and yet took advantage of the parent company’s music distribution infrastructure to build a highly profitable game licensing and distribution business that buttressed the hardware sales. He even insisted on having his own logo, rather than Sony’s, because he thought it was more important to build the name of the product as a brand than that of its manufacturer. It paid off in spades, because Sony Computer Entertainment fueled the parent company’s growth for more than a decade.

But I’ll always remember Kutaragi because he was such a great interview. This despite the fact he spoke only a fractured form of English, and yet wouldn’ t rely on interpreters. And also despite the fact that his moods were unpredictable and that he didn’t suffer fools, much like Apple’s (AAPL) Steve Jobs. He was always playful and provocative, but could surprise you with his bluntness. He was anything but scripted.

My most memorable encounter with Kutaragi was in Las Vegas, while I was reporting a cover story on Sony for FORTUNE in early 2000. We wanted to photograph him in a way that somehow conveyed that he was in charge of the most playful of all of Sony’s businesses, so we persuaded his PR people to bring him to the roller coaster on top of the New York, New York casino and resort on the Strip. There, our photographer, Louis Psihoyos, convinced Kutaragi to climb into one of the roller coaster cars by himself, while Psihoyos and his assistant set up their camera and lights facing backwards from the car in front of him. They handed Kutaragi a Playstation game controller, and then, closed the passenger restraint system so it looked as if he was ready to go for a lap. Then, while Kutaragi giggled and fidgeted, Psihoyos improvised a way to strap himself in facing backwards, using bungee cords and canvas belts. They were the only two passengers on the roller coaster (this took place after it had been closed and cleared of paying customers), and when Psihoyos gave the signal, off they went on a wild ride, much to the apparent surprise of Kutaragi.

It was a wild ride for both of them. Psihoyos was sitting so awkwardly that he didn’t even know if he got Kutaragi in the frame as he snapped away while they were hurtling upside down, 500 feet above the ground. When they arrived back at the platform, Kutaragi appeared to be sweating, but didn’t say a word. “Can we do that again?” asked Psihoyos, directing his question to the ride operator rather than to Kutaragi or the PR people. And with a jolt, they were rolling again.

This time, when they arrived back at the platform, Psihoyos gave Kutaragi the thumbs-up sign. He got his shot. Kutaragi smiled bleakly, and waited for the attendant to release him from the restraint, and then, looking like an astronaut who had returned from a week in space at zero Gs, he wobbled to the nearest chair he could find and sat down and sighed. “I got some great shots that last time around,” Psihoyos crowed. “That was fun!” Kutaragi remained strangely silent. So I asked him what he thought of the ride. And for once, he relied on an interpreter. “I didn’t want to tell you, but I suffer from motion sickness,” he said with a little grimace. “So this is the first time in my whole life that I ever rode on a roller coaster. And I think it will be the last.”

The Shakespearean subtext of the latest turn in the Apple Inc. (AAPL) options backdating scandal is as intriguing as the possibility that Steve Jobs may yet get drawn in to its maw.  Clearly Fred Anderson, the former CFO and board member who settled yesterday with the SEC, and Nancy Heinen, Apple’s one-time top lawyer who vows to fight similar charges against her, feel hung out to dry by their former boss. On the other hand, they were made fabulously rich by hitching their stars to Jobs. And they are mired in legal problems that strictly constrain what they can say about what exactly happened and how complicit Jobs was without possibly incriminating themselves further. So they’re squawking as much as their lawyers will let them.

In Anderson’s case it meant issuing a plainly passive/aggressive public statement that surprised even the SEC, outlining how Jobs seemed very aware of the accounting implications of monkeying with stock option strike price dates when they discussed the issue for which the former CFO was punished. As for Heinen, she’s digging in her heels for a fight to the finish.

Even so, I’m sure both former Apple big-shots have profoundly mixed feelings about it all, too, given that their success at Apple was the culmination of their professional lives. What a way to go out. Heinen in particular built her whole career with Jobs, starting at NeXT as general counsel when she was in her 30s, helping out on the side with Pixar, and then hitting real paydirt with Apple. Anderson was the most senior holdover from the pre-Jobs days at Apple and almost single-handedly held the company together financially for the first few years after Jobs returned thanks to his deft management of Apple’s cash and some smart corporate investments in a couple of internet infrastructure companies that paid off big time.

Jobs has discarded people in the past, but none in a situation where they have had to protect themselves and their reputations quite like this. And, interestingly, two other key lieutenants of Jobs have slipped away in the past year or so, too. Avie Tevanian, who ran operating system software development since Jobs first started NeXT back in the late 1980s, and Jon Rubinstein, who likewise started at NeXT and ran hardware development. I’m sure they were burned out too, but it is interesting that four of the most important people that helped Jobs return Apple to glory slipped away quietly within a year of one another, and now two of them are twisting in the wind.

As for Jobs, surely this complicates things a little, even though the company says the SEC has cleared him, and the agency hasn’t hinted that it is going to go fishing for the big kahuna. But think about it. If Nancy Heinen continues to contest the SEC’s charges, the case could well go to court. And if that happens her attorneys naturally would want to call Steve Jobs to testify, as well as other directors. That could get pretty messy and ugly, and not just for Heinen and Jobs.

So we may also be seeing some brinksmanship here. Anderson blinked when he settled. But he also managed to publicly assert that Jobs was more involved than he’s been letting on. Anderson easily could’ve just paid his fine and walked away. But he didn’t, and in trying to clarify the record gave Heinen some ammunition to defend herself and to prolong the case. That said, Anderson had other motivations, too: He’d like  to get on with his new career with Bono & Co.  at Elevation Partners rather than get mired in this, and his settlement with the SEC allows that. Still, he couldn’t resist the urge to get in a not so subtle little kick.

Heinen, I suspect, is afraid that with this blot on her escutcheon she’ll never work in this town, er Valley, again, and that it will cost her much of her fortune just to try to redeem her reputation. She’s just not quite a big enough fish to shake this off like Anderson. And she’s a lawyer, which means she could be disbarred, too. Of course, if she’s guilty, she’s guilty.  But if Jobs hadn’t been so persnickety about his compensation, she might never have gotten into this mess in the first place.