CARLSBAD, Calif. - The appearance of Yahoo’s Jerry Yang and Sue Decker had to be the most anticipated session of the D conference. The room was standing room only. If you’d like to know every little thing they said in their interview with The Wall Street Journal’s Walt Mossberg, read the liveblog John Battelle wrote from the chair next to me.

For my part, I can’t imagine what the audience took away from this chat. Yang and Decker said next to nothing of value, from a news or any other perspective. They were willing to do a deal with Microsoft. Truly (Yang acknowledged that talks with Microsoft continue.) They’re working on lots of new products. Really. They’re the right people to run Yahoo. Honestly. Yahoo is uniquely positioned as a search and display advertising company. Absolutely.

Yang and Decker insist that the media’s focus has been trained too much on the battle with Microsoft (MSFT) and too little on Yahoo’s (YHOO) strategy, yet they’re not much better than ex-CEO Terry Semel was at articulating that strategy. Mossberg asked, rather long-windedly, what is Yahoo? Yang said Yahoo has to be “incredibly relevant and meaningful to users.” Decker talked, again, about how Yahoo wants to be a “starting point.”

So where is Yahoo going? Alas, it’s hard to say.

CARLSBAD, Calif. - Barry Diller defines the calm, cool, collected CEO. At least on stage, when he’s on his best behavior. He called his recent (successful) litigation with partner Liberty Media a wrenching three-month distraction. Come Aug. 1, he says, IAC (IACI) will complete its split into five companies, including the “new” IAC, a pure Web company.

Diller was more interesting about other people’s businesses than his own. About Hollywood, which he knows well, he said: “It’s a community that’s so inbred it’s a wonder the children have any teeth.” His point is that other than theatrical talent there’s no creativity coming out of Southern California. He expressed dismay that Yahoo (YHOO) let Microsoft (MSFT) walk away and implied that the only way he would have turned down such an offer would be if he knew – and not simply desired – that his business plan would produce a better return.

Diller has been around, so his thoughts on management are illuminating. He said the reason for breaking up IAC is that its more than 50 brands are too much for one company to handle. There’s always trouble somewhere with that many brands, he said. And as a manager, “what you tend to do is go where the trouble is,” as opposed to making trouble, which is far more enjoyable and profitable. Asked his opinion of the digital prowess of the major media conglomerates, he praised only one, News Corp. (NWS)

How do you define Dell (DELL) these days? Listening to Michael Dell speak, I have no idea. Dell himself noted that the company’s former “monolithic” strategy – its famous direct-to-customer manufacturing technique – didn’t work so well toward the end of its run. He cited five areas where Dell missed the boat: consumers, emerging markets, notebook computers, data centers and small- and medium-sized businesses. (Dell is the leader in PC sales to large businesses.) So instead Dell now emphasizes all those things, or at least is trying to. It dabbles in retail. It targets smaller businesses. Its growth has been impressive, but is that over a weak base, what Wall Streeters call an “easy compare?” Perhaps Dell eventually will do many things as well as it used to do one thing. For now, it’s a still a computer maker that spends a tiny percentage of its revenues on R&D ($600 million out of $65 billion in sales) and therefore sells me-too products, though often more efficiently than the competition.

CARLSBAD, Calif. - The cool kids at the D: All Things Digital conference  like to say that the real action is in the hallways, not on stage. That’s mostly true. Still, there are bits of intelligence and insight when the giants of the tech industry subject themselves to interviews in front of a live audience. Some snippets …

Jeff Bezos, CEO of Amazon.com, recently demonstrated his Very Loud Laugh that Josh Quittner amusingly described recently in Fortune. He’s got a lot to laugh about, as Amazon’s (AMZN) business is humming. He spoke at length about the Kindle, Amazon’s electronic book. He says the product will keep getting better and that he hopes Kindle eventually includes a really good Web browser. Bezos was at his best when venture capitalist Stewart Alsop asked why Amazon.com keeps trying to sell him a Kindle even though the Web site knows Alsop already owns a Kindle. “You’ve only bought one,” Bezos shot back.  Bezos broke a small amount of news - that Amazon’s online entertainment store will begin showing ad-supported streams, in addition to its for-fee downloads.

Bobby Kotick, CEO of Activision (and a Yahoo (YHOO) board member) gave a lucid explanation of his company’s acquisition of Blizzard. (He steadfastly said nothing about Yahoo’s non-merger with Microsoft.) The combined video game maker will have revenues of more than $4 billion and operating profits of $1 billion. Blizzard, he said, has the kind of business in massive multiplayer online gaming and a major presence in China and Korea that would have been too expensive for Activision to develop on its own.

Kotick, an amusing fellow with a seemingly thinly repressed naughty sense of humor, turned serious when asked about competition. He thinks Electronic Arts (ERTS), Nintendo, Sony (SNE) and Microsoft (MSFT) are here to stay in the games business, but not much more. He says people underestimate the complexities of running a games business, including how Activision (ATVI) compensates its games developers. He says the company has more than 250 measurements of performance, for example. Twenty percent-plus operating margins are the result, says Kotick. Not bad.

The last speaker of the morning session was the ever-entertaining Howard Stringer, CEO of Sony, who is making gradual progress getting the Japanese giant to think about making money. A classic Stringerism: “As you know, culturally the word profit is not high on anyone’s agenda in Japan.” He says Sony is “halfway up the mountain” of being a proper business. That’s particularly tough in Sony’s unprofitable TV business, given, says Stringer, that it’s still difficult to lay off white-collar engineers in Japan, that televisions are a commoditized business and that the global race for TV marketshare is brutal.

Stringer showed an amazing new product, a 27-inch OLED TV that is 0.3 millimeters wide. Stringer said only that the TV will be “quite expensive” and that it’s not ready for the market. The demo version was encased in glass. It’s fair to say the rich guys in the room salivated over owning one. Oh, he also crowed about Sony’s recent victory in the battle of HD-DVD standards. He says he wish people had focused more on the amazing quality of Blu-ray, Sony’s format, than the format war with Toshiba. He says 4 million Blu-ray players will enter the market in June, which, if he’s right, will spread the Blu-ray love.

CARLSBAD, Calif. - I’m attending the All Things D conference this week in Carlsbad, Calif., north of San Diego. It’s as close as a conference gets to being the Who’s Who of the technology industry. How do I know? When I walked in the door Tuesday evening at the lush Four Seasons Aviara hotel, I immediately spotted IAC (IACI) CEO Barry Diller chatting in the hallway with Howard Stringer, CEO of Sony (SNE). That was after flying down on the same plane as Yahoo (YHOO) President Sue Decker and David Eun, Google’s (GOOG) vice-president for content partnerships. (Decker sat in the first row of the plane; Eun sat in the last; I was in between.) On my way to the room I bumped into a trio of Facebook execs: CEO Mark Zuckerberg, COO Sheryl Sandberg and PR poo-bah Elliot Schrage. On my way to the elevator I traded hellos with Yusuf Mehdi, Microsoft’s senior vice-president for strategic partnerships.

Not impressed yet with the firepower here? Okay, consider the plain folks in the cheap seats around me for the main event of the evening, a joint interview with Bill Gates and Steve Ballmer. A row behind me investment banker Frank Quattrone and VCs Jim Breyer of Accel Partners and Redpoint’s Geoff Yang sat together like three boys in the back of the class. AOL founder Steve case sat a few rows in front of them, just in front of Slide’s Max Levchin. Intuit founder Scott Cook was just behind me.

Oh, yes, there was that interview with Gates and Ballmer. They didn’t say a whole lot, actually. They do a nice buddy act, with Gates playing the Gracie to Ballmer’s Allen. A few highlights … Gates said he remains Microsoft’s (MSFT) largest shareholder. Ballmer is the third largest, with an institution between them. (It is Capital Research.) Ballmer claims not to be frustrated that Microsoft’s bid to buy Yahoo didn’t work out and essentially confirmed there are ongoing talks between the two companies about a partnership that falls short of a merger. Gates was surprisingly candid about the disappointing launch of Vista, Microsoft’s latest operating system. And as I said, other than a handful of yucks, there wasn’t much more to report.

Oh, as I was heading for bed, News Corp. (NWS) CEO Rupert Murdoch was checking into the hotel. Should be an interesting couple days.

The fallout over Microsoft’s (MSFT) collapsed bid to acquire Yahoo (YHOO) has provoked all sorts of hand-wringing about why the deal failed. Yahoo’s stock was up almost 6% Tuesday because Jerry Yang told The New York Times and The Wall Street Journal that he really was willing to do a deal.

But is he? And is he still, which the stock move would imply? I received a passionately argued note Monday from Drew Ianni, who runs programming for ad:tech expositions, whose conferences have become must-attend events in the online advertising industry. I thought it’d be worth publishing his musings in their entirety:

The collapse of Yahoo’s stock price was a widely predicted occurrence in that if the deal collapsed the market correction for Yahoo! is ultimately a non-event as Yahoo’s market value simply returns to the level before the dance with Microsoft.

The more interesting question is why did this deal collapse? None of us have been privy to the conversations between Microsoft and Yahoo. But from my perspective, this deal failed not because of any business related issues or price but because of culture.

Once again, Microsoft has proven that it simply does not understand the culture of Silicon Valley. Microsoft has a long track record of abusing its power in its attempts to destroy Silicon Valley companies. From Apple (AAPL) in the 80’s to Netscape in the 90’s to Yahoo and Google (GOOG) today.

These and other companies are part of the fabric of the Valley, have given it its lifeblood and represent the traditions and rich heritage of what the Valley is about. Those who seek to destroy this ethos are not looked fondly upon in Northern California, and Microsoft has long been at the top of that list. If you have been the schoolyard bully for 20 years and wake up one day to find that you have no friends - especially when you most need one - and no one wants to play with you, don’t be surprised.

And the public trashing of Yahoo and threats of proxy battles only made matters worse. Business is cut-throat in the Valley but it is rarely publicly cut-throat. Battles are fought behind closed doors and within relatively narrow circles. And the public airing of dirty laundry is considered unseemly and without tact. If Microsoft wanted to buy Yahoo, Steve Ballmer should have asked Jerry Yang out for coffee at Buck’s in Woodside instead of disrespecting him personally, the company he co-founded and help build, and the greater Silicon Valley.

This deal was never going to happen and the only reason there were conversations is because Yahoo faces some serious long-term issues. But even with a remarkably generous offer that simply cannot be matched by any other company, Yahoo chose to go it alone. That’s what most of us would do if we were publicly disrespected. It was looking like the arrogance of Microsoft would simply cost them a few extra billion dollars. But it ultimately cost them the entire deal.

I think Drew is on to something. There’s no question that there wasn’t a culture fit.

Having said that, I think Drew’s wrong. People talk endlessly about how Silicon Valley is different. Guess what? The laws of gravity apply here too. And this battle isn’t over.

I wrote Friday about the daunting math that Microsoft (MSFT) suddenly faced if it didn’t significantly boost its stake in Yahoo (YHOO). In short, though Yahoo insiders and generally supportive institutions control less than 40% of Yahoo’s outstanding shares, they easily control a majority of shares likely to be voted in a hostile proxy contest. Average Joes rarely vote in such fights, boosting the power of the pros. Why Microsoft’s bankers at Morgan Stanley didn’t figure this out sooner — or why CEO Steve Ballmer didn’t listen — is one of the intriguing tales that may yet be told.

As of the opening bell Monday morning, however, the math changes immediately. There were reports over the weekend of high fives among the Yahoo senior management group. With Yahoo shares down almost $6 to $23 in early trading, there’s a new calculus. Now the shareholders who urged Jerry Yang to reject Microsoft just watched $14 billion evaporate, the difference between Yahoo’s current price and the $33 Microsoft said it was willing to pay.

Some quick thoughts as the story develops:

* How much director’s and officer’s insurance does Yahoo have? They’re going to need a lot. Bill Lerach may be a convicted felon now, but others will take his place, and Yang & Co. just made a decision on behalf of the owners of Yahoo to walk away from a ton of money.

* The ultimate irony of all this is that Steve Ballmer’s main goal in buying Yahoo was to keep its advertising inventory out of the hands of Google (GOOG). Though a Yahoo-Google arrangement is going to require tough-to-secure regulatory approval, Microsoft’s mishandling of the bid has effectively driven Yahoo into Google’s arms. At least for now.

* This doesn’t leave Yahoo in a position of strength. Listen to how UBS analyst Ben Schachter describes the situation to his clients:

“While we believe there are 3 potential near-term catalysts for the stock (partial outsourcing of search to Google, unlocking the value of its Asia assets, potentially deeper cost-cutting in non-core businesses), Yahoo!’s execution remains the problem, as the company has not been able to execute better targeting and measurement on its own site effectively enough over the past 15 years. We are not willing to give them the benefit of the doubt that they can make meaningful improvement over the next three years, particularly given a heightened competitive dynamic where Yahoo! will now be competing against Google, Microsoft, AOL, and possibly others.”

* Where does Microsoft shop next? The party line is that there’s nothing else big enough for Microsoft to buy. Yet it has a war chest of $44 billion ready to go. Will it make Facebook an offer it can’t refuse? Could it be the solution for AOL that Time Warner (TWX) is looking for? Will Microsoft try again if Yahoo shares remain stuck in the mud?

* What will happen to Yahoo’s board? Now Yahoo has to schedule a long-delayed annual meeting. (Google’s is this Thursday, by the way.) Will angry shareholders kick out its value-destroying board?

All week the Microsoft (MSFT) camp has been leaking to the media that it’s on the verge of launching a hostile takeover of Yahoo (YHOO). Yet as I prepare to hit “publish” (what used to be called “going to press”), still no word. Could it be that Microsoft has realized it can’t win a proxy battle?

Consider some math. According to public filings, various entities of Capital Group own as much as 16% of Yahoo’s outstanding shares. Legg Mason (LM) owns another 6%. Founders Jerry Yang and David Filo together have kept a 10% stake all these years. Directors, top executives and various friends of Jerry and David’s own at least another 5%. That adds up to 37%. And that’s not counting the other institutions that own shares of Yahoo. That 37% alone, though, absolutely will vote against a hostile takeover attempt at $31 per Yahoo share (Microsoft’s original offer), and are highly unlikely to approve a $33 offer either.

Okay, you say, 37% does not a hostile takeover thwart. True, but consider this. Yahoo is a consumer company, and many of its shares are held by retail investors, perhaps as much as 25%. Retail investors almost never vote in proxy contests. It’s just not in their nature. Too much trouble, not enough impact, and so on. So for the sake of argument, remove that 25% from the vote count. Now that 37% of Yahoo stalwarts all of a sudden becomes 49% of the votes outstanding. There are a lot of ifs and mights and at leasts here. But the bottom line is obvious. Team Yahoo wouldn’t have to work all that hard to block a deal anywhere south of, say, $36 a share, while Team Microsoft has a huge task ahead of it to find enough votes to win.

I’ve assumed from the beginning that this deal is inevitable. I still think so, meaning that Steve Ballmer will bite down hard and come up with more money to buy Yahoo. And perhaps by the close of market my math will be proved irrelevant and Microsoft will launch an attack. Marc Andreessen wrote this morning about many of the concerns each company might be having about a deal right now. Good points all. What he’s left out is that Microsoft just maybe has realized it can’t win.

The Wall Street Journal ran an interesting interview with Intel (INTC) CEO Paul Otellini the other day. A few things stuck out. First, in the three years Otellini has run Intel its headcount has dropped from 103,300 to 84,600, according to the Journal.

He also talked a lot about supplying chips to Apple’s (AAPL) iPhone, a no-brainer given that Intel has been a success displacing IBM (IBM) as a supplier of chips to Apple’s Macintosh computers. Otellini also reiterated what’d he’d told investors when Intel recently reported a better-than-expected first quarter, that Intel hasn’t seen any ill effects of a weak U.S. economy, or if there have been any they don’t “move the needle.”

Here’s what’s interesting about all of that to me. Exactly three years ago I wrote an article in Fortune about Intel and Otellini, who was new on the job at the time. I noted then that Intel’s stock price had been stuck for a while at $23, about where it had been in 1998. Intel’s close Wednesday: $22.26.

Yes, Intel pays a 56-cent-per-year dividend, up from 32 cents in 2005, so its total return is better than nothing. But check out its chart compared to the Nasdaq’s in the same time frame. Not pretty. The reason is simple. Yes, headcount is down, but so are revenues and profits.

In 2005 Intel had revenues of $38.8 billion, profits of $8.7 billion and earnings per share of $1.40. Last year the corresponding figures were $38.3 billion, $7.0 billion and $1.18. (An Intel investor-relations site has all these figures and more for the curious.)

If anything, Intel trades for a higher valuation to its earnings today than it did three years ago, though that’s got to be of small solace to its investors. As for its goal of supplying the iPhone, that’s aspirational. What the Journal interview hinted at but didn’t make clear is that Intel doesn’t supply the guts of the iPhone. In short, it’s no closer to its goal of moving “beyond the PC” than it was three years ago.

As for the economy, Otellini identifies the migration from desktop computers to notebooks as the reason Intel’s business has held steady. Still, Otellini has to move the needle in an entirely different way: Like Jeff Immelt at General Electric (GE), he’s got to get that stock up.