Well, we can’t all be Amazon. While the Seattle-based e-commerce giant (NASDAQ: AMZN) raked in a $199 million profit for the third quarter of 2009—a 68 percent increase in net income over the same period last year—Microsoft (NASDAQ: MSFT) posted an 18 percent decline in its profits (still $3.57 billion, better than analysts expected).

But beyond these giants of the global tech scene, Seattle has some mid-market public tech companies that we’ve been paying closer attention to lately. That’s because they provide a much more complete picture of what’s going on in the public markets, as well as the mood across different industries like digital media, data storage, and high-performance computing.

Of these local bellwethers, two companies announced modest quarterly profits this week, and two others posted losses but are on the long-term comeback trail. It’s clearly still tough times out there, but here are the highlights:

—RealNetworks (NASDAQ: RNWK), the Seattle digital media and entertainment company, managed to post a surprising profit of $1.5 million for the third quarter of 2009, its first profitable quarter since the first three months of 2008. That’s despite posting quarterly revenue of $140.3 million, a decrease of 8 percent from $152 million in the same period last year (when the company posted a net loss of $4.5 million). RealNetworks reduced its operating costs and formed partnerships with Facebook and Apple over the past few months.

—Cray (NASDAQ: CRAY), the Seattle-based supercomputing company, reported a net loss of $2.1 million for the third quarter. But its revenue was $58.6 million, a 7 percent increase over the same period in 2008. In the second quarter of this year, Cray posted a surprise profit of $3.4 million on the strength of large government contracts and a broader customer base.

—InfoSpace (NASDAQ: INSP), the meta-search company based in Bellevue, WA, posted a profit for the second straight quarter (following three consecutive quarterly losses). Its net income for the third quarter was $1.8 million, based on revenue of $54.4 million, an increase of 38 percent over its revenue from the same period a year ago.

—Isilon Systems (NASDAQ: ISLN), the Seattle-based data storage firm, reported a net loss of $4.9 million for the quarter. The company’s quarterly revenue was $30.5 million, up 1 percent over the same period a year ago, but its net loss increased from $3.7 million in the previous quarter this year. I wrote about nine-year-old Isilon’s efforts to bounce back from some tough times in a profile last week.

On October’s last trading day, the stock market plunged. As Scott E. Marcouiller, a senior equity market strategist at Wells Fargo Advisors in St. Louis, told the New York Times today, “The market is focusing on the glass is half empty…We just needed to let some of the air out of the balloon.”

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Some tech companies seem to be at their best when things are at their worst. Those are the ones you really need to keep an eye on, especially in a recession. Isilon Systems is one of those companies.

The Seattle-based data storage firm (NASDAQ: ISLN) is announcing its third-quarter earnings this afternoon, and it will be interesting to see how well its products are selling across a wide range of industries—everything from movie studios and media companies to financial institutions and biomedical research organizations. I recently sat down with Isilon’s founder and CEO, Sujal Patel, for a wide-ranging interview about the nine-year-old company’s technology and business strategy. It makes for a pretty compelling case study of a tech startup’s growing pains, and how it has bounced back from adversity to become a leading player in a crowded and competitive field.

In case you don’t know all the twists and turns in Isilon’s history, here’s a quick recap. Patel, a former engineer at Seattle-based RealNetworks (NASDAQ: RNWK), co-founded Isilon in January 2001. The basic idea was to provide cheaper and more efficient data storage for companies needing to host or deliver video, music, and other multimedia content that requires a lot of storage space. In his previous role as chief architect of RealNetworks’ media delivery software, Patel had seen many customers struggle to upgrade their storage capabilities. So there was a real problem to solve. But the tech bubble had collapsed, so customers weren’t necessarily in the mood to buy. Patel says he “pretty much timed the worst spot of the decade to start a company.”

What’s more, there were already about 250 venture-funded storage companies out there, Patel says, and about 50 of them sounded just like Isilon. Patel says he built his business plan around solving the specific problem Real’s customers had, and “how that problem would be pervasive across all mid-range to large enterprises over the next decade.” To start with, he set an incredibly narrow customer focus on photo-sharing and streaming media websites, and media companies.

Isilon’s technology approach was to cluster together a large number of storage “bricks”—each one includes disks, memory, processing, and networking—into a single storage unit. It was a novel approach in the field of network-attached storage, which today is a $4 billion industry with big players like NetApp, EMC, and Hewlett-Packard. Isilon’s technology requires solving some very tough software problems, but the payoff is better storage performance that is also cheaper and easier to manage, for companies dealing with huge amounts of unstructured data. “We can build one gigantic network drive, and we can scale it as the customer’s needs change over time,” Patel says.

Venture capitalists were sold. In August 2001, Isilon closed an $8.4 million funding round …Next Page »

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Seattle-based Decho announced today it has formed a strategic partnership with Vodafone, a British mobile network operator, to develop cloud-based data backup services for personal computers. Financial terms of the deal were not released. The new products for European markets will be built using Mozy, the online backup service operated by Decho, which is a subsidiary of Hopkinton, MA-based EMC (NYSE: EMC).

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How do you go about summarizing a company’s culture in one word? I haven’t a clue, but whenever I ask CEOs, they always come up with something interesting—and often surprising. In the past couple of months, I’ve been asking top executives at Northwest tech startups to talk about their company culture and why it’s unique. So far, none has refused to play the “one word” game.

I’ve received a fascinating array of responses that speak to the companies’ management styles, the kinds of talent they’re looking for, and their overall strategy—what they think sets them apart from their competition. From Bellevue, WA-based Apptio’s “paranoid” to Seattle-based Picnik’s “easy,” you can see a lot of a company’s mindset through the keyhole of just one word. And last month, Bob did a comparison of Boston vs. Seattle one-word cultures—and found that the New England startups were a little more New-Agey in their responses than companies here in the Northwest. (No idea what this means, but it’s always fun to go up against the East Coast.) And Bruce followed that up by checking in with five San Diego firms.

Now I’m extending the exercise to Seattle’s public tech companies. I wondered whether their responses would show any glaring differences from the startups—more conventional, say, or boring. After checking with a few of them (each has been around for six years or longer), my scientific answer is “not really.”

Our initial short list of public companies spans the fields of supercomputing, data storage, and online advertising. Be warned, Mr. Ballmer, Mr. Bezos, and Mr. Glaser—I’m coming for you too.

Cray (NASDAQ: CRAY)
CEO: Peter Ungaro
Culture: “Next”
Comments: Ungaro says, “Never satisfied with the status quo, our employees are committed to providing our customers with the next-generation of Cray supercomputers. Collectively as a company, our passion is setting new boundaries of what supercomputers are capable of and providing those resources to the world’s researchers and engineers.” He adds, “We celebrate achievements and acknowledge milestones, but we are focused on what’s next and what we all have to do to get there.”

Isilon Systems (NASDAQ: ISLN)
CEO: Sujal Patel
Culture: “Driven”
Comments: Patel says, “We have been through a million different things that show how driven we are. We survived…we grew, we built, we went public, we ran into some nasty roadblocks, we recovered from that.” He adds, “We only get through that stuff because we are driven as an organization—and that’s not about me, it’s about the people in this building.”

Marchex (NASDAQ: MCHX)
COO: Peter Christothoulou
Culture: “Innovative”
Comments: Christothoulou says, “Being innovative is at the core of everything we do; from delivering the most innovative products and technology, to hiring and employing innovative, collaborative people to provide our customers with the best experience possible.”

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The DEMOfall 09 conference, billed as “the launchpad for emerging technology,” kicks off today in San Diego, with company presentations and new product launches officially starting tomorrow morning. The Seattle and Portland, OR, metro areas are well-represented in the mix, with three Seattle-area startups and one Portland company scheduled to present their stuff. That’s all according to VentureBeat, which co-produces the conference.

It’s a big deal in the tech industry, and a great opportunity for a select group of startups. Here’s a little bit about each Northwest company that will take the stage:

—Intelius, based in Bellevue, WA, provides background checks and identity theft protection for consumers and businesses. Back in May, we reported that the company acquired Spock, the Silicon Valley-based people search engine, for an undisclosed amount. Intelius was founded in 2003 and is led by CEO Naveen Jain, the founder of InfoSpace.

—Point of Wealth Systems, based in Portland, OR, has developed a method that allows employees who make their money in cash and tips (waitstaff at restaurants, for example) to deposit their earnings into a secure register for savings, retirement, or investment purposes. Point of Wealth was formed in March 2008 to bring financial services to this new market.

—Symform, based in Seattle, has been honing its cloud data-storage product in beta trials (and a pre-launch version) since the spring. We first profiled the company back in February, and in April, Symform announced it had raised a $1.5 million Series A round from OVP Venture Partners. Its basic idea is to offer cheap, efficient, and secure data storage and backup services to small and medium-sized businesses.

—Enroute, based in Bellevue, WA, is giving a sneak preview of its product—a unified system to help businesses find the most efficient way of shipping packages from A to B. Enroute is one of the finalists from the Zino Society investment forum, which took place last Thursday in Seattle. It is in the running for a $50,000 Zino investment prize, to be announced within the next few weeks.

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Now I know why venture capitalists walk the halls at the University of Washington—you never know who you might run into. My timing was impeccable yesterday as I sat down with Kai Li, the co-founder and chief scientist of Data Domain (NASDAQ: DDUP), the Santa Clara, CA-based data storage company that just got bought by EMC (NYSE: EMC) for $2.1 billion in cash.

Li, who is a computer science professor at Princeton University (he has been visiting the UW for the past year and has some strong Seattle connections), made time for me despite his busy schedule. The deal with EMC has been in the works since June 1, when the Hopkinton, MA-based data storage and management giant launched its bid to acquire Data Domain despite a pending acquisition attempt by rival NetApp (NASDAQ: NTAP) initiated in May. Many twists and turns ensued, culminating in yesterday’s announcement by NetApp that it had taken itself out of the running, clearing the way for EMC’s takeover, at a bid of $33.50 per share.

Data Domain’s story is a compelling one. Li co-founded the company in 2001, together with Brian Biles (currently vice president of product management) and Ben Zhu (former chief research officer), with the idea of developing advanced “deduplication” software to get rid of redundant data before it gets stored, thereby saving companies storage space, time, and money. Li served as chief technology officer and CEO in the early days of the company, but since 2002 has been a consulting chief scientist and director. Over the next few years, Data Domain gained traction in the data backup and disaster recovery market and went public in June 2007, raising more than $110 million in an IPO.

In a wide-ranging interview, Li (left) talked about Data Domain’s technical approach, its market strategy, a little bit about the EMC deal, and the broader future of data storage. Here is an edited account:

Xconomy: So how does the EMC acquisition affect you?

Kai Li: I don’t know yet. EMC has been the leader in storage systems in general. They’re bigger than other players in the storage market, comparing with NetApp, IBM, HP, Dell, and Sun (now part of Oracle). EMC is the premier storage vendor for data centers. We haven’t been communicating with EMC because of the definitive agreement with NetApp, so I haven’t talked to EMC yet.

X: How does the deal affect Data Domain’s operations?

KL: EMC has written a letter to Data Domain employees. They said they’ll keep Data Domain …Next Page »

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In case you missed it over the holiday, an electrical fire and power outage at Fisher Plaza near Seattle Center late on Thursday night disrupted a number of websites and services, including those of local tech companies Redfin, Survey Analytics, and Big Fish Games, as well as Microsoft’s Bing Travel site (formerly Farecast), Verizon’s DSL service in the Seattle area, and local television and radio stations including KOMO.

There were no injuries, and most operations were back to normal by the weekend, though Bing Travel was down until late Saturday morning. The news was reported by local and national outlets, including TechFlash, The Seattle Times, The Seattle P-I, and CNET.

Internet companies were directly affected as far away as Marlborough, MA-based Authorize.net (now owned by CyberSource), a credit-card service for online merchants that uses a data center at Fisher Plaza. And there was a ripple effect from there. Annette Tonti, the CEO of Rhode Island-based MoFuse, a network of build-it-yourself mobile sites, says her company’s service was disrupted on Friday because it uses Authorize.net to process credit cards. “The issue for us was getting customers signed up,” Tonti says. “However, we were not affected too long and everything appeared to be working fine by later in the day.”

“Companies should have servers at various physical locations, spread far apart, to keep isolated incidents like a fire from taking down a service,” says David Berube, MoFuse’s founder and chief architect. “I’m sure Authorize.net does have a redundant system, and their quick response to get service back up shows to me that they do have some sort of redundancies in place.”

Closer to home, there has been quite a lot of discussion about what went wrong, and how companies can better prepare for such outages, which seem rather inevitable. The cause of this particular fire is still under investigation.

Praerit Garg, co-founder of Symform, a data storage startup in Seattle, agrees it’s important …Next Page »

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Over the last couple of years, we have been witnessing a resurgence of the “Internet as the new computing platform” idea. I say resurgence because that was the premise of the late 90’s “Internet Bubble.” Given that history, it would be a mistake to use the same term, of course. Instead, we’ve coined a new one— “cloud computing.” New term aside, the core premise of providing applications & services over the Internet remains at the heart of this resurgence. The Internet Bubble has taught our industry to be more circumspect. Furthermore, with 10+ years of multiple successful Internet services under its belt, the industry is that much more mature. Amazon, Google, Hotmail, Yahoo, and SalesForce.com are all great proof points of this maturity.

Yet, as I observe this resurgence, I see the hype is rebuilding and we might be getting carried away again. History is a great place to look for patterns to help predict patterns in the future. Here are some I see.

Fallacy of paradigm shifts

Mainframes to PCs, and now PCs to the Cloud. I’ve noticed that when there is a paradigm shift, a set of people take on the task of re-implementing existing applications in the new paradigm. Somehow, a mindset develops that “paradigm shift” means it is an opportunity to replace the incumbent solutions by re-implementing them in the new paradigm and suddenly the world will move over. I believe that it is a waste of time & energy to re-implement applications that work well in the existing paradigm. ROI for making the shift rarely exists for the majority of the market. It is important to internalize that computing is a tool for most organizations and individuals, not a way of life (like it is for some of us) so they won’t make the change unless there is a very good reason to do so.

Historically, when computing shifted from mainframes to PCs, some believed that mainframes would go away and even tried to rewrite key mainframe applications on PCs. Mainframes remain and continue to be a very healthy business. Most batch/transaction processing applications that worked extremely well on these systems continue to do so. What popularized the PCs was killer applications such as spreadsheets, word processing, etc. that made computing tools much more accessible to businesses and individuals at large, and significantly increased efficiency and productivity compared to using paper and typewriters.

The same is going to be true as we make the shift from PCs to the cloud. PCs aren’t going away—in fact, they are at the heart of popularizing the Internet and fueling the adoption of this new computing paradigm. So PC applications such as Microsoft Office and Adobe PhotoShop that harness the power of local computing capacity, storage, and huge existing user bases aren’t going to be easily replaced, if at all. In fact, I believe that such efforts will see very limited success. I encourage entrepreneurs and innovators …Next Page »

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One of San Diego’s technology startups made an acquisition, and another got a secondary round of venture funding last week. That might not signify the end of the downturn for San Diego’s venture-backed companies, but they were welcome developments nevertheless. Meanwhile, entrepreneurs in San Diego’s technology sector got lots of survival advice.

—Our timing made us look prescient this week when we profiled Slacker and Dennis Mudd, who had raised almost $60 million in venture capital since founding San Diego’s online streaming music website in 2007. If only we had known that two days later Slacker would disclose it had raised another $9.7 million, we would have asked why the online music streaming company needed the extra funding (rest assured, we will press for more on this front anyway). Slacker just raised $5 million in December.

—BakBone Software, the San Diego data backup and recovery company, said it paid more than $15.9 million to acquire ColdSpark, a Broomfield, CO, company that specializes in managing global messaging infrastructures. BakBone says its data protection platform, combined with ColdSpark’s proprietary email platform, will allow customers to improve corporate compliance, mitigate risk, enhance performance, and reduce operational costs.

—Daylight Solutions has developed technology that is the stuff of science fiction. The four-year-old, venture-backed startup has created laser-based sensors capable of detecting glucose in the breath of diabetic patients and carbonyl sulfide in the breath of patients suffering from liver disease. Daylight Solutions’ lasers operate at mid-infrared wavelengths, a part of the spectrum co-founder Tim Day describes as “the color of heat.” I profiled the company and its latest move to prove its technology can be used by the military to prevent heat-seeking missiles from homing in on aircraft in flight.

—Don Dixon, a co-founder and managing director in the Palo Alto, CA, office of Trident Capital, delivered some tough advice at the annual Red Herring North America 100 conference, which was held in San Diego last week. Dixon says CEOs should be cutting costs in anticipation of worsening economic trends. He does not expect the IPO market to return anytime soon, and says his firm views mergers and acquisitions “as a game of musical chairs in which there are six chairs and 600 kids at the party. You want to be sure that you’re one of the ones who gets a chair.”

—Five months ago, Jim Zierick was named CEO of San Diego’s Nirvanix. Last month, the cloud storage technology specialist raised $5 million in a secondary venture round from its existing investors, which include Intel, Mission Ventures, Valhalla Partners, and Windward Ventures. So what’s next? Zierick told Xconomy’s Juha-Pekka Tikka that Nirvanix continues to grow and will likely need more venture capital next year.

—When the exits for venture-backed companies are closed, CEOs should work to get as close as possible to profitability, according to the panelists who discussed strategies for startups while capital markets remain shuttered at the Red Herring North America 100 conference in San Diego. Brian Gentile, CEO of San Francisco-based Jaspersoft, urged startup CEOs to “get to ‘great’ on operational excellence, and from there you’ll have many more options.”

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San Diego’s cloud storage provider Nirvanix has raised eyebrows by claiming to be 200 percent faster than the great storage pioneer, Amazon’s Simple Storage Service. Cloud storage is a current hot topic many find hard to understand, but it all comes down to this: Nirvanix and similar companies store your computer’s archives on the Internet. And there is an inconceivable amount of stuff getting archived. Exactly where it gets stored has sometimes been a bit nebulous, which may be part of the reason why it’s known as storage in the cloud.

Nirvanix has five distributed nodes—in Japan, Germany, New Jersey, Texas, and in Southern California—which can archive 20 petabytes (PB) of data. (Unlike Google’s own enormous data centers, Nirvanix leases its space from companies that operate data centers.) A byte is the basic unit of measuring data in computers. One petabyte is approximately one quadrillion bytes, or a one followed by fifteen zeros. If a two-hour-movie is about five gigabytes, that means one petabyte would be enough data storage for 200,000 movies. Facebook’s 10 billion photos are said to be 1 PB. And it has been said that Google processes about 20 PB of data each day.

Jim Zierick

What comes after petabytes? “Oh, that I don’t know!” laughs Nirvanix CEO Jim Zierick. “The beauty is that it is infinitely scalable. There’s no reason why we can’t have hundreds of nodes around the world.”

Almost everyone has a storage problem, and the amount of computer data is growing explosively. At the same time, hardware and bandwidth gets cheaper. As a result, companies and many individuals are finding it necessary—and less expensive—to shift their data storage to the cloud. Nirvanix has an advertising campaign that says “The Box” (storage server) is dead and “enterprises must abandon archaic devices and embrace the new storage paradigm.”

The new storage paradigm, of course, means the cloud, and the name Nirvanix alludes to the heavenly state of highest spiritual attainment. The company’s slogan is, “We manage your storage, so you can manage your business.” In the world of scalable computer storage such peace of mind comes at an average price of $20,000 and a 24- to 36-month contract.

The company was founded …Next Page »

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It looked like a small deal when San Diego-based data backup and recovery company BakBone Software acquired the assets of Santa Clara, CA-based Asempra Technologies earlier this week. BakBone shares trade over-the-counter, and the company’s press release mentioned that only $350,000 in cash changed hands. In fact, the value of the overall, cash-and-stock transaction was approximately $3 million, but the real significance may be in showing how hard times can make for good deals.

What BakBone got was continuous data protection technology developed by Asempra, a pedigreed competitor that received more than $41 million in venture capital funding.

In its statement, BakBone president and CEO Jim Johnson says, “a key growth strategy of our company is to offer customers a broad portfolio of product and service offerings. This acquisition… helps build on our position as a leading provider of data protection solutions that improve overall performance and reduce operational costs.”

Asempra’s chief technology officer, Siew Sim-Tang, and former CEO and president Dan Fraisl founded the company in 2003 to develop technologies that continuously update clients’ data, and enable them to rapidly recover their data when needed. Gary Gysin was named as Asempra’s CEO in January 2007, and he sat on Asempra’s board with three VC investors, Siew Sim-Tang, and Gordon Eubanks, Symantec’s ex-CEO. Asempra had over 50 employees, and less than three months ago, the Santa Clara company introduced a new business recovery server called BCS 3.0.

BakBone and Asempra had formed a partnership in April 2008. According to a press release at the time, they were supposed to “invest in joint product development, marketing, and services delivery.” Now Asempra’s net pages all lead to BakBone, which is expanding its portfolio in a contested data recovery market with Asempra’s products.

Asempra’s SEC filings show the company got $8.9 million in Series A venture funding in 2003 from Menlo Park, CA-based U.S. Venture Partners and Waltham, MA-based Polaris Venture Partners. Those same firms also participated in a $20 million Series B round in 2006 that included Menlo Ventures of Menlo Park, CA. The SEC filings also show Asempra raised $3.9 million through warrants and stock issued to U.S. Venture Partners and Polaris in 2005. Those two VCs and Menlo Ventures provided Asempra with another $8.7 million in December 2007.

BakBone Software was founded in 2000 and has over 230 employees. Its top product is NetVault, tape backup software.

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It was a pretty busy week for deals in the Northwest, with activity in consumer Internet, security software, gaming, and biotech.

—The most talked-about deal in the Seattle startup community was Urbanspoon’s acquisition by New York-based IAC (NASDAQ: IACI), which owns dozens of popular websites like Citysearch and Evite. Financial terms were not disclosed. Urbanspoon, an online restaurant guide and iPhone application, will remain autonomous, said co-founder Ethan Lowry. New-media expert Warren Gouk of Cascadia Capital added some analysis about what the deal means for consumer Internet startups.

—Luke reported that Seattle-based ZymoGenetics (NASDAQ: ZGEN) licensed the rights to eight of its drug candidates to a new startup called Seattle Life Sciences, in exchange for an equity stake in the company. It’s all part of ZymoGenetics’ strategy to cut R&D costs on programs outside its core business, while it looks to push sales of its drug for surgical bleeding and development of its treatment for hepatitis C.

—Bellevue, WA-based Intelius acquired Spock, a people search engine in Redwood City, CA. Financial terms of the deal were not given. Intelius provides identity theft protection and background checks, among other services.

—Seattle-based Wetpaint, a social publishing startup, formed a partnership with MSN Entertainment to create fan sites that will start rolling out this quarter. Financial terms of the partnership were not announced. MSN will use Wetpaint’s software to power social websites where fans can create content and connect with each other.

—Seattle’s Big Fish Games gobbled up Grubby Games, a development studio in Vancouver, BC. The price of the acquisition was not disclosed. Grubby Games makes titles like Incredibots, Professor Fizzwizzle, and My Tribe. Big Fish says it plans to release a new brand based on Grubby’s technology next quarter.

—Ryan reported that Likewise Software, based in Bellevue, WA, raised $10 million in Series C funding from existing investors Ignition Partners, Trinity Ventures, and Intel Capital. Likewise makes software that helps companies track and secure access to computer networks.

—Seattle-based Geospiza, a bio-software startup, inked a partnership with Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) to help genomic researchers store data and access it in the Internet cloud, as Luke reported. Financial terms were not disclosed. It’s the first time a major gene sequencing company has taken the leap into cloud computing.

—Seattle startup Vigilos closed $1.4 million from Northwest Venture Associates, and is in the process of raising $300,000 more. Vigilos makes security software that helps organizations like the FBI, U.S. Navy, and Washington State Department of Transportation monitor sites remotely.

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The idea of computing “in the cloud” is certainly, well, in the air—to the point where I think people are starting to become allergic to it. It seems that “cloud computing” has become the new “nano.” Putting the term in front of whatever your business is doing doesn’t necessarily make it a good (or even viable) strategy. And the concept—making data storage, computing power, and software applications available over the Internet via remote servers—certainly isn’t new.

But if Microsoft is betting heavily on it, you know it has gone totally mainstream. Last October, Ray Ozzie, Microsoft’s chief software architect, announced Windows Azure, the company’s upcoming cloud-based operating system, and Azure Services, which is meant to allow software developers to build and run software applications hosted on Microsoft servers. The platform is still in the “community technology preview” stage, with a more general release planned for later this year. There has been a lot of speculation about what Microsoft’s cloud-based products can and can’t do—and so far the top brass, including Ozzie (who just spoke at Friday’s Technology Alliance luncheon in Seattle), have kept mum on the details.

Enter Doug Hauger, general manager of cloud infrastructure services and former chief operating officer of Microsoft India. Hauger gave a talk last Thursday evening, organized by the Washington Technology Industry Association (WTIA), in which he spelled out Microsoft’s world view of cloud computing. Hauger said his goal was to convey, “What are we thinking about cloud, and what should people be thinking about?”

It was the final event in a four-part WTIA cloud computing series, which included talks by Amazon, Google, and Terremark. Thursday’s event also had a demo from Ian Knox of Seattle-based Skytap, showing how companies can run Microsoft’s development software in the cloud, and use Skytap’s cloud-computing platform to set up virtual environments for doing testing and debugging; Microsoft is one of Skytap’s partners. But what most people were wondering was how Microsoft is positioning itself versus Amazon and Google in the competition for cloud services.

Hauger, a Boston University alum, didn’t say anything particularly earth-shattering, and he didn’t give very many specifics about Windows Azure—which is fair enough, since the product isn’t out there yet. He did clarify that it’s pronounced “AZH-ure,” with the emphasis on the first syllable (sort of rhymes with “badger”)—at least that’s how Hauger says it. Here are my top five takeaways from his talk:

5. “CIOs are incredibly confused” about the cloud, Hauger said. “IT vendors are saying, …Next Page »

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It was another busy week for deals in the Northwest, with lots of action in cloud computing software, mobile, and healthcare. Xconomy even got into the act, inking a partnership with The Seattle Times (see below).

—Amazon (NASDAQ: AMZN) acquired Lexcycle, an e-book startup based in Portland, OR, and Austin, TX. No financial terms were given. Lexcycle makes an online bookstore application called Stanza for desktops and the iPhone. The move is viewed as part of Amazon’s effort to consolidate its position in the e-book reader market for mobile devices.

—Seattle-based Symform, a cloud data storage startup, raised $1.5 million in Series A financing from OVP Venture Partners in Kirkland, WA. Symform, founded in late 2007, has developed an online data backup service for small to medium-sized businesses that is fast and relatively cheap. It is in public beta trials and plans to release its full service later this year. OVP’s Mark Ashida talked about the deal and some broader issues in investment strategy.

—Opscode, a stealthy Seattle startup working on cloud computing infrastructure for businesses, closed $2.5 million in Series A funding, led by Draper Fisher Jurvetson. Founded last year, Opscode says it will use the new cash to hire engineers and other key staff as it gets ready to launch its core cloud service this year.

—Seattle-based PATH, a global health nonprofit, received two grants worth $52 million to combat the spread of HIV, as Luke reported. The three-year grants are from the U.S. Agency for International Development ($35 million) to strengthen communities’ response to HIV in Ethiopia, and from the Canadian International Development Agency ($17 million) to aid HIV prevention efforts.

—Seattle-based LookStat, a maker of Web-based analytics and workflow automation software for the microstock photography industry, raised $500,000 from Seattle’s Founder’s Co-op and individual investors. LookStat is in public beta trials and looking to sell its service to photographers who want to know what kinds of photos are selling where, for example. Co-founder Rahul Pathak talked about what his company is doing, and provided some more context around the deal.

—Ryan reported on the Northwest’s second-biggest financing deal of 2009 so far, Seattle-based NewPath Networks’ $30 million funding led by Charterhouse Group in New York, with Denver-based Meritage Funds also participating. NewPath, founded in 2004, designs and operates wireless technologies such as antenna networks and underground fiber-optic cables for carriers like AT&T, Verizon, and T-Mobile, who need to provide wireless coverage in remote and difficult-to-access places.

—Bingen, WA-based Insitu, a developer of drone aircraft, received a one-year, $30 million contract from the Canadian government to ship small, unmanned aerial vehicles in support of Canadian military operations in Afghanistan. Insitu was acquired by Boeing (NYSE: BA) for about $400 million last summer.

—Hillsboro, OR-based Kryptiq, a maker of collaborative software for healthcare providers, sold off its health plan network management software line, called Choreo, to Portico Systems in Blue Bell, PA. Financial terms were not announced. Kryptiq’s core product helps providers share information with patients, labs, and pharmacies.

—Luke broke the news that Redmond, WA-based Asemblon has raised $2.9 million in the first installment of a Series C financing, led by London-based RAB Capital and Japan’s Sojitz Trading. Asemblon is working on a novel technology for storing hydrogen fuel using organic carrier molecules that can release hydrogen on demand, enabling the fuel to be stored at room temperature and without high pressure.

—Lastly, Xconomy has formed a partnership with The Seattle Times, whereby the Business/Technology section of Seattletimes.com gets an automatic feed of news and features headlines from Xconomy Seattle, as Luke announced. This syndication deal comes on the heels of another partnership we formed with the Seattle P-I back in December to share online stories.

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Seattle-based Symform, a small company that provides data storage and backup in the Internet cloud, is announcing today a $1.5 million Series A financing from OVP Venture Partners in Kirkland, WA. This is the first new investment OVP has announced this year; the firm made six follow-on investments last quarter. Managing directors Mark Ashida and Lucinda Stewart are joining Symform’s board.

As for Symform, the young startup we profiled back in February, it’s a significant step forward. The company was founded in late 2007 by ex-Microsoft veterans Praerit Garg and Bassam Tabbara, and has been developing its product for the past year and a half. The idea is to sell an online data backup service to small and medium-sized businesses, and make it cheaper and faster than other available services. As OVP’s Ashida puts it, “Symform is a broker of storage that’s on many different people’s disks. It has very good security. The key is you’re not uploading to one site, you’re uploading to 100 sites. There’s no choke point. And when you want to recover the data, you’re downloading from many. They also have this incredible cost advantage.”

But what did it take to get Symform funded, especially in the current climate? It turns out Ashida knew Garg from their Microsoft days together, five or six years ago. “Praerit’s group [at Microsoft] came up with a really innovative way to manage servers,” Ashida says. “A lot of things he was working on were some of the most innovative things Microsoft was doing.” The two started talking about Symform about a year ago, Ashida says. “I met with him every couple months. They kept evolving their idea, which was a really good sign.”

As Ashida explains it, Symform started out as a consumer idea—to sell data storage to individuals instead of businesses. “I said, ‘Your roots are all in enterprise. What credibility do you have for a consumer product? Why are you doing this when you have tremendous roots, 12 years experience, in enterprise?’” So, a month or two ago, Garg came back with a pitch for business customers, and that did the trick. “It went from a good idea to approval inside OVP within two weeks,” says Ashida.

“The money is only one part of the story,” Garg says. “You get someone like [Ashida and Stewart on the team] effectively for free. OVP, given their reputation, brings a certain amount of formal capability to the company. I’ll call this maturing of the company. It’s the next phase. Getting money also means we can hire a set of people.” Indeed, Garg says Symform is in the process of expanding the management team and hiring a couple more engineers.

Meantime, the company has doubled its partner base from 17 to 35 distributors across the U.S. These are small-business IT consultants who will sell Symform’s product along with their other managed services to corporate customers. Symform is currently in public beta trials—its new website has gone live today—and it is doing a pre-launch of its core product on May 1, while it gears up for a full release later this year.

Another development is that one of Symform’s main competitors (at least technology-wise), Swiss-based Wuala, was acquired last month by French network storage manufacturer LaCie. “It’s a great validation for us,” Garg says. “We’re actually hoping LaCie will come out with a device with Wuala software on it.” That would mean that down the road, say in a year or two, Symform could move into …Next Page »

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The carnage continues at tech and life sciences companies in the Northwest. You can follow Xconomy Seattle’s updated layoff litany here—we’ve kept a running tally of job cuts since November. (If you’ve heard of other layoffs in the innovation community, please drop us a line at tips@xconomy.com or gthuang@xconomy.com.)

—Luke broke the news that Amgen (NASDAQ: AMGN), the world’s largest biotech company, is cutting 100 jobs at its drug manufacturing facility in Bothell, WA. The layoff will be effective in July, and will leave about 70 Amgen workers still employed in Bothell, and just under 900 in Washington state. Amgen said it is merging the work being done in Bothell into a larger facility at company headquarters in Thousand Oaks, CA.

—Seattle-based Isilon Systems (NASDAQ: ISLN), a data storage and virtualization company, is laying off 10 percent of its global workforce (about 40 workers) in an effort to save about $4 million a year. Isilon didn’t specify how many positions were cut in Seattle, but the company had 394 employees at the end of 2008.

—Theraclone Sciences (formerly Spaltudaq), a Seattle biotech startup working on an antibody drug for HIV, had a small layoff in the past few months. To our knowledge, this wasn’t reported elsewhere. Theraclone now has about 22 employees and enough cash to last through 2010, as Luke reported this week.

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[Updated April 5 with a correction: Google's Mike Repass is based in San Francisco, not Seattle]
On Monday evening, I stopped by a talk on “Google’s world view of cloud computing,” organized by the Washington Technology Industry Association as part of its series of events on this emerging IT trend. The first event we covered, in early March, gave a glimpse into the strategy of Amazon Web Services. This more recent event, held at Google’s Fremont offices in Seattle, drew a packed room of almost 100 people, most of them software developer types. It provided an intriguing inside look at Google’s cloud computing platform and where it’s headed, as compared with other big players in the space. (The final presentation in the WTIA series will be given by Microsoft on April 23—location to be announced soon.)

Brian Bershad, Google’s Seattle site director, kicked off the evening by describing how Google got involved with the series last fall. “[WTIA head] Ken Myer and I were at a baseball game,” Bershad said. “He wouldn’t stop asking me questions…’How would a member of WTIA know which [cloud computing] system they should use?’ After 30 or 40 minutes of this, I don’t really like baseball, but I wanted to watch the baseball game! So I said, ‘Ken, why don’t we put together a multi-part series to get these questions answered? Not in a bakeoff, but let’s bring in the key players to get answers to the community.’” Bershad noted it was a good opportunity for outreach. “I’m really excited,” he said. “This is the kind of thing we can be doing in the Seattle community. We have all the big players here, which makes it a highly leveraged community.”

The topic du jour was Google’s cloud platform, which has the certifiably geeky name of “App Engine.” Like all cloud-computing software, its basic idea is to create a common language that allows developers to build new Web applications, create new code, gain access to processing power, and store their data on virtual machines via the Internet. It’s all in the name of helping companies avoid the costs of maintaining internally owned and operated servers, hardware, and teams of people to keep everything running right. App Engine has been publicly available since last April, and boasts about 150,000 developers, 50,000 applications (blogs, online messaging, and so forth), and 100 million page views per day. Just last week, the White House website selected App Engine to handle the processing of questions and votes for President Obama’s online town hall meeting. (The site ended up fielding about 100,000 questions and 3.5 million votes.)

All of these details came from the main speaker of the evening—Mike Repass, a Google product manager who joined the App Engine team in January. Repass is a computer programmer by training, and was a software developer and program manager at Microsoft before joining Google eight months ago. Most of the App Engine team is in San Francisco, and that’s where Repass is based. Although Google’s cloud computing platform has been available for almost a year, it is “still evolving very rapidly,” Repass said.

What App Engine uniquely offers, Repass noted, is a way to “pay as you go” for …Next Page »

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While San Diego learned yesterday it is the new home of the nation’s first wireless health care research institute, a vision of the sweeping changes that such technologies pose was taking form in a UC San Diego conference room.

The high-level meeting was organized by federal health officials in an effort to help guide the development of one of the hottest areas in health care—the convergence of “personalized” medicine, based on genomic research, with the latest generation of information management technologies. The session included prominent medical researchers, government health officials and executives from Intel, Google, Qualcomm, and Cisco Systems who are currently overseeing IT initiatives in health care.

The U.S. Department of Health and Human Services, which sponsored the meeting, plans to use the discussion as a way to map future funding and research priorities in personalized health. Russ Altman, a Stanford University professor of bioengineering, genetics and medicine, told the group that sequencing individual patients’ full genomes will be available for everybody in 10 to 15 years.

“Genome information will be fundamentally disruptive to providing health care,” Altman said. And because of the enormous data storage needed to analyze genomic information, Altman added, “anybody who is interested in genomic research also is a huge fan of electronic health care databases.”

Qualcomm’s Don Jones told me during a break that electronic health records have become a particularly hot topic since President Obama signed the federal economic stimulus package. The government’s economic recovery plan calls for spending more than $19 billion to help medical facilities throughout the country adopt electronic health records. Jones predicted the most valuable innovation will be the integration of these records with medical diagnostic tests, wireless monitoring tools and analytical software that, for example, can detect telltale patterns that presage a heart attack or stroke.

Jones also led Qualcomm’s support for San Diego’s new West Wireless Health Institute, which was announced yesterday with a $45 million grant from the Gary and Mary West Foundation. The nonprofit research institute is intended to help develop wireless heart monitors and other types of medical biosensors. Jones also noted that wireless health care also will be a prominent theme at this week’s annual CTIA Wireless conference, which begins tomorrow in Las Vegas, NV.

Kevin Patrick, a UCSD professor of family and preventive medicine, told me that startup companies also are emerging with innovative healthcare technologies. Patrick said he was one of several researchers helping Santech, a San Diego startup that is exploring novel uses of the Internet and cell phones to tackle such health problems as obesity and diabetes.

“We recently released the first study in the world on using text messaging to promote weight loss,” Patrick said.

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When San Diego-based Avaak made its debut earlier this month at the spring DEMO conference in Palm Desert, CA, chief executive Gioia Messinger offered a grand description of the company’s personal video technology.”It’s like your own personal Google Street View, except it’s live, expandable, sharable, and easy—very, very easy,” Messinger told the Demo audience.

The technology enables users to easily set up a wireless Internet gateway and two small video cameras for $300, providing real-time video of anything from a family gathering to a company warehouse that can be viewed online via a personal “VueZone” account. In the same way that YouTube became ubiquitous and Google Earth forever changed the way people view the planet, Messinger said in a company statement, “We believe the Vue personal video network will transform the way consumers use remote video viewing.”

Since Avaak plans to begin selling the technology in the next few months, I met recently with Messinger and marketing vice-president Dan Gilbert to hear the Avaak story.

Messinger told me the idea for Avaak’s technology was hatched about five years ago, when the Pentagon was searching for inexpensive sensors that U.S. troops could leave behind when they must evacuate an area after securing it. In particular, the Defense Advanced Research Projects Agency was looking to expand on wireless networking technology developed by a UC Berkeley computer science team headed by Kris Pister. The Berkeley team created wireless networks consisting of millimeter-sized sensors that were so small and so inexpensive that Pister coined the term “smart dust” to describe them. (Avaak itself is the Hebrew word for dust.) Such technology could be used by the military to track enemy movements, or to detect poisonous gas or radioactivity. Since then, Pister has founded his own startup, Dust Networks, a Hayward, CA-based company commercializing …Next Page »

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It was a busy week for San Diego’s innovation economy, with reports on new products, new deals, and some insights into how startup companies can survive virtually. So read on!

—Zeebo, a new San Diego-based company, launched its game console, entering a multi-billion dollar industry dominated by the Wii, Xbox, and Playstation. Backed by Qualcomm, Zeebo uses a Qualcomm chipset that allows users to connect over a cellular network (instead of broadband or Wi-Fi) to purchase and download games—much like Amazon’s Kindle.

—The U.S. cleantech industry is said to be benefiting from an “Obama bounce,” based on the billions of dollars designated for renewable energy and cleantech spending in the federal economic stimulus package. So it seemed like a good time to put together a comprehensive list of San Diego cleantech companies.

—Pure Bioscience of El Cajon, CA, told Xconomy’s innovation journalism fellow, Juha-Pekka Tikka, the company expects hundreds of products based on Pure’s germ-killing agent, silver dihyrdogen citrate, to soon hit the market. Pure later announced it has found an Indian distributor to immediately begin marketing Enviroguard, a disinfectant cleaner, in India.

—A special committee of the board at San Diego’s Hollis-Eden Pharmaceuticals (NASDAQ: [[ticker: HEPH]]) fired founding CEO and namesake Richard Hollis for cause and named the company’s chief operating officer, James Frincke, as interim chief executive.

—During my recent stopover at San Diego’s DriveCam, CEO Brandon Nixon explained how the company, which began with a dashboard-mounted video recorder, has evolved into …Next Page »

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