Filed under: Business, OS Updates, News, Microsoft

You probably knew that a lot of dissatisfied WIndows Vista users had downgraded — some might say “upgraded” — to Windows XP. It was never clear exactly how many people took that step, but it was enough that Microsoft extended the shelf life for XP for a while. Now we’ve a number, thanks to a survey by Devil Mountain Software: almost 35% of new Vista machines are being downgraded.

The survey used data from PCs that have been shipped in the last 6 months, and included machines that were downgraded by vendors before delivery or by users after the fact. The Register seems to think that Microsoft is shifting focus away from Vista, and instead increasing the marketing effort for its next major OS release, Windows 7. I hardly think these numbers spell doom for Microsoft, but they hopefully provide some incentive to look at why customers are ditching Vista and address their concerns.

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Filed under: Major movement, Earnings reports, Deals, Dell (DELL), Citigroup Inc. (C), salesforce.com inc (CRM)

By all accounts, Salesforce.com (NYSE: CRM) is on its way to being a legendary software company. Based on the latest quarterly results, announced Wednesday after the close, the revenues are on track to reach $1 billion.

The company also continues to grow at a blistering rate. In Q2, revenues surged 49% to $263.1 million. Net income came to $10 million, or $0.08 per share. Actually, for the past 12 months, Salesforce.com generated about $270 million in operating cash flow. In all, there’s $823 million in the bank.

Q2 saw the addition of roughly 4,100 new customers for a total of 47,700. What’s more, Salesforce.com continues to get traction with its existing major customers, such as Dell (NASDAQ: DELL), Citi (NYSE: C) and Canon. It certainly helps that the company has a highly customizable platform (known as force.com).

Something else: Salesforce.com announced the acquisition of InStranet, which develops knowledge-based management systems for call centers. There has been much demand for such offerings, so why not buy a leading company in the space? Salesforce.com considers the market chance to be about $3 billion.

The issue? Well, the deal will mean a 5 cents charge per share for the full-year.

That’s not appetizing to Wall Street. So far in today’s trading, Salesforce.com’s shares are down 15% to $55.31.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Filed under: Deals, Good news, Private equity

Steve & Barry’s, the college town clothier known for selling reasonably good quality clothing for under $10, will live to fight another day.

The Wall Street Journal reports (subscription required) that Bay Harbour Management LC will buy the company’s assets out of bankruptcy for $168 million, and has been negotiating “around the clock” to secure lease concessions from landlord, with the goal of keeping about 150 of the company’s 276 stores operating.

“Value is king this day,” Bay Harbour managing principal Douglas Teitlebaum told the Journal. “The customer still wants to shop but they must get value, and this company offers better value than I’ve seen anywhere.”

I think he’s absolutely right. The company expanded far too aggressively, but its same store sales growth was strong, and its value proposition appears to resonate strongly with consumers. The continued operation of the stores will be a victory for college students all over the country who rely on the chain to dress well on a budget.

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Filed under: Deals, Rumors, Lehman Br Holdings (LEH)

The Financial Times reports that Lehman Brothers (NYSE: LEH) held “secret talks” to sell a stake of up to 50% in itself to investors in China and/or South Korea during the first week of August, but failed to reach any deal. The company held speaks with Korea Development Bank and China’s Citic Securities at its Times Square headquarters.

Of course all this happened while the company told everyone that everything was fine and blasted short sellers for raising questions about its balance sheet. And get this: back in June the company was buying back stock at a far higher valuation than it will now be able to raise capital at: that’s just bad management.

The company’s effort to sell a 50% stake just a few weeks ago does not bode well for the company’s upcoming earnings report and neither does the fact that it was unable to reach any deal with the foreign investors.

“If people think they (Lehman) are heading toward bankruptcy, nobody will want to do business with them or make them new loans. That’s Fuld’s biggest problem,” NYU economist Richard Sylla told The Associated Press.

But Lehman’s credibility is so shot from the uncertainty and lack of forthrightness that it will likely have a hard time convincing anyone to trust it.

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