The HP Mini laptop is aimed at the education market, but it could appeal to road warriors as well. Image: HP

Pick up HP’s new $500 mini-laptop, and the first thing you notice is the aluminum casing. Though the thing weighs only about 2.5 pounds, what’s striking is how its sleek skin makes it feel solid and professional – not at all what you’d expect from a budget PC.

I’m in a suite at the Palace Hotel in San Francisco getting a first look at Hewlett-Packard’s (HPQ) latest machine, which the company hopes will help it steal share from Dell (DELL) and Apple (AAPL) in the education market. (Each of the three companies has just under 20 percent of the worldwide market.) HP’s development team, I’m told, consulted educators as they designed the 2133 Mini-Note, and as I turn the laptop over in my hands that comes through in little details.

HP Chief Strategy and Technology Officer Shane Robison says the reorganization of HP Labs should speed innovation and eventually boost profit margins. Image: HP

Now that it’s an undisputed turnaround story, Hewlett-Packard (HPQ) is looking for ways to fuel long-term growth. An important piece of its plan is HP Labs, a group of 600 top-flight researchers who work to develop breakthrough technologies. To better position HP Labs as a growth engine, the company announced Thursday that it will refocus its efforts on five areas: Information explosion, dynamic cloud services, content transformation, intelligent infrastructure and sustainability. (Earlier: Turning an idea farm into a hit factory)

I sat down with HP strategy and technology chief Shane Robison to talk about the research shift, and what it means for the company. Below is an edited transcript of our chat.

Memory prices are bruising profit margins, but CEO Paul Otellini says the chip giant can still thrive.

CEO Paul Otellini spent 2007 restoring investor faith in Intel; thanks to a slow economy and eroding memory prices, he’s got more work to do. Image: Intel

Facing flagging profit margins and a skeptical Wall Street, Intel (INTC) CEO Paul Otellini hosted investors at the company’s Silicon Valley headquarters Wednesday. His message: Despite a weak U.S. economy and an ugly memory market, the Internet boom will supercharge revenues at the world’s largest chipmaker.

“We essentially think we can triple the market for our products,” Otellini told a gathering of financial analysts. “And this isn’t assuming that we have a full run of every market; it’s assuming we have a moderate view of success.”

But Intel’s growth story is a tougher sell today than it was a few months ago, which helps explain why the company took the unusual step of hosting investors at its Santa Clara headquarters instead of doing the event in New York as usual. And the tough sell is not just an issue for Intel; since November, when it became clear that the U.S. subprime mortgage crisis could tip the economy into recession, the tech industry in general has been hit hard. Stocks like Intel and Apple (AAPL) that were investor darlings in 2007 have suffered gut-wrenching losses; Intel has shed more than $35 billion in market capitalization, a quarter of its value, since December.

Microsoft’s $40 billion bid would be hard to refuse, but there are escape routes.

Yahoo co-founder and CEO Jerry Yang spurned Microsoft’s advances more than a year ago, and insiders say he’s now exploring ways to evade the hostile bid. Courtesy of Yahoo.

Yahoo stock spiked after Microsoft’s bid, reclaiming levels it last saw in November when investors were more optimistic.

Microsoft stock has slipped to September levels as investors express concern about its hostile bid of more than $40 billion for Yahoo.

Since Microsoft bid more than $40 billion for Yahoo last week, the Internet pioneer’s future has been very much up in the air. Many observers seem to think Microsoft will win its prize, given the truckload of cash it’s offering — but others aren’t so sure. In fact, there are ways that Yahoo might get away.

If Yahoo (YHOO) co-founder and CEO Jerry Yang is to wiggle his company free of Microsoft’s (MSFT) clutches, he’ll have to:

a) Find a white knight willing to top Microsoft’s bid.

b) Outsource search to Google; or

c) Break off bits of the company to boost the stock price.

None of these options looks like a strong possibility. Here’s why.

For those who like the idea of Yahoo controlling its destiny, there’s a certain appeal to the white knight scenario — at least Yahoo gets to pick its suitor rather than submit to a shotgun wedding. But the problem here is that Yahoo’s carries an expensive dowry, and the companies that can afford it probably won’t pay.

Traditional media companies like Time Warner (TWX) or Disney (DIS) would be a natural fit, but they can’t afford Yahoo. Many of them already have plenty of debt, a paucity of cash, and the legacy of the AOL/Time Warner deal to remind them (and investors) how badly these old media-new media deals can go. The one company that might have had the credibility to make such a bid is News Corp. (NWS), but CEO Rupert Murdoch has already ruled that out.

Then there are the tech companies like Hewlett-Packard (HPQ), Cisco (CSCO) and Apple (AAPL), which, like Microsoft, could possibly afford to acquire Yahoo with a combination of cash, debt and stock. But why would they? Buying Yahoo means taking on Google, and that’s something most big Silicon Valley companies would just as soon avoid. Just look at Apple — Google’s maps are among the most popular pieces of software on the iPhone, and Steve Jobs has said his engineers love working with Google. Why mess with a good thing?

And what about the idea that a sovereign wealth fund could get into the mix? Overseas investors have been on a spending spree lately, taking advantage of the plummeting dollar. Last May, China’s fund put $3 billion into Blackstone Group (BX); in November Abu Dhabi put $622 million into Advanced Micro Devices (AMD) and $7.5 billion into Citigroup (C). But those numbers are still far short of Microsoft’s $40 billion offer.

The scrappy chipmaker has plenty of life left – but mistakes have cost it dearly.

AMD’s manufacturing facility in Dresden isn’t yet producing enough quad-core chips to boost the bottom line. Photo: Sven Doering/AMD

If you’d like to beat up on Advanced Micro Devices CEO Hector Ruiz, now would appear to be a good time. Ruiz has won praise for helping the chipmaker mature into a worthy challenger to industry heavyweight Intel, but as he prepares for a Thursday meeting with Wall Street analysts, AMD has the look of a well-used punching bag.

Its stock this year has dropped by half, and in recent weeks it has dipped below $10 per share for the first time since 2003. That price marks a disheartening throwback to the days when PC makers didn’t take AMD’s processors seriously and its market share was weaker at about 15 percent. There’s good reason for the share price collapse: though AMD landed a few good shots in recent years, Intel (INTC) has bounced back with a popular, competitively priced product lineup that’s grabbing back some market share and erasing its rival’s profits.

The executive briefing center on Dell’s campus. Image: Dell

Dell is held up as one of the business world’s train wrecks of the moment, sort of a tech version of Britney Spears. The stock is down near the levels where it traded when founder Michael Dell re-took the reins as CEO in February, and the pundits have plenty of questions about the company’s prospects. How could things have gone so wrong? Can Dell ever top the charts again?

If Dell wants to regain its former glory, it will have to do a better job selling laptops like its XPS m1330; and that means new marketing methods. Image: Dell

Two years from now, we’ll be hailing Dell as a marketing innovator — or snickering about its failed attempt to decode the art of hype.

Either way, the struggling computer maker is promising a spectacle that marketing experts everywhere will be watching with keen interest. This week Dell (DELL) announced that over the next three years it will pour its considerable $4.5 billion marketing spending into an unprecedented partnership with marketing giant WPP.

Intel’s new Penryn chip. Image: Intel

Intel has launched a new generation of chips that it hopes will boost its lead over rival Advanced Micro Devices heading into 2008.

The line of chips, code-named Penryn, uses a new manufacturing method that allows Intel (INTC) to make the chips both smaller and more efficient. Penryn chips should help companies like Hewlett-Packard (HPQ), Dell (DELL) and Apple (AAPL) to design more energy-efficient servers, more powerful of desktops and more portable laptops.

In the near term, Penryn’s value to Intel could be more about reputation than the bottom line. Earlier in the decade, competitor AMD (AMD) took advantage of the chip giant’s missteps and offered products that many in the industry judged to be technologically superior to Intel’s. But now Intel is back with a vengeance, and has AMD on the ropes. And because the Penryn chips are based on an advanced 45-nanometer manufacturing process, they give the company valuable bragging rights.

New Home Server aims to bring big-business technology to the home — but it will be a tough sell

HP’s MediaSmart Server runs Microsoft’s new Windows Home Server operating system. Image from Microsoft.

Yes, it has come to this. Now that consumers have multi-PC homes, wireless networks, and thousands of digital files floating around, they need a computer whose sole purpose is to keep an eye on the other computers.

At least, that’s Microsoft’s (MSFT) pitch for a new class of machines built to run its new Windows Home Server operating system. Home Server products became available for pre-order this week from retailers including Best Buy (BBY), Circuit City (CC) and Amazon (AMZN), but it remains to be seen whether mainstream computer shoppers will buy the idea.

The concept is geeky, but the need for a home server is real, as anyone who has lost files to a hard drive meltdown will attest. The promise of the home server is that it will deftly perform many useful tasks that most computer users find too troublesome to do on our own.

For example, it will automatically back up every file on all the Windows computers in your home (so long as they’re running Windows XP or higher). The home server will also allow you to use a web browser to access files that are on your home computers while you’re on the road, and even remotely share them with friends and family. All the while it also watches out for the other PCs in its network, making sure they have the latest security software updates.

Microsoft’s Windows Vista operating system is selling better than investors expected – and customers are spending extra for the premium version. Image: Microsoft

Don’t look now: Dell and Microsoft investors had a pretty good week.

Lately the market news hadn’t been great for these tech stocks. Microsoft (MSFT) couldn’t get respect in a world abuzz about Nintendo’s Wii, Google’s (GOOG) search and Apple’s (AAPL) iPhone – that is, until its stock this week hit levels unseen since the tech bubble. And Dell (DELL), which has been plagued by strategy breakdowns and accounting woes, this week cracked $30 per share for the first time since April 2006.

So what gives?

Maybe investors are remembering that while newcomer buzz is nice, these two old-school companies have the experience to make real headway in a growing global market for PCs and Internet-based communication. But though Wall Street may be warming up to Dell and Microsoft, these tech titans still might not be getting the respect they deserve.