“I don’t think you’re going to have those anymore. Bigness isn’t that great an asset anymore.”

– Tom Freston, former Viacom (VIAB) CEO, in a Reuters story about the waning influence of media moguls. These titans are being upstaged by the darlings of digital, like Facebook’s Marc Zuckerberg and Twitter’s Evan Williams. Old and new media alike are gathered this week at the Allen & Co. media summit in Sun Valley, Idaho.

Freston’s opinion comes from experience. After being fired in 2006 by one major media tycoon — Viacom chairman Sumner Redstone — he has gone on to help Oprah build her OWN cable network (which is likely to have a strong digital play) and to join U2 frontman Bono on his mission to reduce global poverty and AIDS. Read more about Freston in Pattie’s profile of “The Most Wanted Man on the Planet.” –Jessica Shambora

Google (GOOG) is barging into the business of computer operating systems—via Chrome, due next year. Microsoft (MSFT) is vigorously defending its turf–via Windows 7, its new operating system due in October. Simultaneously, Microsoft is striking at the heart of Google, via Bing. “We should have been earlier in search,” said CEO Steve Ballmer two weeks ago in France when asked to name his greatest regrets over the years.

We may be at a tipping point in tech. The spending will rise. So will the sparring. And as the sparks fly, have you noticed? Google and Microsoft both seem to be doing their own searching…to answer that most basic business question: Who am I?

Ballmer riffed on this question, actually, at the Cannes Lions International Advertising Festival. I did an  on-stage Q&A with him there (you can find details and video clips by searching “Ballmer” on Postcards‘ homepage), and afterwards, I followed him to a meeting with the Cannes “Young Lions.” These are rising-star marketers and creative execs age 3o and under. One of them asked: “What does Microsoft stand for?”

Ballmer seemed to love the question. “This is a real debate inside Microsoft,” he replied. “It’s rumored that we’re going to open retail stores,” he added, and then he surveyed the Young Lions about whether it would be wiser to call the stores “Microsoft” or “Windows.” Ballmer suggested that “Microsoft” means “software company” and “well-run business.” What does “Windows” mean? “Access” and “guide to technology,” he said.

Ballmer didn’t get what he hoped for in this mini-focus group. The young stars of the ad universe appeared evenly divided on the ideal name for the prospective retail outlets. Microsoft’s chief ended the discussion by asking: “How many people here use Macs?” Most in the room raised their hands. “Biased!” Ballmer bellowed.

For what it’s worth, we’ll likely see in October what Microsoft can do retail-wise. The company is mum on its plans, but it’s a pretty safe bet that stores will open this fall, accompanying the Windows 7 marketing onslaught. Retail is a gamble; except for Apple (AAPL), consumer tech giants have stumbled. Managing conflicts with existing retailers, like Best Buy (BBY), is tricky too. Moreover, who would bet that Microsoft, which has never oozed sex appeal or product-intro pizazz, would be good at this game?

Then again, Microsoft is redefining itself–or trying to, at least. To command its retail drive, the company recently recruited a heavy-hitter: David Porter, previously head of worldwide product distribution at DreamWorks Animation SKG (DWA). Before the movie gig, Porter spent 25 years at Wal-Mart (WMT).

One of the smartest takes on consumer tech retailing is a story that Fortune ran in 2007: “Why Apple is the best retailer in America.” It’s worth reading again.

“Just like Henry Ford drove down car prices and ripped the heart out of the automobile industry, Google is trying to force Microsoft to cut its prices and eat the heart out of Microsoft’s revenues.”

- Gartner analyst Tom Austin, on Google’s (GOOG) drive to steal customers from the heart of Microsoft’s (MSFT)–its Windows operating system. “Bring it on!” said Microsoft CEO Steve Ballmer two weeks ago in France, where I interviewed him at the Cannes Lions International Advertising Festival. Ballmer boasted that Windows’ superior integration and support is worth the higher price than any system that Google will offer. Here’s Microsoft’s boss talking about Windows 7, due in October, and lessons learned from Vista:

A gloomy outlook as we head off for the long weekend. Today’s monthly jobs report was worse than May’s, worse than expected, and worse than we’ve seen in 26 years. The U.S. unemployment rate rose to 9.5%…and is bound to go past 10%.

So when will the pain ease? Microsoft (MSFT) CEO Steve Ballmer told me last week: “I don’t think we’re in a recession. I think we’ve reset. It’s very different. A recession sort of implies a recovery…I don’t assume there is a recovery.” Here’s the video of Ballmer and me on stage at the Cannes Lions International Advertising Festival, where he was named Media Man of the Year.

While in France, I caught up with another CEO, WPP Group’s (WPPGY) Martin Sorrell, who’s long been one of the more wise and worldly forecasters. (His company owns ad and marketing agencies that serve global giants like IBM (IBM), American Express (AXP), Ford (F), and Nestle (NSRG.Y), as well as Microsoft.) I asked Sir Martin is he buys Ballmer’s belief that media spending might decline as a percentage of GDP in the next 10 years. “I think advertising and marketing services as a proportion of GDP will be flat or rise,” he replied. “Any flatness or decline in the developed markets will be outpaced by growth in the BRICs and next 11.” Next 11? He means the major developing countries beyond Brazil, Russia, India, and China.

As for that broader question of how we’ll “reset” or otherwise emerge from this global economic downturn, Sorrell has an artful way of envisioning it: “It will be like an italic, lower-case letter “L” with a little bit of a flip up,” he says. “The recovery will not be a ‘V.’ And it will not be a ‘W.’ The little flip up will come in the first half of next year.”

Noodle that, and leave your worries behind this weekend!

P.S. In case you missed them, here are two more video clips from my conversation with Steve Ballmer in Cannes: Ballmer on Bing and Yahoo and Ballmer on Windows 7 and lessons from Vista.

On Friday I told you about Microsoft (MSFT) CEO Steve Ballmer’s riff on Bing and Yahoo. I asked him: How much market share do you need to gain in search to not need to do a deal with Yahoo (YHOO)? Ballmer called my question “back-handed” and went on to give a really interesting answer. Check out the video or my Friday Postcard if you missed the Microsoft boss’s take on Bing and Yahoo.

Ballmer nobly engaged and sparred in our on-stage Q&A at last week’s Cannes Lions International Advertising Festival. He batted back my question about the global recession this way: “I don’t think we’re in a recession. I think we’ve reset. It’s very different. A recession sort of implies a recovery.” He added: “For planning purposes, I don’t assume there is a recovery.” Here’s more from Ballmer on the “reset” and how Microsoft is adjusting to it:

The Festival’s 2009 Media Man of the Year wasn’t afraid to sock the ad community with bad news. Ballmer proposed that media spending might decline as a percentage of GDP in the next 10 years. “We live in a funny Internet world,” he told the crowd of 1,000 or so. “As soon as all information and content is digital, and the marginal cost of production can look pretty close to zero, you get all kinds of changes in the monetization models.” Innovators will invent new ad-funded models, he said, “yet at the same time, the amount of time that people will be spending in relatively advertising-free environments could continue to increase.”

Not a happy outlook. Though, as I noted to Ballmer and the audience: Who can predict, really? I mentioned that I’d last been to this Lions Festival in 1993—and read aloud this prediction from a 1993 Fortune story titled “How Bill Gates Sees the Future”:

“I think the intelligent-corded phone will catch on faster than the PDA (personal digital assistant). We can take today’s office phone system with all those features you can’t figure out how to use and put a screen on it, and even do simple video conferencing. Also, in four or five years, you’ll have wild advances in flat-screen technology that will really change what makes sense to be on paper versus what makes sense to be on that screen.”

Ballmer’s reply to his famous partner’s outlook: “Well, he was right on 50% of the predictions!” Indeed, and the art of business is betting big on the right 50%.

I had breakfast today with some extraordinary college students — all women, all majoring in the sciences. That alone makes them extraordinary. After all, women constitute 46% of the U.S. workforce today. But women hold only 26% of the jobs in engineering science and technology. Fewer than 10% of American engineers are women.

The young women whom I met this morning are trying to change that, and we’re cheering them on. They make up the first class of participants in the National Math + Science Young Leaders Program, a new partnership between Fortune, ExxonMobil (XOM), and the National Math + Science Initiative.

If you read Postcards regularly, you know about the Fortune-U.S. State Department Global Women Leaders Mentoring Partnership, which is another offshoot of the Fortune Most Powerful Women Summit. That global mentoring program, launched in 2006, is a remarkable success: 32 rising stars from 23 developing countries came to the U.S. for a month this spring and were mentored by America’s top women execs. This new mentoring venture is aimed at filling a glaring gap here at home.

We already have an impressive lineup of mentors. Three of ExxonMobil’s senior women — VP of global marketing Margaret Mattix, VP of Engineering Sara Ortwein, and VP of Geoscience Pam Darwin — are mentoring college students in Texas, close to their offices. The other mentors are venture capitalist Ann Winblad of Hummer Winblad, Kendle International (KNDL) CEO Candace Kendle, and Kathy Button Bell, chief marketing officer at Emerson (EMR), the $25 billion manufacturing and technology company.

And there’s one “mentor-at-large” who coaches via National Math + Science Young Leaders webinars: Sally Ride. Yes, the astronaut. Ride, a regular at the Most Powerful Women Summit, now has a company, Sally Ride Science, and has dedicated her post-orbit life to encouraging girls to go into science and math.

The young women who bravely venture in that direction — and help to ease a tech talent drought that’s only worsening — need role models more than ever. Mentee Stephanie Ren, who is an electrical engineering major and computer science minor at University of California Berkeley, noted this morning that guys outnumber girls by close to 10 to 1 in her computer science classes. Ren also said that after spending a day in Silicon Valley with Winblad recently — and meeting some of the veteran VC’s high-powered pals — she came to believe that she has a shot at living her dream: to work at Google (GOOG) someday.

Incidentally, Ren said that after Google, she envisions becoming an elementary school teacher. (I tell everyone “Don’t plan your career” — and said the same to these young women at breakfast — but I applaud Ren for aiming to “pay it forward” to the next generation of techies.)

At the least, this new National Math + Science Young Leaders Program will give smart young women a little more confidence to be pioneers. Another mentee, Therica Grosshans, who’s a geology major at the University of Houston, said this morning that visiting ExxonMobil and getting to know her mentor, Pam Darwin, changed her outlook on her own career. Says Grosshans, “She made me feel that I can get that far.”

by Patricia Sellers

As speculation ever swirls about Yahoo (YHOO) and Microsoft (MSFT) joining forces to give Google (GOOG) a better run for its money in search, one party in the on-and-off  negotiations has been notably evasive this week. “If we ever have a deal with Microsoft, it will be announced publicly and until we do, we have nothing to say,” declared Yahoo CEO Carol Bartz at the company’s shareholders meeting yesterday in Santa Clara, California.

A world away in France, one day before, I did an onstage interview with Steve Ballmer, Microsoft’s CEO, at the Cannes Lions International Advertising Festival, And of course I asked him about the likelihood of a deal with Yahoo. Some industry watchers have speculated that the early success of Bing, Microsoft’s new search venture that debuted June 1 (and in less than a month boosted Microsoft’s share of U.S. search results pages to 12% from 9%, according to comScore) makes a Yahoo deal less essential–for Microsoft, at least. Here, in this excerpt from our Wednesday conversation in Cannes, Ballmer suggests that’s not necessarily so…

Sellers: For every share point that you gain in search thanks to Bing, by what percent does that decrease the need to do a deal with Yahoo?

Ballmer: Have you ever heard of a more back-handed way of asking the question than that?  Oh my God… (He waits for audience laughter to die down.) OK, I’m going to try this one time. First of all, we have no interest in acquiring Yahoo.  Can I…? I’ve said that 88 times. I’ll say it the 89th just to make sure it’s clear.

I have said, and I will continue to say, we remain open to a partnership with Yahoo. I think the thing that advertisers. probably more than anything else, appreciate is: When you have two players that are fairly low-share, sitting in an advertiser’s shoes, you have to decide how many of the “search engines” do you bid on and how many key words do you bid on per platform? More people, more advertisers bid on more key words on Google than on Yahoo or Microsoft–even more dramatically outside the U.S. than in.

Forget the economic side to that story, it also affects the product.  The more relevant ads the search engine can serve up, the more relevant the whole page looks. When your average consumer looks at the search page, they don’t just say, “I’m going to look at the algorithmic results.”  They look at the whole page, including the ads.

So, I will tell you, I have a friend who rents apartments–mostly to American tourists. She rents apartments in Paris. If I wasn’t her friend, she would not submit bids. In the old days of 8% share–this goes back a year–she wouldn’t probably bid on our system. She’d only bid on the market leaders. So now somebody types “apartments in Paris for rent. And they’re going to get the relevant ad on the market leader. And they may not get the relevant ad on Yahoo or on Microsoft.

So a partnership makes sense, not because of technology just. Or business just. It makes sense because I think we can provide a better product through scale to our users based upon the kinds of interactions we have with advertisers. I want every bid on every key word that every advertiser in every part of the world would put on Google, I want on our system. As much not just for the revenue, but as much for the value in terms of the relevance of our offering as anything else.

So, am I open to a partnership with Yahoo? We remain open to a partnership with Yahoo.

Sellers: So what’s the likelihood that there will be a partnership in the next year?

Ballmer: Who knows?  Who knows?  I can…

Sellers: Carol Bartz wants “boatloads of money.” Don’t you have, like, almost $30 billion of money in cash?

Ballmer: We’ve got shareholders who want to make sure we take good care of it.

– Thanks to Joshua Glasser and Jessica Shambora for additional reporting.

“All content consumed will be digital…social…and interactive.”

- Microsoft (MSFT) CEO Steve Ballmer, predicting the death of print yesterday at the Cannes Lions International Advertising Festival. After Ballmer, in a talk to 1,000 or so ad and media folks, floated this prediction about the world within 10 years, I interviewed him on stage. Stay tuned to Postcards these next few days. I’ll share some of what the always boisterous Ballmer said, about Bing and Yahoo (YHOO) and Google (GOOG) and more.

Turns out, we had so much ground to cover yesterday that I didn’t get to ask him if he means, by his prediction, that magazines and newspapers won’t exist on paper in 2019. Does Ballmer really think that my company, Time Inc. (TWX), won’t be printing anything on paper a decade from now?

The man answers. Here I am, back in New York and sitting in my living room, taking in the news about Michael Jackson’s death. An email from Ballmer popped in moments ago: “I really really think print goes away.” Well, good for Microsoft, I guess. For us journalists, more pressure to adapt.

Gerri Elliott, one of Microsoft’s (MSFT) star execs, left the company early this year to spend more time with her family. Yes, seriously to spend time with her family. As I wrote in January, her departure was a major loss for Microsoft, according to senior executives there, and it was also a case of a powerful woman asking, “Why kill myself and miss my kids growing up?”

Now Elliott, who spent 22 years at IBM (IBM) before moving to Microsoft and heading the $8 billion Worldwide Public Sector unit there, has finished her hands-on familial gig and hasn’t taken long to find a new one back in the business world. Today, Juniper Networks (JNPR) announced that Elliott is coming on board in a new position crafted for her: EVP of Strategic Alliances.

Elliotts’s friends and former colleagues aren’t surprised. She and Juniper’s CEO, Kevin Johnson, have known each other for two decades, going back to their stints together at IBM and Microsoft. In fact, Elliott says she remembers the day 17 years ago when Johnson walked into her IBM office and told her he was leaving to go to upstart Microsoft. He asked her if she would take him back if he screwed up. Little did Johnson know — or Elliott either — that he would rise to head Microsoft’s biggest business, Windows, and one of its toughest, search.

For a decade, Johnson tried to hire Elliott at Microsoft. But she was a bleed-Blue loyalist. Caving in 2001, she flew from Connecticut to Seattle on September 10. Her first day at Microsoft was 9/11. Between running the company’s enterprise business in the Americas, co-heading the Americas organization, and leading the global Public Sector, Elliott handled some of Microsoft’s largest customers–which include countries and government agencies.

After she left in January, she followed the advice of a good friend: She didn’t take headhunter calls for two months. “I wanted and needed this break with my daughter,” Elliott, 53, told me in an email today. But the phone didn’t stop ringing, and eventually she considered CEO positions at start-ups, a president post at a Fortune 500 company,and COO and EVP jobs at several tech companies.

The only thing that really excited her was working with Johnson again. “He’s an exec who cares about the whole person,” she says — and he proved his worth by agreeing to put in Elliott’s Juniper employment contract that she’ll be able to go to the Fortune Most Powerful Women Summit. That’s the annual confab that I chair, and yes, I was shocked when Elliott told me that this event is so important to miss.)

Also in Elliott’s new contract: permission to participate in the annual Fortune – U.S. State Department Global Women Leaders Mentoring Partnership. This is a program that brings rising-star women from developing countries to shadow American women who participate in the MPWomen Summit. Since we launched the program in 2006, Elliott has been one of the program’s most supportive mentors.

So Johnson has lured Elliott to Silicon Valley by tailoring the job to her. The other clincher, she says: Juniper values partnerships. “I mean really values them, like it’s in their DNA,” she says. Elliott will hit the ground running and work to fortify the networking giant’s existing partnership with Nokia (NOK), Siemens (SI) and IBM.  Actually, she’s hard at work already. When I checked in with her earlier today, she was on the road with Johnson, visiting a Fortune 500 giant and trying to strike another major alliance. — Pattie Sellers

“The qualities that make Twitter seem inane and half-baked are what make it so powerful.”

– Jonathan Zittrain, a Harvard law professor and Internet expert, in Tuesday’s New York Times. Zittrain explained how the social network was able to evade censorship by the Iranian government because there are so many ways for posts to originate. (There are hundreds of tools that can post to Twitter, like Tweetdeck and Twitpic). “It is easy for Twitter feeds to be echoed everywhere else in the world,” said Zittrain. So while you may not care what your buddy had for breakfast, the technology that allows him to share this with the planet is also giving a voice to activists in Iran. –Jessica Shambora