A brewing battle between Apple Inc. and its frenemy, IBM Corp., over the role of an executive who at one time managed Big Blue’s PowerPC chip business may be an early sign that the Silicon Valley wunderkind is considering designing some of its own semiconductors. On Tuesday, Apple said it was hiring Mark Papermaster from IBM as a senior vice president of devices hardware engineering. Apple made the hire despite a lawsuit last week by Big Blue against Papermaster. IBM (IBM) wants to keep him from working at Apple (AAPL) for a year, because of the sensitive information Papermaster is believed to have on its chip business, especially the PowerPC processor, which the companies developed together nearly 20 years ago.

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On Wednesday, about 1,000 of the tech industry’s elite will begin schmoozing at a three-day conference here on Web 2.0 technologies, in what is now a vastly different business climate than a year ago.

At the onset of the Wall Street meltdown, many in Silicon Valley seemed to have their heads in the sand. But in recent weeks, with lightening speed, venture capitalists are suddenly preaching to their portfolio companies to cut costs, generate revenues and become profitable, fast, or die. So it will be interesting to see if the Web 2.0 Summit, founded by Tim O’Reilly, the president of O’Reilly Media Inc., and John Battelle, chairman of Federated Media Publishing and a co-founder of Wired, will also inject more much needed realism without the incessant hype that is often found at these conferences.

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Last month, Richard Stallman, the founder of the free software movement, came out swinging against the concept of cloud computing. His rant was reported by the Guardian newspaper, and a debate in the blogosphere ensued. Stallman argues that users will lose control of their programs, their data and their privacy.

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Sun Microsystems Inc. has been struggling ever since the last economic downturn to consistently regain its footing, and things are grim again. On Tuesday, the systems and software maker gave Wall Street a nasty surprise with the news that it expects to report a worse-than-expected loss in the fiscal first quarter. It is also conducting an internal “impairment analysis” because some its business units may be now worth less than their carrying value.

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Many Internet start-ups are starting to heed the dire warnings of their venture capital investors, and last week, some began cutting costs in order to survive the economic downturn, including laying off employees. Two weeks ago, Sequoia Capital, Benchmark Capital, angel investor Ron Conway and other investors wrote some scary memos to their portfolio companies, warning them to conserve their cash, cut costs and start generating revenues.

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This week, the technology world saw two opposing views on how to deal with the brewing economic downturn. Intel Corp., the world’s largest chipmaker, seems ready for an economic slowdown, with consumers gravitating toward cheaper goods. When reporting third-quarter earnings this week, Intel Chief Executive Paul Otellini told investors that he was seeing “signs of stress” and market uncertainty as a result of the credit crisis. At the same time, Intel saw stronger sales of its Atom chip, designed for low-cost computers and devices. Apple Inc., however, is thinking quite differently.

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Silicon Valley was all a flurry late last week after reports that some respected venture capitalists woke up from their rosy daydreams to the fact that Wall Street’s meltdown is going to have a big impact on their future. Was it really necessary for these VCs to write memos, or as Sequoia Capital did, summon the CEOs of their portfolio companies to an emergency meeting at their Sand Hill Road lair? Some of the messages seemed to be no-brainers, such as “cash is king,” “lower your burn rate” and “if you are not cash-flow positive, get there now.”

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It is ironic that a company whose core business has been caught in a perpetual slowdown has seemingly set its sights on another business–one where the established leader gives away the bulk of its services for free. But that appears to be the case for the online auction pioneer, eBay Inc.

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With the threat of a recession in the air, many companies are going to start looking for places to cut unnecessary spending. I have an idea for Steve Ballmer, chief executive of Microsoft Corp., which, along with most other technology companies may see its sales growth slow as companies and consumers clamp down on spending. Microsoft can save a bundle of money by killing its lame and inconsistent $300 million advertising campaign and going back to the drawing board. Its current campaign just isn’t working.

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Until this week, most technology companies seemed to be weathering the meltdown on Wall Street. But Monday’s sharp selloff on tech shares–which pushed the Nasdaq to its lowest level in more than three years–shows that the ripple effects of the crisis in the financial sector and the near-collapse of the credit markets are being felt. Even Silicon Valley A-list players such as Apple Inc. and Google Inc. were tossed about like small row boats in the wake of a giant oil tanker.

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Pandora, a private company that has created the most popular Internet-based radio service in the U.S., has a lot of zealous fans. In fact, they are a bit like the fanatics who love Apple Inc. and its well-designed products. For its legions of fans, Pandora stands out not just as an Internet radio station but as a gateway to discovering new music. The company’s core technology is based on the Music Genome Project, which essentially matches users’ favorite musicians or songs with other music of similar genres, based on a compilation of hundreds of musical attributes.

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Samsung Electronics Corp. and SanDisk Corp. (SNDK) can both learn some useful lessons from other recent takeover battles in the technology sector, particularly the failed merger talks between Microsoft Corp. (MSFT) and Yahoo Inc. (YHOO). The first lesson is for South Korean electronics giant Samsung. Hostile, unsolicited deals do not have a great history of success in the high-tech business. In the past, such attempts were viewed as a dicey path to take to win over a company where many of the assets were the employees, who could walk out the door. They were rarely pursued.

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This week, two rival technology conferences focused on introducing start-up companies sparred in California, vying for attention from venture capitalists, analysts and the press. On Wednesday, the Inquisitr, a newish tech blog, bemoaned the lack of press coverage of both conferences. One conference, called Demo, took place in San Diego, and the other TechCrunch 50 took place in San Francisco. A few theories about paltry press include the well-publicized animosity between the dueling shows and Apple Inc.’s new iPod announcements on Tuesday. Another possible theory I would like to add to the debate: A lot of the start-ups–many of them in the Web 2.0 arena–were just not that exciting.

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Most science fiction readers have a special place in their hearts or their bookshelves for William Gibson’s short story, “Burning Chrome.” In it, two hackers, or console cowboys, break into the Swiss bank account of Chrome, “a member in good standing of the local Mob subsidiary.” “Burning Chrome” is a classic for cyberpunk and sci-fi fans because in the story, Gibson describes and coins the term “cyberspace.”

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Technology entrepreneur Judy Estrin is worried about the future of technology and innovation in Silicon Valley and the rest of the country. Estrin, who served as Cisco Systems Inc.’s (CSCO) top technology executive during the dot com boom, has a new book coming out next month, “Closing the Innovation Gap,” that should be required reading for whoever takes over the Oval Office in January.

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