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December 17, 2007

Microsoft gets new eggs...

Posted by Benjamin J. Romano at 2:05 PM

... in its cafeterias.

The Humane Society of the United States today pointed out a decision by Compass Group, which describes itself as the "world's leading food-service company with annual revenues of $19.5 billion," to use only eggs from cage-free chickens.

Compass Group named Microsoft as one of its example clients in a press release issued today.

The cage-free egg policy will be phased in during the next three months. Some 48 million eggs will be affected each year.

Compass' decision won praise from the Humane Society.

"It gives farm animals reason for hope this holiday season that one of the worst factory farming abuses is on its way out," Wayne Pacelle, president and CEO of the Humane Society, said in the release.

Compass is careful to note that cage-free and cruelty free are not the same thing:

"[C]age-free hens generally have 250-300 percent more space per bird and are able to engage in more of their natural behaviors than are caged hens. Cage-free hens may not be able to go outside, but they are able to walk, spread their wings and lay their eggs in nests -- all behaviors permanently denied to hens confined in battery cages."

Will Microsoft bid for its name in Portugal?

Posted by Benjamin J. Romano at 9:52 AM

Apparently only one company has the right to call itself Microsoft in Portugal, and it's not the software giant based over in Redmond. According to this Reuters story, Microsoft Lda. began operating in Portugal in 1981, while the bigger Microsoft didn't open up shop there until 1990. It was forced to call itself MSFT, which is Microsoft's ticker symbol.

Microsoft Lda. intends to put its name and business up for auction on eBay starting Wednesday. The starting price is $1 million.

So will MSFT bid? The company did not comment for the Reuters story, which quoted the Portugese Microsoft Lda. CEO saying:

"MSFT has said it was interested in our brand name but needed more time to discuss the matter. We have held talks with them in the past and didn't want to wait for them anymore."
December 14, 2007

Microsoft explains PlaysForSure's demise

Posted by Benjamin J. Romano at 3:56 PM

Several bloggers, analysts and journalists have weighed in on Microsoft's decision to pull the plug on PlaysForSure, a program dating to 2004 meant to assure purchasers of digital media players that their new hardware would work with music and videos on Microsoft's Windows Media Player software and digital rights management (DRM).

The general opinion has been that the rebranding to "Certified for Windows Vista," quietly communicated to the public on Wednesday when this Web site was updated, is confusing.

Rob Pegoraro, blogging at The Washington Post, listed some points of confusion:

1) I'm not aware of any PlaysForSure devices that don't also work in Windows XP.

2) The Zune -- which can't play PlaysForSure content -- advertises its Vista support.

3) Some PlaysForSure devices, such as Creative's Zen Micro, can only work in Vista after non-trivial tinkering.

4) The new slogan says nothing about the core selling point of PlaysForSure: That you can buy or rent a song at one store and listen to it on dozens of different devices. (We'll leave out, for now, the occasionally problematic implementation of this goal.)

The move was also viewed as predictable (inevitable?) given that Microsoft, with its Zune media player, has plunged head-first into the closed-system model that Apple employed to competition-crushing success with the iPod and iTunes.

Microsoft product manager Ryan Moore of the Windows Ecosystem team, just chimed in with a reply and explanation of the decision.

"[T]he PlaysForSure technical requirements are now included in the Certified for Windows Vista logo program. Microsoft continues to work closely with its partners to provide a comprehensive platform for testing and certifying hardware and is streamlining the naming of the programs to simplify the logo process."

Moore gave other background on the specification, noting that it "required performance on items like sync time, album art, and playback. One of the requirements was also that it be able to play tracks that are encoded with Windows Media DRM, as many online music stores sell their tracks 'wrapped' in this format."

He continued, "When Windows Vista became available, we launched a program called Certified for Windows Vista, which is designed to give consumers confidence that their hardware devices, such as printers, Webcams, and digital cameras worked exceptionally well with Windows Vista. In order to consolidate logo programs so that consumers just need to look for one logo when shopping for hardware, including media devices, we rolled the specifications of Plays For Sure into the Certified for Windows Vista program and are retiring the Plays for Sure logo. Our hardware partners have been aware of these plans for some time and are supportive of this move."

December 13, 2007

Microsoft midday sewing circle

Posted by Benjamin J. Romano at 12:38 PM

Here's a look at some of the things that are making Microsoft headlines thus far today:

The Opera antitrust complaint has garnered lots of coverage. It's raising the specter of Microsoft's battles in U.S. courts and the recently resolved, mostly, clash with European Union regulators.

The news didn't trouble the market much. Microsoft's stock closed up 75 cents at $35.22. An analyst upgrade gets credit for today's boost to Microsoft shares. From The Associated Press
:


"In a Thursday client note, JP Morgan analyst Adam Holt said meetings with company executives and data from customer surveys imply the IT environment could be better than some predict in the fourth quarter and possibly in 2008 as well. Holt also expressed increasingly bullish sentiment about the company's organic growth prospects.

"Holt now expects Microsoft will report earnings of $1.82 per share in 2008, compared with an earlier estimate of $1.80 per share. He forecast profit of $2.07 per share, up from an earlier estimate of $2.05 per share."

Also of note today, Microsoft's offering in the virtualization space, Hyper-V, was released to beta testers. It will compete with VMware, one of the year's hottest tech IPOs. That company's stock lost 3.3 percent on the news. See coverage from Reuters.

December 12, 2007

Live Search, mapping to benefit from latest Microsoft acquisition

Posted by Benjamin J. Romano at 9:34 AM

Microsoft this morning announced the purchase of Multimap, a U.K. company that describes itself as "one of the world's leading providers of online mapping and location-based services. Our company delivers more online maps, point-to-point driving directions and geo-spatial ("where's my nearest?") searches to more businesses and consumers than any other supplier in Europe."

As usual, terms of the deal were not disclosed.

Multimap will operate as a subsidiary of Microsoft's Online Services Group.

In addition to linking up with a host of predictable Microsoft products (Live Search, Virtual Earth) the company sees "future integration potential for a range of other Microsoft products and platforms."

December 11, 2007

Office 2007 SP1 released

Posted by Benjamin J. Romano at 10:36 AM

While there hasn't been much clamor for a first service pack for Office 2007, Microsoft certainly turned one out promptly. Released today, the update brings with it the following improvements, according to a Microsoft press release:

-- Full compatibility for SharePoint and other server products with Windows Server 2008.

-- Support for AJAX, "enabling developers to create custom Web Parts for their customers."

-- Manageability enhancements "to consolidate or repartition site collections across SharePoint content databases."

-- Performance enhancements, particularly with large files.

-- Improvements in performance and stability for Project 2007 and Project Server 2007.

-- Incremental security enhancements.

The full run-down of what's in SP1 is here (Word doc).

December 10, 2007

Microsoft adds banners to mobile MSN

Posted by Tricia Duryee at 12:20 PM

Microsoft said this morning that for the first time it is adding banner and text ads to its MSN Mobile properties in the U.S.

The ads, at mobile.msn.com, will start appearing today. After a brief look on my phone, I saw mostly Microsoft house ads, but then I found one on a sports story that asked me to take part in a survey.

For kicks, I clicked on the banner. The landing page thanked me and said my answers would not be sold or shared with anyone. I bravely continued. It asked me about 10 questions, ranging from what year I was born to my behavior on the phone and what I thought of certain banks.

The ad was clearly for one of Microsoft's three launch partners: Bank of America. The other two advertisers are Paramount Pictures and Jaguar, said Phil Holden, director of Microsoft's online services group.

Putting ads on the mobile Web is not new. In fact, a number of companies and online media brands have already been doing it for quite some time. Companies such as Third Screen Media, Medio Systems, Thumbplay and Admob are all active in the space.

For now, what Microsoft is doing is pretty limited. The ads don't take into account the user's search history, their location, or any other information. On the MSN search page, there are no relevant text links on the results page.

"That is in the pipeline, but it wasn't enabled on Monday," Holden said.

It will be launched when it's time, he added.

"Most consumers don't even know what they can do on the mobile phone today. If I talk to my friends outside of the technology space, they don't know you can get e-mail and IM on your phone. In many cases, the iPhone has helped that in terms of the hype it's gotten and awareness" he said.

The mobile ad-serving technology was created by Microsoft's Advertiser & Publisher Solutions Group and through the acquisition of ScreenTonic SA and aQuantive.

Here's a screen shot of what it will look like. Depending on your phone, the ad may appear as a text link or a banner.

msftad1.PNG

Avenue A benefits decision driven by profit-margin pressure

Posted by Benjamin J. Romano at 11:30 AM

Microsoft intends to hold Avenue A | Razorfish, the advertising agency it obtained with the aQuantive acquisition, "accountable to deliver profit margins in line with others in our industry," Avenue A President Clark Kokich told employees in an e-mail Sunday night.

He was responding to several requests for clarification from employees who learned last week that they would not be getting Microsoft benefits, as I reported Friday. One reason given last week: Avenue A is in a different industry than Microsoft and, therefore, should have a different compensation structure. Employees who read Kokich's e-mail last week weren't sure whether that would mean more or less total compensation, but many feared the worst.

Kokich's Sunday e-mail, obtained by The Seattle Times, starts to clear up that question and provides interesting insight into how the agency business is expected to operate under Microsoft's new Advertiser and Publisher Solutions group.

"Profits come from creating high value client work combined with disciplined business management. I certainly don't believe that any of our competitors can beat us on either of those two dimensions. So given that we need to deliver industry-benchmark levels of profitability, we need to think carefully when we are considering new expenses.


"If we take on the expense of Microsoft's benefits package, we'll be offering benefits in excess of those offered by our competitors. This might mean that we would have to offer less in other forms of compensation. We need to learn more before we make those kinds of trade-offs. That's why we're planning to conduct further competitive analysis and to hold a series of employee focus groups this spring. We need to get this right."

More than just a difference in benefits, moving to the Microsoft plan would have stripped some Avenue A employees of their titles -- not an insignificant change. Kokich continues:

"In addition, full integration into Microsoft's compensation program would mean that virtually all of our director, vice president, and president titles would go away. These titles are relevant not only to employees, but to our clients, prospects, and to the industry as a whole, especially when we speak at industry events, serve on panels, and pitch new business. It would also require us to adapt to Microsoft's salary and bonus structure. These changes would negatively impact our ability to compete for the best talent in the industry."

Kokich said the benefits decision was not mandated by Microsoft. "We decided this was the best course of action and Microsoft agreed. They listened well and showed a lot of flexibility -- a good sign as we go forward as an important member of the Microsoft organization."

He concludes by saying the changes will not result in a reduction in total compensation and benefits.

Although for Avenue A employees who are watching their peers in aQuantive's Atlas and DRIVEpm divisions get the full Microsoft benefits package, maybe the concern is not a reduction, but a less-substantial relative increase.

December 7, 2007

Former Microsoftie indicted for million-dollar fraud scheme

Posted by Benjamin J. Romano at 1:28 PM

Carolyn Gudmundson, a 44-year-old Kirkland woman and former MSN program manager, is scheduled to appear in U.S. District Court this afternoon to face charges of wire fraud and mail fraud for a scheme that netted her more than $1 million.

The U.S. Attorney's Office in Seattle alleges that Gudmundson "fraudulently billed her employer and related entities for reimbursement for costs she had purportedly incurred in registering and maintaining Internet domain names for Microsoft and Expedia."

She is charged with eleven counts of wire fraud and seven counts of mail fraud, crimes punishable by up to 20 years in prison and a $250,000 fine.

Update: Gudmundson intends to plead not guilty at a formal arraignment scheduled for Thursday, according to her attorney.

Here's Microsoft's statement: "We can confirm that Microsoft worked closely with authorities on this investigation. We take employee theft seriously and have internal measures in place to help identify fraudulent activities." End of update.

According to a press release issued this afternoon, here's how the deed was allegedly done:

Between 2000 and 2004, Gudmundson was responsible for registering, transferring, renewing, acquiring and retiring Internet domain names for Expedia and Microsoft. During the course of this part of her job, Gudmundson defrauded Microsoft in three ways.

First, Gudmundson was authorized to use her personal credit card to purchase, renew and acquire Microsoft's domain names and then submit reimbursement requests to Microsoft. Gudmundson altered the credit card receipts she submitted so that they showed a much higher price for the purchase, renewal and acquisition of domain names than she actually had paid, and then used these altered credit card receipts to support the false and fraudulent amounts claimed on her reimbursement requests to Microsoft.

Second, Gudmundson allegedly submitted invoices to Expedia for the registration of domain names that she had not paid for.

Third, Gudmundson used an outside company that assists in the negotiation for the purchase of domain names from private parties. Gudmundson told an employee of that company that a fictitious individual had purchased domain names in his name on Microsoft's behalf and that she needed the employee to send a check to that individual to reimburse him for his costs. Gudmundson then directed the employee to send the checks to her, where she allegedly deposited them into a bank account that she controlled.

I'll report any response Gudmundson or her yet-to-be-identified counsel have to the charges. A Microsoft spokesman is looking into the matter and promised to respond with a comment shortly.

Avenue A employees not getting Microsoft benefits

Posted by Benjamin J. Romano at 8:01 AM

Here's the full text of the email Avenue A | Razorfish President Clark Kokich sent to employees Wednesday, informing them that they would not be getting Microsoft benefits, as reported in today's story.

From: Clark Kokich Sent: Wednesday, December 05, 2007 9:54 AM

Subject:

Hello to all:

I would like to let you know of some decisions we've made regarding our total rewards programs.

After several months of careful consideration, we have made the decision to decouple the programs for Avenue A I Razorfish and for Atlas/Drive. As you know, the two groups operate in completely different competitive environments. AA-RF competes within the marketing and technology services industry. We are an agency, while our sister divisions are software and media companies.

As aQuantive, we did our best to maintain one overall total rewards program that tried to balance the needs for these two different types of businesses in one corporate parent. This challenge became more and more difficult as each business matured. Now, as part of Microsoft, which is a mature company with very well-defined programs based on the software and media model, we believe it is no longer tenable for us to attempt to treat all parts of our business the same. It would mean causing AA|RF to conform so closely to the software and media model as to make it non-competitive within its own industry. In order to continue to succeed, we must design our total rewards system to match the expectations of our industry. This includes our approach to salary, benefits, bonus, titles, levels, tools, career development, and performance management.

In order to assure that we can continue to hire, retain, and reward the best people in our industry, we will be launching a competitive review of total rewards within the marketing and technology services industry. In addition, we will be conducting a number of focus groups with Avenue A I Razorfish people around the country to hear from you directly about what offerings you value the most. The combination of these activities will help ensure we understand clearly what we need to do to in order to compete for talent in our industry. This research and analysis will begin after the first of the year and will be completed in the spring.

All legacy aQuantive groups will continue on our existing programs through the first half of 2008. At that time (concurrent with the beginning of Microsoft's new fiscal year), we will make the change to a decoupled approach. Atlas, Drive and Franchise Gator employees will be fully integrated into the Microsoft total rewards program starting July 1, 2008. And at the same time AARF employees can expect to see changes to our own program, some right away and some over time, as we focus towards an agency-driven total rewards package.

I feel good about this direction. In the past we've on occasion made sub-optimal decisions in our desire to maintain one total rewards program across widely disparate businesses. We now have the opportunity to offer programs that will allow us to continue to build Avenue A I Razorfish by attracting the best and brightest in our industry.

Clark

I'd love to hear whether people think this is fair or justified. Add your comments below.

December 5, 2007

MSN/Windows Live staying in RedWest? -- Confirmed

Posted by Benjamin J. Romano at 12:35 PM

We're hearing that an e-mail is circulating among members of Microsoft's MSN/Windows Live group -- based at the company's RedWest campus -- that suggests they will be staying put. This news, according to our source, was greeted with hoots and hollers from people who were none-too-pleased about the prospect of moving to new digs, possibly the Advanta buildings in southeast Bellevue (which, by the way, would have also been news). RedWest, a cluster of buildings put up in the mid-1990s, is already somewhat removed from the main corporate headquarters campus to the east of Highway 520.

Microsoft has not yet publicly announced which groups would be occupying the large tracts of office space it's leasing in Bellevue, with one exception. It said Lincoln Square will house the company's North American sales group, although we know other support services are stationed there, too.

I've asked a Microsoft spokesman for confirmation on the future whereabouts of the MSN/Windows Live group and any updates on plans for the Bellevue leases. We'll post a response if we get one.

Update: "It's true that the [MSN/Windows Live] group was considered to be the candidate to move to Advanta, but is not moving to Advanta," writes Microsoft spokesman Lou Gellos in an e-mail. "... The reason is that, ultimately, it was decided that a move to Advanta would actually split the group. Not of all them would move. So they'll stick together at RedWest. No word on which group may move to Advanta, though, as is the case in all of this activity, a number of scenarios are being considered."

Another source tells us about the cheering in the halls at this news and added that "the little display about how nice life would be at Advanta abruptly disappeared."

Finding, declaring love on Facebook

Posted by Benjamin J. Romano at 7:02 AM

Add this to the ongoing debate over whether Facebook is worth the $15 billion imputed by Microsoft's investment in the company: A couple's decision to link together their Facebook profiles is now akin to "going steady" in the 1950s -- a serious, public declaration of a romantic relationship, just short of moving in together or getting engaged.

That's the assessment of this interesting Reuters feature that includes several interviews with college students and professors about how people communicate their relationships using the wildly popular social network.

From the story:

"For those in a relationship, the theme that kept echoing was that Facebook made it official," said Nicole Ellison, an assistant professor of telecommunication and information studies at Michigan State University who has studied social networking sites. "That was the term they used. And when the relationship fell apart, when you broke up on Facebook, that's when the breakup was official."

This guy's assessment got me thinking about how valuable Facebook could turn out to be:

"People are beginning to use it more than phones, more than text messages, more than instant messaging, even more than talking in person," said Dave Berkman, a mental health counselor at the University of Wisconsin clinic. "It speeds things up. People are prone to define where they are so they can show other people [online]."

Finding, declaring love on Facebook

Posted by Benjamin J. Romano at 7:02 AM

Add this to the ongoing debate over whether Facebook is worth the $15 billion imputed by Microsoft's investment in the company: A couple's decision to link together their Facebook profiles is now akin to "going steady" in the 1950s -- a serious, public declaration of a romantic relationship, just short of moving in together or getting engaged.

That's the assessment of this interesting Reuters feature that includes several interviews with college students and professors about how people communicate their relationships using the wildly popular social network.

From the story:

"For those in a relationship, the theme that kept echoing was that Facebook made it official," said Nicole Ellison, an assistant professor of telecommunication and information studies at Michigan State University who has studied social networking sites. "That was the term they used. And when the relationship fell apart, when you broke up on Facebook, that's when the breakup was official."

This guy's assessment got me thinking about how valuable Facebook could turn out to be:

"People are beginning to use it more than phones, more than text messages, more than instant messaging, even more than talking in person," said Dave Berkman, a mental health counselor at the University of Wisconsin clinic. "It speeds things up. People are prone to define where they are so they can show other people [online]."

December 4, 2007

'Mommy, Why Is There a Server in the House?'

Posted by Benjamin J. Romano at 9:33 AM

That's the title of a new children's book from Microsoft. It's part of a marketing campaign for the company's Windows Home Server product.

The marketing company behind the effort is Creature, an independent Seattle agency that has also done work for Google, Nike and Starbucks.

"When people hear the word 'server,' they equate it with work and a place where information is shared, managed and secure," Steven VanRoekel, senior director, Windows Server Solutions Group, told AdWeek. "There is a sense of pride in telling people that they are running a server in their home."

The 24-page children's book will apparently be sold at Amazon.com, but I couldn't find it this morning. At the Windows Home Server Blog, a post from Nov. 30 says the book "will help parents explain why there is a new member of the family. We are sure the book will become a best seller!"

An excerpt: "But guess what? Some servers aren't boring. They don't go in offices ... they go in houses! Maybe in your house! How does it get there?

"When a mommy and a daddy love each other very much, the daddy wants to give the mommy a special gift. So he buys a 'stay-at-home' server."

November 30, 2007

Microsoft creates new chief environmental strategist position

Posted by Benjamin J. Romano at 3:18 PM

... and fills it with company veteran Rob Bernard.

Most recently a general manager in Microsoft's developer and platform evangelism team, Bernard's new job is "defining and implementing a global strategy for the company's environmental efforts." He'll report to Scott Charney, corporate vice president of Microsoft's Trustworthy Computing (TwC) Group within the Core Operating System Division.

Microsoft said in an e-mail this afternoon that it created the new position "to assess the company's environmental impact and opportunities at all levels, including: working with product groups to create technology innovations in software and hardware that can help enable customers to minimize their impact on the environment, assuring responsible business practices that work to reduce the company's direct and indirect environmental impact, and working with partners in industry, government and non-government to engage on global environmental issues."

Bernard worked with the Clinton Foundation to develop a tool to measure cities' greenhouse gas emissions, something former President Bill Clinton talked about during his recent stop at the Microsoft campus. Bernard also has experience in construction and building management, which will come in handy when assessing the environmental impact of the company's growing physical footprint.

Several of the new and remodeled buildings going up on Microsoft's Redmond campus have or will attain some level of LEED certification from the U.S. Green Building Council. But the main campus still consumes close to 50 megawatts of electricity.

On first anniversary, Vista headlines not so good

Posted by Benjamin J. Romano at 10:39 AM

Microsoft and its partners say the adoption cycle for Windows Vista is still in the early stages, particularly for businesses -- many of which are likely waiting for the release of Service Pack 1. Likewise, many businesses need to upgrade their hardware to run Vista, which is a major proposition. For consumers, this holiday season is the first in which Vista-loaded computers will be on store shelves.

2003455750.jpg

Still, one year after Vista and Office were launched for businesses, some headlines today might have some people at Microsoft cringing.

There's this, from CNET, on a Qualys study that shows a major increase in Microsoft flaws between 2006 and 2007. "We have seen a huge jump in the vulnerabilities in Microsoft Office products," Amol Sawate, manager of Qualys' vulnerability-management lab, told CNET. "These charts show growth of nearly 300 percent from 2006 to 2007, primarily in new Excel vulnerabilities that can easily be exploited by getting unsuspecting users to open Excel files sent via e-mail and instant message."

And the AP's locally based correspondent covering Microsoft, Jessica Mintz, has this report on tests showing that an updated Windows XP will perform faster next year than Vista. Key passage:

[The testers] found the original Vista performed 50 percent to 100 percent slower than the prevalent XP Service Pack 2, or SP2.

Vista SP1, due out in the first quarter of 2008, barely improved the operating system's performance.

But XP SP3, scheduled for the first half of 2008, did improve on XP's earlier performance, running 10 percent faster than SP2.

Microsoft says its too early to make such comparisons.

November 29, 2007

Microsoft not an Internet company, Nasdaq says

Posted by Benjamin J. Romano at 11:19 AM

The Nasdaq Stock Market on Tuesday launched an index tracking Internet companies, and, as the guys at Read/WriteWeb reported earlier this week, Microsoft -- despite its multi-billion-dollar investments in online services and infrastructure -- was not included.

Here's how Nasdaq described the purpose of the new index:

"The Index is a new benchmark designed to track the performance of companies engaged in a broad range of internet-related services including internet access providers, internet search engines, web hosting, website design, and internet retail commerce. The NASDAQ Internet Index is comprised of securities of companies that are at the forefront of internet technology. They are leading innovators in providing faster internet access, creating more intuitive e-commerce experiences, and developing the second generation Web."

I think there are at least a couple of people in Redmond who would say they're working on some of that stuff. I called Nasdaq to ask why Microsoft was not included. Spokesman Wayne Lee said:

"If you use most industry classification codes, Microsoft is generally classified as a software company, not an Internet one, so, we refer to various sources when determining which companies are indeed Internet and subsequently eligible for inclusion in the Internet Index."

Update: The Index, which is up slightly today and is up 35 percent for the 10-months ended Oct. 31 (compared with 27.4 for the Nasdaq 100), contains several Northwest stocks including: AMZN, EXPE, CLWR, NILE, DSCM, RNWK, MCHX and INSP. Here's the whole list (Excel spreadsheet).

Silverlight scores with NBA, getting a major update

Posted by Benjamin J. Romano at 9:47 AM

Microsoft today announced more customers for its new Web-video platform, Silverlight, and outlined plans to build out the product's rich Internet application capabilities.

The company's competitor to Adobe's dominant Flash technology for online multimedia was detailed in April. Silverlight is part of Microsoft's broad "software plus services" strategy, designed to allow developers to make more complicated applications that take advantage of the desktop's power and capabilities from the Internet.

Another big play in the software plus services strategy is the Windows Live suite, which Microsoft is backing with a reported $300 million advertising campaign, according to anonymous sources quoted by the New York Post.

Microsoft has amassed several high-profile users of Silverlight, including Major League Baseball and now, the National Basketball Association's Web site, NBA.com. When the product was officially launched in September, Microsoft touted sites for Entertainment Tonight and World Wrestling Entertainment.

New features being added to Silverlight 2.0, due out in test form by March 2008, include tools for developers who want to make better user interfaces, layouts and advanced controls such as sliders in their Internet applications. All the details are laid out on Microsoft Developer Division GM Scott Guthrie's blog.

Japanese firm builds robot running Microsoft software

Posted by Benjamin J. Romano at 9:29 AM

About a year ago, Microsoft trumpeted its new software for controlling robots. Now, ZMP is selling the e-nuvo WALK, a two-legged robot that utilizes that software. It's expected to go on sale in Japan in January for $5,345.

D8T7FA8G2.jpg

The Associated Press has the story out of Tokyo.

Here's my coverage of Microsoft's announcement of its Robotics Studio product last December. The software was designed to be a common platform so developers could write applications that would run on several different kinds of robots.

November 28, 2007

Microsofties' Capitol Hill restaurant scores good review

Posted by Benjamin J. Romano at 2:55 PM

I'd heard raves about Artemis Cafe & Bar from a few people at Microsoft. The new Capitol Hill restaurant is the effort of Microsofties Oscar Velasco and Boris Gorodnitsky.

In his review today, Seattle Weekly's Jonathan Kauffman is pleasantly surprised at the software guys' first effort in the restaurant biz, writing at some length about the "recipe for failure" that is "well-funded food lovers with no restaurant experience who chuck great careers to open their own bistro." That doesn't appear to be the case at this Mediterranean-themed spot.

Our own Karen Gaudette checked in with Artemis and Chef Chris Hunter in September (second item).

I wonder how long before Velasco and Gorodnitsky get on board with the Microsoft PRIME card to drum up more business. Though from Kauffman's description, it sounds like they hardly need it.

November 27, 2007

Microsoft to employ 6,000 in China

Posted by Benjamin J. Romano at 9:57 AM

Microsoft's head count in China will grow 20 percent to 6,000, according to a Reuters report today. The news agency quoted Zhang Yaqin, Microsoft's chairman in China.

"There will be researchers, but most will be involved with product," Yaqin said.

The rapid growth of the company's work force in China fits with its real estate strategy there.

In an interview earlier this year about Microsoft's major Redmond campus expansion, Chris Owens, Microsoft general manager of worldwide real estate and facilities, described the scope of the expansion in China, as well as in India:

"We're building in Hyderabad. We're building in Shanghai right now and we're in design in Beijing. Those are all million square foot campuses. In Hyderabad, we already have three buildings out and it's the fourth building that takes us into the million-plus range."
November 21, 2007

Microsoft's slice of search pie narrows

Posted by Benjamin J. Romano at 12:17 PM

It's the day before Thanksgiving and all I can think of is pie. Pumpkin. Apple. More pumpkin. And search market. Mmmm, delicious search market.

Microsoft saw its slice of the latter narrow from September to October, according to fresh-from-the-oven comScore stats.

In October, the company's Web sites accounted for 9.7 percent of the 10.5 billion searches conducted in the United States. That's down a bit from 10.3 percent in September -- definitely not the direction the company wants to be going in, especially if it hopes to achieve Platforms and Services Division President Kevin Johnson's "10, 20, 30, 40" goal. (The 30, as in percent, is the target for online search share.)

Yahoo also saw its piece of search pie get smaller, but it's still a comfortable second in the market with 22.9 percent in October, down from 23.7.

Google ate up 58.5 percent of the market in October, up 1.5 percent month-over-month -- just about the same amount that Yahoo and Microsoft, combined, were down.

November 19, 2007

Microsoft hires new sales boss for North America

Posted by Benjamin J. Romano at 4:28 PM

Robert Youngjohns, 56, most recently CEO of a sales-management software company called Callidus, has been named president, North American sales and marketing, and corporate vice president of Microsoft. Youngjohns will be in charge of 8,500 sales people and report to Microsoft Chief Operating Officer Kevin Turner.

Bill Veghte last held this position at Microsoft. Early this year, he moved to Kevin Johnson's Platforms and Services Division in charge of the new Windows Business Group marketing organization.

Johnson, too, held the North American sales lead before becoming head of global sales and then president of the Windows division.

Youngjohns was at Sun Microsystems for a decade before moving to Callidus. He spent 18 years at IBM before that.

Study finds no shortage of science, engineering talent

Posted by Benjamin J. Romano at 2:30 PM

My story on Bill Gates' Friday evening speech to the regional conference of the National Society of Black Engineers elicited several responses from readers who think the shortage of engineering talent Gates described is a fallacy created by Big Tech in order to lobby for a raised H-1B visa cap and cut their labor costs.

Many readers pointed to this recent Urban Institute study, which says "U.S. student performance rankings are comparable to other leading nations and colleges graduate far more scientists and engineers than are hired each year." The authors note in a summary excerpt that the education pipeline in these fields could use improvement, but is not dysfunctional. Further, they wrote,

"Surprisingly few of the many students who start along the path toward [science and engineering] careers take the next steps to remain in an S&E career. If there is a problem, it is not one of too few S&E qualified college graduates but, rather, the inability of S&E firms to attract qualified graduates."

This caveat is offered: "The analysis of all S&E students and workers may not apply equally to the trends and problems faced in specific fields or by domestic minority groups. A fine-grained analysis of specific industries, occupations, and populations is needed to identify the weakness in the U.S. education system."

The study is interesting reading and provides a good counterpoint to the comments Gates made. (Here's a full transcript of his speech and Q&A with the NSBE.)

It seems to me that, as with any complex subject, there are plenty of credible studies supporting both sides of the debate for one to pick from.

November 13, 2007

Microsoft shareholders question insider sales

Posted by Benjamin J. Romano at 12:02 PM

Coming off Microsoft's best first quarter since 1999, one might have expected the company's shareholders, who met in Seattle today, to be more jubilant. And there were several kudos passed on to the company's leadership, in the persons of Chairman Bill Gates, CEO Steve Ballmer, CFO Chris Liddell and General Counsel Brad Smith, during the question-and-answer period that followed the meeting.

But more than one shareholder asked why executives cashed in shares in the days after that quarterly report, which boosted the stock to levels not seen in six years.

"Like all the shareholders in this room and elsewhere, we were delighted three weeks ago when the stock took a nice bounce up and exceeded its six-year high," said Peter Schroeder, a Seattle man who said he owns 60,000 shares and has been an investor in the company since 1986. "Curiously, after that, for about the next 10 days, the stock has been decreasing, falling down every day."

The fact that top management, including Gates and other board members, made significant stock sales in that period signaled to Scrhoeder -- and, he said, to Wall Street -- "a certain lack of confidence in the future of where the company was going."

Ballmer responded:

"Let me comment as a non-seller first, and I definitely respect people selling stock. Management, boards, people will buy and sell at different times for differing sets of reasons. Our board members, our top management, Bill and I, are all, and remain all significant shareholders in the company. It's a significant part of what we own and our net worth and there's a lot of confidence I think in the future of the company, but from time to time people will certainly sell shares.

"To remind all shareholders that the stock moves as it moves over time and it's never a perfect reflection of the actual performance of the company. Nothing magic happened three weeks ago. In a sense, we've been doing whatever we've been doing consistently over time."

Then Gates responded:

"As Steve said, the stock market is not predictable to us or explainable by us and I think over the last few weeks there are a number of factors having to do with the market as whole. You can see technology stocks have been affected by that. They tend to have a fairly high beta. In terms of any sales by myself, I have the majority of my net worth in Microsoft stock. I've sold the same number of shares every quarter for over five years, so that's a plan that I've been on, so that's a very predictable thing. I do think that if you look at the volume that, clearly there are factors in terms of overall market sentiment that are involved there, but I certainly agree with you we all want the stock to be as high as possible."

For the record, Gates sold 13,000,000 shares between Oct. 31 and Nov. 7, which brought him $476,682,276.50, according to SEC filings. He still owns 864,499,336 shares.

November 12, 2007

Microsoft shares more details on real estate

Posted by Benjamin J. Romano at 10:35 AM

But wait, there's more.

Microsoft this morning announced an even broader expansion of its Puget Sound real estate holdings. In addition to the west campus expansion, detailed in Sunday's stories, the company gave shape to its leased property portfolio.

Microsoft intends to lease 21 additional sites in Bellevue, Issaquah, Redmond and Seattle, "which will provide a combined total of 5.5 million square feet and the capacity to house approximately 19,000 people," according to a press release issued this morning.

It was unclear how much of that includes already announced sites in Bellevue, where Microsoft has locked up about 1.6 million square feet of top-end space in Lincoln Square, Advanta and Bravern. The company also detailed its footprint in downtown Seattle earlier this year. Also, the tenant for a 1.5 million space Paul Allen's Vulcan development group is building in South Lake Union has yet to be officially confirmed, though it's widely believed to be Amazon.com. (When I asked Microsoft real estate boss Chris Owens about this recently, he had no comment.)

The company also is planning additional new construction at the Redmond campus, including two new buildings on the Safeco campus it acquired in 2006 and additional new construction on the 26-acre parcel adjacent to its RedWest campus it bought from Nintendo for $42 million. The timing and size of these developments were not disclosed.

The company provided updated figures for its work force. Locally, it now counts more 36,000 workers, out of more than 82,000 globally.

November 7, 2007

Poll names Gates most influential in past 25 years of IT

Posted by Benjamin J. Romano at 8:15 AM

The Computing and Technology Industry Association surveyed 473 IT professionals to list the most influential people in the industry during the past 25 years. Microsoft Chairman Bill Gates topped the chart, with 84 percent of respondents placing him at No. 1. (The Web-based survey allowed people to mark more than one name.)

Here's the rest of the top 10:

2. Steve Jobs, CEO of Apple
3. Michael Dell, Chairman and CEO of Dell
4. Linus Torvalds, who wrote the code for Linux (tie)
4. Sergey Brin and Larry Page, founders of Google (tie)
6. John Chambers, chairman and CEO of Cisco Systems
7. Larry Ellison, CEO of Oracle
8. Vinton Cerf, known as one of the "Fathers of the Internet," co-designer of the TCP/IP protocols and architecture of the Internet
9. Steve Ballmer, CEO of Microsoft
10. Meg Whitman, president and CEO of eBay

November 6, 2007

Microsoft CIO ousted

Posted by Benjamin J. Romano at 12:28 PM

Stuart Scott, who led Microsoft's internal IT department, which is "responsible for security, infrastructure, messaging and business applications for all of Microsoft, including support of Microsoft product groups, corporate business groups, and the global sales and marketing organization," was shown the door early this month.

An editor's note on Scott's Microsoft bio page, updated Monday, states, "Stuart Scott's employment at Microsoft ended in early November 2007."

Mary Jo Foley at ZDNet has more, including a statement from Microsoft confirming Scott's departure adding that he "was terminated after an investigation for violation of company policies." The statement says that's all they're going to say.

Goldman note knocks MSFT off high horse

Posted by Benjamin J. Romano at 10:13 AM

After an impressive run in the six trading days since it reported outsized first quarter earnings, a note to investors Monday from analysts at Goldman Sachs is weighing on Microsoft's stock today.

Goldman analyst Sarah Friar told clients she's removing Microsoft from the Americas Conviction Buy List because "[c]urrently we believe there is more
near-term upside in Oracle, now that Microsoft's 1Q earnings catalyst has
passed."

Friar noted that Microsoft shares are up 21.1 percent since Oct. 16, when she added the company to the Conviction Buy List, compared with the S&P 500, which was down 2.4 percent in that period.

She remains positive on Microsoft, and has a "buy" rating on the stock and a 12-month price target of $39, pointing to the company's strong product cycles, including Windows Vista and Office 2007 adoption by businesses and anticipation of strong Xbox 360 sales over the holidays.

"That said, the stock's 15% move since earnings has tempered the risk/reward somewhat, although in our view Microsoft also remains a good defensive play in a tougher spending environment given portfolio breadth, balanced international
exposure, discounted valuation and product cycle tailwinds."

Shares were down 66 cents to $36.07, 1.7 percent, in early afternoon trading today on the Nasdaq.

Microsoft pushing enterprise search software

Posted by Benjamin J. Romano at 6:00 AM

Microsoft aims to grab more of the enterprise search market -- searches done across company Intranets as opposed to the broader Internet -- with a pair of new products its announcing today.

The company's Search Server 2008 Express is free software to run internal queries that include internal databases. It can also be set up for external company Web sites used by customers and partners. The technology is the same as what's included in Microsoft's Office SharePoint Server 2007, but is limited to running on a single machine. The company is also preparing a full version of Search Server 2008, which will run on multiple machines.

Pricing for the full product was not announced. But Jared Spataro, a Microsoft enterprise search group product manager, said the company is trying to expand the market for enterprise search, which he said has been limited by the high price of existing software options. He pointed to products from Endeca and Autonomy, which he said cost up to $400,000.

"The biggest competition for us isn't necessarily any of those vendors, but that our customers will continue to do nothing," Spataro said.

Enterprise search, which has been around in various forms since the late 1980s, is reaching a tipping point, he said, pointing to the proliferation of information, greater public awareness of and comfort with search technology, and the improvement of server technology for enterprise search.

Search Server Express requires Windows Server 2003, he said.

November 2, 2007

Clinton at Microsoft

Posted by Benjamin J. Romano at 2:37 PM

Bill Clinton went before a crowd of "several thousand" Microsoft employees in person, and tens of thousands who watched via the company's intranet, Microsoft CEO Steve Ballmer said today in introducing the president to a gaggle of reporters earlier today.

After his remarks to the assembled employees, he took questions and waded into the crowd.

Clinton provided a somewhat unsatisfying response to the biggest question involving his presidency and Microsoft: How does he feel about the outcome of the U.S. antitrust case against Microsoft, initiated during his administration?

"I don't know enough about the outcome to know," Clinton told reporters. "You know, in our administration, we had no contact between the White House and the Justice Department over the enforcement of the law, so, I knew, the first time I heard about the Microsoft case is when I read about it in the paper, literally. I had no knowledge of it.

"And I guess, I'm not dodging, this question. If I knew enough to give you an answer, I would, but, then, since I'm so ignorant about this, there's no point in demonstrating it by giving you an answer that would only show that I don't know what I'm talking about."

Clinton also praised Microsoft for matching employee charitable contributions, which, according to Ballmer reached $72 million this year, up from $63 million last year.

"Companies that can afford to do so should follow this company's lead and match their employees' gifts," Clinton said.

He also thanked Ballmer and Microsoft for the company's support of causes he has championed, including www.ninemillion.org, a United Nations effort to provide an education for 9 million refugee children by 2010.

Echoing themes from his presentation to the U.S. Conference of Mayors in Seattle Thursday night, Clinton also highlighted an effort to better measure improvements made to buildings to reduce their carbon footprint.

"The problem is that, believe it or not, even after all these years of dealing with climate change, there is no commonly accepted clear measurement of the impact of specific actions on the problem," he said. "So what Microsoft is doing for us, with Infosys and [the International Council for Local Environmental Initiatives], they're developing the baseline so that we can go into every major building and say, 'OK, here's what your carbon footprint is now and then we'll be able to measure every specific thing we do to say how much it's reducing.'"

Clinton devoted most of his comments to answering attacks on Sen. Hillary Clinton during Wednesday night's Democratic Presidential Debate, particularly an implication that President Clinton had attempted to delay releasing archived records from his administration pertaining to his wife.

"It was breathtakingly misleading," Clinton said of questions put to Sen. Clinton by Tim Russert of NBC's "Meet the Press" during this week's debate.

Bill Clinton's statements at Microsoft today provoked a response from the Republican National Committee, which alleged, in part, that the Clintons continue to distort the facts and hold back documents.

November 1, 2007

Bill Clinton to talk to Microsofties

Posted by Benjamin J. Romano at 6:00 PM

Former President Bill Clinton, in town this week for the Conference of Mayors, will pay a visit to Microsoft's Redmond campus Friday morning for a closed-door chat with employees there.

Afterwards, he's expected to meet the press with Microsoft CEO Steve Ballmer.

Check back here for coverage tomorrow.

October 31, 2007

Merrill Lynch may subpoena Microsoft over identity of racist emailer

Posted by Benjamin J. Romano at 1:15 PM

Brokerage giant Merrill Lynch is going after someone who has sent racist e-mails to black Wall Street brokers and Al Sharpton posing as a Merrill manager.

According to coverage by The Associated Press and Dow Jones, the company filed suit in U.S. District Court in Manhattan late yesterday seeking to identify and stop the sender, who is using a Microsoft Hotmail -- now Windows Live Hotmail -- e-mail account.

Merrill Lynch thinks the defendant, identified in the suit as "John Doe," is somewhere in the Midwest.

"The offensive e-mails were sent to a number of our employees by an anonymous sender," Merrill Lynch spokesman Mark Herr said in an e-mailed statement. "We have sued the anonymous sender and will move to subpoena both the ISP and Microsoft Hotmail for information that would reveal the identity of the sender."

I've asked Microsoft for a response.

Update: "Microsoft opposes discrimination in any form and will take swift action when it learns its products or services are being used in an abusive or harmful manner," reads a statement from David Bowermaster, a Microsoft senior public relations manager. "In taking such action, Microsoft maintains its commitment to protecting the privacy of its customers. Microsoft complies with properly issued and served subpoenas, search warrants and court orders."

(Bowermaster was formerly a reporter for The Seattle Times.)

Privacy is a huge issue for Microsoft and other providers of online services such as e-mail and instant messaging. It's recently been raised as in issue around targeted online advertising.

Here are some key passages from Microsoft's Online Privacy statement, updated most recently this month:

"Except as described in this statement, we will not disclose your personal information outside of Microsoft and its controlled subsidiaries and affiliates without your consent. ... We may access and/or disclose your personal information if we believe such action is necessary to: (a) comply with the law or legal process served on Microsoft; (b) protect and defend the rights or property of Microsoft (including the enforcement of our agreements); or (c) act in urgent circumstances to protect the personal safety of users of Microsoft services or members of the public." (Emphasis added.)

October 30, 2007

Judge taking extra time to mull extension of Microsoft oversight

Posted by Benjamin J. Romano at 1:44 PM

The landmark antitrust case against Microsoft will plod along for at least another three months so the parties will have enough time fully argue whether it should be extended for five years.

The re-jiggering of the schedule comes after most of the states involved in the case filed motions earlier this month asking U.S. District Court Judge Colleen Kollar-Kotelly to extend oversight of the company by five years. Most of the important pieces of the settlement were due to expire Nov. 12, but the states argued that the 2002 antitrust settlement agreement is only just beginning to foster competition and needs more time to work.

In a joint motion filed today the states and Microsoft asked for an extension to no later than Jan. 31, 2008, "solely for procedural purposes to allow the parties to brief, and the court to consider, the motions."

The filing also lays out a schedule for Microsoft and the Department of Justice to respond to the states' motions to extend. Microsoft's argument in opposition is due Nov. 6, and the DOJ, which said in a filing earlier this month that it opposes extending the settlement, has until Nov. 9 to make its arguments.

The states would file counter-arguments by Nov. 16, and Kollar-Kotelly will determine whether another hearing is needed.

October 25, 2007

Microsoft starts fiscal 2008 with a bang

Posted by Benjamin J. Romano at 1:13 PM

The company released its fiscal first quarter earnings just now. The headline is sales of $13.76 billion, up 27 percent from the year-earlier period.

Net income for the quarter, ended Sept. 30, was $4.29 billion and earnings per share of 45 cents blew the Wall Street consensus of 39 cents, as measured by Thomson Financial, out of the water.

CFO Chris Liddell, in a statement, said revenue growth in this quarter marks the fastest first quarter for Microsoft since 1999.

Updated forecasts are as follows:

Second quarter, ending Dec. 31, revenue of $15.6 billion to $16.1 billion; earnings per share of 44 to 46 cents.

For the full fiscal year, revenue of $58.8 billion to $59.7 billion, an annual growth rate of 15 to 16.8 percent; earnings per share of $1.78 to $1.81.

Here's the quarterly filing.

Microsoft's Entertainment and Devices Division appears to have made progress toward its goal of profitability this fiscal year, riding the popularity of "Halo 3," the blockbuster game it released Sept. 25. The division turned in operating income of $134 million, compared with an operating loss of $145 million last year in the period. "Halo 3" generated U.S. sales of $170 million in its first 24 hours on the market.

Update: Investors appear to be thrilled with this news, particularly the fact that the company raised its full-year revenue guidance by about $2 billion. MSFT hit a new 52-week high today of $31.99 in regular trading, and has climbed close to 10 percent in the early part of after-hours trading.

October 24, 2007

Microsoft-Facebook deal: Highlights from the call

Posted by Benjamin J. Romano at 1:57 PM

The long-rumored hook up has been confirmed. Microsoft is taking a stake in social-networking site Facebook. It beat out rival Google, which was reportedly in the running, for the exclusive global rights to sell third-party advertising on Facebook. Microsoft landed a deal to sell banner advertising in the U.S. on Facebook in August 2006. Expanding the deal internationally is important because 60 percent of the site's nearly 50 million registered users are outside the U.S.

Microsoft is investing $240 million in Facebook, about 1.6 percent stake at a stated valuation of an eye-popping $15 billion. Facebook was started in February 2004 by now 23-year-old Mark Zuckerberg.

Owen Van Natta, Facebook's vice president of operations and chief revenue officer, and Kevin Johnson, Microsoft's platforms and services division president, shared more details of the deal with reporters on a conference call.

Here are some highlights:

-- Johnson said, "I think this deal represents a major advertising syndication win for Microsoft" and "an enormous vote of confidence from our largest advertising partner."

-- Asked about the $15 billion valuation for Facebook suggested by the announcement, Johnson pointed to the nearly 50 million active users and the rate at which the site is adding users (Van Natta said later that it's doubling its user base every six months). If they get to 200 million or 300 million users fairly quickly, combined with "a modest average revenue-per-user, per year, and you can very quickly get to this level of valuation," Johnson said.

-- The companies declined to name or confirm the existence of other investors for the funding round. Van Natta also declined to discuss how the equity investment may affect Facebook going public.

-- Johnson said "there's a lot more we're going to be doing together," but both he and Van Natta were vague or non-responsive when asked about technical collaboration; integration of Facebook into Microsoft properties such as Windows Live or MSN; whether or not the agreement includes search advertising ( as opposed to just banner advertising); whether there's any guaranteed revenue to Microsoft as part of the deal.

-- Several reporters and analysts asked Johnson how well the existing Facebook advertising deal has worked out for Microsoft. Some referred to recent comments by Microsoft CEO Steve Ballmer suggesting that the deal has yet to become a huge source of revenue. "We see continued improvement and progress with the overall monetization of the Facebook inventory," Johnson said.

-- Neither executive provided much background on how the deal was done, including any background on other bidders. In fact, neither mentioned Google by name.

October 19, 2007

DOJ opposes extending oversight of Microsoft

Posted by Benjamin J. Romano at 3:53 PM

The Justice Department, in response to motions from several states involved in the antitrust settlement with Microsoft this week, filed a curt statement this afternoon saying it has no intention of filing for an extension and "does not believe that the standard for such an extension has been met."

At issue is the terms of the landmark antitrust settlement between the states, the federal government and Microsoft. Key provisions of the settlement are set to expire on Nov. 12, and while Microsoft has pledged to adhere to business practices that stay within the law and its responsibilities under the settlement even after it expires, the states are asking for five more years of oversight.

U.S. District Court Judge Colleen Kollar-Kotelly has scheduled a conference call with the parties for Tuesday, presumably to discuss the matter. Another hearing is scheduled Nov. 6 in her Washington, D.C., courtroom. It would be the last status conference before oversight expires.

More states call for extension of antitrust oversight of Microsoft

Posted by Benjamin J. Romano at 1:21 PM

New York, Maryland, Louisiana and Florida have joined the California group of states in calling for an extension of judicial oversight of Microsoft.

In a motion filed Thursday in the court overseeing the landmark antitrust settlement, the states write:

An extension is appropriate to assure that marketplace participants have sufficient opportunity to establish positions to compete against Microsoft, an entrenched monopolist. Indeed, experience since entry of the Court's decree in 2002 refutes the central assumption that supported departure from the 10-year term typical of antitrust remedial decrees -- that the industry section was characterized by rapid change. Just the opposite: Microsoft's Windows monopoly is indisputably resilient.

The motion for an extension by New York, Maryland, Louisiana and Florida is notable because they agreed with the Department of Justice's assessment in August that the consent decree had been successful. Thursday's filing (PDF, 9 pages) addresses that point, noting that in the August review, the New York group wrote "that the Final Judgments have begun to foster competitive conditions among middleware products, and more generally in the delivery of web-based applications and services. ... However, the process envisioned by the Final Judgments is far from complete. The inescapable fact remains that, at the client operating system level, Microsoft has a 90%+ market share."

Thursday's filing also provides a score card of sorts on where each of the states stands on extension of judicial oversight.

Of the 17 states plus the District of Columbia, 11 support extension; three have no objection to an extension; three have not taken a position on the matter; and one, Wisconsin, does not join the motion for extension.

October 18, 2007

'Halo 3' drives huge month for Xbox 360

Posted by Benjamin J. Romano at 3:32 PM

As promised, Microsoft's top video game title, "Halo 3," on sale for less than a week in September, fueled the company's broader video game business, according to just-released numbers from researcher NPD Group. (Update: Turns out NPD counts September differently than I do. Their September is longer, so the figures in this story actually represent 12 days of sales.)

NPD analyst Anita Frazier called the 3.3 million copies of the game sold in the U.S. last month "phenomenal." That figure was nearly double the total units sold under the next nine best-selling titles in September. (It also includes copies that eager fans pre-ordered online in the months of hype leading up to the game's release.)

"True to its name, the game rubbed off on hardware sales too -- the Xbox 360 realized it's best month ever in unit hardware sales outside last holiday season," Frazier said in a statement. "If ever there was a doubt that great content drives hardware acquisition, this should put that doubt to rest."

For the first time in several months, Microsoft's Xbox 360 outsold the Nintendo Wii, which also had a stellar September.

Here are U.S. console sales for September, from NPD:

Xbox 360, 527,800

Wii, 501,000

PlayStation 3, 119,400

PlayStation 2, 215,000

Next month's report will show whether today's PlayStation 3 price cut by Sony will juice its sales.

IT industry, Microsoft, continue to rev global economy

Posted by Benjamin J. Romano at 12:01 AM

Microsoft paid leading market-researcher IDC to draw up a major report of the economic impact of the IT industry -- and Microsoft's share of it -- on the global economy.

The big takeaway, no suprise: IT drives a big part of the global economy, and software in particular has a disproportionately large impact.

After studying 82 countries and regions, IDC found that $1.2 trillion, or 2.5 percent of 2007 global gross domestic product, can be traced back to the IT industry. That share is expected to grow to 2.75 percent by 2011.

The report gives Microsoft and its "ecosystem" -- described as "hardware, software, services, and channel firms as well as end user organizations running Microsoft software" -- credit for $400 billion in 2007 revenues and 42 percent of IT employment globally.

Pamela Passman, Microsoft's vice president of global corporate affairs, said the report is useful to the company in talks with government officials.

"What's most interesting about this are the trends that we see and for the audiences that we want to talk to about this, which is significantly policy makers," she said. "It's important for them to understand the trends, as they think about how they make resource allocation decisions."

Packaged software -- Microsoft's bread and butter, also the stuff provided to big enterprise customers by IBM, Oracle and SAP -- represents 21 percent of IT spending. But this sub-category of the industry generates half of all the IT jobs.

IDC chief researcher John Gantz explained why software has an out-sized impact on employment in the industry.

"For every dollar of software sold there's $1.25 of services around that software to be sold," Gantz said. Those services include training, installing, integrating, and working with software and also the software distribution channel, he said.

What about software's share of IT spending vs. hardware and services?

"In general, the software market is growing faster than the hardware market so over time that share will go up," said Gantz. He added that software's growth has slowed since the late 1990s -- hardware growth has slowed more -- when software spending was in the 15 to 20 percent range.

Today, software is growing about 6 to 8 percent a year. So what's causing the slow down?

"We call it basically the software complexity crisis," Gantz said. "It's fundamentally that so much of the software has to be integrated with older software that it slows the adoption down." (That also creates plenty of jobs for IT pros who can integrate the latest and greatest with legacy systems.)

How might the trend toward software as a service or, in Microsoft's terms, software plus services, affect growth of this part of the IT industry?

Right now, Gantz said, software as a service is counted by IDC as a service, and despite all the attention it's getting, "actually there's not enough of it to really make a difference.

"It's Microsoft Office Live, Dynamics Live, Salesforce.com, and out of $220 billion for a total software market, there's not all that much activity," Gantz said. "It's the wave of the future, but the amount today is not that high."

October 17, 2007

States seek to extend judicial oversight of Microsoft

Posted by Benjamin J. Romano at 1:54 PM

On Tuesday, California, Connecticut, Iowa, Kansas, Minnesota, the Commonwealth of Massachusetts and the District of Columbia formally asked the judge overseeing the soon-to-expire antitrust settlement between Microsoft and state and federal governments to extend it for five years.

Major provisions of the settlement are due to expire Nov. 12, while some other provisions around technical documentation have already been extended for two years. The filing (26-page PDF) cites "continuing problems" with the availability of documentation, and how the lack of documentation has hampered competitors ability to benefit from the settlement.

The main focus is on the portions of the settlement regarding middleware -- software that runs on top of the operating system, such as media players and Web browsers. The states say these provisions need more time to work.

The settlement "has yet to pry open the OEM channel of distribution to competitive browsers, because no major OEM currently distributes a browser other than Microsoft's Internet Explorer (IE)," the California group of states wrote.

That's important because:


"Many new middleware technologies are just now appearing that may, in the near
future, pose a competitive threat to Microsoft's operating system monopoly.
These technologies substantially depend upon the browser. Because Microsoft
still retains control of the OEM channel for browser distribution, in part because
its illegal conduct with respect to IE has not yet been fully remedied, it is critical
that [the middleware provisions] be continued until these technologies mature."

The filing Tuesday followed a request the states made at a hearing in Judge Colleen Kollar-Kotelly's courtroom in September to extend oversight.

That request followed conflicting reports from the various government parties to the settlement on its effectiveness.

October 11, 2007

Microsoft employees love Facebook

Posted by Tricia Duryee at 11:39 AM

If you have a Facebook account, then perhaps you got the same message as I did today.

One of the stories Facebook inserted into my newsfeed was on some of the largest work networks on Facebook.

Surprise, surprise: Microsoft, the company rumored to possibly be buying a chunk of Facebook, came up as No. 2. That's right, Microsoft has the second-largest work network on Facebook with almost 17,000 employees.

Slightly ahead of Microsoft with the largest work network is IBM, with more than 20,000 employees.

Following IBM and Microsoft is Ernst & Young, Accenture and National Health Service. Now, I'd never heard of National Health Service, but a quick Google search revealed that it is the publicly funded health care system in the U.K. Go figure.

Those stats are interesting, but frankly, what makes Facebook the application of the decade is its intense student following, and there's a little bit of early evidence that it might be faltering.

Om Malik is writing on his blog that comScore is about to release its September 2007 market research report, and it seems the number of unique Facebook visitors took a little decline. In fact, he said, it's a 9.3 percent drop in unique visitors from 33.75 million in August to 30.6 million in September.

Possibly the decline corresponds with students returning to school and not being in front of a computer as much as they were over the summer. Who knows?

He then points out a blog post by The Wall Street Journal's Kara Swisher who says that despite this news, an investment of some sort in Facebook still seems to be in the works, and still likely at the insanely high valuation of $15 billion.

Who's interested?

She wrote:

"As has been reported here and elsewhere, one is Microsoft, of course, which is Facebook's ad-serving partner and which currently delivers the company a sweetheart guaranteed ad revenue payment of about $75 million annually.

But the second, said sources, is not, as might be expected, Google. It is, in fact, dark horse Yahoo."

October 9, 2007

Fake Steve Jobs to speak on real Microsoft campus

Posted by Benjamin J. Romano at 2:21 PM

Forbes technology editor Dan Lyons, who for the last year and a half has anonymously penned the must-read tech blog "The Secret Diary of Steve Jobs," will be making an appearance at Microsoft later this month in support of his new real fake book, "oPtion$: The Secret Life of Steve Jobs, a Parody."

According to this post, Lyons' publisher set up the stop in Redmond, scheduled for Oct. 23 at 1 p.m. It's likely a Microsoft-only event, as the post suggests. Microsoft regularly invites notable personalities, writers and experts onto its campus for the benefit of its workers.

Lyons' identity was revealed by New York Times reporter Brad Stone in early August.

October 8, 2007

Toyota advergame on Xbox Live to promote Yaris

Posted by Benjamin J. Romano at 3:28 PM

People on Microsoft's Xbox Live gaming service can download a free game that's actually an advertisement for a car. The game, Yaris, debuted today, according to this New York Times story. It's the first free advergame to be distributed over Xbox Live Arcade, the story says.

The Times' coverage goes over the other advergames that Microsoft's Xbox team has been involved in, most notably the ones promoting Burger King, which were sold with burgers and fries, only at Burger King restaurants. Microsoft Entertainment and Devices Division President Robbie Bach told an audience earlier this year that he wasn't expecting the success of the Burger King promotion.

"If you had asked me a year ago, 'Gosh, you're going to do a promotion with the Burger King on Xbox Live Arcade and it's going to generate headlines in the business press about how we lifted Burger King's sales,' I would have been truly surprised," Bach said at Microsoft's Mix conference in May. "... It had a demonstrable impact on their financial results."

More companies are jumping on the video game advertising bandwagon, as the Yaris example illustrates. There are several different flavors of video game advertising, and Microsoft is wading deeper into all of them. Check out this story on the workings of Massive, the in-game advertising network Microsoft acquired.

Sony, too, is moving on its own into in-game advertising, according to this story from paidContent.org.

Microsoft appoints chief operating officer for China

Posted by Benjamin J. Romano at 10:15 AM

Microsoft tapped a long-serving sales executive for the newly-created position of chief operating officer for the Greater China Region.

Eugenio Beaufrand has been with the company for 23 years, according to his bio, serving most recently as vice president of Microsoft Latin America.

He will oversee sales, marketing and services operations in the China market, reporting to Ya-Qin Zhang, corporate vice president and acting CEO for Microsoft Greater China Region.

Zhang is filling the role vacated when Tim Chen was lured away from Microsoft by the National Basketball Association.

October 5, 2007

Microsoft parting ways with 'Halo' maker Bungie

Posted by Benjamin J. Romano at 8:02 AM

In the run-up to the launch of "Halo 3," Microsoft Game Studios Head Shane Kim described the game franchise as the "crown jewel" of the company's burgeoning Xbox video game console business.

This morning, Microsoft announced it is parting ways with Bungie, the studio responsible for Halo, which it acquired in 2000.

Microsoft will retain ownership of the "Halo" intellectual property and an equity interest in Bungie, which is becoming independent. "Halo 3" generated more than $300 million in global sales since it was released Sept. 25.

"While we are supporting Bungie's desire to return to its independent roots, we will continue to invest in our 'Halo' entertainment property with Bungie and other partners, such as Peter Jackson, on a new interactive series set in the 'Halo' universe," Kim said in a statement released at 8:01 a.m. today. "We look forward to great success with Bungie as our long-term relationship continues to evolve through 'Halo'-related titles and new IP created by Bungie."

Bungie will remain in its current Kirkland location and will continue developing games with a "primary focus on Microsoft platforms," Harold Ryan, studio head for Bungie, said in a statement. The statement does not rule out the potential of developing games for competing platforms, though it looks like "Halo" will continue to be a Microsoft exclusive.

UPDATE, 9:45 a.m.: More insight into why Bungie wanted to cut the cord from the Bungie Weekly What's Update!, a newsletter posted on Bungie.net. The post by Frankie this morning at 8:03 a.m., starts out with this: "Almost Nobody asked, What's all this about Bungie and Microsoft splitting up?" A bit of sarcasm, Frankie? I was hanging around your bunker-like offices yesterday pestering employees about this as they strolled through Peter Kirk Park on the way to lunch.

Anyway, here's what he has to say about this "unprecedented and exciting agreement":

[S]tarting immediately, Bungie will become an independent company and will retain a long-term publishing agreement with Microsoft Game Studios for "Halo" titles. The new structure became effective on Oct. 1, 2007. The official blurb follows, but since you're a valuable part of our community, we thought we'd sum it up simply and concisely.

Bungie has long been built on creativity, originality and the freedom to pursue ideas. Microsoft agreed, and rather than stifle our imagination, they decided it was in both our best interests to unleash it. We'll continue to make Xbox 360 games, and we'll continue to make amazing games for MGS. In that regard, nothing has changed. All that has changed is that now Bungie Studios is once again, the property of the folks of Bungie Studios. Microsoft is and will continue to be, a brilliant, inventive and creatively collaborative publishing partner. Practically speaking, nothing has changed and you guys won't see much, if any difference, for a while unless you come to work for us, that is -- we're hiring at http://www.bungie.net/inside/jobs.aspx

October 4, 2007

Gates rediscovers Lovin' Spoonful on Zune

Posted by Benjamin J. Romano at 3:08 PM

Byron Acohido, who won a Pulitzer Prize in 1996 while at The Seattle Times and now reports for USAToday, elicited one of the most lively responses we've seen from Bill Gates in a while. Here's the excerpt from his Q&A with the Microsoft chairman.

Q: What's the coolest thing about the upgraded Zune?

A: Look at this thing! (Holds up a Zune 8) Three or four years ago there was nothing like this. This is cool as heck. I'm finding music I haven't seen in 20 years. Hey, the Lovin' Spoonful? They're in this thing. I find one of their songs. I send it to friends I had an apartment with, it was actually 30 years ago. I can send it out to them and say, "Remember when we listened to this?" It's amazing.

To take a trip on the way-back machine with Bill, here's a link to MP3s of the Spoonful's greatest hits.

Microsoft Vault to store personal health records

Posted by Benjamin J. Romano at 9:54 AM

Microsoft executives have long talked about their plans to push technology further into the health care field, both at the lab bench and the bedside. The company made some first steps with a couple of recent acquisitions and today, it's launching a new "software plus services" combination designed to help people compile personal health data and share it with doctors.

HealthVault, as the company is branding this effort (the first of many ways it is emphasizing privacy), allows users to create an account online that will store data such as medical history, health plan information, prescriptions, images, cholesterol and blood pressure readings. The data can be entered by the patient or by a medical provider authorized by the patient.

Still in testing, the service is free. Security and identity are verified using Windows Live ID, the same sign-on protocol used for accessing the company's Web-based email and instant messaging services.

Underlying the end-user application is a platform -- this is Microsoft, after all -- to connect all of the various sources and outlets for medical data. The company is releasing a software developer kit for medical device makers and others who want to build applications based on HealthVault.

Another element is a new HealthVault Search service, based on MedStory, which Microsoft acquired in February. Health is one of the four areas Microsoft is emphasizing with its refreshed Live Search service. The HealthVault Search returns results from authoritative sources, which can be stored in a HealthVault account. Search is one way Microsoft plans to monetize the overall HealthVault effort.

The first question everyone who hears about this has is whether people will be comfortable sharing their most personal information with a big tech company, be it Microsoft, or Google, which also has designs on this business.

To assure users, before creating an account, Microsoft offers these promises:

* The Microsoft HealthVault record you create is controlled by you.

* You decide what information goes into your HealthVault record.

* You decide who can see and use your information,on a case-by-case basis.

* We do not use your health information for commercial purposes unless we ask and you say clearly that we may.

How do you feel about compiling your medical records in one place and trusting Microsoft or Google to handle them?

Microsoft Vault to store personal health records

Posted by Benjamin J. Romano at 9:54 AM

Microsoft executives have long talked about their plans to push technology further into the health care field, both at the lab bench and the bedside. The company made some first steps with a couple of recent acquisitions and today, it's launching a new "software plus services" combination designed to help people compile personal health data and share it with doctors.

HealthVault, as the company is branding this effort (the first of many ways it is emphasizing privacy), allows users to create an account online that will store data such as medical history, health plan information, prescriptions, images, cholesterol and blood pressure readings. The data can be entered by the patient or by a medical provider authorized by the patient.

Still in testing, the service is free. Security and identity are verified using Windows Live ID, the same sign-on protocol used for accessing the company's Web-based email and instant messaging services.

Underlying the end-user application is a platform -- this is Microsoft, after all -- to connect all of the various sources and outlets for medical data. The company is releasing a software developer kit for medical device makers and others who want to build applications based on HealthVault.

Another element is a new HealthVault Search service, based on MedStory, which Microsoft acquired in February. Health is one of the four areas Microsoft is emphasizing with its refreshed Live Search service. The HealthVault Search returns results from authoritative sources, which can be stored in a HealthVault account. Search is one way Microsoft plans to monetize the overall HealthVault effort.

The first question everyone who hears about this has is whether people will be comfortable sharing their most personal information with a big tech company, be it Microsoft, or Google, which also has designs on this business.

To assure users, before creating an account, Microsoft offers these promises:

* The Microsoft HealthVault record you create is controlled by you.

* You decide what information goes into your HealthVault record.

* You decide who can see and use your information,on a case-by-case basis.

* We do not use your health information for commercial purposes unless we ask and you say clearly that we may.

How do you feel about compiling your medical records in one place and trusting Microsoft or Google to handle them?

October 1, 2007

Microsoft Online and Live "cloud" services: Differences and similarities

Posted by Benjamin J. Romano at 2:05 PM

A reader wrote in today to ask how the new Microsoft Online services for businesses, described in a story today, are different from the cloud services Microsoft is working on.

"Cloud services" refers broadly to the "services" part of Microsoft's "software plus services" strategy. (And yes, I find this stuff a bit confusing, too.) Until now, these have mostly been focused on consumers and small businesses.

The biggest differences with the new business-focused services, I would say, is the specific software functions they will augment or replace, and the end users Microsoft has in mind -- namely business decision makers, IT professionals and what the company refers to as information workers.

So, for example, Microsoft Exchange Online will basically allow Acme Corp. (a large company with 5,000 or more Exchange users) to outsource its corporate e-mail system to Microsoft. Microsoft says Exchange Online will function just like an on-premise instance of the software, but instead of Acme investing in its own servers, server software and IT staff to deploy and manage Exchange, the company would instead pay a regular per-user subscription fee to Microsoft. Microsoft would run Exchange on its servers, in its data centers, and deliver the functionality to the Acme via the Web.

The consumer-focused services are different. If you're using Windows Live Hotmail, for example, you're getting e-mail as a service, funded by the advertising you see whenever you log on. Xbox Live is a little bit different in that you pay a subscription to be a member of the network and play games with your friends.

But what's most interesting about the "software plus services" strategy are the similarities rather than the differences between the various services.

As I said, the services differ in function and end-user. But the underlying cloud infrastructure they rely on -- the servers, data centers, load-balancing and management software, security and identity software shared by many Live services, and technical expertise to keep them running -- is shared by them all. Microsoft hopes to benefit from this economy of scale.

"We're taking a platform approach to services, giving each of our products the common benefits of cost, speed, scale and monetization that a platform approach offers," Microsoft Chief Software Architect Ray Ozzie said at the company's Financial Analyst Meeting in July. "... This platform will ultimately be used by and will benefit all of the audiences that we at Microsoft serve."

Here's a transcript of Ozzie's remarks. And here's a story I did in August explaining the cloud infrastructure in some detail.

September 27, 2007

Windows XP to be sold until June 30, 2008

Posted by Benjamin J. Romano at 5:01 PM

Microsoft said this afternoon that it's extending the deadline for retailers and OEMs to stop selling Windows XP from Jan. 30, 2008, to June 30. The move was chalked up to demand from small businesses for the older product and Microsoft's "overambitious" goal of switching the world to Vista, launched Jan. 30, in only 12 months.

Check out this story for details.

Anyone out there considering a switch from XP to Vista? If so, what's holding you back? And how do you read the extension of the deadline?

September 26, 2007

'Halo 3' rings up $170 million in first 24 hours

Posted by Benjamin J. Romano at 2:33 PM

Microsoft is claiming the title of greatest entertainment company EVER!

OK, not really, but they are saying that the estimated $170 million in U.S. "Halo 3" sales recorded since Tuesday at 12:01 a.m. represents "the biggest entertainment launch in history."

Not clear yet how, or whether, the company will record the added costs it faces to replace scratched "Halo 3" disks that came loose and rattled around inside their commemorative packaging.

September 24, 2007

Crank up the rumor mill: MSFT+Facebook=?

Posted by Benjamin J. Romano at 12:07 PM

This round of speculation brought to you, yet again, by The Wall Street Journal, which this afternoon quotes "people familiar with the matter" describing a potential Microsoft investment of $300 million to $500 million in social networking site Facebook. It adds that those figures would buy Microsoft 5 percent of the company, putting Facebook's value at $6 to $10 billion, and that Google is another potential investor in the company.

The story also includes the obligatory no comments from Microsoft and Facebook. The article cautions that these people call any deal "still preliminary and Facebook could wind up not taking an investment from either Microsoft or Google."

Microsoft and Facebook hooked up on an advertising deal earlier that Microsoft was most proud of. And, as the Journal reported almost exactly a year ago, Facebook has done the deal dance with the tech biggies before. That story included this memorable anecdote about Facebook founder and CEO Mark Zuckerberg being something of a late riser during negotiations with Redmond about a potential acquisition:

"During one series of talks with Microsoft, Facebook executives told their Microsoft peers they couldn't do an 8 a.m. conference call because the company's 22-year-old founder and chief executive, Harvard dropout Mark Zuckerberg, wouldn't be awake, says a person familiar with the talks. Microsoft executives were incredulous."

For more background, see Microsoft's own page on the digital advertising deal it landed with Facebook last August.

September 21, 2007

Microsoft proxy: Exec stock awards show missed goals

Posted by Benjamin J. Romano at 10:31 AM

Microsoft filed its annual proxy statement today. It scheduled its annual shareholders meeting for 8 a.m. Nov. 13 at the Washington State Convention and Trade Center -- a switch from the usual location, Meydenbauer Center in Bellevue.

The proxy also includes a discussion of how the board of directors thinks the top company executives did against their goals for the year. The goals included:

-- Customer satisfaction.

-- Product acceptance, including (i) the percentage of developers targeting Microsoft platforms and/or using its latest tools; (ii) the amount of activity and advertisements generated through its Web sites; (iii) sales of Windows licenses and Office units; and (iv) new Windows Server licenses.

-- Platforms and Services Division ("PSD") share of Internet searches using MSN-Microsoft Web sites.

-- Sales Marketing and Services Group net revenue and contribution margin.

-- Entertainment and Devices Division ("EDD") division net revenue and contribution margin.

-- Microsoft Business Division ("MBD") net revenue and contribution margin.

The board had this to say about the performance: "We were satisfied with our performance in product acceptance and SMSG and MBD financial metrics. Our performance in customer satisfaction, while steady, and Internet searches, while growing, fell short of our challenging goals, and we were not satisfied with our performance in EDD financial metrics."

As a result, Chief Financial Officer Chris Liddell received 46,250 shares, or 37 percent of his target. (An award of 100 percent of the target would indicate the board thought fiscal year 2007 performance showed "meaningful improvements
in performance as compared with actual fiscal year 2006 results.")

Platforms and Services Division President Kevin Johnson received 58,500 shares or 22.5 percent of his target.

Business Division President Jeff Raikes and Chief Operating Officer Kevin Turner each received 133,250 shares, 51.3 percent of their targets.

Details of compensation for Entertainment and Devices Division President Robbie Bach were not listed. Named executives typically include the CEO, CFO and the three highest-compensated executives.

The board also adopted a new requirement that executives "maintain a material personal financial stake in Microsoft to promote a long-term perspective in managing the enterprise, and to align shareholder and executive interests."

As such, the CEO must own stock equal to 10 times his base pay (not a problem for Ballmer, who, with 408.3 million shares, owns 4.3 percent of the company). Division presidents and the COO must own stock worth five times base pay. Other executives must own stock worth three times base pay.

Total compensation for the named executives, including base salary, bonus, stock awards and other compensation such as relocation expenses and matching contributions to 401(k) plans is:
CEO Steve Ballmer: $1,279,821
CFO Liddell: $4,733,262
PSD President Johnson: $7,026,526
MBD President Raikes: $6,182,567
COO Turner: $8,450,750

September 20, 2007

Gates still richest American (Slim's on his heels) Buffet No. 2

Posted by Benjamin J. Romano at 3:28 PM

The Forbes list of the 400 wealthiest Americans -- only billionaires need apply -- is still topped by Microsoft founder and Chairman Bill Gates. He weighs in with $59 billion, up from $56 billion at the end of 2006.

But, as Forbes notes, Gates' days at the top of the world's heap of rich guys may be numbered. As some have already estimated this year, Mexican magnate Carlos Slim Helú is gaining on, and may have surpassed, Gates in wealth. Forbes pegs Slim's total on par with Gates'. As we noted this summer, Gates is giving away his money much faster than Slim.

The latest Forbes list has Warren Buffett as the second-richest American, with $52 billion.

Other Washingtonians on the list:
11. Paul Allen, Microsoft, $16.8 billion
16. Steve Ballmer, Microsoft, $15.2 billion
35. Jeff Bezos, Amazon.com, $8.7 billion
135. Craig McCaw, McCaw Cellular, $2.8 billion
239. James Jannard, Oakley, $2 billion
380. Timothy Blixseth, timberland, real estate, $1.3 billion

September 19, 2007

Tim Chen latest Microsoft China executive to leave

Posted by Kristi Heim at 12:26 PM

Tim Chen, Microsoft's top executive in China, jumped ship to head to the National Basketball League's operations in China, the NBA said today.


DEAN RUTZ/SEATTLE TIMES

Tim Chen will be seeing a lot more of Yao Ming.

Before he joined Microsoft, Chen led Motorola's China operations. He's a well known executive in the country and was undoubtedly sought after by many companies.

At Microsoft, Chen helped the company make progress on intellectual property issues in China, including inking partnerships with PC makers and successfully pushing for a law that requires new computers to be sold with authentic preinstalled operating system software.

He also helped host Chinese President Hu Jintao in carefully scripted visits to Microsoft and dinner at Bill Gates' home.

Chen starts with the NBA on Oct. 15, so Microsoft is searching for his replacement and has named Ya-Qin Zhang as acting CEO in the meantime.
Zhang heads the company's R&D group in China.

Chen's departure follows those of Kai-Fu Lee, whose move to Google sparked a lawsuit between Microsoft and the search giant, and Jun Tang, a basketball player himself, who left his job as president of Microsoft China to join online game company Shanda Interactive Entertainment.

This story says Chen's move illustrates Microsoft's difficulty hanging on to executives in the world's fastest growing economy. I'd say it illustrates any multinational company's dilemma with job-hopping executives there, since the number of opportunities far outweighs the number of capable high-level managers in China.

September 18, 2007

Microsoft launches GPS-based mobile search

Posted by Tricia Duryee at 10:54 AM

For some time, Microsoft has been providing mobile search capabilities to Sprint Nextel, the third largest U.S. carrier.

Late last night Microsoft said it expanded the partnership by integrating two new features into the search capabilities -- GPS, or location based services, and voice search using Tellme technologies.

Users will also be able to surf both information provided by Sprint and the entire Internet. The Tellme voice search will be available on selected Sprint phones as a separate download.

The service sounds a lot like the other search application that Sprint uses. InfoSpace's Find It! application, which has been on the Sprint network for some time, uses GPS and voice capabilities to search Yellow Pages, including movie times and other information.

Coincidentally, that application changed hands Monday when InfoSpace announced it sold its Switchboard.com yellow and white pages directory to Idearc for $225 million.

September 17, 2007

Microsoft to study ruling before deciding on appeal

Posted by Benjamin J. Romano at 2:24 AM

In a brief press conference with reporters outside the Luxembourg court room where Microsoft was handed a defeat in Europe today, General Counsel Brad Smith said the company still has to evaluate the ruling before deciding whether to exhaust its last avenue of appeal.

"I think we need to read the decision before we make any kind of decisions," Smith told a scrum of reporters. "I believe in these kinds of things that although there's a lot of drama, one needs to step back and read first, think second and decide third ... and that is the order in which we're going to take things."

A video of his remarks can be found here (.wmv file).

Smith acknowledged that the Court of First Instance agreed with the European Commission on the most important points in the case.

He struck a conciliatory tone, recommitting Microsoft to compliance with the European competition laws it violated.

"It's clearly very important for us as a company that we comply with our obligations under European law," Smith said. "We'll study this decision carefully and if there are additional steps that we need to take in order to comply with it, we will take them. It will take us a little bit of time, at least over the next few hours, to read the decision carefully, but certainly that is one of our strongest convictions as we go forward."

He recounted efforts Microsoft has made to ensure that Windows Vista, the latest version of the operating system software in which it has a monopoly, did not run afoul of the European Commission's 2004 decision, which has now been upheld by Europe's second-highest court.

Smith said Microsoft is "gratified" that it was able to have "constructive discussions with the European Commission last year that enabled us to bring to market Windows Vista in conformity with the Commission's 2004 decision."

Smith reflected on what has transpired since the European Commission started its investigation into Microsoft's business practices in 1998:

"The world has changed. The industry has changed and our company has changed. We sought to underscore that over a year ago when we published what we describe as our Windows Principles, principles intended to ensure that future versions of Windows, starting with Windows Vista, would comport not only with U.S. law, but with the principles that are applicable here in Europe as well.
"We've sought to be open and transparent and we've sought to strengthen our ties with the rest of our industry. Indeed it's notable, that just last week we announced a new agreement with Sun Microsystems and the week before that we announced a new agreement with Novell -- two of the companies that started out on the other side of this case almost nine years ago."

Smith said one constant is the company's commitment to Europe. He said when the case started, Microsoft offered Windows in 24 European languages; today it is available in 41. In 1998, the company had 3,900 employees on the continent. Today it has 13,000. Its research and development investment has also ballooned during the past decade from $3 million in 1998 to nearly $500 million now.

Smith is expected to hold a formal press conference at 5:30 a.m., Redmond time, with reporters from around the world. Check back here afterwards for updates.

Meanwhile, European Commission officials applauded the court's decision.

"This judgment confirms the objectivity and the cerdibility odf the Commission's competition policy," Commission President Jose Manuel Barroso said in a statement, according to Reuters.

EC Competition Commissioner Neelie Kroes, viewed as a driving force behind the Microsoft case, suggested the decision could have implications for other companies, particularly those in high tech.

"The court has upheld a landmark commission decision to give consumers more choice in software markets. That decision sets an important precedent in terms of the obligations of dominant companies to allow competition, in particular in high tech industries," Kroes said, according to a report by Dow Jones.

European court upholds decision against Microsoft

Posted by Benjamin J. Romano at 12:45 AM

The Court of First Instance just issued its highly anticipated ruling on Microsoft's appeal of a March 2004 decision by the European Commission to sanction and fine the company for abusing its monopoly in PC operating systems. The decision is relatively straightforward, but, as expected, it's still nuanced, as indicated by the headline on this news release the court issued shortly after delivering its brief decision this morning (PDF, five pages):

THE COURT OF FIRST INSTANCE ESSENTIALLY UPHOLDS THE COMMISSION'S DECISION FINDING THAT MICROSOFT ABUSED ITS DOMINANT POSITION

However, the Court has annulled certain parts of the decision relating to the appointment of a monitoring trustee, which have no legal basis in Community law

On March 24, 2004, the European Commission completed a five-year inquiry and found that Microsoft's Windows operating system "broke European Union competition law by leveraging its near monopoly in the market for PC operating systems onto the markets for work group server operating systems and for media players." Here's the EC's news release from that time.

The company was given six months to make available to competitors "the interfaces required for their products to be able to 'talk' with the ubiquitous Windows OS," also described as "interoperability information." The company was also ordered to offer European consumers an unbundled version of Windows without Windows Media Player built in. Microsoft was also fined an eye-popping 497 million euros, or $613 million.

The European Commission also called for the apointment of a monitoring trustee to assist it in monitoring Microsoft's adherence to the decision. According to the Court of First Instance's statement today, "He was to have access to Microsoft's assistance, information, documents, premises and employees and to the source code of the relevant Microsoft products. All the costs associated with the monitoring trustee, including his remuneration, were to be borne by Microsoft."

In June 2004, Microsoft challenged the EC's decision and the fine before the Court of First Instance, one step below the highest judicial authority in Europe. Today's ruling is the outcome of that appeal.

On the question of interoperability information, the court found that the EC correctly determined that Microsoft's refusal to share that information resulted in an abuse of its dominant position in the operating system market.

Also, the court found that the "degree" of interoperability between Windows and server software sought by the EC was "well founded" and the remedy it imposed -- forcing Microsoft to "disclose the 'specifications' of its client/server and server/server communication protocols to any undertaking wishing to develop and distribute work group server operating systems" -- was appropriate.

Further, the court rejected "Microsoft's claims that the degree of interoperability required by the Commission is intended in reality to enable competing work group server operating systems to function in every respect like a Windows system and, accordingly, to enable Microsoft's competitors to clone or reproduce its products."

The court concluded, "The absence of such interoperability has the effect of reinforcing Microsoft's competitive position on the market and creates a risk that competition will be eliminated."

On the question of bundling Windows Media Player into the Windows operating system, the court agreed with the EC's decision that the two products were tied together, to the detriment of consumer choice, and upheld the remedy requiring Microsoft to offer a version of Windows without the player.

The court noted that "independent companies, like [Seattle-based] RealNetworks, ... design and supply competing [media player] products independently of operating systems." This was one of several ways the court determined that Windows Media Player and Windows are in fact seperate products -- a precursor to the finding that they were illegally tied together.

RealNetworks, which settled with Microsoft on the question of bundling two years ago, applauded the court's decision. "The standards affirmed by the European Court should help ensure fair competition for all Windows application developers," Real's General Counsel Bob Kimball said in a statement this morning.

The hefty fine was upheld. The court determined that the EC "did not err in assessing the gravity and duration of the infringement and did not err in setting the amount of the fine."

Finally, on the question of the monitoring trustee, the court found that the EC's creation of such a position -- with its own "powers of investigation and capable of being called upon to act by third parties" -- went "far beyond" merely seeking an outside expert to help with its investigation and monitoring of Microsoft. It struck down the creation of the monitoring trustee position.

Decisions of the Court of First Instance can be appealed to the brought before the Court of Justice of the European Communities, the highest court in Europe. Microsoft would have two months from today to decide to appeal.

As of 1:50 a.m., Redmond time, the company's General Counsel Brad Smith, who was in the Luxembourg court room to hear the decision, had not yet issued a statement on the ruling. He is expected to hold a press conference later this morning.

September 7, 2007

Microsoft still on lease for large space on Seattle waterfront

Posted by Benjamin J. Romano at 11:11 AM

While Microsoft's new presence in downtown Seattle got the headlines, the company 's name has been on the lease for a significant chunk of prime downtown property for years.

When the company acquired Visio in 1999, it also took over office space in World Trade Center East at 2211 Elliott Ave. Microsoft still owns the lease for about 184,000 square feet there, according to Greg Johnson, president of Wright Runstad, the building's landlord.

After the Visio acquisition, "the gravitational force of Redmond just kept pulling people out of that office to the point where it was empty," said Chris Owens, Microsoft general manager of worldwide real estate and facilities.

Microsoft sublet the space to another tenant and its remaining time on the lease is too short to move back.

"We have obligations to lease the space to people and then the lease will expire for us. ... I think that's the only choice there," Owens said.

"It's great space," he added. "If we had another bite at that apple, I would have liked to have had it."

Microsoft learned from its earlier experience with a downtown Seattle workforce.

"It informed us on how big a challenge it is to put a stake in the ground in Seattle when we have such an Eastside-centric population and business model," Owens said. "We learned we have to take conscious efforts to manage that and we have to pick groups that are very willing occupants in Seattle ... to make sure it's sustainable, that they want to be here, that they're not being forced to be here."

September 6, 2007

Xbox exec takes on finance for the poor

Posted by Kristi Heim at 4:30 PM

A former Microsoft executive who led the launch of Xbox and the co-founders of both Classmates.com and Jobster.com have all joined a local non-profit dedicated to helping poor people gain access to credit.

They're part of a wave of experienced technology people leaving the business world to apply their skills to problems of inequality.

Maybe they were listening to Bill Gates' Harvard commencement speech...

Their business experience is valued at Redmond-based Unitus, which looks at microfinance, or providing tiny loans and other services to working poor, as "an up-and-coming business sector, not a charity," in the words of its spokesman. Unitus also operates a separate, for-profit investment fund.

That for-profit approach is somewhat controversial and has its share of critics. But in microfinance the line between doing good and making money is blurring.

Unitus reaches more than 2 million people now with loans, insurance and other services that would not be available to them through traditional banks. Like an aggressive tech startup, it plans to expand to a million more by the end of the year.

Xbox veteran Ed Bland, who was a general manager in Microsoft's Entertainment and Devices Division, left to join Unitus as chief operating officer.


SOURCE: Unitus

Ed Bland's job is anything but.

Other techies that have recently joined Unitus are Derek Streat, co-founder of Classmates.com and now Unitus VP of microfinance solutions; Jobster.com co-founder Jonathan Weinstein, now Unitus director of product development; former Microsoft and BEA employee Diana Reid, now Unitus VP of donor and investor relations; and RealNetworks and Microsoft veteran Sandra Winters, who is Unitus director of strategic alliances.

September 5, 2007

Microsoft releases test version of Windows Live suite

Posted by Benjamin J. Romano at 9:27 AM

After reports earlier this week that the Windows Live suite was on its way, Microsoft today announced a beta or test version of the software will be available later today at this site.

Included in the suite are updated versions of Windows Live Mail, Photo Gallery, Writer blog posting tool, OneCare Family Safety parental controls, Messenger, "and more," according to a blog post this morning from Chris Jones, a corporate vice president heading the Windows Live effort.

Also new is a "unified installer" that will allow all of the pieces of the suite to be downloaded at once. "Once downloaded it will also keep customers' Windows Live services up to date automatically," according to an email from Microsoft's PR firm.

No word on when the beta tag will be removed from these online services.

September 4, 2007

New Microsoft perks around the corner?

Posted by Benjamin J. Romano at 11:15 AM

Business Week's detailed story on changes in Microsoft HR policies during the past two years under the direction Lisa Brummel, includes some perks the company has been or may be offering employees in the future.

Most of these have been talked about -- some were part of the revisions Brummel made to HR policy in May -- but many have not been widely publicized before:

-- Shuttle bus service, with Wi-Fi, coming soon.

-- Food delivered to desks, but no more grocery delivery; and "maybe -- just maybe -- free lunch" to compete with Google's famous perk (Brummel is "contemplating" this, CFO Chris Liddell is "studying it" and CEO Steve Ballmer is skeptical.).

-- Doctors making house calls for Microsoft employees.

-- Perhaps satellite offices or work-from-home schedules. (The article says Brummel has been "considering" the former and is a "proponent" of the latter.)

-- Even new recruits are getting some action: The company's recruiting center has been transformed into a "hip hotel lobby complete with an Xbox lounge and copious snacks."

Will these perks and perhaps others be announced at the company's annual employee meeting Thursday at Safeco? For all the speculation on what is and what should be, check out two recent posts at Mini-Microsoft.

Also interesting to note is the tenor of the comments in those posts, which counter the generally positive depiction of Microsoft's HR changes in the Business Week articles.

For reference on where Brummel's coming from, check out this profile and Q&A we ran last year.


STEVE RINGMAN / THE SEATTLE TIMES ARCHIVE

Lisa Brummel, senior vice president of human resources at Microsoft, talks with an employee in a cafeteria on the campus in September, 2006.

NYT: Windows Live Suite due this week

Posted by Benjamin J. Romano at 9:00 AM

The New York Times reports Sunday that the updated suite of online services Microsoft executives have been promising this summer is due to arrive this week. The Windows Live Suite is said to include Windows Live Mail, Messenger, Photo Gallery, as well as security software and possibly blogging software -- all installed in one move with a Unified Installer program.

In describing Microsoft's Internet services strategy, the story references Microsoft's bruising antitrust battle and raises the specter of history repeating itself. Veteran technology reporter John Markoff writes:

"Microsoft's new approach is in many ways a mirror image of the strategy used during the 1990s in defeating Netscape Communications when the start-up threatened Microsoft's desktop dominance. Microsoft tried to tie the Internet to Windows by bundling its Internet Explorer Web browser as an integral part of its desktop operating system. The company lost an antitrust lawsuit in 2000 brought by the Justice Department in response to this bundling strategy.

"Today, that strategy has been flipped with the growing array of Web services that are connected to Windows. But the new approach, which the company refers to as 'software plus services,' is once again beginning to draw industry charges of unfair competition from competitors."

Those griping rivals were not named in the story.

Last week, I interviewed Howard University's Andrew Gavil, an antitrust law expert and close follower of Microsoft's court battles and subsequent settlement with the U.S. government, certain portions of which are coming to an end later this fall. I asked him then whether he saw Internet services as a potential new antitrust front.

"Ten years ago it was servers," Gavil said. "Now it's more of these Internet services. To the extent that you can do it in a way that's tied to Windows, you are attempting to utilize the market power you've developed with Windows to limit consumer choices and to keep them in the fold."

For more background on Microsoft's push into Internet services, check out stories we ran last week on the strategy and the technology behind the effort.

August 30, 2007

DOJ says Microsoft antitrust settlement a success; California, other states disagree

Posted by Benjamin J. Romano at 11:08 AM

The Department of Justice issued a news release this morning saying, "competition and consumers have benefited from the final judgments entered because of the Department's antitrust enforcement efforts against Microsoft."

The Justice Department was joined by a handful of states. But several others, known as the California group, disagreed.

From Bloomberg News:

Antitrust regulators from California and five other states said in a filing today that Microsoft still maintains a monopoly over personal computer operating system software and some provisions of the settlement have yielded "little, if any, tangible pro-competitive results."

"There can be little doubt that Microsoft's market power remains undiminished,"' state regulators said in the filing in federal court in Washington. Key provisions of the settlement "have had little or no competitively significant impact."

The California group never agreed to the final judgment and was forced to join in it.

The Justice Department release was timed to a series of filings by the parties in the broad antitrust settlement, most of which expires this November, including Microsoft, the department and the states.

In a statement this morning, Microsoft General Counsel Brad Smith noted that the company intends to continue its compliance with terms of the settlement after it expires and codified its own view of its responsibilities in a set of Windows Principles issued last year.

"As it was specifically intended, the Consent Decree defined clear rules for how Microsoft competes without pre-ordaining winners in the technology marketplace. The Consent Decree shaped how we view our responsibilities and led us to adopt a set of voluntary principles that will continue to apply even after major parts of the U.S. antitrust ruling expire this November," Smith said.

The Justice Department cited several examples of middleware competitors -- including Web browsers such as Mozilla's Firefox, Opera, and Apple's Safari; and multimedia players from Apple and Adobe -- to support its assertion that the final judgment has protected competition. I asked a department spokeswoman for the hard data on which these statements are based; she said she would get back to me.

It's important to note -- and the Justice Department does -- that the settlement was aimed only at preserving competition in this middleware software category. It was not an attempt to roll back Microsoft's monopoly in operating system software. Windows is still the dominant OS, running more than 90 percent of the world's computers.

From the department's statement:

"The core allegation in the original lawsuit, upheld by the U.S. Court of Appeals in June 2001, was that Microsoft had unlawfully maintained its monopoly in PC-based operating systems by excluding competing software products known as middleware that posed a nascent threat to the Windows operating system. Specifically, the Court of Appeals upheld the District Court's conclusion that Microsoft engaged in unlawful exclusionary conduct by using contractual provisions to prohibit computer manufacturers from supporting competing middleware products on Microsoft's operating system, prohibiting consumers and computer manufacturers from removing access to Microsoft's middleware products in the operating system, and reaching agreements with software developers and third parties to exclude or impede competing middleware products."

It continued,

"[A]s Microsoft was never found to have acquired or increased its monopoly market share unlawfully, the final judgments were not designed to eliminate Microsoft's Windows monopoly or reduce Windows' market share by any particular amount. Rather, the final judgments were designed to re-invigorate competitive conditions that Microsoft had suppressed so that the market could determine the success of these software products. The final judgments are succeeding in that goal."

Here's the Justice Department's final judgment review, filed today with the court. (PDF, 11 pages).

Microsoft also filed its own report on the final judgment (PDF, 12 pages), supported by two expert reports (PDF, 44 pages), (PDF, 45 pages).

Update: Here is the filing from the California group. (PDF, 21 pages).


August 29, 2007

MSNBC, Conde Naste team on content; CNN choses Google

Posted by Benjamin J. Romano at 10:50 AM

MSNBC.com, the Redmond-based news organization owned jointly by Microsoft and NBC parent GE, will present content from several Conde Naste outlets under a deal announced today.

According to a press release:

"The CondeNet brands that will share content with msnbc.com include Style.com, Men.Style.com, Epicurious.com, and Concierge.com. Content from Conde Nast's publications, such as Vogue, Glamour, Self, GQ, Details, Men's Vogue, Vanity Fair, Gourmet, Bon Appétit, Conde Nast Traveler, and Conde Nast Portfolio will also be available on MSNBC.com."

In another development, CNN.com -- which ranks third, just ahead of MSNBC, on the list of most-visited news sites -- will use Google's pay-per-click advertising technology exclusively. It previously used Yahoo's technology. See coverage from IDG News Service.

No word if Microsoft's adCenter was in the running for this high-profile customer.

August 20, 2007

Photosynth in orbit: New images from Endeavour mission

Posted by Benjamin J. Romano at 4:44 PM

Microsoft and NASA are posting new photographs of the space shuttle Endeavour's mission to the International Space Station, including detailed views of the gash in its heat-shield.

A few days before the shuttle launched, Microsoft posted several sets of photographs of the shuttle in the Vehicle Assembly Building and on the launch pad. They were in the company's new 3-D photo-viewing environment, Photosynth.

The new collection includes images of the shuttle captured Aug. 10 before it docked at the International Space Station. "Endeavour did a complete somersault enabling astronauts to photograph the shuttle's bottom-side. The photos were then sent back to NASA for analysis and later shared with Microsoft LiveLabs to compile a 'synth,'" a Microsoft representative said in an e-mail. The new photo collection can be accessed here.

NASA ultimately determined that the gash would not threaten the shuttle. Endeavour is scheduled to return to Earth on Tuesday, a day earlier than planned in order to avoid possible complications from Hurricane Dean.

Skype ties outage to Windows security update, faulty algorithm

Posted by Benjamin J. Romano at 12:21 PM

Skype implicated Microsoft security updates for the outage that left millions without their Internet phone service. The company had earlier faulted "a deficiency in an algorithm within Skype networking software," and ultimately acknowledged that its own software was at fault.

A Skype employee, posting to a public company blog that details the status of its service, explained the outage that began on Thursday:

The disruption was triggered by a massive restart of our users' computers across the globe within a very short timeframe as they re-booted after receiving a routine set of patches through Windows Update.

The high number of restarts affected Skype's network resources. This caused a flood of log-in requests, which, combined with the lack of peer-to-peer network resources, prompted a chain reaction that had a critical impact.

Microsoft releases security updates for its software on the second Tuesday of every month -- "patch" Tuesday. On Aug. 14, the company released nine patches, six of which were considered critical. Microsoft told The Associated Press that it was a routine patch Tuesday and noted the previously mentioned Skype bug.

While the problem was triggered by the high number of restarts, a faulty algorithm caused the network's self-healing capabilities to fail. Villu Arak, the Skype employee, continued:

... this event revealed a previously unseen software bug within the network resource allocation algorithm which prevented the self-healing function from working quickly. ... The issue has now been identified explicitly within Skype.

August 14, 2007

Microsoft, employment and property, by the local numbers

Posted by Benjamin J. Romano at 10:30 PM

Microsoft just updated its "Fast Facts" page, which is where it provides more precise data on how many full-time employees it has in Washington state. General information about the company's employment growth during the past fiscal was first delivered at the company's Financial Analyst Meeting in July. Additional details were in its annual report, filed with the SEC Aug. 3.

But this is the first look at the latest numbers that describe the company's local economic impact. (The measure still misses some presumably large number of outside contractors and vendors that make the business run.)

As of July 27, Microsoft counted 35,711 employees in the state, up 7.1 percent from the level reported a year ago. In the rest of the U.S., Microsoft had 12,225 employees, up 11.5 percent, from late-July 2006. Total worldwide employment in that period increased 10.6 percent to 79,136.

I wrote a story looking at the numbers and the reasons why Microsoft's employment growth locally is slower than it is overseas.

Here are a couple of other factoids that didn't make it in that story:

The figures reveal an aging U.S. workforce at Microsoft. The average age of Microsoft's U.S. employees was 36.6 in 2006, and 36 in 2005. At the latest report, the average age was 36.9 and more than 16,194 employees -- a third of the U.S. work force -- was over 40.

The gender distribution remains heavily weighted toward men, who represented three-quarters of the company's U.S. work force.

Even at a somewhat slower growth rate, the company is still hungry for local real estate. And the latest numbers show the company has shifted to leasing a substantially larger proportion of its property in the region.

The company had 11.2 million square feet of office space in Puget Sound as of Aug. 1. That's an increase of about 2.9 percent from last year. But the increase in leased office space is 18.6 percent and, now, more than one-quarter of its local portfolio is leased, up from 22 percent last year.

That balance could shift even more. It's not clear whether these figures include all or part of the 1.3 million square feet of new office space committed to lease in Bellevue earlier this year.

At the time of that announcement, Chris Owens, Microsoft's general manager of real estate and facilities, was asked whether the company was favoring leased property instead of new construction to meet its expansion needs.

"It's not a long-term change in strategy," he said at the time. "I think some of the leasing that we did over the past year, we would view as more short-term and temporary leases not necessarily long-term additions to our portfolio."

Microsoft news summary: Bach sells shares; Office competition;"'white space" device broken

Posted by Benjamin J. Romano at 11:06 AM

Several stories of note to followers of the Redmond software giant this morning:

Microsoft Entertainment and Devices Division President Robbie Bach sold more than $9 million worth of stock in the months before the company announced a $1 billion charge against fiscal fourth quarter earnings related to Xbox 360 failure rates he called unacceptable. The sales, outside of any scheduled stock sale program, were first reported last month by MarketWatch. This Dow Jones story notes that Bach sold an additional $3 million in stock May 1, according to this SEC filing Monday, well after they should have been reported. A company spokesman called the delay "an administrative error." It's worth noting that the company's stock price did not change dramatically when the hardware failures and related warranty extension was announced July 5.

"Credible" competition for Microsoft Office is emerging in the form of a combined offering from Google and Sun Microsystems, as well as from Adobe. Mary Jo Foley reports, "Over the weekend, Google began offering StarOffice for download as part of its Google Pack. Instead of charging the $70 per copy that Sun has levied for StarOffice, Google made the office suite available for free." Google is positioning the StarOffice alongside its Google Docs & Spreadsheets offering, which would give it the kind of desktop software plus online services integration Microsoft is trying to develop across all of its offerings.

The FCC reviewed, and ultimately gave thumbs down to a device meant to demonstrate that empty television airwaves could be used for wireless Internet access. It turns out the device was broken, according to a Microsoft's chief lobbyist. His statement, quoted in this Associated Press story, attributed the "FCC's aberrant test results" to a broken internal component. Microsoft was one of several tech companies working on the demonstration device. From the AP story: "An FCC spokesman declined to comment on the matter. Microsoft said in an FCC filing that it sent a duplicate device that was functioning properly, but that the agency never tested it." We wonder if the device was out of warranty.

Microsoft released nine security updates today -- yeah, it's "patch Tuesday" again -- six of which were rated "critical." The nitty gritty details are on the company's Security Bulletin site.

August 10, 2007

China, France, Poland top podium in Microsoft Olympics

Posted by Benjamin J. Romano at 8:25 AM

With the 2008 Olympics in Beijing now less than a year away, we're getting in the mood for medals. And we can consider Microsoft's Imagine Cup, a global technology and creativity competition among students from around the world, the Olympics of software. So, with the winners of this year's cup announced today, let's do a "medal count" -- admittedly an imprecise measure because of inconsistent factors from country to country such as population and resources -- and see which countries have the top young technology talent.

The Imagine Cup has nine events from Algorithm to Short Film. Microsoft lists the top three finishers in each category. There's also an interactive map of the world showing all finalists by category and country.

Both China and France had four teams finish in the top three, the most of any country, but each had only one first place. China's was in the IT Challenge, which asks competitors to "demonstrate proficiency in the science of networks, databases, and servers, as well as the areas of analysis and decision making in IT environments." The French team took first in Web development. (Taiwan also had a second-place finish.)

Poland had three winning teams, all of which finished first. The country dominated the visual arts, winning the photography and short film categories, as well as the algorithm category -- perhaps the most demanding of the event. It's an individual competition comprised of "brain teasers, coding challenges, and algorithmic puzzles."

Romania and Brazil had two top-three finishers each.

In the high-profile software design category, in which teams of students used Microsoft technologies to design applications to improve education, Thailand took top honors, followed by Korea and Jamaica.

The complete results are available here.

The United States had several finalists, but no top-three finishers. Those so inclined to do so might read this as another piece of evidence that the U.S. is lagging the rest of the world in math and science education.

August 9, 2007

aQuantive shareholders agree to Microsoft acquisition

Posted by Benjamin J. Romano at 10:43 AM

In a brief, well-attended -- by aQuantive's past standards -- shareholder meeting this morning in Seattle, owners of the company overwhelmingly approved Microsoft's proposed acquisition, which will net them gains of more than $30 a share, 85 percent, over the price before the deal was announced.

On May 18, Microsoft announced plans to buy the Seattle-based digital advertising company for $6 billion, or $66.50 a share.

The crowd of about 25 shareholders and current and former employees applauded when the vote tally was read. Out of 79,985,251 shares outstanding eligible to vote on the acquisition, the holders of approximately 58,197,697 shares of common stock, 72.7 percent, cast ballots in favor of the acquisition. Here's the regulatory filing confirming the vote.

One man with a big smile on his face was Hoby Douglass. He joined what was then Avenue A in 1999, before the company went public. He was wearing a baseball jersey identifying him as employee No. 106.

Douglass said the jersey was used in a marketing campaign to attract new hires.

"We did a pub crawl all over town and came up to people and said. 'Do you want to work here? Do you want to work here?' Because that's the way it was back then. And we got some new employees out of it, so it was great," he said.

Today, the company has about 2,400 employees globally who will soon become part of Microsoft, which has close to 79,000 full-time workers. The deal is expected to be finalized later this month.

Douglass later left aQuantive, but he said he continued to buy shares of its stock on the open market to add to what he accumulated as an employee. He said he did so because he always had confidence in the company's management.

"I knew the management and I thought, this is not a risk," Douglass said. "They've proven me right."

Get ready for 'Halo 3' marketing blitz

Posted by Benjamin J. Romano at 8:20 AM

Clear the streets. The "Halo 3" parade is beginning.

Microsoft today announced that the third installment of its hit video-game series, due out Sept. 25, has already sold more than 1 million preorder copies.

Brier Dudley explored just how important the success of "Halo 3" is to Microsoft in his column Monday.

Now comes the marketing effort that underscores that importance. In addition to the preorder "news," Microsoft lifted the lid on its marketing plans for the game, and the "Halo 3" branded Xbox 360 is just the beginning. Think major motion picture, Microsoft says.

The company is doing promotional deals with consumer brands that it says set a precedent in video-game marketing.

Mountain Dew is rolling out the first beverage co-branded with a video game, Mountain Dew Game Fuel, which boasts an "invigorating blast of citrus cherry flavor and added caffeine for maximum intensity." (Warning: Do not pour beverage into Xbox 360, it will not improve performance.)

Should you choose to leave your Xbox 360 for long enough to hit up 7-Eleven, treat your "Halo 3" withdrawal tremors with "Halo 3" Slurpee cups and other in-store promotions.

If you need a new car, Pontiac would like you to come down to select showrooms where you can play the game before it's released. And 1,000 people who buy a G6 GXP Street will get a copy of the game. (This seems like a promotion that might be a better fit with "Grand Theft Auto." Then again, maybe not.)

Burger King, which has successfully partnered with the Xbox 360 in the past, will plaster the "Halo 3" marketing materials on its giant cups of pop and French fry containers. (They're called FRYPODS. Does Steve Jobs know about this?)

Comcast is also getting into the act with user-generated content and video downloads related to the game.

Get ready for 'Halo 3' marketing blitz

Posted by Benjamin J. Romano at 8:20 AM

Clear the streets. The "Halo 3" parade is beginning.

Microsoft today announced that the third installment of its hit video-game series, due out Sept. 25, has already sold more than 1 million preorder copies.

Brier Dudley explored just how important the success of "Halo 3" is to Microsoft in his column Monday.

Now comes the marketing effort that underscores that importance. In addition to the preorder "news," Microsoft lifted the lid on its marketing plans for the game, and the "Halo 3" branded Xbox 360 is just the beginning. Think major motion picture, Microsoft says.

The company is doing promotional deals with consumer brands that it says set a precedent in video-game marketing.

Mountain Dew is rolling out the first beverage co-branded with a video game, Mountain Dew Game Fuel, which boasts an "invigorating blast of citrus cherry flavor and added caffeine for maximum intensity." (Warning: Do not pour beverage into Xbox 360, it will not improve performance.)

Should you choose to leave your Xbox 360 for long enough to hit up 7-Eleven, treat your "Halo 3" withdrawal tremors with "Halo 3" Slurpee cups and other in-store promotions.

If you need a new car, Pontiac would like you to come down to select showrooms where you can play the game before it's released. And 1,000 people who buy a G6 GXP Street will get a copy of the game. (This seems like a promotion that might be a better fit with "Grand Theft Auto." Then again, maybe not.)

Burger King, which has successfully partnered with the Xbox 360 in the past, will plaster the "Halo 3" marketing materials on its giant cups of pop and French fry containers. (They're called FRYPODS. Does Steve Jobs know about this?)

Comcast is also getting into the act with user-generated content and video downloads related to the game.

August 8, 2007

EA, Microsoft revolving door spins again

Posted by Benjamin J. Romano at 1:17 PM

Microsoft today announced that John Schappert has been named to head the company's Xbox Live efforts in a newly created role within the Interactive Entertainment Business.

Schappert comes to Microsoft after nearly 10 years with Electronic Arts, the No. 1 video game publisher. If that sounds like a familiar career path, it is. On July 17, Microsoft announced that Peter Moore, head of the Interactive Entertainment Business, is leaving to become president of EA Sports. In his place, Microsoft hired Don Mattrick, who's last job before coming to Microsoft as a consultant in February was with ... wait for it ... EA.

Schappert was an executive vice president at EA in charge of central technology, operations, EA online and the office of the chief creative officer, according to Microsoft's announcement today.

Schappert's purview at Microsoft is the Xbox Live online gaming network, which has more than 7 million members. In addition to multi-player games, the network offers video downloads and communication services, such as instant messaging. He will also oversee Microsoft's casual games business.

So, should the growing roster of EA alums at Microsoft and vice-versa raise the hackles of competitors?



aQuantive Q2 profit down, shareholders vote tomorrow

Posted by Benjamin J. Romano at 10:33 AM

Seattle-based digital advertising house aQuantive today reported second quarter profit of $9.6 million, down 22 percent from a year ago on cost increases. Shareholders of the company, which Microsoft is planning to buy for $6 billion, are scheduled to vote Thursday in Seattle on whether to approve the acquisition.

Revenue on the quarter increased 48 percent to $156 million.

See coverage of the earnings announcement from The Associated Press.

August 7, 2007

Why Microsoft didn't acknowledge Xbox 360 price leaks

Posted by Benjamin J. Romano at 10:21 AM

"What a surprise," Billy Pidgeon, the veteran video games analyst at IDC, said sarcastically when asked about the Xbox 360 price cut Microsoft announced last night.

Really there was no surprise. Everyone saw this coming. Not because of Sony's price cut -- which turns out to be not much of a price cut at all, once the $500 60-gigabyte PlayStation 3s sell out and all that's left is the $600 80-gigabyte version. In fact, another analyst, Van Baker with Gartner, said he didn't see any serious pressure from the marketplace for the Xbox price cut. (He also doesn't see Microsoft competing with Nintendo for the same set of customers, something other analysts and executives might disagree with.)

No, the reason everyone saw it coming was because, well, we saw it.

"There are people at certain big box retailers that like to leak fliers," said Pidgeon, referring to the scanned copies of print advertisements from Circuit City and Toys R Us, which appeared at game-enthusiast sites such as Joystiq last month, showing the exact price cuts Microsoft just announced.

I asked Xbox 360 group product manager Aaron Greenberg why, when there was this obvious evidence the cuts were coming, executives decided to stay mum and make the announcement on their own terms. Here's what he said:

It's interesting, we've had some internal debate here about like how many people really read some of those blogs. I mean while there's been some fuzzy, camera-phone photos like, we haven't seen any mainstream media covering it. I think it's still been pretty much in the speculative space and you know, for us, we know there's always a risk that when you're timing with prices like this and you want to have real, serious integration with retail -- every major retailer is doing a big Sunday ad -- these things are always at risk and we wouldn't trade the risk of those leaks for not having the retail tie-back, so we felt like we made the right bet there. But still we also don't want to just take the leaked news and feel like we have to confirm stuff when certain details are there; some of it's right and some it's wrong. We want to be able to, as we planned, announce it when we're ready to.

Another little detail that came out of Monday's announcement: the limited edition "Halo 3" version of the Xbox 360, priced at $400, and decked out in green and gold, and, Greenberg said, it will have the same HDMI (high-definition multimedia Interface) connection as the "elite" version, which goes on sale tomorrow for $450. The upside of an HDMI connection is that it is a single cable that carries both HD video and audio signals.

August 6, 2007

Judge reverses Microsoft verdict, was largest in history

Posted by Benjamin J. Romano at 5:32 PM

Time to reset the record books -- at least for the moment. A San Diego judge today reversed the $1.52 billion jury verdict Alcatel-Lucent won against Microsoft in a patent dispute.

At issue were two digital music patents owned by Alcatel-Lucent, but originally granted to Fraunhofer Gesellschaft, a German company.

In post-trial motions, Microsoft had asked U.S. District Court Judge Rudi Brewster to reverse the verdict, order a new trial or dramatically reduce the damage award.

The judge ruled that Windows Media Player does not infringe on one the patents, and Microsoft had properly paid Fraunhofer to license the other one.

Alcatel-Lucent intends to appeal.

In a statement issued this afternoon, Brad Smith, Microsoft's general counsel, called the ruling "a victory for consumers of digital music and a triumph for common sense in the patent system."

He went on to note that this clarifies a murky legal situation that threatened many other companies who use the patented technologies at issue in the case. Alcatel's victory had raised the possibility it could pursue similar action against other companies that have licensed the technology from Fraunhofer. There were 454 "licensed companies" listed on the Web site mp3licensing.com, which is affiliated with Fraunhofer. They include Apple, Intel, Motorola, Nintendo, RealNetworks and Sony.

"For the hundreds of companies large and small that rely on MP3 technology, the Court's ruling clarifies that these companies have properly licensed the technology embodied in the '080 patent from its co-owner and industry recognized MP3 licensor -- Fraunhofer," Smith said.

Oh yeah, and for the record, the largest jury verdict ever was $925 million won by Polaroid against Kodak in 1991.

FCC gives 'white space' device an early thumbs down

Posted by Benjamin J. Romano at 11:54 AM

Earlier this year, Microsoft, Google, Dell, Hewlett-Packard, Intel and Philips -- working together as the White Space Coalition -- built a demonstration device to lobby the government to open up unused television airwaves -- called white space -- for wireless Internet access. The effort got the backing of Rep. Jay Inslee, for one.

But the Federal Communication Commission's initial review of the device was negative.

Broadcasting and Cable reports on the FCC's statement:

"This report determined that the sample prototype white-space devices submitted to the commission for initial evaluation do not consistently sense or detect TV broadcast or wireless microphone signals," the commission said, striking a blow to the hopes of companies looking to use the spectrum for portable devices like PDAs and game controllers.

The prototype was meant to demonstrate that accessing unused TV spectrum would not interfere with existing technology, such as TV broadcasts on adjacent channels and wireless signals.

The FCC review pleased the National Association of Broadcasters, which worries that using the white space would disrupt their signals.

NewsFactor Network covers the NAB reaction:

The FCC's latest tests "confirm what NAB and others have long contended, that the portable, unlicensed devices proposed by high-tech firms can't make the transition from theory to actuality without compromising interference-free television reception," said NAB executive vice president Dennis Wharton in a prepared statement.

August 3, 2007

Microsoft files annual report

Posted by Benjamin J. Romano at 2:24 PM

Just in time for summer weekend reading, Microsoft today filed its annual report for the 2007 fiscal year, which ended June 30.

Some interesting things to note within the first few pages:

Microsoft's stock buyback plan reduced the number of outstanding shares by about 600 million, to 9,375,492,496.

This year's shareholder meeting will be Nov. 13, a Tuesday.

In the section describing Microsoft's mission in general, there's a subtle change in language from last year with regard to the company's investment in long-term growth, a big theme of last week's Financial Analyst Meeting.

Last year: "We believe that over the past few years we have laid the foundation for long-term growth by delivering innovative new products, creating opportunities for partners, improving customer satisfaction, putting many of our most significant legal challenges behind us, and improving our internal processes.

This year: "We believe that we continue to lay the foundation for long-term growth by delivering new products, creating opportunities for partners, improving customer satisfaction, and improving our internal processes." (Emphasis added.)

Thoughts on whether this language change is significant?

Anti-piracy move: Microsoft cuts Vista price in China

Posted by Benjamin J. Romano at 10:21 AM

Microsoft said it is cutting the price of Windows Vista in China to combat piracy in the country. The price of Windows Vista Home Basic, beginning Aug. 1, is 499 yuan, or about $66. That compares to a suggested retail price in the U.S. of $199. We had an item (scroll down) in today's paper.

Our own Kristi Heim traveled to China for this two-part report on the market for fake goods there, including a close look at Microsoft's anti-piracy efforts.

August 1, 2007

After a Microsoft career, love of former rivals declared

Posted by Benjamin J. Romano at 12:57 PM

I listened to some excerpts from the Aspen Ideas Festival, which took place early last month, and one quote caught my attention.

Randy Heinrichs introduced himself as a former Microsoft Research employee and the CEO of a new company, 2b3d (more on that in a second). He promptly got something off his chest:

"I am formerly from Microsoft Research, and I've been waiting to say this for a long time after 10 years: I love Apple. I love Sony. I love Linux. I love open source," Heinrichs declared, to big laughs from the crowd of intellectuals at the event.

(You can listen to Heinrichs' brief speech, along with several others that kicked-off the festival on American Public Media's Word for Word, which is where I heard it. Heinrichs' comments begin at 3:39.)

"What I really love is education," Heinrich continued.

He related a story of his son asking permission to play at a friend's house. When granted, the son went to his room, and logged on to World of Warcraft.

That got Heinrichs asking himself what motivates kids to play video games -- particularly the increasingly immersive online multiplayer games -- and, "What motivates us, as adults, to continue to buy them Xbox, Sony PlayStations, Wiis, telephones, all of this digital equipment that is changing these children and building them into a new culture of digital natives, where all of us sitting here, as I look across the sea, are digital immigrants."

Heinrichs' Big Idea is to "build an interactive serious gaming and media grid to support a high-definition learning environment for these kids." His company, 2b3d (to which I could find no link online) is working on doing just that.

"I would like to get these kids to be new citizens of the world by combining our institutions of education with these digital institutions," he said.

July 30, 2007

Windows Mobile marketing head resigns

Posted by Benjamin J. Romano at 1:53 PM

Suzan DelBene, a longtime Microsoft employee, is resigning from her job as corporate vice president in charge of the Mobile Communications Marketing Group to "pursue other opportunities," according to a spokesman with Microsoft's outside PR firm.

The announcement was made internally this morning. Her responsibilities included global marketing strategy for Windows Mobile. She reported to Pieter Knook, senior vice president of Microsoft's mobile communications business.

DelBene joined Microsoft in 1989, left in 1998 to work at drugstore.com, later led Seattle-based Nimble Technology, and returned to Redmond in 2004 to take on Windows Mobile position. She and her husband, Kurt DelBene, Microsoft's corporate vice president of the Office Business Platform Group, made up the only husband-and-wife team serving in Microsoft's executive ranks.

The spokesman said Suzan DelBene did not indicate what other opportunities she may pursue. A replacement has not been named.

Update: Her last day will be Sept. 1.

July 26, 2007

FAM: Bach reiterates profitability in fiscal 2008

Posted by Benjamin J. Romano at 1:55 PM

Robbie Bach is breaking down the Microsoft Entertainment and Devices Division to kick off the afternoon session here. He reassured investors who have watched the division lose billions of dollars over the last several years.

"We said last year we are going to drive this business to profitability in fiscal 08," Bach said. "We are right on track to do that. ... And we believe we can have sustained profitability going forward."

He gave no indication of how much profit the division might deliver.

Like CEO Steve Ballmer did this morning, Bach lamented the $1 billion charge the company took in the fourth quarter related to the quality problems with the Xbox 360. He reiterated that it was something the company had to do to stand behind its product.

"Certainly a key focus for us right now is quality," Bach said. He said there's no specific component to blame for the rate of Xbox 360 hardware failures, but rather it was a Microsoft design problem with multiple components involved.

Despite the charge, he sees the business reducing its manufacturing costs.

"We are right on track with where we expected to be with cost reduction. That is a key driver in this business," Bach said, offering no detail about when that cost saving would translate to a price reduction.

"We have a very specific plan with what we're going to do with pricing. We're just not going to talk about it today," he said. (The company today announced a lower price for its HD DVD player, sold as an accessory to the Xbox 360.)

Bach quickly reviewed other areas:

Music: He said the Zune music player has sold more than 1 million units since launch and has about 10 to 12 percent of the hard-drive based player market.

"You are going to see us continue to invest in this business," Bach said, adding that it will likely be a three- to four-year effort.

This year, the company, as it has said, will release new Zune software, devices and features. He also plans to invest in expanding the Zune brand out of the "hardcore niche music space" where it is now.

Video: Bach said the company will expand its Xbox Live video download service -- currently the largest provider of on-demand video content -- to Europe and Canada in the coming year.

Communications: Bach said Microsoft aims to grow Windows Mobile's lead over Research In Motion during the 2008 fiscal year. He said the company expects more than 20 million Windows Mobile phones to be sold this year. Noting the high turnover in mobile phones, Bach said Microsoft wants to make more end-users aware that they are using a phone running Windows Mobile.

"We want them to go in and ask for another Windows Mobile phone," he said.

FAM: Microsoft buying advertising exchange network

Posted by Benjamin J. Romano at 12:23 PM

Microsoft Platforms and Services Division President Kevin Johnson just announced another advertising-related acquisition. The company is buying a network of digital advertising networks that Johnson likened to the Nasdaq stock exchange -- a place for buyers and sellers of advertising inventory to do business in a neutral marketplace.

The company is called AdECN. Johnson did not disclose the financial terms of the acquisition.

The acquisition raises some of the same issues around neutrality and conflict of interest that came up when Microsoft announced its purchase of aQuantive, which, Johnson disclosed was a very competitive bid process with two other bidders vying for the prize.

I talked to Andrew Frank, an analyst with Gartner, about the issue of consolidation in the industry at the time of the aQuantive acquisition:

This advertising consolidation raises the specter of conflicts of interest for companies that sell advertising across many Web sites but also own major sites of their own, Frank said.

Advertisers might find a better deal in a less-consolidated system in which they could do business with the best company in each segment of the business, "rather than having to choose 'Do you want the Microsoft solution or the Google solution,' " Frank said. "I think that's a danger not just for Microsoft but for the whole industry."

FAM: New Internet research effort; 60 million Vista licenses

Posted by Benjamin J. Romano at 10:56 AM

In addition to the Financial Analyst Meeting items posted here and on Brier Dudley's blog, there were a couple of other news items that came out of the first three presentations today:

Microsoft is creating a new research arm to focus on Internet search and advertising. Harry Shum, who was heading the Asian arm of Microsoft Research. See the company press release here. The Internet Services Research Center will have researchers in Redmond, Silicon Valley and Beijing and will be part of the broader Microsoft Research organization.

Shum told me the ISRC will have about 50 researchers to start and "will continue to recruit great people to the organization." To put that in perspective, Microsoft Research has about 800 people total.

This move was forecast a bit in March when Microsoft created a new group to focus on the search and advertising businesses. At that time, Shum was named chief scientist of the Search and Ad Platform Group.

I asked Shum whether there was any concern that ISRC would duplicate the work on Internet services being done in Gary Flake's Live Labs organization.

"In Microsoft, innovation is everyone's responsibility," Shum said. "We have Microsoft Research. We have Live Labs. We have other labs as well. ISRC is our latest investment in this very important space."

In another development, Microsoft told several reporters that it has sold 60 million licenses for Windows Vista, it's newest operating system. That was supposed to be part of CEO Steve Ballmer's presentation, but if he said something about it, I didn't hear it.

See coverage from Reuters and Bloomberg.

FAM: New Internet research effort; 60 million Vista licenses

Posted by Benjamin J. Romano at 10:56 AM

In addition to the Financial Analyst Meeting items posted here and on Brier Dudley's blog, there were a couple of other news items that came out of the first three presentations today:

Microsoft is creating a new research arm to focus on Internet search and advertising. Harry Shum, who was heading the Asian arm of Microsoft Research. See the company press release here. The Internet Services Research Center will have researchers in Redmond, Silicon Valley and Beijing and will be part of the broader Microsoft Research organization.

Shum told me the ISRC will have about 50 researchers to start and "will continue to recruit great people to the organization." To put that in perspective, Microsoft Research has about 800 people total.

This move was forecast a bit in March when Microsoft created a new group to focus on the search and advertising businesses. At that time, Shum was named chief scientist of the Search and Ad Platform Group.

I asked Shum whether there was any concern that ISRC would duplicate the work on Internet services being done in Gary Flake's Live Labs organization.

"In Microsoft, innovation is everyone's responsibility," Shum said. "We have Microsoft Research. We have Live Labs. We have other labs as well. ISRC is our latest investment in this very important space."

In another development, Microsoft told several reporters that it has sold 60 million licenses for Windows Vista, it's newest operating system. That was supposed to be part of CEO Steve Ballmer's presentation, but if he said something about it, I didn't hear it.

See coverage from Reuters and Bloomberg.

FAM: Web-based productivity aps coming soon?

Posted by Benjamin J. Romano at 10:37 AM

Microsoft Business Division President Jeff Raikes described several ways in which the company plans to get more people using and paying for its Office 2007 productivity software.

Toward the end of his presentation, Raikes gave one of the strongest indications from the company recently about its plans to expand into Web-based productivity software, an area where competitors have made early inroads. It's already setting the stage for this effort with small businesses through Office Live, a suite of online services that now has more than 400,000 users signed up.

"With our software plus services approach, we're going to use Office Live as a foundation to broaden our scope to all information workers, all people who would use Office. And we are investing substantially in Web productivity as a complement to what we do in our traditional Office productivity. We've got some exciting things coming out this year. That's where I'll leave that," Raikes said.

The strategies he outlined for increasing Office 2007 sales include working with OEMs to get trial versions of Office installed on new PCs, which can then become full, paid versions.

Microsoft is also fighting Office piracy with a carrot rather than the stick used with Windows. Users of the genuine software get access to additional capabilities through Office Online.

FAM: Web-based productivity aps coming soon?

Posted by Benjamin J. Romano at 10:37 AM

Microsoft Business Division President Jeff Raikes described several ways in which the company plans to get more people using and paying for its Office 2007 productivity software.

Toward the end of his presentation, Raikes gave one of the strongest indications from the company recently about its plans to expand into Web-based productivity software, an area where competitors have made early inroads. It's already setting the stage for this effort with small businesses through Office Live, a suite of online services that now has more than 400,000 users signed up.

"With our software plus services approach, we're going to use Office Live as a foundation to broaden our scope to all information workers, all people who would use Office. And we are investing substantially in Web productivity as a complement to what we do in our traditional Office productivity. We've got some exciting things coming out this year. That's where I'll leave that," Raikes said.

The strategies he outlined for increasing Office 2007 sales include working with OEMs to get trial versions of Office installed on new PCs, which can then become full, paid versions.

Microsoft is also fighting Office piracy with a carrot rather than the stick used with Windows. Users of the genuine software get access to additional capabilities through Office Online.

FAM: Microsoft total employment 78,280

Posted by Benjamin J. Romano at 9:56 AM

Microsoft CEO Steve Ballmer is running through the five things the company has to do very well to continue its success.

First and foremost, he said, "We've got to get the right people, the best and the brightest, that is absolutely essential."

Ballmer said Microsoft is hiring 90 percent of the people it tries to hire. That equated to 12,800 new hires globally in the fiscal year ended June 30. He also said the company experienced total attrition of 8 percent.

So, with some quick calculations, we get a look at Microsoft's headcount at the end of fiscal 2007:

71,172 (headcount on June 30, 2006) - 5,693 (8 percent attrition) + 12,800 new hires = 78,279

That translates to the 10 percent growth that CFO Chris Liddell talked about last week.

Ballmer provided some new detail on good vs. bad attrition. Four percent is what he called bad attrition: people retiring, relocating or "sometimes we'll lose to another company although that's quite rare."

Good attrition equals about 3 percent. He said that's a must-have and it means holding people who are not performing accountable and moving them out of the company.

FAM: Almost 1 billion served

Posted by Benjamin J. Romano at 9:39 AM

Like McDonald's, Microsoft will soon be able to boast "more than 1 billion served."

CEO Steve Ballmer told the financial analysts and reporters gathered at the company's Redmond headquarters this morning that total Windows installed base will exceed 1 billion sometime during the 2008 fiscal year.

"By the end of our fiscal year 08 there will be more PCs running Windows in the world than there are automobiles, which to me is kind of a mind-numbing concept," Ballmer said.

(A company spokesman clarified earlier that the 1 billion figure includes all versions of Windows shipped by the company, as well as pirated copies.)

In tracking other metrics of the company's performance during the last five years, Ballmer noted that the company has doubled its profits and nearly doubled its revenues and that it boasts the highest operating income of any company outside of the financial services and energy sectors.


FAM: Bill's big picture

Posted by Benjamin J. Romano at 9:23 AM

Bill Gates, Microsoft chairman, opened his company's Financial Analyst Meeting with an outline of the big trends he sees driving technology forward.

He said Moore's Law -- the idea that computer processing power, measured as the number of transistors on a single chip, will double approximately every two years, is still intact -- but that it's manifesting in a different way. Before, individual microprocessors got progressively faster. But the "clock speed" of the chips is reaching its limits

Gates said he expects to see clock speeds "not much higher" than 10 gigahertz in the next five years. Processing power will continue to grow through parallel microprocessor architectures -- so-called multi-core chips.

The most important trend, Gates said, is the ubiquity of broadband access. More than just getting video on the Internet, broadband access changes computing itself. The early PC was a self-contained device, Gates said. "As you get broadband to be widely available you can change that paradigm."

Storage doesn't have to be in one location; you can move easily back and forth between multiple devices; if you're near a bigger display, you can make use of it; likewise with more powerful computing resources available on a network.

The most under-appreciated trend, he said, is the emergence of more natural user interfaces such as speech recognition, touch and vision. He complemented two competitors products -- the Apple iPhone and Nintendo Wii -- for taking advantage of touch and motion-sensing interfaces.

Microsoft has been investing in natural user interface for a long time, Gates said. He went on to demonstrate Microsoft Surface, the table-top, touch-recognizing PC the company rolled out earlier this year. He said people have responded more dramatically to this demonstration than any other he's given in his career.

Unfortunately, his first attempt to demonstrate the Surface here went boink and there were some akward moments as the tech guys came up on stage and fiddled with the unit for a few minutes.

"It's more exciting when it actually does something," Gates said.

Tech support eventually got it going and Gates moved back to the demonstration. Right now, Surface is being rolled out in Harrah's casinos, Starwood Hotels and T-Mobile retail stores. Gates confirmed the company's bigger plan for the computer.

"We want to take this and put it into homes and businesses," Gates said.

Microsoft lowers price on Xbox 360 ... DVD player

Posted by Benjamin J. Romano at 8:17 AM

Speculation about when or if Microsoft would drop prices on its Xbox 360 game console was rampant earlier this month, after Sony lowered its prices on the competing PlayStation 3.

Starting Aug. 1, Microsoft will drop the price of an Xbox 360 accessory: The HD DVD player will now cost $179, down $20, and come packaged with five free HD DVD movies during the month of August.

The announcement was made at the Comic-Con International convention in San Diego.

I'm in Redmond for Microsoft's Financial Analyst Meeting, which will feature presentations from Chairman Bill Gates, CEO Steve Ballmer, CFO Chris Liddell, COO Kevin Turner, division presidents Jeff Raikes, Robbie Bach and Kevin Johnson and other top executives.

Check back here throughout the day for updates from the event.

July 25, 2007

Microsoft to handle ads for Digg

Posted by Benjamin J. Romano at 11:56 AM

In the second significant advertising deal Microsoft has announced today, the company will "sell and serve the ads on Digg," according to this blog post by Digg founder Kevin Rose and a Microsoft press release.

Rose compared the deal to a similar one Microsoft inked with Facebook in August 2006.

The announcement says Digg, which allows users to vote on the Web's best content, has 17 million unique visitors a month.

Other details: The deal is for three years. Microsoft is the "exclusive provider of display and contextual advertising on Digg." Microsoft will work with Digg's current advertising provider, Federated Media Publishing. Financial terms were not disclosed.

EA Sports, Microsoft make in-game advertising deal

Posted by Benjamin J. Romano at 9:46 AM

Microsoft and EA Sports announced today that five of the video-game publisher's biggest titles will be incorporated into the Microsoft's in-game advertising network.

The titles are: "Madden NFL 08," "NASCAR 08," "NHL 08," "Tiger Woods PGA Tour 08," and "Skate."

Advertisements will be placed in the games via the Massive Network, which Microsoft acquired last year.

It's doubtful that Peter Moore, the Microsoft video games executive who is leaving to head EA Sports, had much to do with negotiating the deal, terms of which were kept private. I'm asking about that and will post a response here.

(Because in-game advertising is handled by Massive, which sits within Microsoft's Online Services Division, Moore, who is part of the Entertainment and Devices Division, had nothing to do with the deal, according to an e-mailed statement from a Microsoft PR firm.)

During the E3 Media and Business Summit earlier this month in Santa Monica, I had a chance to talk about in-game advertising with Jeff Bell, corporative vice president of global marketing in Microsoft's video games business.

Bell brings an interesting perspective to the discussion because before coming to Microsoft, he was with DaimlerChrysler, where he worked on the Jeep brand. He tried several game-related advertising strategies including in-game ads (his team helped get Jeep as the vehicle featured in Microsoft's "Zoo Tycoon" game) and adver-gaming. He was also named Interactive Marketer of the Year by Advertising Age in 2005.

From our conversation, this EA deal sounds like just what Microsoft is looking for.

I asked him what role the company sees for in-game ads, and how much advertising is appropriate.

Bell: "I think there we do know and the data is overwhelming, that if you're in a reality based game, people don't want to see Acme. They don't want to see Blogo Shoes. They want to see 7-Eleven and they want to see Adidas. And so, from that standpoint, both from a product realism, as well as an advertising realism, they would like to have the real thing.

"I think where you cross over is you're not going to be seeing Massive or advertisements in 'Mass Effect.' So science fiction doesn't make as much sense.

"For us, I think we tend to focus more on the sports franchises, the reality based driving franchises, Tony Hawk, obviously has been a pioneer in that particular realm of being able to present things in the real world, real advertisements that can attract that audience."

He said EA is leading the way with advertising in sports games, but because of the slow and complex process of negotiating advertising agreements with sports leagues, franchises and stadiums, the area is just now building momentum.

I also asked Bell if he thinks game buyers should get a price break on games that carry a lot of advertising, the reason being that now publishers have a new revenue stream to tap.

Bell: "It's an interesting question, but it's so theoretical at this point, meaning that the business is still driven by the revenue from the sales of the games themselves that, there, I think we're all interested in the growth of the advertising model, but it is at present only a very small part of our overall revenue."

July 19, 2007

Microsoft breaks $50 billion in sales, meets expectations

Posted by Benjamin J. Romano at 1:34 PM

There's a quick summary of Microsoft's quarterly numbers in this story. You can also read the full earnings release here.

Executives are crowing about a significant emotional milestone for the company: Passing the $50 billion mark for annual revenue. The company posted $51.12 billion in sales for the 2007 fiscal year.

The fourth quarter was pretty much as expected. The charge for the Xbox 360 failure rate and associated warranty extension looks to be on the low end of the range the company announced July 5. It works out to be a $1.06 billion hit to operating income, which translates to a $749 million charge against net income.

Executives also revised upwards their guidance for the full 2008 fiscal year. But the new numbers -- revenue between $56.8 billion and $57.8 billion, operating profit of $22.2 billion to $22.7 billion -- do "not include the impact of currently undetermined costs associated with Microsoft's [$6 billion] acquisition of aQuantive, Inc., which is expected to close in the quarter ending September 30, 2007."

The gains made in the regular trading session today, pushing Microsoft stock to a new 52-week high, held through the bell and traders were bidding the stock higher in the early minutes of the after-hours session. We'll see if the trend continues through the evening.

Meanwhile, it looks like Google is missing analyst targets for the quarter, even though it posted another set of strong gains.

News and numbers ahead of MSFT, GOOG earnings

Posted by Benjamin J. Romano at 10:17 AM

Shares of Microsoft stock are up 54 cents, 1.75 percent, to $31.46 in mid-day trading today ahead of the company's after-the-bell earnings report. The stock has been on a bit of a tear this week and is threatening to take out its 52-week high.

Google, which also reports earnings today, is getting more scrutiny of its proposed acquisition of online advertiser DoubleClick. The Senate Judiciary Committee's antitrust subcommittee and the House Energy and Commerce Committee's consumer protection subcommittee are planning to call Google executives to testify in hearings on the $3.1 billion deal in late summer or early fall, according to The Associated Press.

A key measure of the competition between Google and Microsoft is the share of Internet searches performed on each companies' service. Nielsen//NetRatings today confirmed what the comScore figures released earlier this week showed: Microsoft had a substantial year-over-year gain in U.S. search share during June. That's not the whole story, though. Microsoft acknowledged that its Live Search Club games were probably behind the gains, and another AP report explained how many people playing those games didn't even know they were performing the searches.

U.S. Web traffic to the two companies' sites, another important part of the online battle, was almost equal in the June quarter, but Google's growth rate is much faster. According to Nielsen:

-- Google's traffic grew "20 percent year over year, from a three-month average monthly unique audience of 95.9 million in Q2 2006 to 115.2 million in Q2 2007."

-- Microsoft's traffic "increased 3 percent year over year, from a three-month average monthly unique audience of 113.9 million unique visitors in Q2 2006 to 117.8 million unique visitors in Q2 2007."

As I reported today, many analysts will be watching Microsoft's report today to see how Windows Vista performed in its first full-month of availability. One analyst I spoke to talked about better-than-expected growth for the operating system on a strong PC market. IDC confirmed that just such a market existed in the second-calendar quarter: Worldwide PC shipments were up 12.5 percent.

July 18, 2007

Microsoft patents desktop application ad framework

Posted by Benjamin J. Romano at 3:48 PM

Some people have reacted with fear and skepticism to a patent application Microsoft filed for a new advertising framework that would gather data from Word documents and e-mail messages to display more targeted advertising in the context of desktop applications.

The patent application, reported first on Monday by InformationWeek, offers a description of targeted advertising:

Targeting advertisements is highly valued by advertisers because it allows placement of advertisements that are theoretically of greater interest to a particular audience member than blanket advertising.

How it is currently done on the Web:

Targeting advertising to a user viewing content on the Internet or web-browsing on computers creates an opportunity for an "audience of one." By analyzing what a user is performing web searches on or by watching clicks on a web portal, advertisements may be targeted to a particular user.

And how this new client-side advertising framework could expand targeting to desktop applications:

An advertising framework may reside on a user computer, whether it's a part of the OS, an application or integrated within applications. Applications, tools, or utilities may use an application program interface to report context data tags such as key words or other information that may be used to target advertisements. The advertising framework may host several components for receiving and processing the context data, refining the data, requesting advertisements from an advertising supplier, for receiving and forwarding advertisements to a display client for presentation, and for providing data back to the advertising supplier. ... An application, such as a word processor or email client, may serve as both a source of context data and as a display client.

Here's a statement from David Kaefer, general manager of intellectual property and licensing at Microsoft, in response to my request about any plans the company might have to make an actual product/service out of the ideas covered in the patent:

Microsoft is constantly developing innovative, rich technologies in the user interface area. We have over 5,000 patents worldwide and we are proud of the quality of these patents and the innovations they represent. As a general practice, we do not typically comment on pending patent applications because it is unclear if the claims in the application may be modified through the approval process by the patent office.


July 17, 2007

Xbox boss reschedules career

Posted by Benjamin J. Romano at 1:19 PM

Microsoft confirmed this afternoon that Peter Moore, the head of the company's video games business, is resigning for personal reasons. Those reasons? He and his family want to get back to the San Francisco area and he got a job as president of EA Sports, the sports label of leading game publisher, Electronic Arts.

Replacing Moore is Don Mattrick, a game industry veteran who spent 23 years with EA.

People attending the Casual Connect gaming conference in Seattle this morning might have caught a scent of this news coming. In opening remarks at the show, Mark Cottam, CEO of MumboJumbo, noted that Marc Whitten, general manager of casual games at Microsoft, would be subbing for Moore, who was billed as a keynote speaker.

"Unfortunately, Peter Moore had a last-minute scheduling change," Cottam said.

July 16, 2007

Microsoft Search posts gains in June

Posted by Benjamin J. Romano at 3:14 PM

A Microsoft search executive made a few calls to reporters last week to tout what the company expected to be a marked improvement in its share of U.S. Internet searches.

Today, comScore released the numbers for June, and not only did Microsoft's Live Search gain 3 percentage points from a year ago, its chief rivals, and the occupants of the No. 1 and No. 2 spots on comScore's list, saw their numbers decline.

Microsoft still got only 13.2 percent of the roughly 8 billion Internet searches performed in the U.S. last month. Yahoo had 25.1 percent, down a little more than 1 percentage point. Google still dominates the market, notching 49.5 percent in June, also down slightly more than a percentage point.

Brad Goldberg, general manager of Microsoft's search business group, said on Friday that the company was expecting to see a "more significant uptick" with this report because of its efforts with the Live Search Club. The program is designed to show off some of the features of Live Search in an "entertaining and contextually relevant way," he said.

The company's hope is that it will convince more people who try Live Search to stick with it and use it more frequently.

"Today, about 30 percent of people who search use Live Search," Goldberg said, "but that only translates into 10 percent of queries." (Now 13.2 percent.)

Goldberg said Microsoft plans "another turn of the crank" on Live Search by the end of the year to make engineering improvements to search relevance and performance. He said that Microsoft today feels it has a leadership position in areas including mobile search, image search and mapping.

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