Update 1:52 p.m.: Microsoft has pulled its online ad for Internet Explorer 8, after complaints from viewers that it was too foul.

According to a statement from the company:

"We make a point of listening to our customers. We created the OMGIGP video as a tongue-in-cheek look at the InPrivate Browsing feature of Internet Explorer 8, using the same irreverent humor that our customers told us they liked about other components of the Internet Explorer 8 marketing campaign. While much of the feedback to this particular piece of creative was positive, some of our customers found it offensive, so we have removed it."

One of the commenters below, quincompoix, has posted a link to the video elsewhere if you still want to see it.

Earlier: Microsoft continues to launch online videos to promote its Web browser Internet Explorer 8. The latest features actor Dean Cain again and vomit. There is a lot of projectile puke in this video, like Monty Python levels of regurgitation.

A wife gets online after her husband has used the computer, and is so horrified by what she sees, she repeatedly spits up on the floor. He slips, falls on the floor, and she continues to spit up on him. The tag line is O.M.G.I.G.P., as in "Oh my god, I'm gonna puke."

The ad promotes Internet Explorer's privacy browsing feature, which many have dubbed a porn mode. It allows the user to browse without leaving a trail in the browser.

To check out the earlier IE8 ads, click here.

My Seattle Times colleague Lornet Turnbull wrote a story today about a "Microsoft subsidy bill" that the Washington state legislature passed granting in-state tuition rates for children of foreign professionals.

It was dubbed the Microsoft subsidy bill because most of the beneficiaries are children of Microsoft workers who came to Washington state under H-1B visas.

According to the story, the bill was passed during the state budget crisis, while higher education suffered hundreds of millions in cuts, and is projected to result in revenue loss to the University of Washington of $430,000 and to Washington State University of $215,000.

Click here for the full story.

Salesforce.com was in Seattle on Thursday promoting its cloud-computing product ahead of Microsoft's anticipated announcements this summer about its competing product Azure. Chief Executive Mark Benioff gave a speech at the Grand Hyatt in downtown Seattle to customers in an event called CloudForce, which is touring the globe.

While better known for its Web-based software that helps sales teams track and close deals, Salesforce.com is moving aggressively into cloud computing and creating a platform where software developers can make applications and deploy them from servers that SalesForce.com runs, rather than on the PC or a company's server. It has beaten Microsoft to the market and is already selling developers on the cloud product.

For instance, Starbucks approached SalesForce.com shortly after Christmas with an idea: Create an online campaign and Web site called Pledge 5 to encourage community service, launching the same day as the presidential inauguration. Also, Starbucks CEO Howard Schultz was scheduled to be on Oprah to promote it, so the site had to be built tough enough to withstand hundreds of thousands of visitors. Systems integrator Apperio built the application, which allows users to seek out volunteer opportunities in their neighborhood, in three weeks.

In another example, a small Bay Area company that manufactures kitchen countertops from recycled glass, Vetrazzo, talked about how they managed their supply chain, each countertop slab and travel expenses with custom programs that one developer built on Salesforce.com's cloud platform.

Amazon.com is also a player in cloud computing. Microsoft is expected to make announcements about how it will charge people to use Azure, its cloud product, this summer.

(Photo of Marc Benioff: SalesForce.com)

Microsoft and Google are having compatibility issues. Microsoft says Google software disables some features in Outlook, the company's e-mail and calendar software.

In a blog item posted by the Outlook team at 1:56 a.m. today, Microsoft developers said the Google Apps Sync, a plug-in, disables the search function in Outlook, making it difficult to search through the 1,000 e-mails in your inbox.

The Outlook team has complained to Google, according to the blog item. Google says in its enterprise blog that it's working to fix the issue, but so far the solution it is suggesting is to uninstall Apps Sync.

Update 11:06 a.m.: The incompatibility issue is between Google Apps Sync and Windows Desktop Search, which runs the search function in Outlook behind the scenes. If the user gets under the hood in Outlook and disables the Windows Desktop Search function in Outlook, then Outlook data will be searchable.

It's like I work for tech support. Did you try restarting?

Microsoft is suing two brothers and their mother in Vancouver, B.C., for $750,000 after the company said the three engaged in online ad fraud to boost traffic to their auto insurance and World of Warcraft Web sites.

According to a civil case Microsoft filed Monday in the Western District of the U.S. District Court, Eric Lam, his brother Gordon Lam and their mother Melanie Suen used click fraud to increase their rankings on Microsoft's search engine Live Search.

Advertisers paid for placement on Microsoft's former search engine Live Search, now known as Bing. When a user entered a search term such as "auto insurance," advertisers bid for sponsored placement in the results. Each time a user clicks on an advertiser's link, the advertiser pays Microsoft. The cost per click ranges from five cents to hundreds of dollars depending on the desirability of the search term, according to court documents.

In click fraud, a person or computer program repeatedly clicks on a link without any interest in the Web site. It can be used to exhaust the ad budget of a competitor, and lower that site's placement in the rankings of the search results.

According to the court documents, the Lams and their mother engaged in click fraud in spring 2008 for advertisers who paid for placement for the search terms "auto insurance" and "WoW," short for the online game World of Warcraft. The Lams' Web site, WoWMine.com, sold game gold that could be traded in the online game.

I am trying to get in touch with the Lams to get their comments.

Update 6:35 p.m.: Gordon Lam declined to comment on the story by phone.

Some bits and bytes on Microsoft from around the country:

New York Post says Google's co-founder Sergey Brin has a team of engineers dissecting Bing, Microsoft's newly upgraded search engine. Early data after Bing's launch at the beginning of June show that traffic numbers have improved for Microsoft's search operation.

MocoNews says Microsoft has stopped reimbursing employees for their BlackBerry and iPhone plans, unless they switch to a Windows Mobile device. We ran a New York Times story today on how even discretionary spending shrinks elsewhere, smartphone sales are projected to go up by 25 percent this year. And on the other end of the spectrum, here's another story we ran today about how the poor are using a federal government telecom subsidy for cell phones.

Seattle Examiner reports that Bill Gates shocked Cambridge when he showed up to receive an honorary degree without a tie. Which would make news only in England.

To deal with European Union's antitrust concerns, Microsoft said Thursday it would ship Windows 7 in Europe without its Web browser Internet Explorer. Today, the European Union released a statement saying Microsoft is offering less choice, not more.

In its statement, the European Union said:

"... the Commission has suggested that consumers should be offered a choice of browser, not that Windows should be supplied without a browser at all."

The comments are pointed at retail copies of Windows 7 that are sold separately from new PCs:

"As for retail sales, which amount to less than 5% of total sales, the Commission had suggested to Microsoft that consumers be provided with a choice of web browsers. Instead Microsoft has apparently decided to supply retail consumers with a version of Windows without a web browser at all. Rather than more choice, Microsoft seems to have chosen to provide less."

The European Union appeared more positive about removing the browser from copies of Windows 7 that computer makers install on new PCs:

"As for sales to computer manufacturers, Microsoft's proposal may potentially be more positive. It is noted that computer manufacturers would appear to be able to choose to install Internet Explorer -- which Microsoft will supply free of charge -- another browser or multiple browsers."

Here is our story today on Microsoft's move to sell Windows 7 in Europe without the browser. The European Union is expected to rule on whether Microsoft's tying of Internet Explorer to Windows since 1996 is anticompetitive.

In the surreal, ominous style of Hulu, Microsoft has released two online ads to market its latest browser, Internet Explorer 8. Microsoft's ads feature actor Dean Cain, who played Superman on "Lois & Clark."

Microsoft will also make donations to food banks every time someone downloads the new browser. For each download at www.browserforthebetter.com, Microsoft says it will donate the equivalent of 8 meals to Feeding America, a national network of food banks, between now and Aug. 8.

Here the new browser ads, and for comparison's sake, the Hulu ad with Alec Baldwin.

F.O.M.S. ad (Fear of Missing Something):

S.H.Y.N.E.S.S. ad (Sharing Heavily Yet Not Enough Sharing Still):

Hulu ad:

Microsoft confirmed reports from CNET and Bloomberg today that the company will be shipping Windows 7 in Europe without the Internet Explorer browser in it.

CNET's report cites a memo that was sent to computer makers saying the changes were being made to comply with European Union law.

Earlier this year, the European Commission notified Microsoft that the inclusion of its browser in Windows since 1996 violated European competition law. Check out our earlier coverage here. Microsoft was due to present its defense June 3 to 5, but canceled because senior regulators would not be able to attend. Here is the story on that development.

Would a rose by any other name smell sweeter?

Silicon Valley Insider found this site over the weekend: BlindSearch. It compares search results in a blind test, then reveals which search engine the results came from: Microsoft's Bing, Google or Yahoo. The site says it was built by Microsoft employee Michael Kordahi as an experiment.

Kordahi previously posted the survey results but says on the site that someone was gaming the system and he had to take it down.

Microsoft rebranded its search engine as Bing last week, and many company executives kept repeating that in their market research, customers who were given Microsoft search results disguised as Google results preferred Microsoft search.

Try it yourself.

Here is the next round of TV commercials Microsoft is airing to make some headway in online search. The ads all criticize Google without actually naming the search leader, claiming that using Google's search engine results in an overload of results that don't get you the answer you want.

On a side note, our reliable Seattle Times copy desk caught an error in one of the ads, which I had quoted in a story, saying "The Breakfast Club" came out in 1986. According to all the searches our copy editors did, the film came out in 1985. (A search for "breakfast club release date" on Wolfram Alpha, Google and Bing all point to 1985.) I've called Microsoft to see if its plans to change the ad and it said they will get back to me.

Update Friday 12:36 p.m.: Microsoft says they are going to change the ad so it reflects the correct year, and highlighted that Bing returns the correct date in its search results.

Here is the ad that cites "The Breakfast Club":

And two other ads, which we have not fact-checked:

If you're watching "So You Think You Can Dance" at 8 p.m. today, keep an eye out for Microsoft's first TV ads for its upgraded search engine Bing. (The company has dubbed it a "decision engine.") It will also air during "CSI: NY," the Jimmy Fallon show and on several cable networks.

News reports estimate that Microsoft is spending $80 million to $100 million on advertising to create a new search brand where it previously faltered with Live and MSN, The company has declined to comment on the ad budget.

The ad campaign highlights confusion that can spring from search results. Here's the video:

User intent, user intent, user intent.

That was the message Qi Lu, head of Microsoft's online division, brought to his keynote this morning at SMX Advanced, a search marketing conference at Bell Harbor Conference Center that started Tuesday.

The keynote began with a television commercial for Microsoft's upgraded search engine, Bing, which the company plans to air tonight. The ad jumps among several people asking search questions ("I want two tickets to paradise" is one.) in accelerating cuts that ends with the onscreen question, "What has search overload done to us?"

Lu then did a Q&A with Daniel Sullivan, editor-in-chief of Search Engine Land. Here are some excerpts of Lu's comments at the event:

On the development of Bing:
"Bing as a product took a very distinct differential approach. What we would like to offer is rich and more organized user experience so we enable users to complete tasks more efficiently and make more informed decisions faster."

On the future of search:
"if you have heavy R&D investment, if you have those infrastructure R&D, we will be able to model computationally user intent. The other important trend is the [shrinking] barrier for producing content. The Web gets richer and richer. It starts out with links, then there's images, now you have Facebook and Twitter. We're able to understand user intent very well over the next few years and Web gets richer and richer. You're able to build user experience that's vastly more compelling than today. While no one has a crystal ball on how future plays out, I firmly believe the best way to predict the future is to create one."

On the brand name "Bing":
"We have teams of experts going through very extensive processes looking at all the choices. We wanted something short, easy to pronounce, very easy to come up with URL. You want brand to be very accessible on the Internet. The brand also has to work well across the world."

On how Microsoft, which has 8 percent of the search market, will gain market share against Google, which has 62 percent, according to most recent rankings from comScore:
"We believe search is still relatively very nascent. There is a whole lot more that can be done. The search experience in next few years can be a lot more compelling. The second, ultimately, the real strengths you compete in search space has to be based on strength of product, quality of experience. ... Over time the best product will sell itself."

On status of talks between Microsoft and Yahoo on a search partnership:
"The best person to ask that question is [AllThingsD's blogger] Kara Swisher. Obviously I don't think I can say anything beyond what's out there. ... It won't be proper for me to speculate on what would happen, so I will just have to leave it to everybody's imagination what would happen."

(2008 Photo of Qi Lu: Marshall Miller/Microsoft)

Windows 7, the next version of Microsoft's operating system, will go on sale Oct. 22, the company said.

The latest version will replace Windows Vista. Microsoft says it plans to offer a tech guarantee program that would offer a free upgrade to Windows 7 for people who purchase computers that come installed with Vista before Oct. 22.

The company did not have details on the time frame the guarantee will cover.

To mark the launch of Microsoft's upgraded search engine Bing, the Space Needle will be sending a beam of light into the sky on Tuesday starting at 10 p.m. The company will also hoist a Microsoft Bing flag atop the needle.

While the preview of the Bing began today at www.bing.com, the company will wrap up some back-end engineering work, invisible to most users, and officially launch the search engine on Wednesday.

According to Advertising Age, Microsoft plans to spend $80 million to $100 million to market Bing. Executives have acknowledged that a poor consumer brand dogged its previous search efforts, branded Live Search. In April, Microsoft accounted for 8 percent of all share traffic, compared to Google's share of 64 percent, according to comScore.

(Photo credit: Ellen M. Banner/The Seattle Times)

The launch of Bing, Microsoft's upgraded search engine, was all drum roll without a cymbal crash last week. The company announced it would be launching a new version, but Bing would not officially launch until Wednesday.

A preview version went up this morning at www.bing.com. Here are some early reviews from around the Web:

ArsTechnica says there is much to like, as well as some frustration.

TechCrunch reports positive reader comments, including "Holly [sic] crap, it doesn't suck."

CNET also seems won over by Bing.

The reviews are an early positive sign for Microsoft, which trails mightily in the search market. Google held 64 percent of all searches in April according to comScore. Microsoft's share was 8.2 percent. Microsoft is calling Bing a decision engine.

Have you tried it out yet? Post reviews to the comments section.

As expected, Microsoft took the wraps off its overhauled search engine this morning, introducing a new brand name, Bing.

The Wall Street Journal reported online that Chief Executive Steve Ballmer was demonstrating Bing at the Journal's D: All Things Digital conference in Carlsbad, Calif. Here's Microsoft's release on the introduction.

The Journal's report said the search engine, which has been called Live Search, will sport a new look next week when it goes online. In addition, it is being designed to give users "access to a range of categories of search" and that Microsoft is targeting four distinct categories: shopping, local, travel and health.

Whether Bing can cut into Google's overwhelming lead in search will be one of the most closely watched issues in tech.

Bing will attempt to accomplish this by adding more features to Microsoft's search. Among other things, Microsoft is adding Bing Travel to the Bing.com site -- a combination of technology from Farecast and content from MSN Travel designed to help people in making travel plans. Microsoft acquired Seattle-based Farecast, an airfare prediction Web site, in April 2008.

Separately, BusinessWeek has an interesting interview with Qi Lu, president of Microsoft's Online Services Division who came to the company from Yahoo. In it, Lu gives a broad outline of where Microsoft thinks there are opportunities to advance search beyond what Google has accomplished:

"When you see a query box, you type in it. [The assumption is that] it will give you what you want. But [consumers'] expectations have increased. They are using that search box for all kinds of things: to purchase product, to plan a vacation, to research a particular organization, to study a particular concept."

Lu also says he came to Microsoft because the company has the resources to invest in infrastructure and "a world-class R&D team that has top-notch experts in all the critical disciplines."

Oh, yes, one more thing: Fortune magazine columnist Stanley Bing has a few words to say this morning on brands and brand names, including his own.

Update, 4:36 p.m.: The Live Search team (presumably that now becomes the Bing team?), responded to Stanley Bing's call to work out their differences by accepting Bing's (the person's) offer of services. The team's blog said:

After an emergency meeting (three people were invited, all declined), we've decided to take you up on your offer. We're not certain what exactly this would involve. We're not certain it would pay much (nothing, actually) but we look forward to starting a dialogue and hope we can work together soon. Let's do lunch.

Listen up and you can hear the badda bing.

It looks like Microsoft's long-awaited revamp of Live Search is about to unfurl.

Last week, word leaked out that the company would be unveiling its updated search engine, code-named Kumo, at The Wall Street Journal's D: All Things Digital conference, which takes place this week in Carlsbad, Calif. Steve Ballmer is on the roster of speakers.

Today, Advertising Age is reporting that Microsoft is launching the update, to be called Bing, with an $80 million to $100 million advertising campaign. Compare that with what Ad Age says is considered a "sizable budget" for a national consumer product launch, $50 million. JWT, one of the ad industry's major players, is handling the campaign.

One prominent part of the upgrade is expected to be a branding change. Speculation has centered on the code name, Kumo, but last week a leading search analyst, Danny Sullivan, said he thought the new brand would be Bing.

Despite the typical big-budget effort Microsoft appears to be setting up, the company faces a monumental challenge in going after a market leader whose name is virtually a generic term for Internet searching. In the latest monthly reports Google continued to hold a commanding 64.2 percent of the U.S. search market in April. Microsoft's Live Search remained languishing in third at 8.2 percent, behind Yahoo with 20.4 percent.

Whether the campaign can equal or better the impact that Microsoft's ads appear to making in the company's battle with Apple over laptop PC sales will be one of the closely watched issues in tech for a spell.

Sharon mentioned looking back at the latest volleys in the Mac vs. PC ad battle while she's away for a couple of weeks. That's certainly a way to keep up with the fascinating marketing was Microsoft and Apple have engaged in over the past year or so.

Now comes word that Microsoft's efforts may be paying off.

Advertising Age, citing work from BrandIndex, reports that the "value perception" of the Apple and Microsoft brands "has shifted dramatically in the eyes of 18- to 34-years-olds" since the first "Laptop Hunters" commercials began running in March. Apple's has fallen, while Microsoft's has risen.

Value perception is based on scores that BrandIndex calculates from daily interviews of 5,000 people. Interviewees are asked if they think the get good value for their money.

The Microsoft campaign emphasizes price in highlighting shoppers looking for a laptop that has their desired features but which cost less than a dollar limit they've set for themselves. Depicting their shopping experience in fast-cut shots, the ads all include one shot in which the shopper looks at a Mac but bemoans its higher price.

Of course, the value message of the ads has a bit more resonance in the context of a tough economy.

Here's the latest in the "Laptop Hunters" series.

<br/><a href="http://video.msn.com/video.aspx?vid=0170090f-53b2-40fc-89a4-c759cb088e0a" target="_new" title="Laptop Hunters $1700 - Lauren and Sue get a Dell XPS 13">Video: Laptop Hunters $1700 - Lauren and Sue get a Dell XPS 13</a>

Mike McCue, the cofounder of TellMe, announced today that he is leaving Microsoft's speech-recognition subsidiary.

Zig Serafin, a general manager for Microsoft's speech components group, will be taking McCue's job and bringing together TellMe's 330 employees in Mountain View, Calif., together with another 80 people in Microsoft working on speech technology in Redmond and in Beijing, China.

Microsoft bought TellMe in 2007, which provides the voice-recognition technology behind many customer-service phone systems. TellMe handles 40 percent of all 411 calls in the U.S., the company says. They also developed a voice-recognition service for Windows Mobile that we wrote about here.

McCue, then chief executive, became general manager of the business. Before starting TellMe in 1999, he started a company that he sold to browser maker Netscape. Here's a story we ran on McCue last year. He plans to stick around until June 30, take a month or two off, then return to the startup world.

(Top photo of Mike McCue credit: Paul Sakuma/The Associated Press; bottom photo of Zig Serafin credit: Microsoft.)

"There are 5 billion working people in the world. In 2010 their hero will arrive."

Those are the opening lines to an online video trailer for Microsoft Office 2010. The company is now taking requests for the technical preview, set to begin in July, which you can sign up for at the Microsoft site "Office 2010 The Movie."

Like a trailer for a real movie, it doesn't say much about the plot of the movie, I mean, the software.

Dennis Liu, credited as the director of the trailer, sounds like a technology agnostic guy. He first gained notice last year for making a music video on the Mac. In this interview with the Unofficial Apple Weblog, he says he's a Mac fan. The video is set to the song "Again and Again" by Bird and the Bee, which has been viewed 1.3 million times. Here's that video:

And, check out this other funny short film he did called "Pretend to Work" using Microsoft Office for Mac:

The same day we ran a story about Microsoft's efforts to develop greener data centers, we found out the company almost sent 40,000 old recycling bins to a landfill after replacing them with new ones.

The Washington State Recycling Association, a trade group, today named Tom and Justin Roth "Individual Recycler of the Year" for redistributing the bins so they could be reused instead of thrown out. Tom, who is Justin's dad, works at Microsoft. He and Justin found donated space on a cargo ship and sent the bins to organizations such as the Chignik Tribe in Alaska, as well as the Mukilteo School District. The Colville Tribe has used the bins to expand itsr recycling.

(Photo of Waste Management's Cascade Recycling Center in Woodinville: Ken Lambert/The Seattle Times)

Microsoft confirmed today that Windows 7 will be in stores by the holidays, in a news release the company released for the Tech Ed conference.

The announcement also included some comments from Bill Veghte's keynote at the event. Veghte is the senior vice president of Windows Business: "With early RC testing and extensive partner feedback we've received, Windows 7 is tracking well for holiday availability."

For months, rumors have swirled that Windows 7 would be released in time for the holiday season, even as the release candidate of the operating system was made available to the public.

The release candidate, the final testing version of Windows 7, is available here.

Update 5:08 p.m.: Microsoft confirmed that it will issue $3.75 billion in long-term debt and gave more details on the breakdown.

They will offer $2 billion of 2.95 percent notes due June 1, 2014; $1 billion of 4.2 percent notes due June 1, 2019; and $750 million of 5.2 percent notes due June 1, 2039.

Update 1:11 p.m.: Microsoft's plans to issue debt would be the company's first long-term debt offering. Back in September, the board of directors authorized the company to issue $6 billion in debt. Here is our coverage from that announcement.

The company then issued $2 billion in commercial paper, short-term debt for corporate purposes and to purchase stock. That leaves $4 billion in debt the company could still seek. Bloomberg reported the company plans to offer $3.75 billion in long-term debt, citing an unnamed source.

Earlier: In a regulatory filed today, Microsoft says it plans to sell debt to raise money. The company will offer 5-, 10- and 30- year debt. The filing does not specify how much money the software company plans to raise with the debt offering, or when it will make the debt offering.

The proceeds will be used for working capital, capital expenditures, repurchases of stock and acquisitions, the company said in its filing.

Bloomberg is reporting that the sale could happen as early as today.

Software development in Redmond appears to have ground to a screeching halt as Microsoft employees flock to screenings of "Star Trek."

A number of Twitter messages -- here, here and here -- have popped up from employees who say they are at private screenings of "Star Trek," thanks to Microsoft.

The company has made no secret of love for all things "Trek." The lobby art in one of the entertainment and devices offices in Redmond features a light-up bead curtain with the images of Kirk and Spock, as played by William Shatner and Leonard Nimoy.

So what did you think of the movie? Are Chris Pine and Sylar worthy of wearing the uniform?

Here's video of Nimoy on David Letterman giving an abridged Top Ten list of lines never said on "Star Trek."

Update 5:28 p.m.: Microsoft spokesman Lou Gellos said the entire Microsoft Research group did take off to see the new Star Trek movie this afternoon.

"Indeed some of our Microsoft researchers boldly went where only a few had gone before," Gellos said. That's just one of several Star Trek jokes he made in our phone conversation. Set phasers to funny.

It's a tradition for Rick Rashid, a senior vice president for the division, to take the group to the movies every time there's a new Star Trek movie. He pays for it out of his own pocket, Gellos said.

(Photo credit: The Associated Press)

Microsoft is making 3-D photo technology available to businesses through PhotoSynth and Virtual Earth. The two products have been integrated so businesses can use the software to stitch together photos and create 3-D models. The models can then be viewed online with Microsoft's Silverlight technology.

Users can share their 3-D models online at www.photosynth.net. The site is fun to surf around if you have time. It has models of the terra cotta warriors in Xi'an, China, the leaning tower of Pisa and the ancient city of Petra in Jordan, also known as the final resting place of the Holy Grail in "Indiana Jones and the Last Crusade." Only the penitent man shall photosynth.

Organizations like VisitBrighton have used the technology to give visitors an idea of attractions in the city in the U.K. Other businesses that Microsoft hopes will possibly use the technology include real-estate companies that can provide virtual tours of homes, retail businesses to show off products and stores, media and entertainment and the public sector to distribute information on public services and buildings.

Coffee break time. Sit back with your compostable cup of Joe or free soda and check out humor site Cracked.com. It held a contest to depict what the world would look like If Everything Was Made by Microsoft.

The contestants ranged from Mona Lisa done in Paint.NET to a baby born with a "Do you want to register now?" on its leg.

Click and laugh.

Ray Ozzie, Microsoft's chief software architect, sat down for a question and answer session at the Technology Alliance lunch today at the Westin in downtown Seattle.
Ed Lazowska, a computer science professor at the University of Washington, asked questions and took a few from the audience. Ozzie talked about the cloud, netbooks and took a stroll down memory lane to describe the first Internet-ish system he used in 1974.

(Photo credit: Microsoft, 2008)

Update 2:00 p.m.: Here's a video demo of the new TellMe service.

I have a voice-activated dialing button on my Blackberry Pearl that I never use. To set it up I would have to record the name of a contact I want to dial by voice. It's clunky and one step too many. The function also uses a prime button on the side of my phone, so I often accidentally activate it when I pick up the handset.

TellMe, a Microsoft subsidiary based in Mountain View, Calif., is launching a product today for mobile phones that would allow a user to speak commands into a phone without the setup -- whether that's calling a contact, dictating a text message and sending it to a friend or searching for a restaurant. Windows Mobile 6.5, when that's ready this fall, will include the voice technology.

The challenge for TellMe, and all Windows Mobile products, is to get wireless carriers to buy in and get it installed on that carrier's devices so the service is readily accessible through a single button.

TellMe is best known for providing automated customer-service systems that allow callers to speak requests instead of punching in numbers or talking to a live operator.

(Video credit: TellMe)

Microsoft announced a new piece of the software ecosystem it is building for health care: Amalga Life Sciences. The software is targeted at research institutes, pharmaceutical companies and large medical organizations to organize research data and design better clinical trials.

Jim Karkanias, senior director of applied research and technology with the Microsoft Health Solutions group, said in an interview that Amalga is akin to GPS for research data. The Fred Hutchinson Cancer Research Center is an early adopter, according to the company's news release, but it's unclear whether that means it's a customer.

The Health Solutions group has been developing products targeting customers along the full spectrum of the health-care system. Last week, the company launched a product with the Mayo Clinic targeted at consumers called the Mayo Clinic Health Manager, which helps individuals manage wellness and health conditions.

This was announced Tuesday by the company at the Bio-IT World conference. It's coming to you a day late because I was out sick Tuesday. I'm back in the swing of things today. I don't think it was swine flu.

Update 1:25 p.m.: I just spoke to Microsoft spokesman Lou Gellos by phone and he said ,yes, the picnic has been called off. The company will not hold its annual summer picnic near North Bend this year.

As the company's local headcount grew to 41,000 people, the picnic went from a one-day affair to one spread out over two weekends, featuring pony rides, wall climbing, food, drink, softball and frisbee for Microsoft workers and their families.

"The feedback from employees to Lisa Brummel, our VP of HR [human resources] has been overwhelmingly positive and understanding," Gellos said. "Obviously people are disappointed but they understand why and there doesn't appear to be any angst over this at all."

Microsoft plans to eliminate 5,000 jobs between January and July 2010, and has made 1,400 of those cuts. The company also plans to create 2,000 to 3,000 jobs in the same period.

Earlier:

• CNET says Microsoft has canceled its annual summer picnic for its Redmond employees. We are checking with the company to see if it's true.The event usually takes place over a few days. The company said in its earnings call Thursday it planned to cut another $1 billion in operating expenses by June 30.

The Windows team at Microsoft reported on its blog this evening that its release candidate for Windows 7 will be available on April 30 for developers and for the public on May 5.

This means the company is one step closer to bringing the next version of its trademark product to market.

Windows 7 is the next upgrade of Microsoft's PC operating system. The release candidate will be the last chance for the company to get feedback and tweak the code before it sends the software to manufacturers to install on PCs for sale. The last version, Windows Vista, came out for general distribution in January 2007.

The public has had a chance to pick over the beta version for the past few months. Parri Munsell, director of consumer product management with Windows (not the guy in the photo below), said his group collected feedback starting three years ago to build Windows 7, and the comments fell into three main buckets:

"First people wanted to simplify. They wanted the PC to get out of their way." The Windows 7 beta removes almost all desktop icons. Applications will live in the taskbar at the bottom of the screen next to the start button.

"Second, making the PC work the way they want." Munsell mentioned reducing lag times to shut down and start down, as well as making sure the more premium versions of Windows 7 built on the features in less-expensive versions. For example, with Windows Vista, people using the business version could not play DVDs, whereas people using the less-expensive consumer version could.

"The final thing is adopting new technology." For example, incorporating the touch interface into all aspects of the software, making home networking easier and making it more consumer friendly to hook in devices.

I will be interviewing Bill Veghte, senior vice president for the Windows business (the guy in the photo to the right), on Monday morning to get more details on what's different in the release candidate. If you have questions you want me to ask him, leave them in comments below or shoot them to me via e-mail at schan@seattletimes.com.

As soon as we have details on where you can get your hands on the release candiate, we'll post them here at the blog.

(Photo courtesy of Microsoft.)

Thanks to everyone who joined us for the Microsoft earnings liveblog!

Here's the link to the earnings release. And click below for a replay of the liveblog.

We will be liveblogging Microsoft's third-quarter earnings call tomorrow at 2:30 p.m. so come back, click in and share your thoughts on the tech giant's report card.

Here's what to look for in the earnings call. Analysts are expecting a weak quarter as the general state of the economy has pressured businesses to pull back on IT spending.

It did not help that Microsoft declined to provide any financial guidance for this quarter in its last call, when it announced it planned to cut 5,000 jobs between then and 2010.

First Call has put analyst profit estimates at about 39 cents per share, or $14.2 billion, compared with 47 cents per share in the same quarter last year.

Sid Parakh, analyst at McAdams Wright Ragen, is expecting earnings to come in below that. "We cited weakness in enterprise spending as well as the factor of netbooks that you might want to consider," he said. Microsoft has been selling a version of Windows XP for the low-cost laptops, but the company makes less than what it would for a copy of Windows installed on a desktop PC.

Parakh has done a round of checks and believes the company could be preparing for another round of deeper cuts. He recommends paying close attention any time someone says "enterprise spending," "netbooks" and "operating expenses."

Matt Rosoff, an analyst at Directions on Microsoft, said he also expects a "pretty down quarter." He's seen evidence that the company is offering special deals on its enterprise software such as SQL, Exchange and Sharepoint, and offering incentives to large companies to renew their agreements. "Typically at Microsoft they don't offer a lot of deals," he said.

Still, Rosoff said most financial analysts have already accounted for lowered spending: "I don't know that Microsoft is going to disappoint them by missing."

We will also be listening for anything related to search, given all the talk about a Microsoft-Yahoo search partnership in the works.

We doubt that CEO Steve Ballmer and CFO Chris Lidell will drop any f-bombs, as Yahoo CEO Carol Bartz did on the company's earnings call Tuesday.

More background reading:

• Apple just reported better year-over-year results in its earnings> Here's Ars Technica
's account.

• Computerworld has some early info on Google's Android software for netbooks, which would compete with Microsoft's Windows software for the low-cost laptops built for basic computing like e-mailing and surfing the Web. Built by SkyTone in China, CW says, the new device undercuts most netbooks out there on cost, and should end up costing $100 to $200.

• Techcrunch has some tidbits on social networking in Windows Live. It reports that Microsoft plans to announce a number of partners today that would stream social feed updates onto the Windows Live page. Facebook and Digg are on their list, but no Twitter. Update 10:37a: Twitter feeds are already available on Windows Live.

From our newsroom's courts reporter Ian Ith, two Seattle companies are expected to finalize a settlement with Matthew Ammon's parents. Ammon, a 31-year-old lawyer at Microsoft, was killed in his apartment in 2006 when a crane in Bellevue collapsed on his building. The settlement amount was not disclosed.

The lawsuit against Lease Crutcher Lewis and Magnusson Klemencic Associates was set to go to trial, with Ammon's parents arguing the crane had been negligently installed and operated. A 210-foot crane fell on the Pinnacle Bellecentre, Ammon's building, and Plaza 305.

Our columnist Danny Westneat had a great commentary on it in March before the settlement. This is what Ammon's mother, Kathy Gaberson, told Westneat:

"Sometimes I'll go by a tower crane, and I become paralyzed," she says. "I can't move. I can't talk. I'll get a visceral feeling, a physical pain in my body. I just wish someone had listened. I wish the very earliest warning signs had been heeded."

(Photo credit: Mike Siegel, The Seattle Times)

• WSJ by way of Electronista: It's reporting that Microsoft is charging PC makers only $15 per copy of Windows for netbooks, low-cost laptops that cost around $300, about a third of the cost of a PC version of Windows.

• Ballmer Watch: Steve Ballmer, Microsoft's chief executive officer, is hitting the road. He is traveling to Europe, Middle East and Africa this week. According to the company, he is holding meetings with high-level government officials, customers and partners to discuss how technology can help during an economic downturn and will appear in several public engagements. The company did not give any more details about whom he was meeting with.

• Oracle wants to buy Sun Microsystems for more than $7 billion. Ballmer told Reuters he's "very surprised."

BusinessWeek has a comment from Apple on Microsoft's laptop hunter ads:

"A PC is no bargain when it doesn't do what you want," Apple spokesman Bill Evans says. "The one thing that both Apple and Microsoft can agree on is that everyone thinks the Mac is cool. With its great designs and advanced software, nothing matches it at any price."

What's clever about the Microsoft ad is how cool Giampaolo and the ginger Laura are with her glasses.

The Seattle Times' earlier story on the rollout of the laptop hunter ad is here.

Laptop Hunters #2 - Giampaolo

Laptop Hunters #1 - Lauren

Microsoft is hosting a two-day symposium in Redmond bringing together an international group of 300 people who work in public safety. The company announced Citizen Safety Architecture this morning, which brings together several products Microsoft has developed for governments, such as sharing information across agencies for disaster management and criminal investigations.

The company will offer free to Interpol agencies a software called Computer Online Forensics Evidence Extractor, which will help law enforcement extract information from a computer before it's unplugged and taken back to the evidence vault. That would help them pin down what's in the cache memory, which would be erased once the computer is unplugged.

Having covered criminal courts for several months here in King County, I usually only came across computer evidence when vice squads searched Craigslist to bust teenage prostitutes and their johns. Investigators also would confiscate hard drives to prosecute child porn cases.

As for crisis management, it would be interesting to hear how software could be used to effectively deploy resources during a snowstorm, such as which streets to plow and how long you can expect to wait for a Metro bus.

If you don't fit into these neat categories, feel free to tell me more about you in the comments section.

Happy day-after Easter. Witness the resurrection of the Microsoft blog. Our former Microsoft reporter Benjamin J. Romano departed The Seattle Times two weeks ago for another opportunity, and I will be blogging to you from here on out.

I've been reporting for The Seattle Times for more than a decade, and I've covered everything from the failure of Seattle's high-tech toilets to Christina Aguilera's concerts. I wrote about personal technology, wireless and telecom and video games several years ago here. My last job writing about business ended with an investigation of accounting tricks and dubious deals at InfoSpace.

My dad was an early adopter. We had a Commodore VIC 20 we connected to our television set in the living room, and I wrote junior high science papers using Wordstar. It once dumped my entire junior-high science paper at 9 p.m. because I forgot to save to the floppy drive. In the interest of full disclosure, I currently use Microsoft software on my Seattle Times laptop and my home PC; but my cellphone runs on BlackBerry, my iPod runs on Apple, my Sansa runs on Napster and my Wii runs on Nintendo.

That could all change in six months. The technology landscape is constantly shifting. Microsoft's challenge is to maintain its business with Windows and the PC while expanding on the frontiers of computing -- mobile, television, netbooks, search, social networking. Our challenge is to help you make sense of it.

What you can expect from me in our paper: fair and accurate, local and global coverage of our region's most important tech company, and why it matters to you.

What you can expect here at Pri0: the latest news, multimedia, polls, live blogs, an active dialogue with you.

Let's start with you: What do you want to see on this blog?

If you're spending $300 million on a major ad campaign for your biggest product, this is not the line you want to read in Advertising Age: "Your brand power is waning."

A few buzzworthy video games items out of the U.K. press this morning.

As my colleague Brier Dudley has noted, the Inquirer is reporting that Google is going to buy Kirkland-based Valve "any second now." Valve is a video game company with an industry leading distribution platform called Steam. (Update, 12:53 p.m.: Turns out that it ain't happening, according to MTV Multiplayer, which quoted a Valve spokesman saying, "complete fabrication." Oh, and Valve is now in Bellevue, not Kirkland.)

The U.K. Guardian Games blog has an interesting interview with former Microsoft Xbox boss Peter Moore, who left the company last summer to head EA Sports. Moore, who started at the Redmond company in January 2003, provides some candid assessments of life inside the Microsoft games business. Here are the bits I found most interesting.

ELLEN M. BANNER / THE SEATTLE TIMES

Mike Calcagno, general manager with the Natural Language Group for Office at Microsoft, and members of his team identify and vet new words to add to the spell checkers that ship with Office in many different languages.

A friend who works in the sciences said it's difficult to trust the spell-checker in her field. "You think Bromodichloromethane or 4-Methyl-2-Pentanone are in there? Or whenever we use borehole the suggested correction is brothel..."

MIT's Technology Review, the world's oldest tech magazine, has named four Microsoft employees to its "annual list of 35 outstanding men and women under the age of 35 who exemplify the spirit of innovation in business and technology." Only Harvard and its affiliates had more people on the TR35.

From the company's just-released fiscal fourth-quarter earnings announcement: Revenue was $15.84 billion for the quarter ended June 30, 2008, up 18 percent; operating income and diluted earnings per share were $5.68 billion and 46 cents. The average estimate of Wall Street analysts was for earnings of 47 cents a share.

Update, 1:31 p.m.: Microsoft is also tumbling in the after-hours market on the earnings miss. Its shares finished the regular session at $27.52, but were trading around $25.95, down 6 percent, in the after-hours market.

Update, 1:43 p.m.: Microsoft lowered its income and earnings outlook for the current fiscal year, which began July 1. Now the company expects full-year operating income of between $26.3 billion to $26.9 billion compared with a range of $26.7 billion to $27.4 billion given April 24.

Earnings per share, management says, will come in between $2.12 to $2.18 for the full year, down a penny from April 24 update of $2.13 to $2.19.

CFO Chris Liddell will surely offer an explanation for the move, which isn't entirely surprising given the tighter IT spending environment. Still, this is the first sign that Microsoft's business has been impacted.

Update, 2:23 p.m.: After speaking just now with Colleen Healy, Microsoft's investor relations head, it turns out the reduced guidance is not the result of an expected tightening IT budget. Microsoft instead is upping its spending on the Online Services Business, which just turned in a $1.2 billion operating loss for the fiscal year, more than twice the loss of the prior year.

Since the April update, "We have made a conscious decision to increase our spending, in particular to invest in our Online Services Business," Healy said.

Specifically, the company wants to drive increased awareness and search traffic to its Live Search engine; continue building its advertising platform; and enhance its MSN portal, Healy said. In total, that will come in at about $500 million in operating expense increases.

Revenue growth forecasts for 2009 are actually up slightly, indicating the company is not expecting any softening in sales. "We're feeling good about fiscal year 09 and that does give us the confidence to invest in the business," she said.

Also, in the current fiscal fourth quarter, Microsoft saw operating expenses increase by $500 million, in part because revenue was higher than expected because of increased consulting business and Xbox 360 sales, which have higher costs associated.

The other half of that op ex increase -- about $250 million -- "was to do things like get tenacious on taking advantage of the economic climate out there to attract top talent," Healy said.

Update, 2:37 p.m.: The Entertainment and Devices Division met its goal of profitability -- operating income of $426 million for the full fiscal year, a first. But the company stumbled to the finish with a $188 million loss in the current quarter. Healy chalked up the loss to investments in the division.

"We did continue to invest in things like our mobility efforts and other areas in that business, which, we think, is going to fuel growth in the future," she said. "Our goal was sustained profitability on a yearly basis, and that doesn't mean that quarter-by-quarter, it's going to be in the black. It means that our goal is that on a yearly basis, we expect to be in the black, which continues for fiscal year 09."

The company noted strong Xbox 360 sales in the quarter, and revenue growth of 36.6 percent. Asked if the company loses money on each console, Healy said the company's goal is for the console to break-even in the long run, excluding the $1.1 billion charge the company took in the fourth quarter last year to expand warranty coverage on its overheating Xbox 360s.

Too often, we focus on the video game (and Internet search) competition in the U.S., to the exclusion of the rest of the world. But on the games front, the battle for Europe during the current console generation is more interesting and perhaps more up for grabs than in the U.S.

And if Microsoft Xbox boss Don Mattrick wants to back up the claim he made today -- that "Xbox 360 will sell more consoles worldwide this generation than PlayStation 3" -- he'll have to win in Europe.

LOS ANGELES -- A post on video game news site Joystiq shows what is described as a Wal-Mart inventory listing for something called Halo "Blue," due out, perhaps, Sept. 30. So what is it? Add that to the list of questions that may be answered at Microsoft's E3 press conference in two and a half hours.

DOUGLAS C. PIZAC/AP

Yahoo's Jerry Yang and Google's Sergey Brin at the 2004 Allen & Co. Sun Valley Conference.

With Yahoo, Microsoft and Carl Icahn waging a public campaign to win shareholder hearts and minds (and, most important, votes), a few more interesting reports surfaced this afternoon: One major Yahoo shareholder is said to be leaning toward Icahn's slate of director candidates. Meanwhile, any potential Yahoo-AOL deal would be on hold until after Aug. 1.

All of this as the titans of the online and media worlds head toward Sun Valley, Idaho, for the annual Allen & Co. deal-making retreat.

Microsoft in July will begin selling a package of subscription services for consumers and small businesses, including the latest version of its widely used Office suite, previously only available for purchase as a one-time license.

Rub your eyes and read that again. Yes. It's a Microsoft product and "ahead of schedule" in the same sentence. Microsoft just announced that it has shipped Hyper-V, the promised virtualization feature of Windows Server 2008. It wasn't supposed to arrive until late summer. The final version of the software is available for download now, the company said.

Microsoft is now a company of close to 90,000 people and may, in fact, surpass that number by the time the fiscal year ends June 30.

Yesterday's Agence France-Presse report on a Chinese antitrust investigation into Microsoft and other foreign software companies is being refuted today. AFP itself reported that the China State Intellectual Property Office issued the following statement: "We have never carried out investigations on suspected market monopoly against enterprises, and currently we do not have any plans for this type of work either."

With some high-profile executive departures from Yahoo in the wake of its tie-up with Google, Microsoft is launching a recruiting push in Silicon Valley.

Chinese regulators confirmed an antitrust probe of Microsoft and other software companies, according to an Agence France-Presse report this morning. Updated, 4:55 p.m. with the full Microsoft statement. Updated, Thursday morning: Officials from the same Chinese agency quoted in the AFP story are now saying there is no antitrust probe. Please see this post for an update.

IGA Worldwide, a competitor of the Massive in-game advertising unit of Microsoft, announced a deal with Sony yesterday to sell in-game advertising on PlayStation 3 in Europe and North America. The move comes a day after Microsoft touted the success of its in-game advertising network on the Xbox 360, and also illustrates the different approaches the two console makers are taking to the business.

In a sign that every search -- or would-be search -- counts, Microsoft today announced a plan to steer people who hit the Internet's dead ends toward its Live Search service. The company says it is equipping pages on its Internet domains that return a "404 - File Not Found" error message to redirect to its search engine, and helping Web publishers do the same.

Portfolio.com is reporting today on an escalating probe into account irregularities at Fast Search & Transfer, which Microsoft acquired for $1.2 billion.

Update, 4:55 p.m.: Microsoft is taking the matter seriously. See a statement added after the jump.

Ballroom dancing, shuffle board, lounging on deck with a pina colada, hitting the buffet again and again. Great cruise activities. But you've got to be able to show it all off for the folks back home. To that end, Holland America Cruise Lines is bringing Microsoft aboard to offer digital media workshops on its ships.

COURTNEY BLETHEN / THE SEATTLE TIMES

Do you have that jersey in a size medium?

Here's our story confirming earlier reports that Microsoft's Xbox 360 is sponsoring the Seattle Sounders FC.

Some additional details: The company gets naming rights for the soccer field, which will be known as "The Xbox Pitch at Qwest Field." I suggested a few months ago that Microsoft build a new arena for the Sonics and call it simply the X Box.

The Wall Street Journal reports today that the Seattle Sounders FC are set to announce a major sponsorship deal with Microsoft. The $20 million, five-season deal will put the words "'Xbox 360 LIVE' on the front of the Sounders' uniforms," according to the story, which cites unnamed "people familiar with the arrangement."

In addition to announcing its Live Search cashback program, Microsoft today is providing details on how it's incorporating Farecast, the Seattle company it acquired for about $115 million in April.

Brian McAndrews, kicking off advance08, Microsoft's advertising summit, announced today the company's new brand for its broad advertising efforts: Microsoft Advertising.

As Bill Gates hobnobbed with the chief executives invited to his CEO Summit yesterday, their spouses were getting a personal cooking lesson with Seattle restaurateur and chef Tom Douglas, according to a source familiar with planning for the hush-hush Microsoft event.

Updated, 5:43 p.m.: After the jump, details on a Douglas-led tour of Pike Place Market and what was on the lunchtime menu.

ERIKA SCHULTZ / THE SEATTLE TIMES

Elop, the new president of the Microsoft Business Division, said one of his biggest surprises since joining the company is "the extent of innovation."

Now that Jeff Raikes' move to the Bill & Melinda Gates Foundation has been made public, the man replacing him as president of the $16.4 billion-a-year Microsoft Business Division is making the rounds.

Stephen Elop, 44, took the job in January. Here's a brief profile of Elop we ran at the time. On Tuesday, Elop sat down to talk about how he's settling in, impressions of Microsoft and the challenges facing his part of the company.

Kevin Doerr, a Microsoft general manager in Windows Live, is leaving for a San Mateo, Calif., classified advertising startup called Oodle.

The company is confirming today that it plans to lease the 26-story City Center Plaza, under construction at Northeast Sixth Street and 110th Avenue Northeast in downtown Bellevue. That would be on top of more than 1.3 million square feet of office space it nabbed last spring, and its swanky Lincoln Square digs.

GREG GILBERT/THE SEATTLE TIMES

The Baudboys in concert in Building 16 on Microsoft campus.

While it may not score them points at their next performance review, the men of Microsoft's a cappella group, the Baudboys, have met their goal.

The Wall Street Journal's anonymous sources say Microsoft's board of directors is meeting now to weigh its next step in the Yahoo takeover drama. An announcement is expected at the conclusion of the meeting. Someone familiar with the matter told us earlier today that the situation is still undetermined.

Today's story on a Microsoft device that helps law enforcement gather forensic evidence from a crime suspect's computer has garnered lots of attention and raised questions about how exactly it works and what it's able to do. Update, 5:10 p.m. I just got a response from Microsoft. See the end of the post.

Mary Jo Foley explores how Microsoft employee morale has suffered since the company began pursuing its acquisition of Yahoo. She says there's a "real and prevailing sentiment among many in the Microsoft ranks" that the company should walk from the deal, no matter the price.

I've heard from a few at the company on this subject, and their thinking tends to follow these lines. But I'd love to hear from more employees.

After shedding 5 percent in after-hours trading Thursday, Microsoft shares dipped further this morning. The company's third-quarter earnings clearly did not delight investors.

Microsoft CFO Chris Liddell addressed the biggest outstanding issue facing his company during its third-quarter earnings conference call this afternoon: the bid to acquire Yahoo. He gave one of the strongest indications yet that Microsoft is considering abandoning the deal.

Microsoft's core operating system business saw year-over-year revenue and operating income declines in the latest quarter. Likewise, the Online Services Business -- where it competes most directly with Google, the impetus for the Yahoo acquisition -- also saw a slight decline.

Wall Street analysts had been expecting earnings per share of 44 cents. Microsoft just announced earnings of 47 cents a share. The company's third quarter revenue of $14.45 billion was right in the middle of the range it forecast in January.

Those tracking the price Microsoft has offered for Yahoo know that it fluctuates every day because half of the compensation to Yahoo shareholders would be Microsoft stock. If Microsoft continues its pattern of better-than-expected earnings releases later today, its stock, and, in turn, the compensation to Yahoo's shareholders, could jump.

Microsoft released the first service pack for Windows Vista in March. Today, it started pushing the update to its customers via Automatic Updates.

Microsoft and Farecast are confirming the acquisition of the Seattle-based airfare prediction and travel site. A person familiar with the transaction said the purchase price was around $115 million.

I assume NPD will be out with its monthly U.S. game industry figures later this afternoon. For now, Nintendo has chimed in early with an e-mail crowing about its sales in March: More than 720,000 Wiis sold, "representing the highest monthly sales total outside of" November and December, the holiday sales period.

Updated with the full NPD report after the jump.

Microsoft CEO Steve Ballmer spoke in Seattle this morning to one of the friendliest, but also most knowledgeable and critical audiences he faces: Microsoft's Most Valuable Professionals. In a jocular, hourlong speech and conversation, Ballmer gave some unguarded assessments of his company's position in online search; its bid for Yahoo; the success of Windows Vista; and its market acceptance vs its predecessor. Here are some of the highlights:

Someone has posted to YouTube what appears to be an internal Microsoft sales music video imploring the sales force to get out and sell Windows Vista to businesses now that Service Pack 1 is available. It's unabashedly cheesy, a bit hard to watch and quickly becoming the object of ridicule around the Web. But the message in the video sheds some light on how the company's sales arm sees its most important product.

This interesting report in The Economist on how mobility is changing urban and suburban landscapes pulled some solid examples from our region. One brought to my attention is a description of the afternoon clog on Highway 520. An urban movement researcher focusing on how traffic patterns are evolving discussed in his 2006 book "a 'reverse commute' in Seattle [in which] lots of male computer scientists at Microsoft in the suburb of Redmond raced downtown to find females---a weekday ritual called 'the running of the programmers.' "

Microsoft's acquisition of Danger is complete, the company announced today.

The Microsoft employees trying out the company's new "Touchdown Space" in Seattle's South Lake Union neighborhood on Monday were impressed with the design and seemed genuinely pleased at what it could mean for their work-life balance.

MIKE SIEGEL / THE SEATTLE TIMES

Microsoft is more than doubling its new regional employee shuttle service.

Microsoft launched a free shuttle service taking employees from around the region to its Redmond campus last fall. The program has been a success, the company said today, and it will more than double later this spring.

In a pleasant break from the Microsoft-Yahoo news, an MTV News report out yesterday suggests that Microsoft is at work on a controller for the Xbox 360 that would mimic the successful motion-sensing remote controller for the Wii from Nintendo. Nintendo's top U.S. exec said in February that competitors would have a tough time copying his company's model.

Last night, U.S. District Court Judge Marsha Pechman granted Microsoft's request to halt proceedings in the "Vista Capable" class action lawsuit pending results from the company's appeal to the Ninth Circuit Court of Appeals. More details coming...

Brian Pertl has been at Microsoft since 1992. He heads up a small group in charge of media acquisitions. Now he's going to be dean of a music school. Update, Friday morning: Listen to a clip of Pertl's music after the jump.

Makers of ultra-low-cost PCs (ULPCs) such as ASUS and Intel can install Windows XP Home until June 30, 2010, or one year after the general availability of Windows 7, whichever is later, Microsoft said today. But isn't Windows 7 supposed to be available in 2010?

Readers more familiar with Microsoft's Employee Stock Purchase Program than I am pointed out a better way to evaluate the data the company filed with the Securities and Exchange Commission earlier this week. I wrote that Microsoft employees, per capita, bought fewer shares of stock through the program in each of the past two years.

"There's no reason to bid against ourselves," someone close to Microsoft told The Wall Street Journal. The unnamed sources for the story insist "the stance isn't posturing."

Today is one of four days each year that Microsoft employees can buy company stock at 90 percent of its fair-market value as part of the company's employee stock purchase plan. A report filed today on that plan shows that Microsofties have purchased fewer shares of company stock through the program per capita in each of the past two years.

(Update, Wednesday afternoon: Note this post responding to readers who suggested a better way to evaluate the figures reported here.)

Microsoft's "white spaces" demonstration device is broken. For the third time.

There are a couple of interesting articles out today about Microsoft's relationship with China, past and future.

A prominent pundit and legal expert during the historic Microsoft antitrust trial, William Kovacic, was named chairman of the Federal Trade Commission.

For the 2008 season, Microsoft will be one of the sponsors of the No. 49 NASCAR Sprint Cup Series team.

Matching the trend reported last week in comScore's Internet search market share figures, Nielsen Online is out with its February report showing Google built on its enormous lead while Yahoo and Microsoft gave up ground.

Yet another Adobe/Macromedia veteran is joining the Microsoft team doing battle with the design and online applications giant.

After a lull before and after Easter weekend, it seems the tidbits on the Yahoo acquisition front are starting to roll in again.

Yahoo announced it's joining with Google and MySpace to form a foundation backing "the sustainable and open development of the OpenSocial initiative and related intellectual property." Meanwhile, Microsoft announced that it's working with five social networks, including Facebook, to allow users to easily move their contacts between the networks and Windows Live.

A survey of U.S. corporate brand recognition and favor shows Microsoft on a five-year skid, even as it ranks highly on other such lists.

In February, the total volume of U.S. Internet searches declined from a month earlier, as did the share of searches performed on Microsoft and Yahoo sites. Google's share increased, according to data just released by comScore.

Adobe CEO Narayen.

Two weeks after Apple CEO Steve Jobs made waves by saying Adobe's widely used Flash multimedia technology wasn't up to snuff for the iPhone, Adobe CEO Shantanu Narayen said Tuesday his company is "committed" to developing a Flash Player for the device.

Microsoft today released a major update to its year-old operating system, Windows Vista, but there has been some confusion about exactly when, where and how to get the software. I asked David Zipkin, a Microsoft senior product manager in the Windows group, to explain how a person in each of the four following situations should get Vista Service Pack 1, which includes the bug fixes and patches Microsoft has issued since Vista launched.

SEC

Yahoo optimistic investor presentation today included this slide, which shows that the company's forecasts for revenue and cash flow growth are much higher than those of financial analysts.

Yahoo this morning publicized an optimistic investor presentation that spells out its plans to "roughly double operating cash flow over the next three years." The plan was shown to the company's board of directors in December 2007 and is being released now to support the board's determination that Microsoft's acquisition offer of $44.6 billion "substantially undervalues Yahoo."

You can't yet watch Flash videos on your iPhone, but soon that capability will be available on Windows Mobile phones.

Adobe announced this morning that Microsoft has licensed its Flash Lite software, the version of the nearly ubiquitous multimedia platform designed for mobile devices. Future Windows Mobile phones will be able to access Flash content in the Internet Explorer Mobile browser.

The announcement this morning that Microsoft will buy Rapt, which makes advertising yield management solutions for digital publishers, marks the eighth advertising-related acquisition by the company since at least 2006. Mary Jo Foley counted them up here.

Rapt will be folded in to the Atlas Publisher Suite, technology from aQuantive, which now resides in Microsoft's Advertiser and Publisher Solutions Group.

The company's products and services measure supply and demand to help publishers "better price, predict, and provision advertising assets." Customers include: CNET Networks, Dow Jones & Company, Expedia, Fox Interactive Media, Microsoft, MTV Networks, NBC Universal, The New York Times Company, Reuters, USA Today and Yahoo.

On Tuesday, Microsoft and Intel, along with researchers from two as-yet unnamed universities, are planning to announce "significant new research ventures," according to a news release Microsoft sent out this afternoon.

The executives making the announcement are Tony Hey, corporate vice president in charge of external research at Microsoft Research, and Andrew Chien, an Intel vice president in charge of the Corporate Technology Group and director of Intel Research.

I wonder if their announcement will look anything like the ongoing research into Internet-scale applications backed by Google and IBM, which got its start at the University of Washington.

Adding credence to reports Thursday that Microsoft and Yahoo were in informal negotiations, The Wall Street Journal today reported that the talks took place Monday and that no investment bankers were present.

Additional details from the Journal, which relied on unnamed "people familiar with the matter":

For the second month in a row, Sony's PlayStation 3 outsold Microsoft's Xbox 360, according to U.S. sales data for February from The NPD Group.

As the two higher-end consoles duke it out, Nintendo's Wii, which is in the midst of several sought-after game and accessory launches this spring, continued to run away with the market.

ERIKA SCHULTZ / THE SEATTLE TIMES

Picture added, 4:23 p.m.: Bradford talking with Terry Semel, then chairman and CEO of Yahoo, at Microsoft's Strategic Account Summit May 9, 2007 in Seattle. At the time, rumors of a Yahoo acquisition were swirling, but it was not addressed in Semel's speech or the Q&A with Bradford.

Joanne Bradford is leaving Microsoft on March 19 for Spot Runner, a Los Angeles advertising company focused on technology to make "television advertising more affordable and accessible for local businesses."

Microsoft said Greg Nelson, who has spent six of his 12 years at Microsoft in a leadership role at MSN, will lead the portal in the interim.

Satya Nadella, the newly elevated senior vice president of Microsoft's Search, Portals & Advertising Platform Group, issued a statement.

CNET is reporting this morning "informal merger discussions" are taking place between Yahoo and Microsoft. The source is unnamed, and there are several caveats that make this soup taste pretty thin. But perhaps the tide is starting to turn on Microsoft's acquisition offer, now six weeks old.

Earlier this week, prominent tech pundits were again considering a scenario in which Microsoft waits for Yahoo's April 22 earnings report -- which could be ugly -- and then pulls its offer. Presumably, this would send Yahoo shares down the tubes. Then Microsoft could come back with a lower offer that investors and management (already under a barrage of shareholder lawsuits) would have to see as the only port in the storm.

I've asked Microsoft for comment on the CNET report, and any update on the status of the offer.

Meanwhile, TechCrunch has named four potential Microsoft candidates for Yahoo's board of directors:

-- Edward H. Meyer - former CEO, Grey Advertising
-- John Chapple - CEO, Nextel Partners
-- Tom Freston - former president, Viacom
-- Jaynie Studenmund - Former CEO, eHarmony

Microsoft is purchasing Kidaro, a Redwood City, Calif., desktop virtualization provider, for undisclosed terms. It comes on the heels of Microsoft's January purchase of Calista Technologies, another desktop virtualization company.

It's at least the third significant acquisition of a company in this space this year, the third being VMware's purchase of Thinstall.

So what is desktop virtualization and what is Microsoft getting with Kidaro?

Microsoft Chairman Bill Gates is scheduled to testify before the House Committee on Science and Technology Wednesday morning in what is likely his last appearance on Capitol Hill as a full-timer at the company he co-founded.

DENNIS COOK / AP

Bill Gates, right, talks to Sen. Edward Kennedy and Sen. Patty Murray in this March 2007 photo.

As he did just more than a year ago, Gates is expected to press Congress on the need to raise the cap on H-1B visas and improve the quality of U.S. high school graduates -- particularly in math and science. (Update, 9:40 a.m., Wednesday: Here's Gates written testimony, a 20-page PDF. Excerpts after the jump.)

BusinessWeek, having reviewed the latest H-1B numbers, reports that "Indian outsourcers accounted for nearly 80 percent of the visa petitions approved last year for the top 10 participants in the program." Only two "traditional U.S. tech companies" are among the top 10 participants. Can you guess who?

Mark Anders, a senior principal scientist at Adobe, read my story today about the former Adobe and Macromedia people who now work on competing products at Microsoft and wanted to point out that "the brainpower flows in both directions." I mentioned at the end of the story that Anders -- who is leading work on Thermo, a new tool for designers building rich Internet applications -- came from Microsoft, but there are many more who have followed a similar path. He gave me just a few examples in an email this afternoon.

"I would like to point out that there are a LOT of former Microsoft people here," Anders wrote.

News Corp. is not going to battle Microsoft for Yahoo, Rupert Murdoch told investors this morning. From Reuters: "We're not going to get into a fight with Microsoft, which has a lot more money than us," Murdoch said at a Bear Stearns media conference.

An interesting footnote on the methodology behind Louise Story's piece today on the amount of data being gathered on us by media companies. The New York Times paid comScore to tally this data. comScore tracked five types of "data collection events," such as videos served or searches entered.

Microsoft is appealing U.S. District Court Judge Marsha Pechman's Feb. 22 decision to certify a class-action lawsuit challenging Microsoft's "Vista Capable" marketing program as deceptive.

In a motion filed Thursday, Microsoft's attorneys argue that Pechman's ruling raises "important legal questions ... which have significance far beyond this case." Microsoft is asking the Ninth Circuit Court of Appeals to immediately review the ruling and asking Pechman to delay further proceedings in the Vista Capable suit until it does.

From Microsoft's motion (18-page PDF):

"If the Court of Appeals answers those questions in Microsoft's favor, this case will not proceed as a class action; if the Court of Appeals resolves these questions in plaintiffs favor, it will lay these threshold legal questions to rest. Either result will allow the parties to approach this action with full information about Microsoft's potential exposure to class-wide damages."

Bloomberg first reported this development.

Update, 12:20: Microsoft's attorneys listed several ways the company would be hurt if the proceedings continued with the case continues with the class-certification appeal unresolved.

Microsoft CEO Steve Ballmer and former Apple evangelist Guy Kawasaki made a great combination on stage. Their hourlong Q&A at Mix, Microsoft's conference for Web developers Thursday, was filled with zingers, tough questions and some pleasantly frank answers -- especially once Kawasaki established early on that he was going to call Ballmer out on any "bull***t PR" answers. They also left enough time to take several questions from the audience.

I included some highlights in this story -- Ballmer's latest comments on the Yahoo bid, Google, online services, antitrust and the pending exit of Bill Gates -- but there was much more than I could fit in the print edition. Below you'll find expanded coverage of various topics from the talk.

For those with the time and the inclination, I suggest you watch the Q&A yourself. There are plenty of technical sections -- still interesting, but not for everyone. There are also several laugh-out-loud hilarious exchanges between the two tech veterans.

Is Apple 'this little Chihuahua you just kick away?'

What's up with Vista?

Three days in the life of the Microsoft CEO

Buying in to Facebook

No comment on the Sonics

Steve Ballmer went toe-to-toe with Guy Kawasaki on Apple, dissing his MacBook Air and welcoming his suggestion that Microsoft might view the longtime rival as a "little chihuahua you just kick away."

"Arf. Arf," Ballmer responded, in a startlingly good impression of a small dog barking. He acknowledged that Apple has taken some market share from Microsoft in recent years and credited the company for the iPhone, calling it a "very prominent product."

"They're going to continue to do good work, and we're going to continue to compete with all vigor and energy," Ballmer said.

One of the best exchanges of the event came when Kawasaki challenged Ballmer on Vista.

Kawasaki: "Another not-so-softball: What's the deal with Vista?"

Ballmer: "Vista, the second-most popular operating system in history?"

Kawasaki: "The one that you get no choice in getting, yeah."

Then Ballmer changed the subject, reaching into Kawasaki's lap to grab his MacBook Air.

Asked to describe his typical day running the world's largest software company, Steve Ballmer outlined three patterns.

There are his days on the road, meeting with customers typically from 7:30 in the morning to 8 at night and then flying to another city for another 11 hours of meetings.

"The second kind of day is what I call the doctor is in his office," Ballmer said. "Every hour on the hour I have a meeting. One-on-one, group reviews, just boom, boom, boom, boom, boom."

That can be a little exhausting, he conceded.

The third type of day is one he spends thinking, writing and researching with only one or two meetings. "Most of the time is mine. Mine to dig into things. Mine to call people I'm interested in talking to," he said.

Ballmer gets a surprisingly small amount of e-mail.

Guy Kawasaki asked Steve Ballmer about Microsoft's "ashtray size" bet on Facebook. Again, it's about advertising and the belief that a few key sites will have an outsize impact on the future of the Web and online advertising, Ballmer said. Neither Ballmer nor Facebook founder Mark Zuckerberg was involved in negotiating the specifics of the deal, Ballmer said.

Later, Kawasaki asked, "What's the Microsoft perspective on social networking? Is it a fad? What is it?"

Ballmer: "The notion that people are going to use the Internet more and more richly and more and more deeply to stay in touch with their friends, to make new friends, that's not a fad. There's no question that's not a fad. The fundamental nature of how people socialize is changed forever."

The business models for social networking will continue to evolve, however.

Check out our complete coverage of Ballmer's Q&A with Guy Kawasaki.

The New York Post chimed in this morning on Yahoo's move to postpone the deadline for nominating candidates for its board of directors -- seen as an effort to stave off Microsoft's acquisition. The Post's unnamed sources expect this to push Microsoft to take a more aggressive strategy.

"'[Microsoft CEO Steve] Ballmer is just one of many highly emotional people involved in this,'' said a source who has spoken with executives at both companies. ''Microsoft has been trying to avoid going completely hostile, but now it is going to get completely hostile.'"

More substantive details in the story, again from unnamed sources: Microsoft has readied a slate of Yahoo director candidates and could submit it as soon as next week. It is considering changing its bid to all cash. The value of the current bid, which is half stock and half cash, changes with Microsoft's stock price, and is down from $44.6 billion when it was announced to $41.5 billion, as of Wednesday's closing price.

Yahoo announced this morning that it amended its bylaws to extend the deadline to nominate candidates for its board of directors. The move gives Microsoft more time to select a slate of candidates favorable to its acquisition bid -- a strategy the company is widely thought to be pursuing. It also removes some of the pressure on Yahoo to come to the bargaining table as early as this weekend, as some observers have speculated.

The deadline, according to this news release, was extended from March 14 to "10 days following the public announcement of the date for Yahoo!'s 2008 annual meeting of stockholders. As the Company has not yet announced the date of this year's annual meeting, the amendment will give stockholders who want to nominate one or more directors, including Microsoft Corporation, more time to do so. The amendment does not preclude any party from nominating one or more directors at any time prior to the new deadline."

Meanwhile, another round of "white knight" talks are making headlines. This morning, The Wall Street Journal, quoting unidentified sources, reported that Yahoo is stepping up talks with Time Warner as an alternative to Microsoft's bid, worth $41.2 billion at yesterday's closing price. (Microsoft shares opened higher this morning.) Reports suggest Time Warner's Internet unit, AOL, would be folded into Yahoo, and the parent company would take a large financial stake in Yahoo.

Microsoft has invited academics and journalists to its Redmond campus this morning for a preview of TechFest, the company's effort to transfer the technology developed in its huge basic research arm to the rest of the company.

Rick Rashid, senior vice president of Microsoft Research, is giving an introductory talk. He's explaining the importance of Microsoft Research, which now has more than 800 Ph.D. computer scientists. One benefit of doing research that looks over the horizon is identifying new competitive threats.

"We're a great early warning system," he said. "We'll say something like, 'You know, this Internet search thing, it could be big some day.' People don't always listen to us."

Microsoft Chairman Bill Gates, taking questions from the audience at his company's SharePoint conference in Seattle this morning, was asked how Google Sites competes with Microsoft's new SharePoint Services. It's an issue I covered in this story.

He lauded Google's Internet search, but said its online offerings that compete with Microsoft's own productivity applications such as Office and SharePoint don't have the richness or responsiveness that businesses demand. He also suggested that Google has been able to make big marketing splashes for its Apps products, but has had little market penetration.

"The day they announce them is their best day," Gates said, adding, "I might be biased."

Asked who he's backing for president, Gates pointed people to www.one.org, an effort he has helped fund to get candidates to state their positions on global healh.

"I'm not making any particular public comment beyond that," Gates said.

He was also asked whether a Microsoft acquisition of Yahoo would have any impact on SharePoint. His answer, not really. The acquisition proposal reflects how serious the company is about consumer search, he said.

Microsoft is getting more mileage from the star-studded spoof video of Bill Gates' "Last Day" at work, which debuted to big laughs at his Consumer Electronics Show keynote and has since been viewed hundreds of thousands of times on the Internet.

Gates paused his keynote at Microsoft's SharePoint conference in Seattle this morning to show it again, with new footage and a cameo from billionaire buddy Warren Buffett, who gave Gates some work space in a Dairy Queen (I think it was a DQ) to hold a meeting on global health. (How tempting it must have been to set that scene in a Hooters.)

The global-health message was more prominent in "Bill's Last Day Redux." In an early scene of Gates working out with Matthew McConaughey, for example, the buff movie star is holding a heavy punching bag and urges Gates on with shouts of, "I am tuberculosis!" Gates finishes off with a head butt.

Still scored hearty laughs.

The line formed at least an hour in advance for Chairman Bill Gates keynote speech to Microsoft's SharePoint conference here in Seattle this morning. The conference is sold out with 3,800 people in attendance. The company announced an expansion of its online services for businesses this morning, previewed in this story.

Gates' appearance begins a week in which nearly all of Microsoft's "C suite" will be speaking. Also today, CFO Chris Liddell is talking at Morgan Stanley analyst conference and CEO Steve Ballmer is taking the stage with a panel of European political leaders, including French President Nicolas Sarkozy and German Chancellor Angela Merkel as part of CeBIT 2008, a tech expo in Hanover, Germany, expected to draw 475,000 people.

Tomorrow, Chief Research and Strategy Officer Craig Mundie speaks at Microsoft Research TechFest in Redmond.

China Central Television is planning an interactive Web site for the Beijing Olympics in partnership with MySpace China and Tudou.com, an online video site, The Wall Street Journal reports. It will be viewable only in China, so it won't compete directly with Microsoft's own site, which it's producing in partnership with NBC Universal.

That site, www.nbcolympics.com, was announced during Bill Gates keynote address at the Consumer Electronics Show earlier this year. It's expected to offer some 2,200 hours of live event coverage from the games with up to 30 streams of full-screen content to choose from. It will be based on Microsoft's new Silverlight technology, which competes with Adobe's Flash -- the widely used online multimedia player that powers YouTube and other popular Internet video destinations.

Advertising agency Crispin Porter & Bogusky has won the Windows account at Microsoft. The company is reportedly preparing a $300 million campaign, according to sources cited in this Advertising Age story. The campaign would seek to promote the operating system with consumers later this year, probably to coincide with the release of Service Pack 1 for Windows Vista. Given the beating Vista has taken in the "I'm a Mac. I'm a PC" campaign for Apple, it will be interesting to watch how aggressive Microsoft and Crispin are willing to be in this next wave of promotions for Vista.

Google Sites, a retooled JotSpot, is getting headlines today as a competitor to Microsoft SharePoint. Microsoft will be making noise about SharePoint next week when it hosts a conference here in Seattle devoted to the software for collaboration among work groups. Bill Gates is scheduled to give a keynote on Monday morning. I wonder how much execs will entertain comparisons of their technology with what Google has on offer.

The reports from Europe are probably echoing around the Los Angeles Convention Center, where Microsoft's "Heroes Happen Here" launch event is scheduled to get going this morning. Despite his best efforts to make peace with Neelie Kroes, the European competition commissioner who announced $1.3 billion in fines against the company, Microsoft CEO Steve Ballmer's launch of three big products later today will be overshadowed by the European regulator.

Ballmer is set to give a keynote speech extolling the virtues of Windows Server 2008, SQL Server 2008 and Visual Studio 2008. Check out today's story for more on what these products, particularly Server 2008, mean for the company and the market. I wonder if he will make reference to the fines -- and whether Microsoft will appeal them. I doubt it. I imagine this is particularly frustrating for Microsoft, especially given its effort last week to position itself and its products as even more open and interoperable -- an announcement that was greeted with a skeptical statement by Kroes even as Microsoft executives were still holding a press conference.

I also wonder whether the fines were announced now with Kroes knowing that Microsoft was trotting out major products. Here's her press release.