Google IPO and Microsoft

A quick search of Google's long-awaited IPO registration statement, submitted today, shows some interesting Microsoft-related statements but no big Microsoft-related surprises. Most of the mentions come, as you would expect, under the category of risk factors. Here's the relevant passage:

We face significant competition from Microsoft and Yahoo.

We face formidable competition in every aspect of our business, and particularly from other companies that seek to connect people with information on the web and provide them with relevant advertising. Currently, we consider our primary competitors to be Microsoft and Yahoo. Microsoft has announced plans to develop a new web search technology that may make web search a more integrated part of the Windows operating system. We expect that Microsoft will increasingly use its financial and engineering resources to compete with us. Yahoo has become an increasingly significant competitor, having acquired Overture Services, which offers Internet advertising solutions that compete with our AdWords and AdSense programs, as well as the Inktomi, AltaVista and AllTheWeb search engines. Since June 2000, Yahoo has used, to varying degrees, our web search technology on its web site to provide web search services to its users. We have notified Yahoo of our election to terminate our agreement, effective July 2004. This agreement with Yahoo accounted for less than 3% of our net revenues for the year ended December 31, 2003 and less than 3% for the three months ended March 31, 2004.

Both Microsoft and Yahoo have more employees than we do (in Microsoft’s case, currently more than 20 times as many). Microsoft also has significantly more cash resources than we do. Both of these companies also have longer operating histories and more established relationships with customers. They can use their experience and resources against us in a variety of competitive ways, including by making acquisitions, investing more aggressively in research and development and competing more aggressively for advertisers and web sites. Microsoft and Yahoo also may have a greater ability to attract and retain users than we do because they operate Internet portals with a broad range of products and services. If Microsoft or Yahoo are successful in providing similar or better web search results compared to ours or leverage their platforms to make their web search services easier to access than ours, we could experience a significant decline in user traffic. Any such decline in traffic could negatively affect our net revenues.

For further coverage of the Google IPO, see sites including Google IPO Central, MSNBC.com, and TheStreet.com and Watching Google Like a Hawk. The Associated Press weighs in here. And here is the company press release.

Kinsley swimming away

This week I experienced one of those moments of serendipity that can restore a person's faith in the universe. At a conference in Seattle a few days ago, I happened to meet someone who was selling a collection of used Microsoft books, magazines and memorabilia. I ended up buying pretty much all of it, and in going through the pile yesterday I came across a copy of the May 20, 1996, issue of Newsweek magazine.

On the cover, next to the headline "Swimming to Seattle," was Michael Kinsley, then the newly appointed editor of Microsoft's Slate online magazine. "Everybody is Else is Moving There," the cover read. "Should You?" The story was a fascinating read, documenting a watershed moment in Seattle's recent history, from the emergence of grunge to the rise of Starbucks and Microsoft. A passage on Kinsley -- the former New Republic editor who was probably best known for going head-to-head with Pat Buchanan on CNN's "Crossfire" -- noted that he had second thoughts about his decision to join Microsoft when he was invited to "bond with his colleagues in a game of Laser Tag."

The serendipitous part: As it happened, not two hours after I went through that article yesterday, the Los Angeles Times announced that Kinsley will be joining the newspaper in June as its editorial and opinion editor. He'll be leaving his position as a contributing editor to Slate, although he'll remain part time in Seattle. As you can probably imagine, I couldn't help but let the experience of looking back at the Newsweek story influence the angle of the story about Kinsley that ran in this morning's P-I. If you have access to a copy of the physical paper, we also ran an image of the cover along with the story.

Also see coverage by MSNBC, Editor & Publisher, Reuters, the New York Times, the Associated Press -- and, of course, the L.A. Times.

Apple, Microsoft and toast

Apple Computer CEO Steve Jobs, in a conference call today marking the one-year anniversary of the iTunes Music Store, reiterated his past comments about the prospects for portable video players, such as the Portable Media Center devices set to debut later this year around a new type of Microsoft software. (One of them is pictured at right.) In short, Jobs said he thinks they're a bad idea, and he said Apple doesn't plan to add video to the iPod.

His comment on the issue came in response to Detroit Free Press reporter Mike Wendland, who asked what's next for the iPod. Video? A color screen? Might we see an iPhone multi-purpose device?

"You know, our next big step is we want it to make toast," Jobs answered. "I want to brown my bagels when I'm listening to my music. And we're toying with refrigeration, too."

Wendland, laughing, tried to get Jobs to be serious: "But where is it going? Are you going to stay strictly in music or will there be other features?"

Responded Jobs: "You know one of the things that I say around Apple, I paraphrase Bill Clinton when he was running long ago, when he said, 'It's the economy stupid.' I say, 'It's the music, stupid.' We have to stay focused on the fact that people are buying these devices to listen to music. ... People love listening to music as a background activity when they're exercising, when they're commuting and when they're just hanging out. Music is a wonderful thing because A, it's music, and B, because it can be listened to as a background activity. And a lot of these other things that people are talking about building in, such as video and things like that, are foreground activities. You can't drive a car when you're watching a movie. You know? It's really hard. So we really are very focused on music because that's what we think the revolution is here."

Want anti-virus with that?

The graphic at right shows the results from yesterday's poll on the seattlepi.com home page, which asked readers whether Microsoft should build anti-virus protection into Windows. As you can see, nearly 77 percent of respondents answered yes. It's important to keep in mind that these polls are unscientific and not designed to be representative, making it difficult and unwise to try to draw from them conclusions about the larger population. Still, it's an interesting result.

The poll was based on this story from Saturday's P-I, which recounted the comments of Microsoft General Counsel Brad Smith at a seminar held by Seattle University and TechNet. As the story explains, the situation presents Microsoft with a dilemma. With many computers unprotected, some might say it would be responsible for the company to incorporate antivirus capabilities into Windows. But doing so could give rise to claims over the competitive impact. (See also this previous story on the subject.)

Public sentiment seems to be more divided than the poll results suggest. I received this emphatic e-mail from a reader in Renton after the story appeared:

An absolute NO!!!!!! Would you buy a car built by Microsoft?? Hell NO!! McAfee, Norton and Innoculan do a great job with their virus programs. It's only those folks who are too cheap or too ignorant to invest in or learn to constantly update their virus programs that get hit with viruses. As a computer tech who has RELIGIOUSLY kept his virus program updated, I have been hit with exactly ONE virus in 4 years that came even remotely close to doing any kind of damage.....Having Microsoft get into the virus protection business is an exercise in futility & will only give us a sub-standard product.....Don't own a virus program or do not update it regularly?? TOUGH LUCK!!! Like the old Fram oil filter commercial. You can pay me now or you can pay me later.....

Also see this discussion on Neowin, below a reference to the story. A comment there and a post by Joe Wilcox on Microsoft Monitor both questioned the 70 percent/30 percent statistic cited by Smith during his speech. I've made a few calls in an attempt to figure out where that came from, and I'll let you know what I find out. (Microsoft CEO Steve Ballmer cited essentially the same stat in a speech a few weeks ago.)

In the meantime, I went back to my recording and transcribed the relevant portions of Smith's speech. It's important to note that this came as part of a much broader discussion. He also talked in detail about the security-related responsibilities of Microsoft, the rest of the industry, government, law enforcement and others. With that in mind, here's what he said about the consumer aspect of the issue:

"Automobile manufacturers have had to do a great deal to make cars safer. But individuals are still the ones who decide whether to put on their seatbelt. And to some degree the same analogy applies with respect to PCs, as well. And I think part of our responsibility as an industry is not only to provide the tools that individuals can use but to invest in increasingly broad education campaigns to help make consumers aware of the tools that are at their fingertips, and the need for them to use them.

"So earlier this year we launched a Protect Your PC campaign that basically has three simple steps. First it encourages individuals to turn on their firewall in their software. Especially if they have a broadband connection, there's really no reason for the individual to keep that PC connected without having their firewall turned on. Through something like the Security Center in Windows that I mentioned, that will become even easier for people to access. The second is for people to regularly update their software, and again, with a broadband connection, that becomes an easy and even seamless step for people to take. And the third step is for people to keep their antivirus software up to date.

"If you bought a new computer for your home in the last two or three years, in all probability it came with some type of limited-in-time, free subscription from a company like Symantec or Network Associates for anti-virus features. The interesting thing today, however, is that only 30 percent of consumers keep their anti-virus software up to date. What that means is that as more and more of these computers are being connected through broadband links to the Internet, over two-thirds of these PCs do not have current anti-virus protection. And so, while we as an industry need to keep making it easier and perhaps even less expensive for people to do this, ultimately it will be a bit like the seat belt in people's cars. We need to ask people and remind them to keep their software up to date, to turn on their firewall, and to subscribe to an ongoing anti-virus program."

Later, during the Q&A, a person in the audience noted that, in the auto industry, consumer lawsuits prompted manufacturers to install seat belts and airbags as standard features, not just as options. (The issue of legal liability is different in the software industry, given the protections of end-user license agreements. See this story and this post from last year if you're interested in more on that issue.) The person asked Smith whether the same might happen in the software industry -- with antivirus features, for example. Here's what Smith said in response:

"Well, you raise an interesting question, because the reality is, over the last decade, Microsoft has been sued not for leaving things out but for putting things in. [Laughter from crowd.] There is a tension that is a real-world tension. We definitely have emerged from all the antitrust issues of the last decade with a keen appreciation for the wide variety of ways in which our decisions affect others, including others in our industry. There are a number of very important companies that we collaborate very closely with, and have for years, who are in the anti-virus space. At the same time, one does hear increasingly suggestions from consumer organizations or consumers who basically say, 'Gee, why don't you build anti-virus support into Windows?'

"It's not a decision that we have decided to take, to date, but it is something we hear increasingly about. I have to say, it is a real cause of concern for us that 70 percent of consumer PCs do not have current anti-virus protection. It is such a threat to what we characterize as the PC ecosystem as a whole. It is such an obvious threat to everybody who uses a PC, whether they have anti-virus protection or not, because it can be a threat to the entire Internet. ... If people come to perceive PCs as these devices that are more problematic to use, that is something that can become a barrier to the industry's long-term ability to keep growing.

"And so, it is something that we're definitely mindful of. At the same time, I think we are really trying to bear in mind all of the factors in the equation, including the benefits that consumers would derive if there were stronger anti-virus features built into operating system software, whether it's from Microsoft or Apple or anyone else. ... We clearly need to bear in mind the potential impact on other highly respected companies in our industry."

Keeping Sun talks secret

Over lunch at an event where he spoke last week, Brad Smith, Microsoft’s general counsel, told this behind-the-scenes story from the company's recent settlement discussions with Sun Microsystems:

The final stages of the talks, in late March, took place in New York City. At one point, Smith had to leave for a previously scheduled speaking commitment at the nearby Columbia University Graduate School of Journalism. As Smith tells the story, one of the people there -- unaware, like everyone else, that settlement talks were under way at that very moment -- asked about the possibility of a resolution in the Sun case. Smith could only say that he certainly hoped one would be possible.

Imagine that person's surprise at the news a few days later.

MBS: A closer look

Mary Jo Foley of Microsoft Watch analyzes the financial performance of Microsoft Business Solutions in this story and questions whether the unit -- one of Microsoft's seven primary divisions -- will meet its stated goal of becoming profitable by the end of the calendar year.

Behind all that ill will

Why do some people hate Microsoft? John Topley -- "a Java developer who does actually like Microsoft" -- poses that question and seeks to answer it in this extensive and thoughtful post on his weblog. (Link via Watching Microsoft Like a Hawk.)

European decision text

The European Commission released the 302-page public version of its Microsoft antitrust ruling today. You can go to this portion of the EU Web site to download a copy (under "Hot Topics"). Microsoft released a seven-page response (click here for the .pdf) essentially previewing the arguments it's likely to make on appeal. In the meantime, the trade group CCIA is asking Secretary of State Colin Powell and U.S. Trade Representative Robert Zoellick to refrain from intervening.

.Net vs. Java: One view

Sun Microsystems and Microsoft settled their litigation and agreed to cooperate in a range of areas a few weeks ago, but they're still competitors. One of the main areas of competition is between Microsoft's .Net and Sun's Java, rival platforms for software development.

In a story this morning about a $16 million round of funding received by software company Dexterra Inc., John Cook, the P-I's venture capital reporter, wrote about issues including the company's decision to go with .Net. Here's the key passage below, quoting Rob Loughan, Dexterra's founder.

Unlike some competitors, Dexterra's software is completely built around Microsoft's .NET technology. It only works on Microsoft-powered devices such as the Tablet PC, Smartphone and Pocket PC.

Tying its future to one technology platform -- in this case Microsoft -- was a risky strategy. But Loughan, who prior to co-founding Dexterra ran sales at Octane Software, said it was an important decision that propelled the company forward.

"We bet the company on Microsoft," said Loughan. "And you know what? It was a damn good decision."

When Dexterra was formed, Loughan considered building the company around Java, a competing programming language pioneered by Sun Microsystems. One of Dexterra's main competitors -- Arlington, Va.-based Telispark took that path, said Loughan. Telispark was sold to Infowave Software for $8 million earlier this year.

"I am raising $16 million and they are selling for $8 million," said Loughan. "In my opinion, they made the wrong platform choice."

Lindows files for IPO

Lindows Inc., the desktop Linux vendor in a trademark dispute with Microsoft, filed papers with the Securities and Exchange Commission today for an initial public offering of its stock, seeking to raise as much as $57.5 million. Among the disclosures in the filing: As of Dec. 31, the company had an accumulated deficit of $11.9 million. The company also discusses the Microsoft litigation at length. See the full document here.

Jeff Bezos as heckler

Frank Catalano wrote an interesting roundup of the Science Fiction and Fantasy Writers of America's Nebula Awards, held this past weekend in Seattle. (Link via Anita Rowland.) Among the anecdotes Catalano tells:

Rick Rashid, senior vice president of Microsoft Research, while giving the keynote speech on previous visions of the future, had a display problem that required him to re-start his laptop. While the audience waited ... and waited ... a lone voice, belonging to Amazon.com founder Jeff Bezos, shouted out from the audience, "It's nice to see that Windows doesn't boot up any faster for you."

Computer student decline

NPR's Morning Edition had an interesting story this morning on declining enrollment in college computer science programs, adding some context to Bill Gates' recent college tour. Listen to the NPR audio here.

How many 747s is that?

In looking for a way to conceptualize $53 billion, Microsoft's cash balance as of Dec. 31, some colleagues and I came up with the approach reflected in the opening paragraph of this story from today's paper:

The sum of $53 billion is enough to fund NASA for a year, assemble a fleet of 100 Boeing 747s, and buy every person in Seattle a 2004 Subaru Outback -- with a few billion left over for incidentals.

In case you're wondering, here's the math behind the sentence:

• NASA's 2004 budget: $15.4 billion
  
• A fleet of 100 Boeing 747-400s (at $215 million each at 2002 prices): $21.5 billion
  
• A Subaru Outback (at $23,470 MSRP) for every person in Seattle (pop. 563,374 in 2000 census): $13.2 billion.
  
• Total: $50.1 billion
  

There's got to be a MasterCard commercial in there somewhere.

Addendum: One more point came to mind on this issue: Discussions about the company's cash make me think back to a passage in the book "Hard Drive" (by James Wallace of the P-I and Jim Erickson, then of the P-I) where Steve Smith, Microsoft's first marketing director, discovers in the company's bank account 10 certificates of deposit worth $100,000 each. "After that," they write, "he never worried about his marketing budget."

Even back then, it seems, Microsoft didn't quite know what to do with all the money it was making.

Minnesota settlement

Microsoft and lawyers representing Minnesota consumers this morning announced that they reached a settlement in the consumer class-action suit in the state, which accused the company of overcharging for its software.

Here's the joint statement. See this Associated Press story for more details. The settlement ends what had been the first consumer antitrust class action to reach trial against the company. Highlights of the trial included some interesting e-mail disclosures and an apology from a Microsoft lawyer about the company's tactics. Bill Gates and Steve Ballmer had both been expected to testify in the trial.

A new Newsbot

The test version of the MSN Newsbot news-search engine was updated this week with some of the additional features shown a few weeks ago at a conference on the Microsoft campus. The beta is now available in 10 versions, each targeted to an individual country, although there's no U.S. English version as yet. You can access the various sites through the MSN Sandbox page.

New features of Newsbot include a section called The Daily Me, with a search-history feature similar Amazon.com's newly launched A9 search and personalization features similar to Greg Linden's Findory.com, which we profiled last week. Stefanie Olsen of CNet News.com has more about MSN Newsbot and the other news-search tools in this story.

Real's Apple overture

Despite our best efforts, we haven't been able to get Microsoft or Apple to comment on yesterday's New York Times story, which detailed an e-mail from RealNetworks CEO Rob Glaser to Apple's Steve Jobs, seeking a "tactical alliance" opening the iPod to use with RealNetworks' music services. Without such an alliance, Glaser wrote that Real could be forced to support Microsoft's rival media format. As this Associated Press story explains, Real has apparently made no further progress with Apple.

Online chat about MSR

WashingtonPost.com hosted Rick Rashid, the Microsoft senior vice president in charge of the company's research unit, for an online chat with its readers yesterday. Topics included Microsoft Research's role in the technology behind Longhorn, the next version of Windows. Here's the transcript (free registration required).

New antitrust filings

Microsoft, the U.S. Justice Department and Massachusetts filed their latest status reports yesterday in the company's U.S. antitrust settlement. Click here for the full text of the Microsoft/DOJ joint status report. Click here for a .pdf of the Massachusetts filing.

In its portion of the report, Microsoft disclosed new licensing deals with Time Warner, Sun Microsystems and GeoTrust, giving them access to the communications protocols needed to make their software work better with Windows -- a key issue in the antitrust case. But the Justice Department said it received a complaint about the technical documentation given to the licensees. The agency concluded that the documentation "needs substantial revision" to make it more usable. A status conference is scheduled for next week in Washington, D.C.

See stories by News.com, Bloomberg News, and Reuters.

Lindows changes name

As promised last week, desktop Linux vendor Lindows Inc. today announced a new name for its software, trying for now to avoid litigation outside the United States with Microsoft, which alleges that Lindows infringes on the Windows trademark. Lindows said its operating system, previously called LindowsOS, will now be known as ... drum role, please ... Linspire.

The company itself will still be called Lindows. But the surprising part is that the name of the software will also be Linspire in the United States, except "in certain instances," when the name Lindows will still be used, according to the news release. Lindows CEO Michael Robertson had seemed to suggest in this newsletter last week that the name change would apply only outside the United States.

Lindows says in today's news release that, in the United States, the legal fight will continue over its use of the Lindows name for its software. As part of that case, Lindows is asking the court to declare the Windows trademark generic, and therefore invalid. The initial court rulings (see stories here and here) haven't been especially promising for Microsoft in that regard.

But it was Microsoft that started the case in the first place, meeting its legal obligation to defend its trademark. The question now: If the product itself were no longer named Lindows in the United States, could Microsoft simply drop the suit, thereby sidestepping Lindows' related challenge to the Windows trademark? Or would the "certain instances" be just enough to require Microsoft to continue to pursue the suit?

"It's still too early to tell how this will impact the legal proceedings," Microsoft spokeswoman Stacy Drake said after the Lindows announcement. "We need to learn more about what changes will be made." However, she added, "We're pleased to see that they've changed their name to one that does not directly infringe on our trademark. As we've said all along, this case and our issue with Lindows have always been about the name."

Update, 4 p.m.: After talking about this further with lawyers who have been tracking the case, it doesn't look as if this move by Lindows opens the door for Microsoft to escape the genericness challenge. For one thing, CEO Michael Robertson says the Lindows name will still be used on software sold in retail stores in the United States. For another, Lindows' challenge to the trademark's validity came in the form of counterclaim, which would keep the issue alive even if Microsoft were to drop its claims against Lindows in the United States.

In addition, even if Microsoft were able to end the case at this point, the preliminary rulings by U.S. District Chief Judge John Coughenour would still exist, perhaps influencing future cases. In one of those rulings, in March 2002, the judge wrote that there were "serious questions regarding whether Windows is a non-generic name and thus eligible for the protections of federal trademark law." More recently, in a ruling that Microsoft is appealing, he wrote that any jury assessing the validity of the Windows trademark should consider the time period prior to its 1985 debut, before the word became famous in connection with the Microsoft operating system.

"Judge Coughenour's decisions are out there, and they can't make those go away," said Tom Hoffmann, a lawyer with Gray Cary Ware & Freidenrich and an adjunct professor at the University of Washington Law School who lectures on the Lindows case. "Even if Microsoft walks away from it in this case, the problem is still there and any other defendant is going to raise the same issue."

Google on the offensive?

It's no secret that Microsoft is preparing to take on Google in the search-engine space. But could Google emerge as a challenger on Microsoft's turf? Chris Gaither of the L.A. Times explores the possibility in this story today. (Free registration required.)

Executive blogger back

Eric Rudder, senior vice president in Microsoft's server and tools division, has resurfaced in the blogosphere, as Mary Jo Foley notes.

For those of you who might not have been tracking this story, Rudder last May became the highest-ranking Microsoft executive to start a weblog. It was widely seen by employees as a green light to start or continue with their own personal blogs. But in the months that followed, Rudder, no doubt a very busy guy with more important things to do, posted nothing further.

That changed with this post a couple weeks ago, in which he noted that others have jokingly suggested using his name as a verb for "letting one's blog go dormant." He set low expectations, writing that it's "incredibly difficult to find the time to post," but he followed up with another post yesterday, not only addressing the Sun Microsystems settlement but quoting the R&B hip-hop group OutKast to make a point.

We mentioned Rudder's blog in this story last summer about the Microsoft employee blogging phenomenon. He's also the senior executive who was involved in the fender-bender mentioned in the sixth paragraph of that story.

More vulnerabilities

Microsoft released four security bulletins today, three of them critical. The associated patches fix a total of 20 vulnerabilities in Windows and the Outlook Express e-mail program. The bulletins are part of the company's regularly scheduled monthly release, but the number of reported vulnerabilities is significantly more than usual. Click here to get the full list, and, if you're a Windows user, instructions on downloading the patches. Here's an AP story by Allison Linn with more details.

Another big settlement

Click here for the official details on Microsoft's $440 million settlement and licensing agreement with InterTrust Technologies, a California company that filed a patent infringement suit against Microsoft over its digital-rights management, or DRM, technologies.

See coverage by the Associated Press, the New York Times, and News.com.

For more background, here is Google's cache of InterTrust's Web page detailing the case. (The actual page appears to have been taken down.)

Mag cites Longhorn trim

A story by BusinessWeek's Jay Greene, citing internal e-mails obtained by the magazine, says Microsoft is scaling back some of the features of Longhorn, the next version of Windows, to make sure it's shipped in the first half of 2006.

More on exec moves

A couple additional notes on this story from today's P-I, about SQL Server VP Gordon Mangione and Content Development and Delivery VP Rich Kaplan moving over to the Security Business and Technology Unit: A replacement for Kaplan has not yet been named. As for Mangione's position, the company says it will essentially be covered by existing SQL Server execs and Paul Flessner, whose role as senior vice president in the Server Platform Division already includes oversight of SQL Server. See their official bios for more information about Kaplan and Mangione.

A Google Web browser?

In the letters section of this week's Newsweek, the magazine's readers offer some interesting responses to the recent cover story about Google. One reader suggests that Google create its own Web browser. Another notes Microsoft's search ambitions and asks, "What's the deal with Microsoft, anyway -- why does it have to be in control of everything? It's as if General Motors also wanted to own all of the gas stations, the roads you could drive on and the radio stations you might listen to on your trip." Read all the letters here.

In Yahoo's tea leaves

Microsoft won't report its quarterly earnings for a couple weeks, but Yahoo!'s strong financial results, announced yesterday, would appear to bode well for the Redmond company's MSN Internet division. Yahoo's quarterly revenue rose to $758 million from $283 million. Much of that increase is credited to revenue from Overture Services, the Yahoo company that provides sponsored search results for sites including MSN. Overture and Microsoft share the proceeds from the MSN sponsored search feature. (See our recent Microsoft Notebook for more background.)

The youngest MVP

In this post yesterday, I wrote that Brian Desmond, a 16-year-old Windows Server MVP from Chicago, is the youngest person in the program. That's incorrect. In fact, the current youngest is 14-year-old Benjamin Johnstone-Anderson, a Windows Security MVP who was 13 when he first received the recognition. Thanks to those who e-mailed me about this.

Ballmer on monoculture

During the question-and-answer session at the end of this speech today in Washington, D.C., Microsoft CEO Steve Ballmer was asked the "monoculture" question by a Mac user.

The idea is that the pervasiveness of Windows fosters a situation in which a single software flaw could be exploited to wreak havoc around the world. (The term is borrowed from biology, where a lack of genetic diversity can make crops vulnerable to widespread damage from pests.) The person who asked Ballmer the question didn't use the word, but expressed the basic concept. See this Wired News story from February for more explanation.

Here's the exchange from today's Q&A, as printed in the transcript. I'd be interested in seeing comments on Ballmer's response. Does his logic hold up?

QUESTION: My name is Philip Steger. I'm from the Embassy of Austria. I'm a Mac user, and as such I've been spared many of the viruses. And one of the questions that of course comes up when you see a lot of your colleagues who are working with a specific other operating system, the question -- and having, you know, a lot of problems -- the question comes up is, isn't the preponderance of one major operating system part of the problem?

STEVE BALLMER: No.

(Laughter.)

STEVE BALLMER: No, I'd be happy to explain it, too. But the answer is no.

(Laughter.)

STEVE BALLMER: Let me give a little context around that. There are an installed base of about 600 million computers in the world. That's a good thing. I hope nobody disagrees that it's a good thing that there's a lot of computers installed. If we're going to continue to see computers flourish and have many, many more hundreds of millions of computers, the truth is whether there is one or two -- not that I'm desirous to see there be a lot more than Windows. I love Windows, but whether there's one or two or three operating systems that have some high percentage of that installed base, the truth is, hackers will go after one or two or three. They will go after what is popular. They will go after what is popular.

If we said, "Whoa, wouldn't it be great if the world had 100 million different operating systems, because then none of them would be popular, and nobody would ever attack any of the operating systems?" Well, that's obviously not a very good idea, because when you get things spread that thin, there'd be no critical mass of computers that people could write applications for, so the computers would have much less value. The truth is, we have a lot of the users, but, you know, Linux gets attacked all the time. The Mac, less so, because the Mac's an even more narrow percentage of the population. We're glad you love your Mac. We've got a new version of Mac Office. I encourage you to take a look at it.

(Laughter.)

STEVE BALLMER: So, we are not anti-Macintosh in any sense. But I think that as long as there are a handful or less of operating systems that are popular, hackers will figure out how to attack each and every one of them, because there will be profit to be made, national security interests to be pursued, and mischief to be done. And so I don't think -- I don't buy into the argument, which I have heard articulated before, that you raise.

Watching Channel 9

If you haven't seen it yet, be sure to check out Channel 9, a Web site launched this week by a team of Microsoft employees who are trying, as they put it, to create "a new level of communication" between the company and outside software developers. The site has video interviews, a wiki, and a moblog, among other features. It's named after the United Airlines in-flight channel that lets passengers listen in on the cockpit.

See coverage by Mary Jo Foley of Microsoft Watch, Ryan Naraine of InternetNews.com, and Joris Evers of the IDG News Service.

MVP Summit under wraps

Access to the Microsoft MVP Global Summit is being tightly controlled this year, even by Microsoft's standards. In contrast to years past, no reporters were allowed to listen to speeches yesterday by Microsoft executives. (The agenda included CEO Steve Ballmer and Windows Group Vice President Jim Allchin.) Microsoft's public-relations reps say the restriction was made in part because the execs were talking about some information that wasn't yet meant to be public.

I was able to have some interesting conversations with a few of the MVPs during a designated press event yesterday. Phil Webster, a Windows Direct X MVP from El Paso, Texas, talked about the advantages of being able to help other developers by using his ability to view source code through the company's Shared Source Initiative. I also got a chance to talk with Thomas Lee, a Windows Server MVP from England; Greg Low, a developer tools MVP from Australia; and Brian Desmond, a Windows Server MVP from Chicago -- who, at 16, is the youngest person in the program. (He runs the network at Walter Payton High School.)

(Unfortunately, as I was leaving the event, a security guard, seeing "press" on my name tag, quickly directed me to an elevator bank and out the door, squelching any hope I had of wandering around a bit.)

The people attending the event are required to sign non-disclosure agreements, or NDAs, limiting what they can say about what they saw or heard. They weren't allowed to bring laptops, cameras or recording devices to the speeches yesterday. Still, some of them have posted on their blogs what little they can disclose, giving at least a flavor of what happened behind the closed doors. Here are a few of the posts from yesterday's speeches and other portions of the event:

• MVP Summit, Day 2
  
• MVP Summit, Day 2 (Sander Gerz)
  
• MVPs at the Summit
  
• Musings from the MVP Summit
  
• Summit Day 3 -- Executive Day
  

Glaser tests the waters

RealNetworks CEO Rob Glaser, in Europe to launch the European versions of the company's latest media player, tells reporters that RealNetworks is talking with PC makers to assess the impact of the European Commission antitrust ruling against Microsoft. That ruling would require Microsoft to sell a version of Windows in Europe with out Windows Media Player, potentially opening the door to companies such as RealNetworks. See coverage by Reuters and News.com.

Captioning Gates' mower

John Paczkowski of the Good Morning Silicon Valley column held a contest among his readers to fashion a caption for this strange AP photo of Bill Gates with a background image of a lawnmower. (We posted it here a couple weeks ago.)

He lists the winners toward the bottom of this column. The longer list of submissions is in this column. My favorite: "Microsoft Chairman William Gates discusses the company's new 'Where Do You Want To Mow Today?' public relations campaign ... " submitted by Greg Phillips.

Tablet PCs on the mind

Apple Computer may be renowned for the allegiance it inspires among users, but it would be hard to match the level of devotion I heard last night during a dinner of Tablet PC enthusiasts. (In fact, I felt a little sheepish scribbling notes in my low-tech reporter's notebook.) The dinner was held by Microsoft's Tablet PC team for its MVPs, or most valuable professionals, people the company recognizes for their leadership in Microsoft-related technical communities.

About 1,500 MVPs related to all sorts of product groups are in Seattle and Redmond this week for their annual summit. They are hearing from executives including Windows chief Jim Allchin and Microsoft CEO Steve Ballmer today at the Washington State Convention & Trade Center. (Those speeches aren't open to the general public or press this year.)

The Tablet PC aficionados at the dinner last night included Spencer Goad, of Tablet PC Buzz; Fritz Switzer of abletfactory.com; Terri Stratton of TheTabletPC.net; Linda Epstein of TabletPC2; Lora Heiny of TabletPCPost; Loren Heiny, a.k.a. the Incremental Blogger; Dennis Rice, who contributes to Tablet PC Buzz; Peter Rysavy of Tabula PC, and Chris Hassler, who has the Tablet Creations site; among others.

The market acceptance of Tablet PCs has been mixed, as we reported last fall, but there are some positive signs. Among them: Stratton, who catalogs all forms of Tablet PCs on her site, said last night that it has been hard keeping up with all the new models coming out from various manufacturers.

More on Sun settlement

When I heard the big news while on vacation last week, I found myself checking the date to make sure it wasn't April 1. I'm sure I wasn't alone.

Here's the latest on Microsoft's settlement with Sun: The Associated Press reports today that the deal is unlikely to affect the European Commission's ruling against Microsoft, even though Sun helped instigate that case. John Markoff of the New York Times (republished here in the International Herald Tribune) considers the deal in the context of Microsoft's broader relationship with Silicon Valley. Steve Gillmor of eWeek.com has more of the nitty gritty in this interview with Sun's Jonathan Schwartz.

Sun's employee bloggers, as listed here by Simon Phipps, have so far been mostly silent on the matter on their blogs, with exceptions including Patrick Chanezon and Richard Giles.