Blaster restitution deal

As reported late yesterday, Microsoft reached an agreement with Jeffrey Lee Parson over the $500,000 in restitution the Minnesota teenager owes the company for releasing a variant of the Blaster computer worm. Essentially, Microsoft agreed to let Parson satisfy the obligation by working an additional 225 hours of community service, over and above his earlier sentence.

For more background, click here to download a copy of the proposed restitution agreement. (PDF) The deal still requires court approval.

Cursing Word's dictionary

The discussion about Microsoft Word's grammar checker is also prompting people to air their complaints about the spelling checker and incorporated dictionary. Here's an e-mail message I received yesterday from writer William Scholen of Renton, Wash., explaining how those tools handle a certain four-letter word, in his experience:

My complaint is with Bill's dictionary and spell checker.  As a fiction writer I use obscene words from time to time.  When I used WORD 5 the spell checker refused to recognize any of the four letter words that appeared in my writing and would always give suggestions for corrections from way way out in left field.  If I made a typo and misspelled a four letter word the spell checker would do the same.

Now I'm using WORD X and the spell check program is slightly improved, but not much.  If I use a four letter word for sexual intercourse and spell it correctly the spell checker will go right past it, not tag it as a misspelled word as it used to in WORD 5.  But if I use the dictionary and type in the word to get a definition the program won't recognize it and will offer some other word with different spelling and totally unrelated definiton.  I have a Random House Unabridged Dictionary on CD-ROM that is my main dictionary. There are about fourteen definitions for that same four letter word for intercourse, among other things.

The same is true for a slew of other curse words that any fiction writer might use from time to time.  All of this is obviously done by design.  Are Bill's prissy middle class morals at the root of it?  Yes, I think.  I just wish the guys at Microsoft would grow up and produce a really good uncensored dictionary.

More on grammar checker

It has been entertaining to sift through the ongoing discussion of UW professor Sandeep Krishnamurthy's campaign to improve Microsoft Word's grammar checker. A few of the highlights:

• Slashdot comment: "Hulk work hard on Grammar Checker for Microsoft! Program many long hours. Very hard to type with huge green hands and puny little keys! Many times get angry and smash keyboard. Many keyboards broken. Hulk also get help with grammar from Yoda. Yoda very wise. Maybe not best work in world, but Hulk take pride in work. Why puny University of Washington professor criticize hard work of Hulk? Criticism hurt Hulk's feelings. Hulk angry! HULK SMASH!"

• Arguing with signposts weblog: "This just in! Humans understand language better than computers. I know. It’s a shocker. ... I look forward to the paper’s forthcoming series on why paper is a better writing surface than porous rock. Maybe an investigative report on the fact that digital watches are easier to read than analog."

• On a more serious note, Rick Schaut, who works on the Word for Mac program as part of Microsoft's Macintosh Business Unit, describes the technical challenges of natural language processing as they relate to automated grammar checking. He also addresses some of the issues Krishnamurthy raises.

• And finally, I received this short e-mail message, hopefully satirical, from one reader: "rather than improving the computers grammar, students should improve their own grammar. a students 'badly written report' isnt magically healed by grammar check or spell check. a bad writer is a bad writer."

No Belluzzo for HP

The naming of Mark Hurd as Hewlett Packard's chief executive dashes any hopes for what would have been an intriguing twist in Microsoft's relationship with the big computer maker: Rick Belluzzo, the former Microsoft president, was among those reported to be under serious consideration, along with Hurd, to succeed Carly Fiorina.

Belluzzo, now head of data-storage company Quantum Corp., worked as an HP executive earlier in his career. Now that would have been an interesting choice for the top HP job.

The antitrust scrapheap

It probably wouldn't qualify as a David Letterman Top 10, but here, according to Microsoft, is the complete list of names suggested by the company but rejected by the European Commission for the stripped-down version of Windows to be offered in Europe. As reported this morning, Microsoft has agreed to the name subsequently chosen by the commission: "Windows XP Home Edition N" and "Windows XP Professional Edition N."

• Windows XP not incorporating Windows Media Player
  
• Windows XP not including Windows Media Player
  
• Windows XP NIWMP
  
• Windows XP/B
  
• Windows XP/N
  
• Windows OS/U
  
• Windows OS/B
  
• Windows OS/N
  
• Windows OS/C

See this Associated Press story for further developments in the case today.

OptinRealBig bankruptcy

Depending on whom you listen to, Scott Richter is either a "premier Internet marketer" trying to make an honest buck or a "deceptive spammer" in violation of Washington's anti-spam statute. What's not in dispute is that Microsoft's lawsuit against him and his company, OptinRealBig, has helped drive them into bankruptcy. Here's more background on the subject:

Profiling Mimi Gates

P-I art critic Regina Hackett has an interesting profile today of Seattle Art Museum director Mimi Gates, the Microsoft co-founder's stepmom.

Inside Gates' think week

Rob Guth of the Wall Street Journal spent time with Bill Gates during one of his famous "think weeks" at a secluded Pacific Northwest hideaway, location undisclosed. The result was this inside story, published today.

Introducing ... Windows N

Microsoft and the European Commission have resolved one of the lingering differences over the commission's antitrust ruling. The product formerly known as Windows XP Reduced Media Edition shall henceforth be known as "Windows XP Home Edition N" and "Windows XP Professional Edition N" -- the "N" standing for "not with media player," according to this Associated Press report out of Brussels.

Dueling grammar tools

In the process of working on today's story about Microsoft Word's grammar checker, I spent time last week running UW Professor Sandeep Krishnamurthy's demonstration documents through the grammar checkers in various versions of the Microsoft program. I tweaked the grammar-checking options to make them as strict as possible, wanting to make it catch as many mistakes as possible. Depending on the version and settings, the Word grammar checker did catch some of the problems, but it let the vast majority of them go by unflagged.

As noted in the story, however, the most interesting test came when comparing Word's grammar checker to the Grammatik grammar checker that comes inside WordPerfect Office 12.

For example, consider the grammatical train wreck that began this morning's story: "Microsoft the company should big improve Word grammar check." As noted in the story, Word's grammar checker didn't see any problem with the sentence. In contrast, Grammatik in WordPerfect flagged the sentence, pointing out that an adjective such as "big" doesn't typically modify a verb such as "improve." Among other things, the WordPerfect tool suggested checking for missing words.

So far, based on my e-mail this morning, the most common reaction involves pointing out that people should learn to write well enough that they don't need to rely on an automated grammar checker. Judging from my conversations with Professor Krishnamurthy last week, he doesn't dispute that. However, if Microsoft is going to offer a grammar-checking function as part of Word, he says the company owes its users a more effective tool than it currently provides. At the same time, he believes, people who use the tool should be aware of its limitations.

And finally, proving that Clippy jokes never go out of style, the P-I's Brian Chin came up with this satirical graphic to illustrate the story on the seattlepi.com home page last night.

Glaser on 'Plays for Sure'

Covering the annual PC Forum gathering, Eric J. Savitz of Barron's magazine reports on some comments by RealNetworks Chief Executive Rob Glaser (last item).

Among other things, Savitz reports that Glaser thinks "Microsoft is making a mess of 'Plays For Sure,' its effort to provide an umbrella brand for non-Apple music players and download sites. 'It makes the marketing for Microsoft Bob look masterful,' he said. Which is not to say that he thinks marketing is the only issue. 'They're taking a bunch of online sites that aren't that good, a bunch of products that aren't very good, and putting a logo on them. Every nickel they spend on this is a wasted nickel.' "

Link via PaidContent.

Looking for Linspiration

BusinessWeek's Tech Beat has an update on Michael Robertson and the company formerly known as Lindows. Robertson's Linspire, as it's now known, collected $20 million from Microsoft in the settlement of their long-running trademark dispute last year, and the San Diego company is still hoping to chip away at Microsoft's dominance of the desktop computer.

Writes BusinessWeek's Steve Hamm: "I don't hold out a lot of hope for Linspire becoming a force in the industry. After all, mighty players such as HP, Dell and IBM haven't been able to make much of Linux on the desktop. But Robertson is fighting a guerilla war against Microsoft with Microsoft's money, so you’ve got to like that."

'Halo 2' expansion pack

Microsoft isn't waiting for the next generation of the Xbox to try to boost video-game revenue through downloadable extras. The company today said it will release a $19.95 multiplayer map pack for "Halo 2" in June. The Bungie Studios site provides more background.

Bungie on the move

Creating a couple blockbuster video games apparently has its privileges. The King County Journal has the word on Microsoft's plan to move Bungie Studios, maker of "Halo" and "Halo 2," from a satellite campus in Redmond to the site of a former hardware store in Kirkland, near Google's regional facility.

Another twist in EU saga

A new rift has apparently emerged between Microsoft and the European Commission in the company's antitrust case. A commission spokesman told reporters in Brussels that Microsoft essentially wants veto power to control which issues would be eligible for examination by a "monitoring trustee" required by the commission's ruling against the company.

Bloomberg News quotes European Commission spokesman Jonathan Todd: "The commission considers this veto to be unacceptable as it would compromise the trustees' ability to provide the commission with effective assistance in the monitoring of Microsoft's compliance with the March 2004 decision."

The company's initial response, as reported by Reuters: "We are fully committed to complying with the Commission's decision," Microsoft spokesman Dirk Delmartino said. "All the proposals we are sending to the Commission we believe are in line with the decision."

For background, click here to download the portion of the European Commission ruling that requires a monitoring trustee to ensure the company's compliance. Among other things, the passage outlines the broad issues to be overseen by the trustee:

As regards interoperability, the Monitoring Trustee's responsibility should, in particular, involve assessing whether the information made available by Microsoft is complete and accurate, whether the terms under which Microsoft makes the specifications available and allows the use thereof are reasonable and non-discriminatory and whether the ongoing disclosures are made in a timely manner.

As regards tying, the Monitoring Trustee's responsibility should, in particular, be to advise the Commission whether substantiated complaints by third parties about Microsoft's compliance with this Decision are well-founded from a technical point of view. In particular, but not exclusively,

(i) the Monitoring Trustee should advise whether Microsoft has unbundled WMP from Windows as ordered by this Decision;

(ii) the Monitoring Trustee should advise whether the unbundled version of Windows is less performing than any bundled version of Windows that Microsoft would continue to offer, regard being had to the fact that media functionality included in WMP would, by definition, not be part of the unbundled Windows;

(iii) the Monitoring Trustee should advise whether Microsoft hinders the performance of rival media players through selective, inadequate, or untimely disclosures of Windows APIs.

Microsoft board expands

Microsoft is adding Dina Dublon, former J.P. Morgan Chase chief financial officer, as a director, expanding the board to 10 members in the process.

Fortune magazine has routinely named Dublon among the most powerful women in business. She was among the executives profiled in this Fortune story, "Trophy Husbands."

At the Dublon household in New York's Westchester County, it has always been husband Giora who packed the lunches and took the kids to school. Wife Dina, the CFO of J.P. Morgan Chase, is the spouse who handles tough questions from Wall Street about the bank's exposure to Enron. "My dad has always been my mom," says their 16-year-old son, Gershon, with pride. "He keeps a pretty good house."

Symbian's Microsoft deal

A new licensing pact will let people using Symbian's mobile-phone software access e-mail and other data from Microsoft's Exchange Server software. The companies announced the deal this morning, without disclosing financial terms. The arrangement is notable in part because Microsoft's separate Mobile and Embedded Devices Division competes directly with Symbian, the dominant player in the mobile-phone operating system market.

Coverage: CNet News.com, Wall Street Journal, Associated Press, and Reuters.

Microsoft's iPod critique

Digital Media Thoughts recommends Microsoft's "Six Tips for Buying an MP3 Player with Flash Memory", calling it "not too propaganda-heavy." Engadget reads between the lines and comes to a different conclusion, noting that some of the buying guide's tips come off as "not-so-subtle" criticisms of Apple's iPod Shuffle flash player and iTunes Music Store.

Such as Tip No. 3:

You'll want a display: When you have hundreds of songs on your player, you really need an easy way to select your music by artist, album, or genre. This is critical if you want to find that one song or artist you really want to hear. A display also comes in handy when you're looking for your favorite radio station.

Jupiter Research analyst Michael Gartenberg comments on the buying guide: "If this is how they are going to take on Apple, they are in serious trouble."

Microsoft 9, IBM 5

Following up on this preview in Saturday's paper, IBM failed to end Microsoft's winning streak in their charity hockey game over the weekend in Seattle, falling 9-5 to the hometown team.

However, it was one of the tougher games that the team from Redmond has yet faced in the Hockey Challenge's seven-year history. Also, it should be noted that Big Blue's team was assembled just for the event, consisting of people from various IBM offices around the country who hadn't played together previously. Microsoft's team plays together regularly. There's already talk about the possibility of IBM returning for a rematch next year.

The sign at right, depicting Windows executive Brian Valentine, was posted all across the Microsoft campus to drum up attendance. See this story from the Microsoft Web site a few years back for more background on how the event started, as a grudge match between the Windows and Exchange teams.

Bill vs. Barry in search

How will the purchase of Ask Jeeves by Barry Diller's IAC/InterActiveCorp. affect the search competition? As noted in this story by CNet News.com, being part of a larger company could put the Ask Jeeves search engine in a better position to compete against rivals Google, Yahoo and Microsoft's MSN Search.

Adds Forrester Research analyst Charlene Li: "Having worked with [Ask Jeeves] for years, I’ve seen innovation after innovation, but lacking the network and traffic, they usually got short-shifted. They have good personalized search, desktop search, their own algorithmic search engine, and of course, their recent purchase of Bloglines. Add in their ownership of properties like Excite, iWon, and My Way, and they make a great acquisition target for IAC."

What's $5m to Microsoft?

The prospect of a $5 million daily fine is obviously not something any company would take lightly. That's the extra penalty the European Commission is threatening to impose on Microsoft unless the company, in the commission's view, complies fully with last year's antitrust ruling. At issue are the terms of the licensing agreements that the ruling requires Microsoft to offer rivals, to help competing server software interoperate with Windows.

Just to put the potential penalty into context, however, it would take nearly 19 years for a fine of $5 million a day to fully drain the $34.5 billion in cash and short-term investments that the company had on hand at the end of the second quarter -- after paying out its record $32 billion special dividend. That's not taking into account the fact that the company routinely adds a few billion to the balance each quarter from its operations.

Considered that way, it might not seem like the European Commission would have a lot of leverage over Microsoft. But that actually isn't the best way to look at the situation, and it's definitely not how the company's shareholders would see it. That's because $5 million dollars a day translates into more than $1.82 billion a year -- or nearly 5 percent of Microsoft's $36.8 billion in 2004 revenue.

Along the same lines, the extra fine isn't something that could be satisfied by, say, merely cutting back on office coffee or eliminating employee towel service. Even spread among the 58,000 Microsoft employees around the world, the fine would translate into roughly $86.20 per employee every day. To put that into terms Seattleites can understand, that's the equivalent of somewhere around 28.7 grande lattes per employee each day.

Potential fine aside, BusinessWeek's Andy Reinhardt and Jay Greene say in this commentary that Microsoft should pay careful attention to the European Commission's complaints: "In effect, Redmond was ordered to act like a good corporate citizen -- to share information that would let all the servers on a network, whether running Windows or another operating system, communicate on equal terms. In the interests of customers, that ought to be a goal for the software giant to embrace. Instead, it's trying to maintain a proprietary advantage, at the expense of the broader computing industry."

Good Morning Silicon Valley addressed the subject in the headline on its Friday column: "Interoperability? Ohhhhh. We thought you said inoperability. Must have been the accent."

New twist in EU case

The European Commission's new concerns over Microsoft's antitrust compliance focus on the portion of the commission's ruling that requires the company to license technical information to competing server companies. The goal is to let their programs work more effectively with Windows, leveling the playing field with Microsoft. The BBC outlines the commission's latest statements in this story:

"On the basis of market test results, we have serious doubts that Microsoft is complying with the interoperability remedy," EU competition spokesman Jonathan Todd said.

The European Commission said the group had failed on four counts. It was difficult for companies that wanted to licence Microsoft data protocols to get access to its documentation.

Furthermore, companies which wanted to take out a licence would have to pay for an extensive one that also covered items they did not want.

Another limitation was that developers of open source software, which compete with Microsoft in providing software for server computers, could not gain access to the protocols.

But the biggest problem, said Mr Todd, was that: "It would appear that the level of royalties applied would be unjustified."

Additional coverage: New York Times, Wall Street Journal, Reuters, Dow Jones Newswires, and the Associated Press.

Ballmer on MSNBC.com

Microsoft CEO Steve Ballmer during his speech today on the Microsoft campus: "Press reports to the contrary, we and General Electric are very committed to what we’re doing together online with MSNBC."

He didn't elaborate. But note the presence of the word online and the absence of the phrase on television. In that way, his comment doesn't directly refute reports that the companies are talking about the possibility of ending the MSNBC cable channel joint venture. The companies have two separate joint ventures, one for MSNBC online and one for MSNBC cable, according to Microsoft's regulatory filings. (See Equity Method Investments.)

MSN paid search unveiled

Microsoft CEO Steve Ballmer showed the prototype of MSN's planned paid search system at a conference for online advertisers on the company's Redmond campus this morning. Microsoft says the technology is part of a broader system it's calling "MSN adCenter."

Some of today's newspaper coverage focused on the way the Microsoft system would collect and report data to advertisers. Excerpts:

• Wall Street Journal: "For now, the new functions Microsoft is testing appear to be more advanced than those offered by its lead competitors. Today most services charge fees based on the number of "clicks" on a specific advertisement but provide little information about people who searched on a specific term. ... An advertiser linked to "NCAA basketball," for instance, on MSN adCenter could view graphs showing that mostly males age 16 to 60 searched for the term. Such information can be used by Microsoft to tailor its fees based on the audience and move online advertisers from "buying keywords to buying an audience," Microsoft Vice President Yusuf Mehdi said. ... Microsoft said it will give advertisers only aggregate data, not the identities of individual searchers."

• Associated Press: "Analyst Niki Scevak with Jupiter Research said Microsoft's detailed profiles, combined with plans to eventually also sell regular ads on other MSN Web sites through the same system, could give the company a significant edge over its rivals in the long-term. ... But although the personal information is anonymous, analyst David Garrity with Caris & Co. said the detailed profiles could dissuade some consumers from using the search engine. 'This all very much smacks of Big Brother,' Garrity said."

• New York Times: "The executives said the MSN adCenter software would appeal to advertisers by giving them the ability to fine-tune their purchases based on audience demographics. For example, on a search results page, men might be shown ads different from those shown to women. ... Mr. Ballmer also said he thought Microsoft could avoid potential privacy problems by using aggregated data of Web search users rather than individual data."

Decoding 'Digital Pharma'

Joe Wilcox and the Inquirer try, with varying degrees of success, to decipher a Microsoft news release about something called the "Digital Pharma" initiative.

What's Digital Pharma, you ask? According to the news release, it's a "solutions framework" that "delivers a platform, based on open standards" to "enable pharmaceutical and life sciences companies to realize their full potential in a rapidly changing environment by addressing two distinct industry imperatives." Those imperatives, of course, are "speed-to-insight and value-for-cost." All of this, to be sure, will "improve productivity, integrate disparate data sources and enable better collaboration across the pharmaceutical value chain."

Suddenly, it's entirely clear.

Microsoft on TiVo deal

TiVo's surprise deal with Comcast underscores the notion that the cable company isn't inclined to rely on any one vendor of television software for its set-top boxes.

That might be considered bad news for Microsoft, which no doubt would like to expand its own relationship with Comcast, but the Redmond company yesterday downplayed the implications. Asked for a comment on the TiVo-Comcast deal, Microsoft sent along this statement from Shari Glusker, a group product marketing manager in its TV division:

"The Comcast agreement with TiVo doesn’t indicate any changes in Microsoft TV’s relationship with Comcast. We have a solid working relationship with Comcast and continue to work together on the deployment of Microsoft TV Foundation Edition software to Comcast’s digital cable subscribers in Washington State. Comcast has acquired licenses to deploy Foundation Edition to up to 5 million subscribers and the Washington State deployment is already underway. 

"The partnership between TiVo and Comcast is not limiting to us in any way. While for both basic and 'power user' DVR functionality, TiVo and Foundation Edition are very close feature-to-feature, Foundation Edition is a much more comprehensive digital TV software solution that enables operators to give their customers simple and elegantly integrated control of advanced digital TV services like VOD, DVR, HDTV and Interactive Program Guides. That makes Foundation Edition a very compelling solution for the operator that wants to be competitive in the long run."

'Power' struggle

A Microsoft-related item from the P-I business staff's Insider column this morning:

Bill Gates and Lotus Notes creator Ray Ozzie appeared on CNBC's "Power Lunch" last week to talk about Microsoft's plan to purchase Ozzie's Groove Networks. At least, that was the ostensible purpose of the interview.

Presented with the rare opportunity to interview Gates, hosts Bill Griffeth and Sue Herera couldn't resist asking him about completely unrelated topics -- leaving Ozzie, a technology pioneer in his own right, sitting silently for long portions of the interview.

The scene turned almost comical as Gates tried to bring things back to the subject of Microsoft's pending acquisition of Groove and its collaboration software. For example, at one point, Griffeth asked for Gates' opinion on the decline of the dollar.

Said Gates: "Well, I'm not really an expert on macroeconomic things. ... I think the value of innovation is something that will be very strong no matter what's going on macroeconomically. I do see the global economy forcing people to collaborate in more complex ways ... There's wonderful stories about how the Groove product has been used. ... That's the kind of scenario we're seeing in more and more businesses. We just hope we can facilitate the economy working more efficiently."

Ah, back on topic. Well, for a moment, at least. Herera next asked for Gates' opinion on "the situation over at Boeing" -- a reference to Harry Stonecipher's ouster -- and the ethical standards to which CEOs are being held nowadays.

How on earth could Gates turn a question like that back to the subject of the Groove deal? First he pointed out that he passed the CEO's role to Steve Ballmer five years earlier. It has worked well, he said, "to have me focused on product technology -- and now people like Ray Ozzie helping me do that even better."

Access the CNBC video via the link in this Wall Street Journal article.

Microsoft's Groove thing

Microsoft employees are having a hard time containing their excitement over the company's acquisition of Groove Networks and its founder, Ray Ozzie. Nathan Weinberg summarizes the reaction in this post on the Inside Microsoft blog. Part of the reaction comes from Ozzie's reputation in the industry, but Groove's software also is playing a role in the response. Microsoft employee Korby Parnell explains the appeal in this post.

"For end-user application designers ... Groove is like one of those folk singers that most people have never heard about but which nearly every popular musician counts among their top five role models. Groove has inspired and informed my work in countless ways. It is sleek, beautiful, immersive, intuitive, extensible, conceptually well-centered and holistic, almost self-documenting but well-documented nonetheless, fast, and reliable. Admittedly, I don't use it every day but I would if I could and it's looking like I might someday, in one form or another."

Parnell's message to Groove's employees: "Whenever you are in Redmond, give me a holler or drop by my office. I don't care if you're Ray Ozzie or the janitor, I'll make some time to chat."

From Groove to Burst

Busy day for Microsoft news so far:

• The company said it plans to buy Groove Networks, the Massachusetts collaboration-software company founded by Lotus Notes creator Ray Ozzie. See our story online.

• Burst.com says it has reached an agreement with Microsoft to settle their antitrust dispute.

• Associated Press: "Microsoft Corp. announced plans Thursday to open a new research and development center in Ireland that it said would design parts of the next edition of its Windows operating system, codenamed 'Longhorn.' ... Irish Prime Minister Bertie Ahern said the new facility was expected to employ about 100 people recruited from throughout the 25-nation European Union."

• During an address in Washington, D.C., this morning, Microsoft General Counsel Brad Smith called for changes in the U.S. patent system.

A virtual peanut gallery

In addition to a regular webcast, Microsoft offered access to Bill Gates' speech yesterday in San Francisco as a Web conference via its Live Meeting software. The running questions and answers between the participants and the moderator were at times more interesting than the Microsoft chairman's actual presentation.

Lots of the questions were about the technical aspects of the Microsoft software and technical problems with the audio on the conference. Other questions were more, shall we say, entertaining. Some of the highlights:

Question: why aren't you including video of Bill Gates in the custom frame?

Answer: Live Meeting does not support Live Video at this time. It will be a feature included in future releases.

...

Question: what is Bill wearing today? I need a visual!!

Answer: Thank you for your feedack. He's wearing a blue botton down collared shirt.

...

Question: Are the audio problems an issue with Windows Media 9 Audio that you're using or with Live Meeting 2005?

Answer: We are currently investigating what has caused the audio difficulties that you experienced. We apologize for these issues.

...

Question: Will Paris Hilton use this?

Answer: hopefully :)

A sampling of the commentary on various weblogs following yesterday's event: Ed Brill, Phil Wilson, Joe Wilcox and Paul Manoogian.

Glimpse of Xbox 2

Xbox Live's Major Nelson (a.k.a. Larry Hryb) posted a brief audio interview last night in which Xbox executive J Allard previewed some of the expected contents of his speech later this morning at the Game Developers Conference in San Francisco. Among other things, Allard said the company plans to show "a little bit of what the Xenon user interface might look like" and will talk "a little bit about the specs -- just a little bit." Xenon is the internal code name for the next-generation Xbox game console.

In addition, Allard said, "We're going to talk a lot about online, as well, and where we see the future of (Xbox) Live."

Hryb is planning to offer a separate online recording of Allard's speech later today. And on the subject of the next Xbox, Hryb told a funny story earlier in the week about some fans who approached him at the airport to ask about the case he was carrying.

UPDATE: Here's the Microsoft press release about Allard's speech: Microsoft Reveals First Details of Next-Generation Xbox.

'Communicator' debuts

AP Photo/Paul Sakuma

Microsoft's Real-Time Collaboration Business Unit held a launch event in San Francisco this morning, with Bill Gates and "Apprentice" executive producer Mark Burnett, among others. Gates showed programs including the company's new combined communications program for businesses, formerly known as Istanbul and now known as Microsoft Office Communicator. The company said Communicator will be released in the next three months.

The video of the event is available on this page.

Beverly Hills ... 98040?

P-I gossip monger J.D. Marshall relays an odd item from the New York Post, in which Paul Allen is reported to have approached Shannen Doherty, of "Beverly Hills 90210" and "Charmed" fame, and asked for her number at a New York club.

"She gave it to him," the Post's tipster said, "after joking that she'd trade it for some Microsoft stock."

Conference round-up

It's a busy week for Microsoft at various tech conferences and events on the West Coast. A few of the highlights:

• CNet News.com previews Microsoft's Covergence business-software conference, which begins today in San Diego. Microsoft Business Solutions executive Doug Burgum spoke today; Bill Gates speaks Wednesday. Here's the Microsoft news release from this morning.

• The company's Real-Time Collaboration Business Unit is holding a special event in San Francisco tomorrow. One focus is expected to be the launch of the telephony software code-named Istanbul. (See this story for more background on the software.)

• Microsoft Xbox executive J Allard is scheduled to speak Wednesday at the Game Developers Conference in San Francisco. Nintendo President Satoru Iwata speaks at the conference Thursday. The company this morning announced a new iteration of its XNA game-development software.

Justice Dept. picks Corel

Associated Press: "The Justice Department, which challenged Microsoft Corp. in courtrooms for nearly a decade over antitrust violations, will pay more than $2 million each year to buy business software from Corel Corp., a leading Microsoft rival."

About that teddy bear ...

Kevin Schofield, whose team within Microsoft Research organizes the TechFest event, offers a response to what he calls "the whole 'evil spy robot teddy bear' thing which is getting blown further and further out of proportion as it makes the rounds of the blogosphere." (See Brian Chin's previous roundup of the weblogger reaction.)

Schofield explains that "the demo was just intended to show using vision technology to track faces and have a teddy bear's head movements follow faces and mimic some lifelike reactions to people moving around it." He adds:

"It's not 'watch' in the sense of 'surveillance,' it's 'watch' in the sense of  'it can track your head as you move around.' It's a TOY. It's an experiment in how to make a toy that's more fun and more engaging. Plus, this is EXACTLY why we do research ahead of product development -- so we can try wacky things and find out early whether they are actually good ideas or not."

The face-recognition and tracking technology was the initial function on display at TechFest last week. (You can see it working in the computer monitor in the picture above.) However, the researchers who showed the project talked about some future possibilities that would go beyond seeing and turning toward someone. The researchers focused primarily on the possible educational and entertainment aspects, but they also discussed the idea of using the teddy bear to capture moments from the child's day, or to serve as an intermediary for remote interaction between parent and child. Here's how Steven Bathiche, a researcher from Microsoft's hardware group, described some of the long-term possibilities for the Microsoft Teddy research project when I spoke with him during the event:

"Imagine putting a book in front of him and he'll read a story to you. It's totally feasible . ... The other thing is that since this is a networked device in the home, you can imagine a parent at work can log on to their machine and log onto this robot and interact with the child. It's like a phone for the kid, essentially. Or why not, since you've got a camera in there, record snapshots of the life, record the kid as he's playing during the day. Life recorder, essentially. And edu-tainment is another scenario that we're targeting -- which is, 'Hey, Teddy, sing me a song.' Using voice recognition and simple command and controls. ... 'Tell me a story.' Maybe during the day randomly intersperse lessons such as math and vocabulary, grammar, whatever. You can totally do that, and with the connection to the PC, parents can sit at their home computer and actually program a repertoire for a child: 'Wake up at 8, brush your teeth. ... It's time to eat now.' Maybe the parent wants the kid to learn a new word, and use it a sentence. 'Do you know what that is?' [Teddy would say.] That's where we want to go, and all these are feasible with today's technologies."

Surface computing demo

(Click to download QuickTime videos: 15 seconds, 3.5 mb each.)

A couple of the projects on display at the Microsoft Research TechFest yesterday involved "surface computing" -- the idea of turning an ordinary surface into an active computer interface. One of the projects, TouchLight, is shown in this photo of Microsoft researcher Andy Wilson that accompanied our story.

Another surface computing project on display at the event is called PlayAnywhere. The system basically turns an ordinary tabletop into an interactive surface that could be used for playing computer games, among other things. It consists of a computer, a projector and an image-processing system that analyzes video from an incorporated camera to see what is happening on the table, allowing the system to react as programmed.

For example, the PlayAnywhere system can sense when a hand or a piece of paper is placed across the table. It can then adjust the path of the bouncing ball, or project an image or video onto the paper. In the same way, the system can recognize the patterns printed on game pieces placed on the table, and project the corresponding image.

To get a better sense for what this is like, check out three short videos that I took of the PlayAnywhere demo during TechFest yesterday. Click on the images above to download them.

Explained Wilson: "The vision really is that you have this thing that's completely self-contained, and it literally has a handle on it, so you can pick it up and set it up anywhere. A kid could have this in his room, set it up on the floor, play around it -- and in some sense the floor comes alive, or your desk comes alive."

The projects on display at TechFest are still in the realm of research, but because the company's research unit often feeds technology to Microsoft's separate product teams, many of the projects point toward the long-term direction of the company's products. The broader aim of Wilson's surface computing research is to move beyond the traditional screen, keyboard and mouse to use alternative surfaces for input and output. Here's how he explained the underlying motivation for his work:

"The desktop metaphor suits a particular mode of interaction with computers and your documents and your information. But as the machines become more and more part of our daily lives, it's hard to imagine having a desktop computer everywhere you go. We're already moving away from that with the phones and the Pocket PCs and the Tablet PCs -- a lot of different form factors that are really kind of loosening up our notion of what a computer is. ... Now we're really considering what's going to happen after that. Look at it this way: If you have 20 computers in your house, can you imagine having 20 keyboards? No. Some things are going to be specially tailored to environments in your house."

For more on Wilson's work, see his Web page.

MSNBC cable deal ending?

Reports the New York Post, citing unnamed sources: "Microsoft and NBC Universal are in advanced discussions about a deal that could result in NBC taking full control of the cable news network MSNBC."

New trial in Eolas case

Bloomberg News: "A U.S. appeals court threw out a $521 million patent verdict against Microsoft Corp. and ordered a new trial in the case against the world's biggest software maker. The U.S. Court of Appeals for the Federal Circuit in Washington said a trial judge erred in failing to let a jury hear some evidence to support Microsoft's claim that the infringed patent is invalid. To win at retrial, Microsoft must successfully challenge the validity of a patent held by the University of California and licensed to closely held Eolas Technologies Inc."

See the full text of the ruling in this pdf. Microsoft's statement is here.

DOS dispute resurfaces

See the links below for more background on the defamation lawsuit filed this week by DOS creator Tim Paterson over Harold Evans' book, "They Made America," which contends that Paterson essentially ripped off the software that became Microsoft's pivotal MS-DOS program.

• The opening page of the book's disputed chapter on Gary Kildall.

• BusinessWeek's extensive article on the Kildall chapter. The article ran when the book was released in October.

• A link to a pdf of Paterson's suit, filed Monday.

• Tim Paterson's Web site and the beginnings of his planned account of the origins of MS-DOS.

• A news release for the audio version of the book: "... we see Gary Kildall invent the operating system that will underpin Bill Gates's empire."

• The "They Made America" PBS series, based on the book.

• A Washington Post online Q&A in which Evans answers a reader's question about digging up information on the innovators he profiled: "Perhaps the toughest to get right was the story of Gary Kildall and his invention of the operating system that led to Bill Gates' fortune. I had his unpublished memoir and lots of interviews -- but Bill Gates, who had the vision to see where the [PC] could go, did not feel disposed to answer questions about Kildall."

Gates receives knighthood

Associated Press

Coverage: BBC, Associated Press, and Bloomberg News. See also Gates' official statement.