A brief break

I'll be out of the office the week of Aug. 1 and won't be posting here until I get back. Have a good week, everybody.

Google court decision

Here's a link (PDF) to King County Superior Court Judge Steven Gonzalez's order yesterday granting Microsoft a temporary restraining order in its lawsuit against Google and Kai-Fu Lee, the executive who left Microsoft to join Google. The decision capped a tumultuous couple of weeks in the most high-profile dispute to date between the budding rivals. See today's story by my colleague, Dan Richman, for more information on the decision.

Microsoft's Xbox car race

Bill Gates, speaking at Microsoft's meeting with financial analysts today, explained that the company believes the hardware specifications of its Xbox 360 and those of Sony's PlayStation 3 are both top-notch. However, Gates said, Microsoft's head start should give it a key advantage: "Our view is, basically, we've got a Ferrari, they've got a Ferrari. Our Ferrari is leaving the starting line substantially before their Ferrari is. In most races that's a very nice thing."

Apple on Windows radar

Speaking to financial analysts here on Microsoft's Redmond campus, top PC Windows executive Will Poole listed three main obstacles facing the company as it tries to keep sales of the operating-system growing: The "good enough" problem in which people are relatively content with their existing version. The continued challenge posed by open-source software. And the "halo effect" in which sales of the Apple iPod are boosting sales of its personal computers.

That halo effect isn't news to people following the trend, but it's notable to hear a Windows executive acknowledge it. "It’s enabling them to more effectively go after PC users and sell them future Apple products," Poole said.

High-end versions coming

He didn't go into much detail, but Microsoft CEO Steve Ballmer this morning said the company will introduce higher-end versions of its core programs, including an enterprise edition of Windows Vista and a premium version of Microsoft Office. He described that plan as part of a broader opportunity for "phenomenal growth" in the company's core businesses. But he also conceded that he has some convincing to do, acknowledging that many people who follow the company aren't as optimistic as he is about its growth prospects.

Also see coverage by Ina Fried of CNet News.com.

MSFT's piece of the pie

At last year's Financial Analyst Meeting, Microsoft CEO Steve Ballmer prompted some head-scratching by expressing the company's growth potential not in absolute figures but rather in terms of the operating profit of three other companies. He opened the meeting this morning with another industry comparison to express Microsoft's growth, but this one more easily understood.

Ballmer said he had the company's number-crunchers add up the operating profit of 25 top technology companies in both 2000 and 2005. In addition to Microsoft, names on the list include Apple, Oracle, IBM, Sony, Yahoo, HP, Google, SAP, eBay, Adobe, Sun, Cisco, Red Hat, Intel, Novell, Symantec, Nokia and quite a few other well-known companies.

The company's calculations put its operating profit (before taxes and some other expenses) at $62 billion, or 18 percent of that industry total (on that same basis) in 2000. In 2005, the calculations put Microsoft's operating profit at $84 billion, or 23 percent of the industry total.

Posting from FAM ...

I'm over at Microsoft's annual Financial Analyst Meeting today and will be posting updates during the day. You can see the agenda and access the webcast from this Microsoft page.

Google, Microsoft in court

A King County Superior Court judge heard arguments Wednesday in Microsoft's motion for a temporary restraining order seeking to prevent recently departed executive Kai-Fu Lee from continuing in his new role with Google. For more details, see this story on the arguments made by the companies in court and in their legal motions. Judge Steven Gonzalez is expected to issue a decision on Microsoft's motion Thursday afternoon.

As the story notes, the case is providing an inside glimpse into the competition between Microsoft and Google. In its motion for a temporary restraining order, for example, Microsoft disclosed the fact that its executives held a previously secret March briefing, entitled "The Google Challenge." And Lee's declaration recounts conversations with Bill Gates, Ballmer and others.

Here are links to PDFs of three key documents:

• Microsoft's motion for a temporary restraining order.

• Google's opposition to Microsoft's motion.

• Kai-Fu Lee's declaration.

Vista, IE7 betas released

As expected yesterday, Microsoft this morning announced the release of the beta versions of Windows Vista and Internet Explorer 7.0, about a week ahead of the schedule the company suggested last week. See this online update for more details.

Motorola's new Windows phone

One of the questions that arose when Microsoft released its new Windows Mobile 5.0 software earlier this year was which devices would use the software. Well, here's one of them. Motorola yesterday unveiled this phone, dubbed the "Q," which the company describes as a cousin of its popular Razr phones. Motorola says the Q should be on the market in the first quarter of next year.

The phone comes with a QWERTY keyboard, and in that way it's seen as a potential rival to Research in Motion's BlackBerry. As Forbes notes, some are calling the new Motorola phone the "Razrberry." But the BlackBerry won't be its only competition. In this post, for example, Engadget shows how the new Q stacks up against the Treo 650.

See this story for more background on what Microsoft is doing on the BlackBerry front. Also see additional coverage of the Q by Engadget, the Chicago Tribune, and VNU.net. And in this post, the MSMobiles site recaps Steve Ballmer's participation in the Q unveiling, via live video. That story notes that Motorola specifically didn't unveil the expected iTunes Motorola phone at the same event where it showed the new Windows Mobile-based phone -- no doubt wanting to ensure that its headquarters remain visible on MSN Virtual Earth. (In case you missed it, see this previous post for background if that lame attempt at a joke doesn't make sense to you.)

Kai-Fu Lee in China

Kai-Fu Lee, the Microsoft executive who left to join Google last week, is apparently forging ahead with his work despite the dueling lawsuits (see previous posts) over his departure. According to reports from Beijing yesterday, he was in China yesterday laying the groundwork for the Google research-and-development center he was hired to lead there.

A Seattleite in Beijing e-mailed me this morning to alert me to Lee's visit and describe some of the additional coverage:

Kai-Fu Lee made a whirlwind visit to Beijing, interviewing candidates for Google's new research center. He talked to reporters briefly ... . He said he approached Google in May on his own after learning [Google CEO] Eric Schmidt -- an old acquaintance -- planned to set up a research operation in China. Since he was not involved in search engine research at MSFT, he didn't think his moving over to Google violated his non-compete clause. Earlier, Lee, who is greatly admired in China, posted a personal message on Blogchina about how he looked forward to starting up the new research institute.

Note the part about not being involved in search engine research. Exactly what Lee was doing in recent years at Microsoft, and to what extent, promises to be one of the critical questions in the lawsuits over his departure, because that will help determine whether what he is doing for Google is in direct conflict. In line with the statement above, he told the New York Times last week that he was primarily working on speech-recognition technology at Microsoft. But Microsoft's complaint says he led the development of some of its search technologies, in addition to being "one of the main architects of Microsoft's business strategies in China."

In fact, Lee's experience in China may be just as or more significant in this situation than his role in the search business. Lee established Microsoft's Beijing research lab, and I've heard him described as extremely effective in working the system and building relationships in China -- as yesterday's visit would suggest.

Security woes increase

BusinessWeek's Spencer E. Ante has an interesting assessment of the personal-computer security landscape in the post-Service Pack 2 era. This won't come as a surprise, but one of the remaining culprits he cites is Internet Explorer.

Since Microsoft released its Windows XP Service Pack 2 last August, many computer users have shored up security of the Windows operating system. However, Microsoft's Internet Explorer remains vulnerable, say experts. One major reason: Software applications such as Internet Explorer contain code that is 5 to 10 years old, when security was less of a priority for software makers. "We are paying for the sins of the past," says Gerhard Eschelbeck, chief technology officer of Qualys, a computer security firm based in Redwood Shores, Calif.

No Apple on MSN's Earth

The Register reports that Apple's headquarters in Cupertino, Calif., are shown as an empty lot on Microsoft's Virtual Earth program, which was released today. In contrast, the Apple headquarters are in full view on the Google Maps service.

It might be tempting, or fun, to jump to the conclusion that Microsoft purposefully omitted the home of its digital music and personal-computer rival from MSN's view of the earth, but it looks as if it's actually a satellite image that predates the construction of the Apple headquarters.

The image of the current Apple site on the MSN Virtual Earth service is the same as this image from Microsoft's longstanding TerraServer project, which indicates that it was a USGS satellite image taken in 1991. But 1991? That's 14 years ago. If that's accurate, why is the new MSN service relying on a satellite image so old?

Update, Monday afternoon: It looks like it is, in fact, a 14-year-old image. Microsoft issued this statement in response to an inquiry about this topic:

MSN Virtual Earth was launched as a beta, and we expect to provide regular incremental updates, as well as major upgrades throughout the year. Ensuring our customers have the best possible information from this new service is critical to us. We’re confident that upcoming upgrades will continue to deliver a service that allows our customers to search locations like never before. We have announced agreements with Pictometry Intl Corp to deliver low-level 45 degree or Birds Eye imagery and with ORBIMAGE to provide Intl aerial photos. Birds Eye imagery will be available later this year, and MS has not announced a timeline for inclusion of ORBIMAGE photos.

Today the aerial imagery in MSN Virtual Earth comes from Microsoft’s Terraserver project (terraserver.microsoft.com). Terraserver has been digitizing publicly available aerial images taken by U.S. Geological Survey's National Aerial Photography Program (NAPP) for use on the Web. The frequency in which these images are updated varies.

The age of Terraserver images in Cupertino in particular are split -- we have some photos taken in 1991, and some from 2004. We believe that differences in our competitor’s imagery are due to them working with other vendors to provide more updated photos. We’re also extending and updating our imagery and are dedicated to continued enhancement of the beta product so that our customers have the best possible local search experience.

Windows 'Vee-sta'?

In online forums and on at least one Microsoft employee blog, there's some suggestion that the company may be pronouncing the new Windows Vista name as "vee-stah" instead of the more traditional "vis-tah." I don't have any official word on this, but going with the more unusual "vee-stah" would seem extremely awkward, and in my conversations with Microsoft people about the new name, everyone has used the normal "vis-tah" pronounciation.

Meanwhile, on a related subject, one of the Inside Microsoft bloggers jokes that the company should start referring to the control-alt-delete combination -- used for terminating frozen programs, among other things -- by the term hasta la vista. Or would that be hasta la vee-sta?

Google v. Microsoft

Here's a link to the PDF of Google's lawsuit in California last week, essentially responding to the suit filed by Microsoft over Google's hiring of Kai-Fu Lee. In essence, Google contends that the non-compete clause in Lee's employment contract is unenforceable under California law. See this previous post for more information, including a link to Microsoft's complaint.

'Free Arfa' campaign

Some participants in the Yahoo! SCO Group message board have begun a grassroots effort to see that non-Microsoft alternatives are available to Arfa Karim Randhawa, the 10-year-old Microsoft Certified Professional from Pakistan. Asks the group's "ColonelZen," who started the "Free Arfa" thread: "How can I arrange to send this kid a Linux box?"

For what it's worth, it appears that Aptech, the parent company of the institute where Arfa studies, does offer Oracle and Java certifications in addition to Microsoft-related ones.

Windows Vista: It's official

The next Windows operating system, previously known by the code name Longhorn, will be called "Windows Vista," the company announced this morning, confirming reports that began to surface last night. See this Microsoft page for the announcement and a video. Here's the new Windows Vista site.

See some of the online reaction via Bloglines, Feedster, and Technorati, where the name was the second-most-popular search term this morning.

UPDATE: In addition to the comments, below, you can weigh in with your opinion of the new name through this seattlepi.com online poll.

Microsoft earnings today

We'll find out this afternoon just how "not bad" Microsoft's fiscal year was. The company reports its quarterly and annual earnings after the stock market closes. Bloomberg News previews the possibilities in this story. Google also will report its earnings this afternoon.

Xbox Live hits 2 million

Microsoft's Xbox Live service has reached 2 million subscribers, the company announced today.

Makeover for Teddy

Teddy, the head-swiveling, interactive, child-monitoring Microsoft Research prototype that creeped out quite a few people when it debuted earlier this year, has lost the hat. Researchers displayed the revised bear (image at right) at the Microsoft Research Faculty Summit this week. The microphones formerly in his hat were attached to the chair. (You can see the row of mics directly below Teddy in the new picture.) The effect is to make him look slightly more like a normal teddy bear. But he still has those cameras for eyes, and it was the concept as much the appearance that creeped people out.

While aesthetics were a consideration in the change, the bigger reasons were technical, explained Steven Bathiche, a researcher from Microsoft's hardware group who is involved in the project. The microphone system works better when it's not moving with the head, although eventually the researchers hope to put the microphones back into the bear's head, in a more inconspicuous way.

"The hat didn't look all that great," Bathiche said.

However, he said the changes weren't made in response to the criticism about the teddy bear's creepiness. He said those criticisms seemed to overlook the fact that Teddy isn't a proposed product but rather a research project exploring the different ways that humans and computers might someday interact.

Microsoft's Google suit

Microsoft filed suit today against Google and a seven-year Microsoft executive, Kai-Fu Lee, who left the Redmond company yesterday to go to work for the search company.

Click here to download a copy of the complaint filed in King County Superior Court. Microsoft is basing its claims on a non-compete clause in Lee's employment agreement. In a statement, Google said it considered Microsoft's suit to be without merit.

See this Associated Press story for more background. Here's the press release in which Google announced the hiring of Lee to head a new research and development center in China. And here is Lee's biography on the Microsoft home page, updated to reflect his departure.

Gates' legal experience

Here's one exchange from yesterday's on-stage discussion between Bill Gates and Princeton University's Maria Klawe at the Microsoft Research Faculty Summit in Redmond. (Read the full transcript here.)

MARIA KLAWE: I would like to close by hearing some of your ideas about how our technology, computing technology, algorithms software, hardware, all these kinds of things can address things like healthcare, education, water quality, all of those kinds of things. Do we have a role to play?

BILL GATES: Yes, absolutely.

MARIA KLAWE: (Laughter.) No, no, that's not enough.

BILL GATES: No, no, I know. The lawyers always tell you first you say yes or no, and then --

MARIA KLAWE: Oh, I see, okay.

BILL GATES: -- and then you explain.

MARIA KLAWE: Yeah, I haven't had as much experience there as you have.

See this story from today's paper for details on Gates' comments yesterday about the effects of declining interest in computer science, as well as the counterpoint from those who say Microsoft isn't adequately tapping the pool of available computer scientists in the United States. For an inside look at the summit, Microsoft Research is offering a live weblog on this page. Also see coverage by eWeek and CNet News.com.

Testing Longhorn demand

Reed Stevenson of Reuters reports in this story that one aspect of Microsoft's upcoming earnings release may give a good indication of initial demand for Longhorn, the next version of Windows. The key measure to watch in that regard is unearned revenue, billings from long-term software deals that are counted as revenue over time. If unearned revenue goes up, the theory goes, that would suggest that businesses are renewing contracts with Microsoft in anticipation of next year's scheduled release of Longhorn and other products, such as the next version of Office.

BioCert trademark tangle

The screenshot below is how a portion of Microsoft's Intellectual Property Ventures Web site looked until the middle of last week. (Click to see a screenshot of the full page.)

If you look at the site today, you'll see that the company no longer is using the name BioCert for the first technology on the list, opting instead for the name Microsoft Biometric ID. The company has similarly gone back and revised the online version of the May 4 news release announcing the IP Ventures program, also replacing BioCert with Microsoft Biometric ID there. (Go to Google's cached version of the news release to see how it was worded originally.)

So what happened? See this morning's Insider column (second item) for information on the trademark infringement lawsuit filed against Microsoft last week by Artemis Solutions Group, a Whidbey Island company that happens to market its own biometric authentication products under the name BioCert, for which it also happens to have a trademark. As the Insider item explains, Microsoft declined to confirm the reason for the switch but said it was talking with Artemis representatives and hoped to resolve the situation amicably.

For more background, see the Artemis press release about the suit, and the complaint (PDF) filed in U.S. District Court last week.

Bill Gates originally introduced the Microsoft biometric technology at the 2004 RSA conference, but back then the company wasn't referring to it by the BioCert name.

James Childers, who owns Artemis, questions how Microsoft could have missed the BioCert trademark. It's somewhat reminiscent of the earlier situation involving MSN's use of the Spaces name for its blogging service, although in that situation the other company that had been previously using the Spaces name didn't have a trademark. I called that company, Edict Inc., for an update on their situation last week but haven't yet heard back. They're still using the name.

A high-profile dumping

Public relations man Steve Rubel, known for his Micro Persuasion weblog, writes an open Dear John letter to Microsoft: "Dear Microsoft," he writes, "I am dumping you." He goes on to explain why he is switching to a Macintosh despite suiting up in Longhorn gear at the recent Gnomedex conference.

Robert Scoble, Microsoft's ambassador to the blogosphere, comments on Rubel's article in this post.

Microsoft ally: Warner?

A story in Sunday's Los Angeles Times explored a new and unexpected twist in Microsoft's longstanding efforts to make Hollywood inroads. Quoting Gates and others, the story says Microsoft's settlement with two years ago with what was then AOL Time Warner "led to a new relationship that has changed the course of Microsoft's fractious dealings with Hollywood. " The story continues:

Since then, the Warner Bros. studio has guided its movie industry peers in quietly meeting Microsoft halfway on a range of contentious issues, setting the stage for the software giant to play gatekeeper for the home video business of the future.

The alliance with what is now Time Warner Inc. "is quite an amazing thing, given that they had a lawsuit against us and we were really mostly in conflict," Gates said in a recent interview. "We have a great, ongoing dialogue with them, including them guiding us on the concerns of other content companies."

Creative investment rumor

Reuters explores the origins and effects of an apparently unfounded rumor that Microsoft was considering an investment in Creative Technologies, one of the companies using Microsoft's technologies in portable audio and video players. According to the story: "The rally was powered by comments last week from Microsoft chief Bill Gates that his company would support Creative in its MP3 player ambitions that challenge the global leadership of iPod-maker Apple Computer Inc." However, the story adds, "Analysts said Gates's comments were not new."

Arfa's poem for Bill Gates

I've gotten quite a few e-mails asking for more details on the poem that 10-year-old Microsoft Certified Professional Arfa Karim Randhawa presented to Bill Gates during her Microsoft visit this week. The folks on Slashdot have also been having fun speculating about its contents.

Arfa gave the text of the poem to Gates during their meeting, so she didn't have it when I spoke with her, but she recited as much as she could from memory. Here's a recording of her reciting the poem, with some help from some of the people who were with her and remembered it, as well: MP3, 0:34.

Microsoft's many payouts

A reporter for the Inquirer technology news site attempts to document and add up as many lawsuit-related payouts by Microsoft as she can. Not an easy task. The sum she comes up with is nearly $9 billion, which the subhead points out to be twice Cambodia's gross domestic product.

Predicting a good quarter

With less than a week to go before Microsoft reports quarterly and fiscal year earnings, financial analysts who follow the company are expecting good results. (Steve Ballmer's encouraging comment at the company's partner conference probably didn't do anything to dispel that notion.) Marketwatch sums up the analysts' expectations in this story.

Microsoft's Marvel deal

This story in the New York Times today explains how Microsoft's deal to make games based on the Marvel comics characters ups the ante in its competition with Sony, which recently struck its own agreement for rights to the DC Comics characters.

Meanwhile, in this story, the Wall Street Journal calls a decision by Electronic Arts to delay release of "The Godfather" video game "a blow to the company's sales plans as well as Microsoft Corp.'s strategy for marketing its next videogame console." Explains the Journal story:

The software company has been counting on the Godfather game to be available around the same time as its Xbox 360 game console, which is expected to go on sale in November. Microsoft needs big-budget games such as The Godfather to help drive sales of the console this year before Sony Corp. markets its rival PlayStation 3 machine next year.

Talking with Arfa Karim

		Dan DeLong / P-I
	Ten-year-old Arfa Karim Randhawa of Pakistan visits Microsoft's Redmond campus.

P-I photographer Dan DeLong and I spent an enjoyable afternoon this week with Arfa Karim Randhawa, a 10-year-old Microsoft Certified Professional from Pakistan, for the story about her that ran in this morning's newspaper. To give you a better sense for what Arfa is like, here are some audio clips of my interview with her:

• Describing her meeting earlier that day with Bill Gates: MP3, 1:40.

• Talking about the programs she has made and the computer languages she uses: MP3, 1:01.

• Discussing what she plans to do in college, and afterward: MP3, 1:23.

• Reciting her philosophy for life: MP3, 0:14 (This is apparently something Arfa has memorized, because it's verbatim with what she has told some of her previous interviewers.)

S. "Soma" Somasegar, the Microsoft vice president who invited Arfa to visit the Redmond campus, writes about his interactions with her this week in this post on his weblog. (See also his additional comments in response to a question below his primary post.)

More on photo keyboard

On the Microsoft Monitor weblog, Jupiter Research analyst Joe Wilcox observes that much of the media focused on Microsoft's new Media Center keyboard in the coverage earlier this week. (Me included.) In fact, Wilcox contends, the other keyboard announced by Microsoft, for editing photos, was the more significant development. Here's his reasoning.

Mac rising, but still small

Apple Computer reported a record quarter yesterday, including another big increase in iPod and Mac shipments. The result suggests a continuation of the "halo effect," in which iPod sales appear to be fueling growth of Apple computers. Here's a look at Apple's unit shipments of Macs, updating this previous post on the subject. (As in the past, this chart references calendar-year quarters. Q2, for example, translates into Q3 of Apple's fiscal year, the quarter reported yesterday.)

However, to put things in perspective, Mac shipments remain a small portion of the nearly 200 million yearly worldwide PC shipments, most of them Windows machines. Actually, at this rate, iPod shipments are also beginning to dwarf those of the Mac. Along those lines, here's a chart that puts the Mac numbers above into context.

Ballmer: 'Woooo! Woo!'

Steve Ballmer has pretty much given up the dancing, thank goodness, but he hasn't lost his trademark enthusiasm. Here's what you don't read in the official transcript of the Microsoft CEO's Sunday keynote at the company's Worldwide Partner Conference, courtesy this story in the St. Paul Pioneer Press:

Microsoft CEO Steve Ballmer repeatedly screamed his love for Microsoft's hundreds of thousands of partner companies worldwide — "I love you, partners! Wooooo! Wooooo-oo!" — as he animatedly paced the stage Sunday on the third and final day of the software giant's annual Worldwide Partners Conference in Minneapolis.

Of course, if you're familiar with Ballmer's knack for big entrances, you know that was only a partial quote. Here's the full quote, transcribed from the event webcast:

"Wooooo! ... Wooooo! ... Woooooo! ... I love you partnaaaas! Wooooo! Round of applause for you guys! ... Woooooo! ... Everybody up too late last night? I love you partners! Let's hear it for you guys, come on! .... Woooooo! ... You guys asleep over here? I love you guys, come on! ... At least I'm awake now."

If that's not enough for you, access the webcast via this page. Ballmer's appearance begins about 50 minutes, 30 seconds into the video.

New keyboard concepts

It's apparently a big day for keyboard news. Microsoft's hardware group this morning announced plans for a special Media Center PC keyboard, effectively combining the functions of a television remote control and a computer keyboard. (Click on the image at right for a larger picture.) See this story from today's paper for more on the subject.

As mentioned at the end of the story, the company also plans to come out with a new computer keyboard designed for photo editing. It comes with photo-editing software and a new mouse with a side button for quickly magnifying a portion of the screen, not only in the photo-editing software but also on Web sites and in other programs. That button is expected to become a standard feature of Microsoft's mice.

Meanwhile, CNet News.com reports on Shark, an experimental method developed by IBM for putting letters into a mobile device by dragging a stylus around a virtual keyboard. Explains the story:

Shark (Shorthand-Aided Rapid Keyboarding) is an advanced pen-based shorthand method that allows users to input words into mobile devices by tracing them letter by letter on a virtual keyboard. Instead of tapping independently on four virtual keys with a stylus to spell "word," for example, consumers would put the stylus on "w" and then carve a continuous trail all the way to "d."

Ballmer hint: '05 'not bad'

Microsoft isn't scheduled to report financial results for its fourth quarter and fiscal 2005 until July 21, but CEO Steve Ballmer gave a hint during his speech yesterday at the company's Worldwide Partner Conference in Minneapolis:

"[W]e're in the process of finishing up our financial year -- but I saw some early numbers -- not that I could comment on them, because if I did you'd all be insiders. So I'm not going to tell you what things look like. But I'll tell you they are not bad. (Applause, cheers.) Which means I want to say thank you, thank you, thank you, thank you, thank you."

That follows another possible clue, the raise disclosed two weeks ago for Microsoft sales chief Kevin Johnson.

Competing with allies

The Associated Press looks at new moves by Microsoft in the software market for small businesses, and how those moves make the company a bigger competitor to some of its partners:

While Microsoft has sold millions of copies of business programs such as Word and Excel, other companies write software that is often customized for individual companies.

Yesterday, Ballmer signaled that Microsoft has its eye on that market. The company has hired more than 200 people such as doctors, bankers, and plant managers to help it write software for specific industries, and it plans to roll out a program called Small Business Accounting this fall that will compete with accounting programs such as Intuit Inc.'s QuickBooks.

Ballmer said he believes business software will increasingly become a product that's ready to use off-the-shelf, rather than needing to be written for individual businesses the way it is now, often by small software firms.

Mary Jo Foley of Microsoft Watch, reporting from the conference in Minneapolis, has this story on the subject: "Microsoft may love its partners. But that isn't stopping the company from continuing to encroach on areas that have traditionally been its partners' turf."

Linux at Microsoft event

Peter Galli of eWeek reports on a lab session at Microsoft's Worldwide Partner Conference where attendees were given an opportunity to see Linux and other open-source software in action:

Titled "Linux and Open Source: Understanding the Competitive Challenge," and run by Don Johnson, an electrical engineer from Techstream Inc., the lab let attendees, many of whom were not familiar with Linux, experiment with KDE (K Desktop Environment) as well as see the Apache Web server in action.

In addition, Johnson, who has been a system administrator and is familiar with both Microsoft and open-source solutions, gave them an overview of some Linux concepts and what he believed were the key tradeoffs between Windows and Linux.

However, it was clear that his bias lay firmly on the Windows side for the most part. ...

The story was posted to Slashdot over the weekend, and you can read through the responses from its readers here.

Tablet PCs getting small

Remember the Ultra Mobile 2007, the tiny Tablet PC conceptual mock-up that Microsoft showed at its Windows Hardware Engineering Conference this past spring? Well, computer makers aren't there yet, but they're getting somewhat closer. Motion Computing today announced the LS800, which it describes as "the most compact tablet PC available running Microsoft Windows XP Tablet PC Edition 2005." That's it, pictured at right.

See coverage by Engadget. Robert Scoble's readers give a mixed reaction in response to his post on the subject. Just for sake of comparison, here's how the LS800 stacks up against Microsoft's hypothetical Ultra Mobile 2007.

Status change for Claria

This was the story last week in the New York Times: "For the last two weeks, Microsoft has been in talks to buy a private Silicon Valley company, a move that underscores just how eager Microsoft is to catch up with Google, the search and advertising giant. The company that Microsoft has pursued is controversial: Claria, an adware marketer formerly called Gator, and best known for its pop-up ads and software that tracks people visiting Web sites."

This was a story today in eWeek: "Microsoft's Windows AntiSpyware application is no longer flagging adware products from Claria Corp. as a threat to PC users."

Google's many thorns

Motley Fool contributor Rick Munarriz considers the many areas in which Google appears to threaten Microsoft in the long run: "Everywhere you look, Google seems to be planting the seeds whose flowers may one day provide the thorns in Microsoft's side."

More for Xbox in Japan?

GameSpot reports that Microsoft will hold an Xbox 360 summit in Japan later this month: "The company is expected to disclose a number of additional games from Japanese publishers, including new ones for the console's launch in Japan."

Microsoft's door glitch

While eating lunch yesterday, some members of Microsoft's Windows and Internet Explorer teams observed an amusing scene at the entrance to one of the company cafeterias. As explained in this post, they concluded that it was an example of a real-world user-interface problem. (Via Ed Bott.)

Roundup: Gates at 'Live 8'

The lineup at the London installment of "Live 8" over the weekend included Bono, Mariah Carey, Pink Floyd, Madonna ... and Bill Gates? Yes, the Microsoft founder and philanthropist was among those appearing at the event, part of the worldwide series of concerts calling on leaders of the G8 nations to provide new aid and support to Africa. The photo at right (AP/Lefteris Pitarakis) shows Gates speaking during the concert at London's Hyde Park, where the crowd either greeted him "like a rock star" or was "somewhat incredulous" at his appearance, depending on whose article you read.

Excerpts from some of the coverage:

• MTV.com backstage report: "If you're ever curious about exactly how many cameras are in a room at any given time, send in Paul McCartney. As he made his way through the backstage area, every disposable, digital and cell-phone camera in the hall materialized from out of nowhere. Publicists, journalists, managers and other musicians were all suddenly just fans. Still, amid the assembled A-list entertainers, who attracted the biggest backstage throng? U2? McCartney? Geldof? Nope: Bill Gates."

• ZDNet: "Gates' presence on a stage shared with the likes of Elton John, REM and Coldplay may have seemed out of place to some but he was also in the presence of famous friends and fellow humanitarians such as U2 singer Bono. Gates was introduced to the crowd by Live8 founder Bob Geldof who praised the charitable work of the Bill and Melinda Gates foundation and hailed the software tycoon as the world's most important philanthropist. Gates told the crowd and a worldwide audience of millions 'if you show people the problems and you show people the solutions they will be moved to act.' "

• New York Times: "Mr. Gates gave a C.E.O.-style pep talk: 'Success depends on knowing what works and bringing resources to the problem. We know what to do.' "

• VNUnet.com: "Introduced by Sir Bob Geldof before a somewhat incredulous crowd, Gates urged world leaders to do more to fight poverty, and called on people to act. 'If you show people the problems and show people the solutions they will be moved to act,' he said. 'The world is beginning to demand more action on poverty. We know what to do. Some day in the future all people, no matter where they are born, will be able to live a healthy life.' "

Inside the IBM deal

Last week's big antitrust settlement between IBM and Microsoft might inspire images of Bill Gates and IBM CEO Sam Palmisano sitting down and hammering out a deal over a game of bridge, or maybe Steve Ballmer and Palmisano working things out over a round of golf.

But reality doesn't quite live up to imagination in this instance. Although the top executives of both companies were kept in the loop on what was happening, there weren't direct discussions between them on the issue. Microsoft General Counsel Brad Smith explained last week that the deal was reached by teams led by Microsoft's Tom Burt and IBM's Don Rosenberg, during meetings in Redmond, at IBM's Armonk, N.Y., headquarters and over the phone. Smith and IBM General Counsel Ed Lineen started the discussions with a phone call about two months ago, and wrapped them up with another phone call last week.

Why the sudden rush to settle? An earlier agreement between the companies to extend the statute of limitations over Judge Thomas Penfield Jackson's November 1999 antitrust findings was set to expire this month -- meaning that IBM needed to either reach a deal or file suit if it was to preserve its claim against Microsoft.

Basketball with Ballmer

Microsoft CEO Steve Ballmer, a devoted basketball player, took time for a game during a visit to the company's Beijing research lab last week, playing with a team of interns against a team of researchers. Kevin Schofield of Microsoft Research in Redmond has the details -- including some great pictures of Ballmer and the rest of the players. Especially check out this one of Ballmer and one of the interns.

Judging from the evidence, Ballmer may want to stick to basketball, as opposed to, say, golf. In a recent interview with the San Francisco Chronicle, republished yesterday in the P-I, Sun Microsystems CEO Scott McNealy recounted how the two top executives began the process of mending fences between the companies.

Question: How did the partnership with Microsoft come about? How did the conversation start?

Answer: I called (Microsoft CEO Steve Ballmer) up. I said, "Let's play golf."

Q: So, he's a golfer, too?

A: No. (Laughter.)

Q: So you had the advantage.

A: Yeah. He lost big time. It was over before we got to the third hole.

Sighting: IE 5 for Mac

I found myself doing a double-take while checking in with CNN Headline News over the weekend. One of the commercials, an ad for Turner Broadcasting's "Bamzu" service, showed the Web site framed in none other than Internet Explorer 5 for Mac.

Seeing the Mac version of a Microsoft program is unusual enough in such situations, given the prevalence of the Windows versions. But in this case, it was particularly unexpected, given that it was way back in June 2003 that Microsoft said it would discontinue development of the Mac version of the Internet Explorer browser. Maybe it's a testament to the program's popularity, or to inertia. But apparently there still are Mac users out there -- or at least in Turner's graphics department -- who haven't yet moved to the alternatives, more than two years later.

Microsoft, IBM settle

Microsoft announced a surprise antitrust settlement with IBM this morning. A summary from the announcement: "Today’s settlement resolves claims arising from the United States v. Microsoft antitrust case in the mid-1990s, where IBM was identified in U.S. District Judge Thomas Penfield Jackson's findings of fact as having been impacted in its business by certain Microsoft practices. Under the agreement, Microsoft will pay IBM $775 million and extend $75 million in credit towards deployment of Microsoft software at IBM."

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

For more background, see the discussion of Microsoft's IBM that begins in paragraph 115 of Jackson's findings of fact. (PDF.) Here's a summary from the ruling:

In sum, from 1994 to 1997, Microsoft consistently pressured IBM to reduce its support for software products that competed with Microsoft’s offerings, and it used its monopoly power in the market for Intel-compatible PC operating systems to punish IBM for its refusal to cooperate. Whereas, in the case of Netscape, Microsoft tried to induce a company to move its business away from offering software that could weaken the applications barrier to entry, Microsoft’s primary concern with IBM was to reduce the firm’s support for software products that competed directly with Microsoft’s most profitable products, namely Windows and Office. That being said, it must be noted that one of the IBM products to which Microsoft objected, Notes, was like Navigator in that it exposed middleware APIs. In any event, Microsoft’s interactions with Netscape, IBM, Intel, Apple, and RealNetworks all reveal Microsoft’s business strategy of directing its monopoly power toward inducing other companies to abandon projects that threaten Microsoft and toward punishing those companies that resist.