Microsoft

With Windows 7, Microsoft is making some subtle changes to the ways it tries to thwart piracy.

As has been the case for some time, Microsoft's strategy hinges on requiring a user to electronically verify their copy of the software, a process known as activation, and then the software also periodically validates that a copy of Windows is genuine.

In Windows Vista, if a user does not activate their software immediately, they get a warning that they still need to do so. The dialog box offers two options, to activate immediately or to do so later. However, the activate later box cannot be checked for 15 seconds.

Microsoft decided this was a bit too annoying. With Windows 7, users can click activate later immediately, but then get a dialog box touting the benefits of activation.

It's the latest effort by Microsoft to scale back the intrusiveness of its technology while still aiming to deter piracy. With the first service pack to Vista, Microsoft made the software significantly more usable to those whose versions of Windows are determined not to be genuine. Before that, Vista systems entered a nearly unusable "reduced functionality mode" once they were deemed to be non-genuine.

"We think we've gotten it to a pretty good place where it strikes an effective balance," said Alex Kochis, director of product management for Microsoft's Genuine Windows unit. "We're committed to the program for the long term because it works."

Microsoft said in December 2007 that it was seeing Windows Vista pirated at only half the rate of Windows XP. Kochis said that general trend has continued.

With Windows 7, Microsoft is also changing the name of its antipiracy technology, from Windows Genuine Advantage to Windows Activation Technologies. The Windows Genuine name took some beatings in the Windows XP time frame, so probably a good move from a PR standpoint.

The software maker is also adding technology designed to make it easier for businesses to activate multiple machines as well as manage activation for virtual machines.

Attention, software buyers: there's no such thing as Microsoft Office "Blue Edition."

That's the latest ruse making the rounds on online auctions. It feigns to be some sort of technician version of Microsoft's software that happens not to require a serial number or product activation or any of Microsoft's antipiracy mechanisms. In actuality, Microsoft says, it's just the latest wrapping for a pirated version of the company's software.

"That program is entirely fictitious," said Matt Lundy, a senior attorney for Microsoft. "It's nothing more than a scheme by pirates to confuse and deceive consumers."

The so-called Blue Edition of Office shown here is nothing more than a cheap pirated copy, Microsoft says. The problem is that the software has been selling well via online auctions.

(Credit: Microsoft)

Microsoft has targeted those selling the "Blue Edition" as well as several other elaborate schemes in a series of 63 lawsuits in 12 countries, including a number of actions filed this week in the United States.

In addition to targeting Blue Edition sellers, Microsoft is going after pirates in New Zealand that were selling counterfeit copies of Windows XP that were shipped to buyers in the U.S., directly from China.

"It really highlights the global nature of the problem," Lundy said. Windows XP remains the version of Windows most often pirated, Lundy said, although in some cases Vista is also being offered.

Although eBay was among the places where those targeted in some of the suits sold their wares, Microsoft said it isn't blaming the online auction site.

"We hold the pirates responsible for piracy," he said. "All online marketplaces are susceptible to abuse."

Piracy is, of course, a huge problem for Microsoft. The lawsuits, while perhaps necessary, don't seem like they will stop such schemes. But maybe they will force pirates to shift tactics, or at least change colors.

Note: Lundy was originally quoted as saying he holds pirates responsible for privacy. He said piracy. I've fixed it above.

Microsoft is touting its actions in 49 countries its Global Anti-Piracy Day. (Click on the map to go to a Microsoft site for the interactive aspects of the map.)

(Credit: Microsoft)

Microsoft plans on Tuesday to announce "Global Anti-Piracy Day," an effort to gain attention for the steps the company undertakes in order to thwart those who would profit from illegitimate software.

As part of the event, Microsoft is highlighting recent antipiracy efforts in 49 countries, ranging from the filing of lawsuits in the U.S. to a seminar for journalists in Pakistan.

It's the kind of thing that Microsoft does all the time, although the company is aiming for some added ink by grouping together so many actions at once.

"One of the things we want to illustrate with this announcement is the diverse nature of the work," associate general counsel David Finn said in an interview from Singapore.

The third pillar of Microsoft's efforts is its engineering work, adding programs like Windows Genuine Advantage that are designed to make it harder--and less rewarding--to copy Microsoft's products.

Whether it's a testament to tougher engineering or the lukewarm response to Vista, or some combination, Windows XP continues to be copied far more than its successor.

"We continue to see much more counterfeit Windows XP," said Finn, who actually says the company is predicting a rise in XP pirating as the last legitimate copies of the OS wind their way off retail shelves.

Overall, Finn said Microsoft and the software industry are making progress in some areas. He noted that the piracy rate in Western Europe has dropped to about 34 percent from the 78 percent level in 1991.

At the same time, however, rates still top 90 percent in some emerging markets. And even in the U.S., where rates are a relatively low 20 percent, that still means 1 in 5 software installations are illegitimate.

"It thwarts innovation," he said.

While much attention these days has centered around whether Microsoft will buy a big name to boost its online business, expect a lot of attention on Thursday to focus on the areas where Microsoft actually earns money.

The Windows business in particular will get attention after showing less than stellar results last quarter. Microsoft has forecast its Windows client unit will show between 7 percent and 11 percent growth for the quarter.

Overall, Microsoft said in April to expect earnings of 45 cents to 48 cents per share on revenue of $15.5 billion to $15.8 billion. (First Call has analysts pegging earnings at 47 cents per share, on revenue of $15.7 billion.)

As for the outlook for the current quarter, which stretches through September, analysts are currently expecting earnings of 49 cents per share, on revenue of $15 billion. It will be interesting to see where Microsoft's forecast comes in, as well as what it has to say about the broader economy and IT spending in particular.

Expect analysts to push for some more details on Microsoft's plans to significantly boost Windows marketing, particularly as Apple is gaining not only mindshare with its anti-Vista ads, but also market share.

Here's another thing I'm going to be watching--piracy rates. Last quarter, the company noted an uptick in piracy rates after making some significant gains. With Vista Service Pack 1, Microsoft also made life for pirates somewhat less onerous.

And of course, folks will be hanging on every word regarding Yahoo, AOL and anyone else Microsoft is thinking about buying. I would expect company officials to have only the expected things to say, that they are still interested in transactions that would accelerate their growth, strong go-it-alone strategy, etc. More interesting will be if they give any of the investment levels that go-it-alone strategy will entail.

We'll have the earnings report just as soon as its out, as well as some insight ahead of the earnings conference call and then frequent updates once the call gets underway.