Beyond Binary

Microsoft said late Monday that is suspending access to an MSN China microblogging site amid allegations the service is based on code swiped from a rival.

Canadian start-up Plurk lashed out at Microsoft earlier on Monday, saying that 80 percent of the code for Juku appeared to be lifted directly from its service.

Microsoft reiterated late Monday that it is investigating the matter but issued a statement saying it was pulling down the Juku feature while it looks into things.

"Earlier today, questions arose over a feature developed by a third-party vendor for our MSN China joint venture," Microsoft said in a statement. "Because questions have been raised about the code base comprising the service, MSN China will be suspending access to the Juku beta feature temporarily while we investigate the matter fully."

Microsoft added that the investigation was slowed by the fact that when questions were first raised it was the middle of the night in China.

"Now that the day has begun in China, our teams are working hard to track down the information," Microsoft said.

The company also confirmed what a source previously told CNET, namely that Microsoft's MSN China joint venture "contracted with an independent vendor" to create the MSN Juku feature, which debuted last month and is still in beta.

Earlier on Monday, Microsoft said it was investigating the issue.

For its part, Plurk said it is still trying to decide how to handle things.

"We're not entirely sure but we are exploring our options," Plurk said in its blog posting. "We have been seeking advice from respected colleagues, responding to press inquiries and gathering facts on the timeline of events and parties involved here to understand why and how this took place."

It's the second time in recent weeks that Microsoft has been accused of lifting other's work in its products. Last month, the company was forced to pull down a tool for loading Windows 7 onto Netbooks after allegations that the product improperly included open-source code. Microsoft later apologized and last week re-released the tool under the GPL open-source license. Microsoft also blamed a third-party vendor in that case.

Plurk accuses Microsoft China of ripping off its design and code to create its Juku microblogging service.

(Credit: Plurk)

Windows 7 isn't just getting good reviews, it's also selling well, CEO Steve Ballmer told shareholders Thursday.

Delivering opening remarks at Microsoft's shareholder meeting, Ballmer said that Windows 7 was off to a "fantastic start."

"We've already sold twice as many units as any OS in a comparable time frame," Ballmer said. "Windows 7 is simply the best PC operating system that we or anyone else has ever built."

Microsoft CEO Steve Ballmer delivers a point at the company's Worldwide Partner Conference in July.

(Credit: Microsoft )

By last week, Windows 7 accounted for 4 percent of Web-accessing devices, according to Net Applications; it took Vista more than seven months to reach that level.

Addressing the overall economy, Ballmer reiterated that things seem to have stabilized.

"The economy has, at least for now, leveled off," he said.

The meeting is still going on and has just entered the question-and-answer session and I'll update this post if anything interesting comes up. So far, though, it's been mostly about local and legislative matters, rather than technological issues.

Microsoft vs. Apple
There was one fun one from a shareholder who noted that young people tend to gravitate toward Macs and that Apple seems to be outmarketing Microsoft.

"You've got a real bad image out there," the shareholder said. "You sure don't have that younger generation."

Ballmer acknowledged that there are "certainly always opportunities for improvement."

"We all watch television," he said.

That said, Ballmer noted that "96 times out of 100, worldwide, people choose a PC with Windows."

He added that even in the toughest market--the high end of the U.S. consumer market--Windows is chosen 83 times out of 100.

"That doesn't let us rest on our laurels," Ballmer said. "Apple has picked up a couple tenths of a percent of market share."

But those couple tenths matter, he agreed. He said the downturn in the economy has actually bolstered Windows' competitive position. "People understand that Macintoshes are quite a bit more expensive."

Another questioner asked why Microsoft can't better compete against Apple's iPhone and other smartphones.

"Certainly our objective is to have the leading position," Ballmer said. "I think we have a lot of opportunity to improve...Undoubtedly we've got our work cut out for us."

He did say that Microsoft has put a lot of smart people on the task.

"We've got our heads down to do our best," Ballmer said.

When Ray Ozzie first landed at Microsoft in 2005, he found a company with lots of good ideas. He also found things were getting in the way of innovation, everything from businesses that weren't thinking about the broader company strategy to the way Microsoft stationed each of its workers in their own office.

As the new chief software architect set out to work on Microsoft's cloud-based strategy, he also started doing his part to shift that corporate culture. To house his team, Ozzie had Microsoft tear up its typical floor plan. Instead of tons of hallways and offices, Ozzie wanted lots of common space and whiteboards everywhere. Once a notable oddity at Microsoft, such work areas have become increasingly common in recent years.

Ray Ozzie, chief software architect,
Microsoft

(Credit: Microsoft)

Ozzie also quickly set to work on changing Microsoft's product development, first detailing his plans publicly in a 2005 memo, titled the "Internet Services Disruption."

In the missive, Ozzie talked about the emergence of advertising as a business model for software, new ways of delivering software, and the need to make things simpler in an era where users are inundated with technology choices. Ozzie and company Chairman Bill Gates talked about a wave of "Live" software that would extend Microsoft's products with new Internet-based services.

Ozzie challenged the company that it was faced with new challenges and aggressive competitors that threatened its cash cows, but was careful to only rock the boat so hard.

"In assessing where we are and where we need to be, some new efforts will surely require incubation," Ozzie wrote in 2005. "But in many areas we have 80 percent of the product and technical infrastructure already built--we just need to close the 20 percent gap."

The extent to which Ozzie has managed to reshape Microsoft's product and culture since then will be on display this week, as Microsoft hosts a major conference for its developers in Los Angeles.

Azure, Office unveilings
At the Professional Developer Conference, as the event is known, Microsoft is expected to announce the commercial launch of Windows Azure as well as a beta version of its Office 2010 software. Ozzie is set to speak on Tuesday, while office unit senior vice president Kurt DelBene will be part of Wednesday's keynote address.

(Credit: Microsoft)

The arrival of those two products shows just how much has changed since Ozzie's memo.

Shown for the first time at last year's PDC, Windows Azure is the operating system re-imagined for the cloud computing era. Instead of controlling a local PC or server, Azure is designed as a platform where developers write programs that run from inside Microsoft's massive data centers. Microsoft and customers have been testing Azure since then as part of a free technology preview. Starting in February, though, Microsoft plans to start charging based on how much computing resources a customer is using.

Office, while one of Microsoft's core products, is in the midst of a major shift. Amid competition from Web-based rivals such as Google Apps, the product is morphing into a number of different forms, everything from the traditional desktop suite, to a hosted Web service, to free browser-based applications.

Showing off other wares
Beyond Azure and Office, Microsoft will also be talking about other topics ranging from identity systems to developer tools.

It will also be showing some new technology coming out of its labs--highlighting some closer ties between the company's research unit and its product groups.

Live Labs head Gary Flake is scheduled to show off "a new approach to exploring information on the Web."

Meanwhile, Microsoft's Seadragon unit is showing off a couple new projects. Seadragon is known for a "deep zoom" technology that allows a user to dive into an image, going from a wide angle to the finest grain of detail.

One of the group's new efforts--Snapdragon--is designed as a new concept approach to image search. "Snapdragon utilizes Flickr images to prototype what image search would be if, instead of searching, we allowed users to explore images and the relationships between them," Microsoft said on its Web site.

The other is a collection of work by artist Chris Jordan. Jordan's work is particularly well suited to Snapdragon's deep zoom since it uses thousands of everyday objects to create a broader image. In one picture, for example, Jordan uses thousands of cigarette packs to recreate Van Gogh's smoking skull portrait. In another, Jordan uses soda cans to recreate a Seurat painting.

But more than any one product or technology, PDC will serve as a chance to check back and see what impact Ozzie has made with that 2005 memo and in the years since.

For some groups, Ozzie's memo was a codification of what they were already doing. Corporate vice president Dave Thompson, who was running Microsoft's Exchange team at the time, said his group was already moving in that direction--having already bought FrontBridge and PlaceWare--acquisitions that became Live Meeting and Exchange Hosted Services. Plus, Microsoft had started its pilot program with Energizer to see what other sorts of services it might be able to take on for large businesses.

"When Ray sent his memo, it was a broad call-to-action that was a great affirmation and a rallying point for the efforts already underway," Thompson said in an e-mail interview.

But Ozzie acknowledged that the shift to services--and the transition from Bill Gates' style to his--was more jarring for others.

"My engagement style is far different from Bill's," Ozzie said in a recently published interview with analysts from Gartner. "For a number of groups, that has worked out really well. With others, there are challenges. Some people have a different style or a different view of how they want to take it."

Ozzie says that Gates was supportive of the places that his successor wanted to take the company, but also said that neither he nor Gates really knew how to get there.

"In those days, I had conversations with Bill and he'd say, 'Well that's pretty dramatic or radical in terms of what you are trying to accomplish. It's the right thing to do and if you do it, that will be great,' " Ozzie recalled in the Gartner interview. "And I said, 'How?' And he'd say, 'I don't know. It starts with a memo, and I don't know what happens after that.'"

Nonetheless, Ozzie says, Microsoft has gotten where he hoped the company would get. "When I look back and I read the memo, so many of the things that I had written have come to pass, not because I drove them to make it happen, but because the organization made it happen. It may have happened a little differently here or there, but it happened. So, I'm very pleased about that."

Of course, CNET News will be on hand to see what else Ozzie and team have in store, so check back throughout the week to catch our live, ongoing coverage of the event.

Microsoft said on Wednesday that it is notifying approximately 800 workers that their jobs are being eliminated as the software giant completes the layoffs it announced earlier this year.

In January, Microsoft said it would cut approximately 5,000 positions before the end of the next fiscal year, which ends in June. With the latest cuts, Microsoft said it has essentially completed those layoffs. Microsoft CEO Steve Ballmer said in May that it was mostly, but not entirely, done with the job eliminations.

Actually, though, the latest cuts will push Microsoft past that 5,000 number. Once these cuts are made, it will have eliminated approximately 5,800 jobs since January, said Microsoft spokesman Lou Gellos.

Wednesday's job cuts were spread across multiple businesses and around the globe, Gellos said. Microsoft didn't announce any specific products that are getting the axe as a a result of Wednesday's cuts, although it has cut a variety of products in recent months, including Microsoft Money, Windows Live OneCare and, just this past week, its small business accounting product line.

There could also be additional cuts, even as Microsoft does some hiring in key areas. Although January's layoffs were the company's first across-the-board cuts, it regularly reviews its businesses and makes adjustments as necessary, Gellos said.

"We'll manage our businesses closely and do the things that we need to do," Gellos said.

Update 12:05 p.m. PT: As noted by TechCrunch and others, among those let go on Wednesday was Don Dodge--one of Microsoft's key voices in Silicon Valley and a director on the company's emerging business team. Dodge wrote about the turn of events on his personal blog Wednesday.

Apparently it's not only Apple that knows how to draw people in for a store opening.

Microsoft managed to draw more than 1,000 people to its Mission Viejo, Calif., store opening, although some were drawn less by Windows 7 and more by Canadian pop star Justin Bieber (above).

(Credit: Microsoft)

Thursday's opening of a Microsoft Store in Mission Viejo, Calif., drew some 1,000 people, according to the Orange County Register. The store is Microsoft's second, after a Scottsdale, Ariz., outlet that opened last week.

Aliso Viejo resident Stefanie Tran waited almost a full day for the opening, according to the paper, although that was mainly to score tickets to a performance by Canadian pop star Justin Bieber at 5 p.m. Thursday. Tickets were given to those first in line at the store.

Beyond the occasional pop star, the store features a video wall, several Surface tabletop computers, as well as the ability to buy Microsoft Signature PCs--computers from Sony, Dell, HP, and others that feature a clean desktop, no "crapware," as well as the complete collection of Windows Live software.

Microsoft Chief Operating Officer Kevin Turner, who oversees the retail effort, was among those on hand for Thursday's opening.

Microsoft has decided that its Office Accounting product just doesn't add up.

The software maker said on Friday that it plans next month to stop distributing the accounting product line, ending the latest in a series of efforts to take on market leader Intuit.

The accounting product line was launched in 2005 amid some fanfare, but failed to grab much market share and was later pulled from retail shelves in favor of online-only sales.

"We continually evaluate our business strategies to make sure we're working to meet the needs of customers, partners and shareholders," Microsoft said on its Web site. "With that in mind, we have determined that existing free templates within Office used with Excel was a better option for small businesses, and the Microsoft Dynamics ERP products were appropriate for mid-range organizations."

The software maker said it will stop distributing its free Office Accounting Express as well as all of the paid Office Accounting product in the United States and United Kingdom.

Microsoft has been paring back a number of the efforts at the periphery of its product line, including mainstays such as Microsoft Money, which had long been second fiddle to Intuit's Quicken. The company has also discontinued its Windows Live OneCare security software.

Microsoft plans to continue supporting the Office Accounting product, although a number of related services are ending.

"Online sales from eBay and credit profile from Equifax will no longer be available after December 15, 2009," Microsoft said. "However, your customers will still be able to pay e-mailed invoices directly through PayPal. In addition, credit card processing services and the ability to order compatible checks and forms will still be available."

Those who have bought the product in the last 30 days can return it for a refund.

The "Microsoft Signature" PCs that are being sold at Microsoft's retail and online stores contain a bunch of extra Windows Live software, but also feature something rarely found on a PC--a clean desktop.

(Credit: Microsoft)

Although Microsoft isn't making its own PCs, the software maker is taking an active role in customizing just what goes on the computers it sells through its online and retail stores.

In its new role as PC retailer, Microsoft is loading computers with what it's calling its Microsoft Signature experience--a collection of Microsoft products, including the complete Windows Live suite, Security Essentials antivirus product, Zune jukebox, and Bing 3D Maps software, as well as Adobe's Flash and Acrobat Reader products. Internet Explorer 8 is the browser, with Bing as its default search provider.

(Credit: Graphic by Ina Fried/CNET News)

The computers are being sold at Microsoft's two retail stores--the Scottsdale, Ariz., store that opened last week and the Mission Viejo, Calif., outlet that is opening later on Thursday. The software giant is also selling PCs throughout the U.S. via its online Microsoft Store.

The goal of the Signature effort is to give customers what Microsoft feels is the best software experience they can have on a PC.

"Signature gives them a PC that is ready to run," Microsoft retail unit chief technology strategist Kevin Eagan said in an interview. "We think we're really unlocking the potential of Windows 7."

Microsoft isn't completely deciding what goes on the system. Computer makers can also add software that takes advantage of particular hardware features, but it's not allowing any trialware or "crapware."

"Much like other retailers would define (what goes on their PCs), we do the same working closely with our (computer maker) partners," Eagan said.

As part of the in-store experience, Microsoft staffers will also help customers install other software they might want--even competitor's products, such as Apple's iTunes. They can also change their browser or default search provider before they leave the store, Eagan said.

"We want to give customers what they are asking for, so they leave store 100 percent satisfied," Eagan said.

Eagan said Microsoft is just taking advantage of the customization options that other retailers also have available to them and said the company doesn't anticipate any regulatory concerns.

"We're absolutely confident that what we've done is added another choice for customers," he said. "We think expanded choice is good for customers."

Those who already have a PC, but live near one of Microsoft's stores, can bring in their PC and have the Microsoft Security Essentials software added at no charge.

Microsoft said strong demand for Windows and Xbox buoyed the company's financial results in the past quarter.

The software maker said Friday that it earned $3.57 billion, or 40 cents per share, on revenue of $12.92 billion for its fiscal first quarter, which ended September 30. Microsoft also deferred $1.47 billion in revenue ahead of the launch of Windows 7. Adding that back in, revenue would have been $14.39 billion and per-share earnings would have been 52 cents.

Those results topped forecasts, although sales are still down from a year ago.

"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," Chief Financial Officer Chris Liddell said in a statement. "We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions."

Chris Lidell,
Microsoft CFO

(Credit: Microsoft)

On the Windows front, Microsoft saw the number of PCs shipping with Windows grow 6 percent in the quarter even though PC sales overall were anywhere from flat to up 2 percent. Microsoft cited, among other reasons, the fact that more Netbooks are using Windows compared with a year ago.

Overall demand for Windows was strong, the company said, with the software seeing its highest first-quarter unit sales ever and September being the strongest overall unit sales in the company's history.

The company sold 2.1 million Xbox consoles in the quarter, according to a PowerPoint chart posted on Microsoft's investor Web site. That's just slightly down from the 2.2 million units sold in the same quarter a year ago, but up from the 1.2 million consoles sold in the previous quarter.

In a conference call, Liddell said that the company sees the economy remaining tough during the current fiscal year, but noted some potential for improvement.

The earnings report came a day after Microsoft launched Windows 7 and followed the disappointing previous quarter when the company reported weaker-than-expected results.

The company said Friday it is continuing to cut costs. In the current fiscal year, which runs through the end of June, Microsoft said it now expects operating expenses of $26.2 billion, a drop of $300 million from its prior forecast.

Microsoft normally releases its earnings in the afternoons, but it moved the report from Thursday afternoon so it wouldn't step on the toes of the Windows 7 launch.

The company continued to lose a significant amount in its online business, with the operating loss growing to $480 million from $321 million a year ago. Revenue for its online business, which includes Bing and MSN, dropped to $490 million from $520 million a year ago. However, Microsoft said it has seen a mid-single-digit increase in U.S. search revenue.

Looking ahead, Liddell said that Microsoft sees some signs that more businesses will buy new PCs starting next year, though the upgrade cycle will probably stretch over several years.

For the current fiscal year, Microsoft said it expects Windows sales to roughly reflect the PC market, while Office unit sales will lag. It expects its server unit to slightly outpace the overall market, while entertainment unit sale should be roughly flat. For its online business, Microsoft said it expects to outperform the broader market, excluding its MSN Internet access business.

Liddell said Microsoft continues to be hopeful that its search deal with Yahoo will gain needed regulatory approvals and be completed early in calendar year 2010. Liddell said to expect $100 million to $200 million in costs related to that deal, if it closes.

Here's a chart of last quarter's segment-by-segment results, though keep in mind that the Windows numbers are affected by the amount that Microsoft deferred because of the coming launch of Windows 7.

(Credit: Microsoft)

Update at 6:45 a.m. PDT: More details added throughout.
Update at 7:55 a.m. PDT: Added details from conference call with analysts.

(Credit: CNET News)

NEW YORK--In a surprise move, Microsoft has started selling computers and third-party software via its online store.

It's part of a broader push to try to give Windows the kind of lift that Apple has gotten from its network of retail stores. Microsoft had said it would sell PCs at its brick-and-mortar stores, but it plans to open just two of those this year, including a Scottsdale, Ariz., location that opens later Thursday.

Early on Thursday, though, Microsoft revamped its online store, which had been an outlet only for Microsoft products. The remake of the online store comes just as Microsoft is launching Windows 7.

The revamped online store not only has Windows 7 for sale, but also a variety of machines running the new operating system, as well as other PC accessories and software from other vendors.

Clicking on laptops brings up a list of 10 models, organized by price, including two models below $750. The site also offers three Netbooks and a single desktop model, Lenovo's $999 A600 all-in-one.

On the software front, Microsoft is selling Norton 360 and Adobe Photoshop, along with Windows, Office, and other Microsoft products. Accessories include a lot of Microsoft keyboards, mice, and Webcams, along with flash drives and blank DVDs from other companies.