Microsoft

Update at 2:17 p.m. PST, with comments from Microsoft on fate of Windows Marketplace.

Microsoft is doubling down on retail, with the launch of a second online store at the start of this year's especially critical holiday shopping season.

The Microsoft Store, which opened for business Thursday, is designed to carry the largest and most up-to-date selection of the software giant's product lines, such as Office, Windows, Xbox, and Zune.

The one-stop shop will carry Microsoft hardware too.

Microsoft currently operates its Windows Marketplace e-commerce site, which it .

There are many similarities between the two sites, but with the launch of Microsoft Store, that will change.

"With the launch of the Microsoft Store, Windows Marketplace will shut down as an e-commerce site. Marketplace will transition from an e-commerce and referral site to a Web page that will refer customers to sites such as Microsoft Store, Windows Vista Compatibility Center, and other appropriate destinations," a Microsoft spokesman stated.

Meanwhile, according to a Microsoft team blog, the Microsoft Store is also accessible to folks in Germany, the United Kingdom, and Korea. Plans are in the works to add Japan, France, Spain, and the Netherlands in the near future, as well as other countries.

Microsoft is launching its new site at a time when retailers are facing a major downturn as concerns over a recession weigh on the minds and wallets of consumers.

Online retailer Amazon.com issued a cautious note regarding holiday sales when it reported its third-quarter financial results last month, while eBay lowered its fourth-quarter forecast.

As for Microsoft...in this current climate, two sites could have possibly been better than one.

Microsoft is getting more aggressive with Live Search Cashback, a program that offers price cuts for those who buy products found with the company's search engine, touting a 25 percent rebate for items purchased through eBay.

eBay has long been a Cashback partner, but the company went to the trouble of promoting the deal on its Live Search blog Thursday. Kok Waii Wong, Microsoft's group product manager for Live Search, announced the 25 percent eBay rebate on the blog. There are some conditions, though, including a $200 cashback limit and payment through PayPal only. It's offered only in the United States.

That rebate rate is significantly higher than the rebate from most stores, though a few come close, such as Footlocker.com with a 20 percent rebate.

Microsoft also offers a program called SearchPerks that awards points for searching; points later can be redeemed for prizes. The programs are part of its effort to bring more attention to its search engine and compete better against Google and Yahoo.

MOUNTAIN VIEW, Calif.--"Innovation" has been thrown around so often in technology circles that to some, it's a four-letter word.

At one tech company, innovation can mean bringing a dazzling new product to store shelves. At another, it can translate to a tiny new button on a Web site. That's why, executives say, the word itself has been overused and devalued.

Still, new cutting-edge products mean everything to a successful tech company.

Executives from eBay, Hewlett-Packard, Microsoft, and others were here at SDForum's first Corporate Innovation and Research Fair on Friday to talk about their techniques for staying creative. Each company has its own style, with some strategies that overlap. But they all acknowledged it's not easy to innovate, especially considering that large corporate cultures can be a curse to fresh ideas.

Max Mancini, eBay's senior director of Platform and Disruptive Innovation, went so far as to say that Silicon Valley venture capitalists wouldn't make so much money on start-up investments if tech companies were better at developing new products.

"Venture capital firms thrive on inefficiencies in large organizations," said Mancini, who spoke at the gathering held at the Computer History Museum.

His counterpart at HP added to the idea by saying that demands from Wall Street and senior management can stifle innovation. "If you're a larger company, there's high probability you have creative people (in your organization). But creative people get impatient," said Rich Friedrich, director of HP's Enterprise Systems and Software Lab.

That means that these companies either must invest billions in research and development units, or bake in policies to ensure that people dream up new products. Google, of course, asks engineers to spend 20 percent of their time on pet projects. Microsoft, in contrast, employs more than 800 researchers in labs around the world.

A bottom-up style
Roy Levin, Microsoft's director of research in Silicon Valley, said that one reason the labs have proven helpful to Microsoft, including bringing products like Windows Media to consumers, is their bottom-up style. The labs' researchers pick projects themselves and collaborate with each other. They're also not beholden to profit-and-loss goals or managers, he said.

"Every time you introduce (managerial) hierarchy, you introduce barriers to collaboration; and collaboration is key," Levin said.

But once a technology is ready, transferring it to a product group or bringing it to market can be highly difficult, he said. That's why so-called technology transfers are "a contact sport," he said. Researchers must travel a lot to get new ideas and prototypes in front of the right people, Levin said.

eBay's Mancini said that the auction company does two big things to promote creativity. The first is operating a technology platform that mirrors the eBay framework so that its engineers can experiment with new tools. That way, developers can test products outside of the company's rigid software development process, he said.

The other method is to invite third-party developers into the fold through application programming interfaces. He said that in the last year developers have created an estimated 12,000 applications for eBay, producing as many as 60 percent of the listings on the site. "That's innovation we probably couldn't afford," he said.

"Innovation is about the ecosystem, either removing barriers internally or allowing third parties to help meet the needs of your customers in ways you can't afford to do (or have the time to do)," Mancini said.

Similarly, HP's Friedrich said that one of his company's strategies is to partner with outsiders on projects. "All of the innovative people don't work for your company," he said.

HP, for example, teamed up with DreamWorks years ago to work on technology for life-like animation and "cloud" services that were used to produce the movie Shrek. Last week, HP also teamed up with Intel and Yahoo to create six large-scale computing centers that would allow outsiders to test technology.

Cloud services are one of several areas of research for HP, which invests about $3.6 billion annually in R&D, Friedrich said. It's also looking at projects in sustainability and managing data. On a broader level, HP is trying to shift the company from a hardware maker to a software company; and it's doing that largely through acquisitions.

Oracle's Marie-Anne Neimat, vice president of development for embedded databases, also pointed to acquisitions as a way to evolve, beyond Oracle's multibillion dollar annual investment in R&D.

"It's new blood," she said.

Finally, some technology companies have turned into venture capitalists, too.

Ike Nassi, SAP's executive vice president of research for the Americas and China, said it recently started a venture capital incubator. It solicits ideas from internal employees and external start-ups; and if it's a good idea, SAP will help form a new business unit, fold the start-up into an existing product line, or spin it out as a new company, he said.

"If you have an interesting idea and don't want to go the VC route, we provide seed funding," Nassi said.

That's similar to other technology companies. Intel, Google, Motorola, Amazon, and Comcast run venture capital units either formally or informally.

What about the word innovation?

"It's completely devalued," Nassi said. "The thing we need to look at is managing risk--whether placing an investment on this versus that, and what's the payoff of that investment."