Apr. 16 2001

MSFT  $67.80 B.G.  $48.3B 01.04.30. Thanks to BillG Networth.

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When Microsoft introduced HailStorm several weeks ago [see Mar. 26, 2001], privacy advocates protested the plan to store user information on centralized servers. Microsoft dismissed their concerns, claiming all customer details will be controlled by the users themselves and stored on secure servers maintained by outside companies. Under no circumstances would they EVER try to take control of anyone's personal information. Meanwhile, the Terms of Use agreement for Microsoft's Passport Web site were giving The Behemoth intellectual property rights to MSN customer's personal communications.
According to the terms, anyone communicating from Passport or a site/service accessed through it (Hotmail, MSN Messenger, et al) would give Microsoft the right to "use, modify, copy, distribute, transmit, publicly display, publicly perform, reproduce, publish, sublicense, create derivative works from, transfer or sell any such communication." Microsoft could also sell the content to anyone else without paying the author a dime, and "publish your name in connection with any such communication" - meaning that those confidential messages could be broadcast to the world if Microsoft ever had a desire to do so. The Terms of Use agreement was in direct contrast with similar documents on other sites (like Hotmail) using Passport for login and verification services, but the Passport ToU specifically said it would override any other agreements if there were conflicts.
Once the Passport agreement was uncovered the news spread across the Internet like wildfire, bringing much negative news coverage down on Microsoft's pointy head. Particularly outraged were the privacy advocates who have opposed their Internet plans for years - but even some of Microsoft's staunchest defenders were taken aback and angered at the company's clear violation of user trust. The Terms were never displayed during customer signup processes on Passport (or any of the other sites), so literally hundreds of millions of customers had accepted the agreement without ever laying eyes on it. Hotmail customers, some of whom used the service to transmit valuable intellectual property, began immediately abandoning the service in favor of other free mail providers with less draconian policies.
To stop the bad press and stem the flow of departing customers, Microsoft dove into spin mode and came up with an explanation of the situation. According to spokesman Tom Pilla, the Passport Terms of Use were outdated with no updates since at least 1999 (if not earlier), and were invalidated by the site's Privacy Policy. Pilla claimed the ToS never trumped privacy policies or user agreements on any other MSN site, and Microsoft had never taken advantage of the agreement to take any personal information or intellectual property for its own uses. The terms were then amended to reflect Ms' newly discovered concern for its users, giving the company rights to only materials specifically sent to it by the customers. (As a side note, international Passport customers are still bound under the old terms since the amended agreement doesn't apply to them.) To offset fears abut HailStorm, Mr. Pilla said it will have a separate terms of use agreement - which may or may not give Microsoft rights to the thoughts, ideas, and eternal souls of its customers.
ALSO SEE: The Register, Wired News, ZDNet, The Register

On April 2nd, Microsoft announced the final lineup and pricing scheme for Office XP. The office suite upgrade will be available in four flavors: Standard, with the typical applications of Word 2002, Excel 2002, Outlook 2002, and PowerPoint 2002; Professional, which adds Access 2002; Professional Special Edition, adding FrontPage 2002 and Publisher 2002; and the high end Developer edition that contains teamgroup software and Office development tools. (Several other variable versions will be made available for OEM preloads.) Prices for the suite range from $330 for a Standard edition upgrade to $800 for a standalone release of XP Developer - a rather steep pricing scheme for a piece of software that gives existing Office users no reason to purchase it. But that won't be a problem for everyone, as Microsoft is also giving away limited trials of Office Standard to anyone willing to pay $9.99 shipping and handling. The trial version expires after 30 days, but there are apparently registration keys floating around that extend the deadline indefinitely (not that we would encourage any sort of illegal behavior).
ALSO SEE: WinInfo, CNET, The Register, TechWeb

With Office XP priced so high and lacking new features of any significance, how does Microsoft plan to convince users of previous versions to upgrade? By promoting features Office XP doesn't have - namely the ill-advised Office Assistant help features that have annoyed countless people over the last four years. On April 11th Microsoft launched a new Web site that does nothing except poke fun at 'Clippy', the default Office Assistant character. The extremely tounge-in-cheek site explains that Clippy is concerned about his future because Office XP is supposedly so easy to use that he is no longer needed. The site includes polls, animated cartoons, and games - all designed to push Office XP. No word on how much of Microsoft's $30 million Office ad budget went into creating the site, but with celebrity cartoon voiceovers we expect it cost quite a bit. Certainly not as much as creating a patch to turn Clippy off by default in Office 97 and 2000 - which is all Office XP actually changes; The Office Assistant characters will still be available under its help menu.
If the anti-Clippy campaign is successful in luring people to upgrade Office, Microsoft will reportedly include a 'continual beeping noise that won't stop' feature inside Windows XP. This new function, which will not become activated until Windows.NET ships sometime in late 2002, is designed to let users know that an upgrade is available and encourage them to purchase it. According to beta testers, the 'continual beeping noise that won't stop' will be generated by an internal speaker which cannot be disconnected. Additionally, future releases of VisualStudio are rumored to include something Microsoft is calling 'ActiveBSOD', a feature that we so far know nothing about. [That was a bit too sarcastic, sorry.]
ALSO SEE: CNET, The Register

For the last few years, especially since he stepped down as Microsoft's CEO, Bill Gates has talked frequently - almost obsessively - about a class of computers fitting between handhelds and laptops. The devices would look similar to a laptop screen minus keyboard, with input done via stylus, speech, or touchscreen. Gates calls his pet project Tablet PC, and he displayed a nonworking prototype of one at last year's Fall Comdex [see Nov. 20, 2001]. Last month during the WinHEC 2000 trade show Gates brought out a more recent Tablet PC prototype, this time a working model running a modified version of Windows XP. Gates said the product is being seriously developed by Microsoft, Compaq, Acer, Sony and other companies, with plans to put the device on sale sometime next year.
Unfortunately for Microsoft, all the effort put into developing and promoting Slablet PC probably won't be enough to avoid a repeat of what happened when other companies introduced similar products in the past. Tablet computers from Apple and 3Com both had extremely short lives, and Microsoft's design adds nothing (including purpose) to what those unpopular products offered. In the five months since Gates first displayed Tablet PC at Comdex we've been unable to come up with a single reason why anyone would choose this device over a laptop or a simpler PDA, especially considering that it uses Windows XP. WinXP is designed for computers equipped with a keyboard and mouse instead of a stylus, so the interface will be clumsy and hard to use - and XP's hardware requirements will drive Tablet PC's weight, heat, energy use and price so high that nobody outside Microsoft will have anything to do with the thing anyway. This is just another good example of what happens when large egos and small brains bump into each other.
ALSO SEE: PC World, CNET, TechWeb, The Register

Also at WinHEC, Gates announced the immediate availability of Windows XP Beta 2, only three weeks later than originally planned. The software was handed out for free to developers attending the conference, and was immediately sent out to Microsoft's legion of product testers. But Microsoft's professional customers - MSDN and TechNet subscribers who pay thousands of dollars every year in exchange for early access to all the company's software - were left out in the cold. Microsoft at first said it would send out a set of CD-ROMs to all MSDN subscribers the following day and make the beta software available for download, but then rescinded that promise because of "security reasons" related to Windows XP product activation keys. Then MSDN customers were told they would get XP Beta 2 CDs in the mail afterall - but not until the beginning of May, some six weeks after it was made available to everyone else.
Most MSDN and TechNet subscribers are professionals who develop applications or drivers that work with Microsoft products - and as a result need access to new software (especially Windows) before it is made available to the public. So, as one might expect, they were quite put off at Microsoft's neglect. ('Put off' being a nice term meaning they were ready to storm the gates of Redmond and ride the other Gates of Redmond out of town on a rail.) After a week of questions and protests from the developer community, Microsoft finally backed down and started sending Windows XP Beta 2 CDs with unique activation codes to professional subscribers. All of which leads us to one question: Would a company without a monopoly treat its developers and professional partners that way? We don't think so either...
ALSO SEE: WinInfo, The Register, WinInfo, The Register

Hewlett-Packard and Microsoft have saved themselves from having to pay hefty fines by agreeing to demands made by the Federal Trade Commission. The FTC accused Microsoft and HP of misleading consumers with their advertising for the HP Journada PocketPC [see Mar. 12, 2001], claiming that the devices provide built in wireless Internet access when they actually require the extra cost of an additional landline or wireless modem. The advertisements mentioned the modem in fine print, but the FTC said the font used was too small and the statement was too confusing. In exchange for the false advertising charge being dropped, HP and Microsoft agreed to change their promotions and run a series of advertisements in large newspapers explaining PDA choices. The settlement will prevent future false advertising, but it does little to restore the marketshare Microsoft's PocketPC took away from Palm while the ads were running.
ALSO SEE: PC World, The Standard, FTC Site

Microsoft, IBM, and the Pfizer drug company have set up a joint venture that will sell software services to small doctors' offices. A joint press release said the newly formed unit will offer software to speed up chores like writing prescriptions and reduce the amount of paperwork doctors have to deal with. Apparently Microsoft will provide the software and .NET services for the venture, IBM adds hardware, remote hosting facilities, and helpdesk support, while Pfizer gives the group credibility and easy access to doctors. The new partnership as of yet has no name, no management team, and no products, but the three companies claimed it should begin selling services before the end of the year. They also hinted it will be announcing one or more significant acquisitions in the next few months. (Just pray they don't start running critical medical equipment on Windows CE.)
ALSO SEE: TheStreet.com, The Standard

On April 6th Microsoft announced its latest internal reorganization, the fourth in only two years. Microsoft was at one time split into groups by product segment (OSes, business, dev tools), then a few years ago started rearranging by market (business, consumer, developer) to head off any breakup attempts resulting from the government lawsuit. This year's org chart update returns to the traditional and more logical layout, with units set up by product category instead of product audience. That shows Microsoft feels the antitrust case is now heading nowhere (we don't disagree with that assumption either), and also reflects input from Jim Allchin who was absent during last year's strange adjustments. Allchin strengthens his position by overseeing the rejoined platforms group, now containing all Windows products (except WinCE), MediaPlayer, and Internet Explorer/MSN Explorer. Bob Muglia's .NET-oriented 'Personal Services' unit is divorced from MSN and becomes its own entity, while Yusuf Mehdi keeps responsibility for what little remains of MSN. The broader consumer group that contained MSN and Personal Services is being dissolved and its director, 13 year Microsoftie Brad Chase, is being left in limbo. He's presently on vacation and discussing "exciting new opportunities" with CEO Steve Ballmer, but things don't look too well for his future at Mr. Softee. Of course that could change in a few weeks when things are reorganized again, since MS shuffles its divisions around more than some people change socks.
ALSO SEE: The Standard, The Register, The Standard

As March was drawing to a close, Microsoft updated the Windows Media Audio and Video formats to version 8. The latest codecs for streaming media will supposedly bring a 50% improvement in quality, but they still require a rather fat Internet connection to have the clarity Microsoft has claimed. Version 8 of the codecs is supported by Windows MediaPlayer 6 and 7 on Windows and the sorry Mac OS version of MediaPlayer 7 Microsoft released on the same day.
At the same time, Jupiter Media Matrix released a new report showing market share for the three top media players. According to their survey, Windows Media, RealPlayer and Apple QuickTime all gained users over the last year - but Microsoft and Real both grew their overall marketshare percentages at Apple's expense. In the year 2000 RealNetworks went from being used by 22.4 percent of the market to 31.8, while Windows Media Player jumped from 21 percent to 26.4. But during the same year, QuickTime dropped from 10.2 percent of the market down to 8.9. (Other players like WinAmp held steady at the bottom of the heap and made little impact on the market overall.) The Matrix study noted that most of Real's gains are due to a contract giving it access to AOL's 29 million subscribers.
ALSO SEE: PC World, WinInfo

More former employees have filed class-action lawsuits against Microsoft for discriminating against them because of their race and/or gender. The lawsuit accuses The Behemoth of violating federal civil rights laws by allowing department managers to be subjective in handing out promotions and bonuses, goodies that were withheld from black and female employees because the managers were biased against them. The suit was filed in a Washington State court by the law firm Cohen, Milstein, Hausfeld & Toll, and was aided by attorney Johnnie Cochran - infamous for his handling of the OJ Simpson mistrial. Several other racial discrimination cases have already been filed, and may all be combined into one large class action suit against the company. Death by a thousand papercuts..
ALSO SEE: CNET, The Register

Late last week, Microsoft announced its MSN Internet Access unit finally reached five million subscribers - after only six years of existence, an icon on the Windows desktop, and countless billions of dollars in promotion and rebates. The service reportedly grew by half a million users in the last six months, something Microsoft credits to its tight promotional partnership with RadioShack. MSN Internet Access is now the second largest service provider, surpassing EarthLink's 4.7 million customers. But America Online remains the #1 service (and will for some time) with nearly 30 million users. Never underestimate the power of stupid people in large groups.
ALSO SEE: WinInfo

To limit the distribution of viruses and other dangerous files through e-mail, Microsoft is going to disable one of its products. Instead of making Outlook, IE, Office, and Windows less susceptible to viruses by limiting scripting features, SatanSoft is going to simply prevent Outlook users from using files attached to their e-mail. Outlook 2002, the e-mail client and scheduling program included with Office XP, will refuse to open executables, batch files, Java and Visual Basic scripts, photo CD images, and screensavers (among other things). That eliminates pretty much every commonly attached file type except Office macros (the root cause of most viruses) and standard photos. Making things worse, Outlook only refuses to open the attachments instead of refusing to download or attach them in the first place - resulting in vast amounts of time and bandwidth wasted to download files that cannot be used.
ALSO SEE: CNET

To prevent faked VeriSign certificates from being used on Windows PCs [see Mar. 26, 2001], Microsoft on March 29 released a small patch that will put up a warning message if the illegitimate certificates are attached to any programs. The update is available for every version of Windows since 95, even though several of them (95 and NT 3.X) are technically no longer supported.
On April 5th, Microsoft completed its buyout of Great Plains software, a publisher of remote-hosted business software. The $1.1 billion merger [see Dec. 25, 2000] makes Great Plains a standalone division of Microsoft's business group. Current GP products are being made available through Microsoft's bCentral Web site and will eventually tie in with .NET, once Microsoft decides for sure what .NET actually is.
As Microsoft continues developing Windows XP, standard protocols are being divided into lists of supported and unsupported. The 'supported' list now includes wireless protocol IEEE 802.1, a supposedly secure upgrade to what Apple uses in its AirPort system. On the unsupported side Microsoft is listing USB 2.0, an input bus Intel has been pushing, choosing instead to go with IEEE 1384 (FireWire) because that protocol has a layer Microsoft can use to limit the copying of 'unapproved' media files. Also unsupported is Bluetooth, a wireless network technology being used by almost everyone else in the computer industry.
April has been good for Internet Explorer bug hunters, with two security holes discovered during a single week earlier this month. The first hole, involving MIME types in e-mail, allowed malicious programmers to attach dangerous programs to messages. The second vulnerability relates to scripting functions in Outlook and Exchange servers, exposing e-mail and server information to crackers. The first problem was fixed immediately with a patch, but the second has so far not been corrected and Microsoft is reportedly threatening the bug's discoverer because he leaked the information before a fix was released.
Users of Microsoft's UltimateTV console (combining WebTV and a TiVo-clone satellite receiver) have recently discovered storage space on the device's hard disk mysteriously shrinks as they use it. The problem is related to a software bug that leaves certain deleted programs on the disk to take up space. Microsoft has admitted the problem and has developed a patch, but refuses to release it until an UtimateTV software update goes out late next month.
Raphael Gray, a 19 year old Briton, was recently arrested by the FBI and local law enforcement for cracking into a server and stealing 23,000 credit card numbers - including one belonging to Bill Gates. Mr. Gray then used Gates' number to have large quantities of the impotence drug Viagra delivered to Microsoft headquarters. Gray, who agreed to a plea bargain, said he did it to prove a point about the insecurity of Microsoft software.

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