Beyond Binary

Microsoft is indeed hiring former Yahoo executive Qi Lu to run its online services business, but in the process, it is also losing one of its own top advertising executives.

Qi Lu

(Credit: Yahoo)

In its announcement of Lu as the president of Microsoft's online services group, Microsoft said that Brian McAndrews, former CEO of Aquantive, would be leaving Microsoft. McAndrews was seen as the top internal candidate for the post, which came open when Kevin Johnson left to become CEO of Juniper Networks.

Lu will start at Microsoft on January 5 and will report to Steve Ballmer, Microsoft said.

"I am genuinely excited about the opportunities ahead for Microsoft to make an enormous impact on the online industry," Lu said in a statement. "Microsoft has built a great foundation for its search and advertising technologies and put an amazing team of researchers and engineers in place to drive the next wave of innovation in online services."

Lu was at Yahoo for a decade, most recently as vice president of engineering overseeing the company's search and e-commerce efforts. Before Yahoo, Lu was a researcher at IBM's Almaden Research Center.

Reporting to Lu will be Satya Nadella, who has been heading Microsoft's search business as well as senior VP Yusuf Mehdi and two new vice presidents--divisional finance head Rik van der Kooi and Scott Howe--who will head advertiser and publisher efforts in the wake of McAndrews' departure.

Microsoft said McAndrews "has decided to transition out of Microsoft, and will do so over the next several months, serving in a consultative capacity to Steve Ballmer and Qi Lu during that time."

Ballmer praised the departing executive in the statement.

"Brian McAndrews built a world-class business for advertisers and publishers and led the successful integration of Aquantive into Microsoft, setting the foundation for our next phase of growth," Ballmer said. "While I am sorry to see Brian leave the company, I respect and understand his decision and wish him nothing but the best in the future."

Microsoft's plan to hire Lu was reported earlier by Dow Jones' AllThingsD site.

Microsoft's efforts to acquire one Yahoo employee at a time appear to be working.

Qi Lu

(Credit: Yahoo)

As has been rumored for a while now, former Yahoo search executive Qi Lu is expected to be named head of Microsoft's online efforts, according to a report on All Things D.

All Things D's Kara Swisher says the announcement could come as early as Monday, though some details remain to be worked out, such as whether Lu, whose experience is largely on the technical side, would be paired with one of Microsoft's business executives.

Former Aquantive CEO Brian McAndrews was considered a leading internal candidate for the job.

Lu's hiring would follow that of fellow Yahoo search executive Sean Suchter. Suchter was named general manager of Microsoft's Yahoo refugee camp, or, as Microsoft calls it, the Silicon Valley Search Technology Center.

Yahoo announced Lu's departure in June, along with that of several other executives.

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.

Adobe added its name Wednesday to the list of companies warning of weaker sales and cutting jobs.

In a press release, the company said it would slash 600 jobs amid less-than-anticipated demand for its recently launched Creative Suite 4 series of products.

"The global economic crisis significantly impacted our revenue during the fourth quarter," Adobe CEO Shantanu Narayen said in a statement. "We have taken action to reduce our operating costs and fine-tune the focus of our resources on key strategic priorities."

The company said it now expects per-share earnings of 45 cents to 46 cents, on revenue of $912 million to $915 million for the three months ended November 28. The company had expected sales to come in as high as $955 million. The company said it expects revenue to drop further in the current quarter, with expectations now for revenue in the range of $800 million to $850 million.

The company said it will take pre-tax charges of $44 million to $50 million to account for the restructuring.

Among the things the company is apparently cutting: its booth at Macworld Expo.

It is widely known that Google pulled the plug on the search advertising deal with Yahoo only because it appeared that it would face a regulatory challenge. However, it emerged on Wednesday just how close the company came to facing an antitrust suit from the U.S. Department of Justice.

Sandy Litvack, the lawyer hired by the Justice Department to look into the search advertising pact between Google and Yahoo, said in an interview with American Lawyer's AmLaw Daily that the government had a suit ready and was just three hours away from filing it.

"We were going to file the complaint at a certain time during the day," Litvack said in the interview. "We told them we were going to file the complaint at that time of day. Three hours before, they told us they were abandoning the agreement."

According to Litvack, the government would have sought an injunction to stop Google from serving up search ads for Yahoo, alleging that Google was violating two sections of the Sherman antitrust act.

At the end of the interview, Litvack said he's happy to be heading back to his law firm, but says he regretted not getting to take part in the legal battle.

"Of course I was looking forward to it," Litvack said. "We felt pretty good about it, we felt pretty confident. Yeah, I would have liked to have done it."

Microsoft is attempting a challenging task with its positioning of Windows 7. The company is trying to make the case that the product won't break things that work with Vista, but at the same time trying to convince users its a worthy upgrade.

Bill Veghte, the senior vice president of the Windows business put it this way in a speech to investors on Wednesday:

Bill Veghte, Microsoft's senior vice president for the Windows Business

(Credit: Microsoft)

"It's a minor release when it comes to incompatibilities," he said, adding that most applications and hardware that worked with Vista should work just fine in Windows 7. At the same time, Veghte tried to make the case that Windows 7 will nonetheless be a significant step forward.

"There are plenty of great things in there that make it much more significant than a service pack," Veghte said. In addition to improving some of the annoyances of past releases, such as slow boot time, Veghte pointed to new features that make it easier to connect to both home and business networks.

"In Windows 7 there's a capability called Direct Access," Veghte said, that allows users to more easily connect to their corporate network. "You no longer have to VPN in," he said.

Windows 7 also adds an improved taskbar for managing multiple windows as well as support for multitouch--assuming one buys a touch-screen computer. But it is clear that one of Microsoft's biggest challenges with Windows 7 will be to convince users that it is an important upgrade.

With Windows 7, Microsoft is adding support for multitouch, demonstrated last month at the WinHEC conference.

(Credit: Ina Fried/CNET News)

One indication of just how neatly Microsoft is trying to thread this needle is the fact that the server unit is saying its version of Windows 7 will be a minor release. The product that had been code-named "Windows 7 Server" is getting the designation Windows Server 2008 R2. The "R2" designation has in the past been used for very minor updates to Microsoft products.

Veghte was asked about things like how many versions of Windows 7 there will be and about pricing, but offered no new detail there. The company released a pre-beta version of Windows 7 for developers at two conferences earlier this year, with a broader beta scheduled for early next year, followed by a release candidate. There are some indications that January may be the timing for the beta.

As for the final release, Microsoft's internal goal has been to get it out next year, although its public target has been for release within three years of Vista's January 2007 mainstream launch. Veghte appeared to give even more wiggle room on Wednesday, though, saying its goal was a release to manufacturing (as opposed to a formal launch) by January 2010.

Note: The dates in the last paragraph were off by a year when I first posted but have since been corrected.

When it comes to picking a spot for a data center, Google and Microsoft often have the same sites in mind. But when it comes to how they build, the two companies take far different approaches.

Google relies largely on its own design expertise, contracting for and building its own server designs. Microsoft, meanwhile, relies on outside companies to build the hardware, though it certainly takes an active role in designing the centers themselves.

A custom Dell server known as Xanadu built for an unnamed data center customer.

(Credit: Dell)

Dell is one of the companies that helps power Microsoft's server farms, including the ones that power Microsoft's operating system in the cloud, Windows Azure.

Data centers have been a bright spot for Dell, which has struggled in recent years. On its own, Dell's data center business would be a top 5 server vendor, said Forrest Norrod, the Dell vice president who heads its data center effort. In its most recent earnings conference call, CEO Michael Dell called out Facebook, Microsoft, Amazon.com, Akamai, and Baidu as key customers in that arena.

The story of how Dell got into the data center business is an interesting one. A couple of years back, the company was noticing that its share of the largest data centers was less than it might expect. Plus, it noticed that whether it won or lost a bid, the terms tended to be such that Dell didn't stand to make money.

"That was curious," Norrod said.

It turned out that customers at the highest end didn't really need some of the hallmarks of Dell's servers. Built-in management code and redundancy might appeal to the average business, but to a customer that expects to burn through their servers, such features are costly and unnecessary.

Meanwhile, other features like extreme power efficiency and density were the things that companies would pay a premium to get.

Dell data center chief Forrest Norrod

(Credit: Dan Farber/CNET News )

At the beginning of 2007, Dell set up a separate unit to explore this area. Its mission was to look at the 50 biggest data center customers worldwide and work to understand what those companies needed.

It turns out there are a lot of things you don't need when building a server that is going to go in one of these data centers. For example, expansion ports are definitely out, as are legacy I/O ports. Memory slots need to be limited to the minimum necessary (and then kept full so they don't change the thermodynamics).

Instead of redundant fans or power supplies, Norrod said, Dell learned what customers really needed was one good one, since a system wasn't likely to be touched until it failed, at which time it would be replaced.

Norrod said that Dell has learned a lot by working with Microsoft, including the need to start a system's design by knowing where the server is going. And that is a rapidly changing environment as servers move from racks, to pre-equipped containers and even to entire prefabricated data centers.

"Whether the room is a room or a container, looking at the environment is one of the key parameters in system design," Norrod said.

And companies like Microsoft are looking to get rid of anything they can.

"They want computers and servers sitting in a field with a power cord and network cord going to them. Period," Norrod said. "Everything else is overhead--the building, the rest of the infrastructure. We're at the end game of how close can you get to that. "

Microsoft announced on Tuesday that its so-called Gen 4 data centers will consist of prefabricated buildings that can be up and running in three to six months.

Windows enthusiasts were buzzing on Tuesday over a Microsoft blog posting that makes it seem as if a beta version of Windows 7 should be ready by next month.

In a blog posting on Microsoft's Technet site, Keith Combs suggests those wanting to get their hands on the beta version should register to attend one of a dozen or so upcoming MSDN developer conferences.

That blog, and another Microsoft blog, make it clear that attendees will get a DVD with Windows 7 beta 1 on it. Some of the events are in December and the bloggers make it clear that those attending the earliest events won't get their DVD at the conference. In the comments section of his blog, though, Combs said the DVDs should be ready by mid-January.

"My understanding is that the DVD will not be ready for the first few show dates but will be mailed to each attendee," Combs said. "We are targeting to have the DVDs in the materials from 1/13/2009 on."

Microsoft handed out a pre-beta version of Windows 7 to attendees at the Professional Developer Conference in late October and the Windows Hardware Engineering Conference (WinHEC) in early November.

In a statement late Tuesday, Microsoft said only that it is still targeting early 2009 for the broader beta.

"As we said at the PDC, we expect to deliver beta 1 in early 2009 and we continue to be on track to deliver against that development milestone," Microsoft said.

Microsoft is still trying to sort things out following a glitch on Friday that prevented people from getting a promised 40 percent cash back on purchases made on HP.com via Microsoft's Live Search Cashback program.

A crush of traffic led to a glitch that apparently led to a number of problems. Some shoppers were credited with only 3 percent cash back, rather than the promised 40 percent. Microsoft has said all those who made purchases through Live Search during the Black Friday promotion would get the higher rebate.

But some folks were unable to make their purchase at all on Friday. A Microsoft spokesperson told CNET News in a statement Monday that the HP promotion would be restarted in the coming days. However, that statement appears to have been premature.

In a blog post late on Tuesday, the software maker offered a much more vague statement.

"We're working actively to determine next steps for any specific HP promotions," according to the post, which was attributed to Rajat Taneja, Microsoft's general manager of worldwide commercial search. "We regret that we don't have more specific details at this time, but we can point customers to other Live Search cashback merchants with great deals on HP products, including eBay, which is currently offering 20 percent cashback."

The glitch was an unfortunate blow to Microsoft, shifting what could have been a banner day for Live Search cashback into another online black eye for the company.

Microsoft said on Tuesday that it is ready for broader testing of Windows Vista Service Pack 2, the second collection of fixes for the latest version of the operating system. In addition to bug fixes and performance tweaks, Service Pack 2 adds support for Blu-ray, Bluetooth 2.1, and Windows Search 4.0, the latest version of Microsoft's desktop search technology.

In a blog posting, Microsoft VP Mike Nash said that while Microsoft is offering the customer preview program to all interested parties, not everyone should download SP2 in test form.

"The (test version) is intended for technology enthusiasts, developers, and IT Pros who would like to test Service Pack 2 in their environments and with their applications prior to final release," Nash said. " For most customers, our best advice would be to wait until the final release prior to installing this service pack.

Microsoft announced in late October that it was starting limited testing of the update.

Nash said Vista SP2 is on track to arrive sometime before the end of June. "As of today, we are tracking to ship Windows Vista SP2 in the first half of 2009," Nash said.