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Week in review: Microsoft the magnanimous?

Microsoft says it wants to be more open with other software makers, while Toshiba closes down HD DVD. Also: Gates wants Yahoo for the people.

Microsoft says it wants to get along better with other software makers.

Company executives detailed steps they say will help the software giant comply with antitrust legal requirements and announced changes in its business practices to work better with software from other providers, including open-source communities. Microsoft plans to publish reams of documentation around its communication protocols to make it easier for third parties to connect to Microsoft products.

It also pledged not to sue open-source developers who create noncommercial software based on Microsoft's protocols.

The measures build on previous commitments to interoperability, standards support, and dialogue with open-source developers that the company has made over the past three years.

Specifically, Microsoft said it will publish the documentation for the application programming interfaces and communications protocols in its "high-volume products." Developers do not need to buy a license or pay a royalty to access the information.

As a first step, Microsoft will publish protocols for communicating with Windows Server, which had previously only been available under a trade secret license. Protocols for interoperability with Office 2007 will be published in the coming months, the company said.

Microsoft said the pledge will ultimately extend to Windows Vista, the .Net Framework, Windows Server 2008, SQL Server 2008, Office 2007, Exchange Server 2007, and Office SharePoint Server 2007.

Executives said the steps will help it comply with obligations dictated by the European Court of First Instance in September, as well as help Microsoft compete in a marketplace that increasingly values interconnected systems.

"In a more connected, services-oriented world...one of the greatest value-adds in some sense is what people do on the other end of the wire," Microsoft CEO Steve Ballmer said.

However, the European Commission expressed doubt regarding the announcement claiming a move toward greater interoperability. In a statement, the Commission said that while it would welcome greater interoperability, Microsoft had made similar announcements before.

"The Commission would welcome any move towards genuine interoperability," the statement says. "Nonetheless, the Commission notes that today's announcement follows at least four similar statements by Microsoft in the past on the importance of interoperability."

CNET News.com readers appeared suspicious of Microsoft's announcement, as well as a little bitter.

"This latest 'generous' offering of cooperation evidences only the final capitulation of a band of thugs who now realize they can no longer bully their way around the sandbox, and are thus facing up to the reality that their fake technology will likely be irrelevant with a decade," wrote one reader to the News.com TalkBack forum.

Although programmers now are apparently free to reproduce the software, Microsoft's generosity ends when the software crosses the threshold from project to commercial product.

"Microsoft is providing a covenant not to sue open-source developers for development or noncommercial distribution of implementations of these protocols," the company said. "Companies that engage in commercial distribution of these protocol implementations will be able to obtain a patent license from Microsoft, as will enterprises that obtain these implementations from a distributor that does not have such a patent license."

In other Microsoft news, the software giant stopped automatically distributing a prerequisite piece of software for Vista Service Pack 1, following some customer complaints that it had caused system problems. Servicing stack update KB937287, released last week, contained updates to Windows Vista installation software, and was billed as being "necessary to successfully install and to remove Windows Vista SP1 (Service Pack 1) on all versions of Windows Vista."

Microsoft published a list of programs that will not work or that will suffer from reduced functionality after the installation of Vista Service Pack 1. The list of programs consists mostly of security applications, such as Trend Micro Internet Security 2008. However, programs such as The New York Times Reader application also feature on the list. Users are advised to install updates from the application vendor to fix the problem.

The list is not considered to be comprehensive, and Microsoft has asked users who encounter problems with other applications to first restart their PC and, if they still encounter problems, to install a newer version of the program or contact the software vendor.

The software maker also said that it plans on March 11 to deliver the first update to Office 2008 for Mac, delivering several key fixes. At the same time though, it has again pushed out the release of converters needed by users of Office 2004 to read documents saved in the new XML file formats used by Office 2007 for Windows.

R.I.P. HD DVD
For Toshiba, when it rain it pours, so the company threw in the towel on its HD DVD format.

The deluge began in January at the Consumer Electronics Show when Warner Bros. Entertainment announced that it would stop making HD DVD discs and will become a Blu-ray-only studio at the end of May. That move was soon followed by online video rental company Netflix, electronics retailer Best Buy, and retail giant Wal-Mart Stores.

So it came as little surprise Tuesday morning as Toshiba waved the white flag and declared it would stop producing HD DVD products, officially ending the two-year war between HD DVD and Blu-ray.

The company, which began sales of HD DVD in March 2006 with the HD-A1 player, "decided it was not right for us to keep going with such a small presence," said Chief Executive Atsutoshi Nishida. The Blu-ray format is now the definitive winner in the war and stands unopposed as the optical media replacement for DVD.

The announcement effectively stamps Sony as the new standard bearer of high-definition video. Sony has long been associated with the Blu-ray Disc format, but HD DVD's demise brings new opportunity for the Japanese electronics maker to effectively take control of the future of high-definition in consumers' living rooms.

The fall of HD DVD gives Sony a chance to really extend its high-definition strategy with the pieces it already has in place. It's the only major consumer electronics player with a real presence in every high-profile consumer market: HDTVs, cameras, notebook PCs, gaming, and even a film studio that creates high-definition content. It has positioned itself so well that it would have to really screw up to not seamlessly ascend the throne as king of HD.

It's a change in fortune for the company whose gaming and electronics divisions were struggling throughout the past year. Suddenly the company's PlayStation 3 strategy appears smarter than previously thought.

The real issue in the war between Blu-ray and HD DVD, according to CNET News.com's Michael Kanellos, was royalties. With the competition gone, he argues, the Blu-ray consortium now has the opportunity to persuade PC makers and consumer electronics makers to adopt Blu-ray drives as their optical drives of choice. It will also get studios and disc makers to deliver Blu-ray discs to consumers. And every time one of those drives or discs leaves a factory, the Blu-ray Disc Association will get a royalty.

The numbers add up quickly. Look at DVD, for example. To make a DVD player legally, manufacturers recently had to pay around $4 per player or drive, according to some estimates. A few years ago, those fees were around $15 to $20. Fees get paid every time a DVD drive gets included in a PC. Nearly every PC in the world has a DVD drive these days and roughly 250 million PCs get shipped every year. Companies that legally make discs also pay fees. The DVD6C licensing group dropped the per disc fee in January to 4 cents per disc. Years ago, it was 7.5 cents per disc. Then there are verification fees.

All about the Yahoos
Apparently Microsoft Chairman Bill Gates is a people person. When asked what makes Yahoo worth more than $40 billion, Gates pointed not to the company's products, its huge base of advertisers, or its market share, but rather to Yahoo's engineers. Those people are what Microsoft needs to go after Google, he said.

In an interview after his speech at Stanford University, Gates said it takes a lot of manpower to build tools for advertisers, mobile, and video products as well as improve its core search algorithm and build an infrastructure for cloud computing. "The amount of computer science it is taking to do that is phenomenal," he said. "As you get more scale of engineering you can just pursue that agenda more rapidly. Yes, the advertisers and the number of end users is good, but we'd put the people and the engineering as the key thing."

Gates spoke to News.com about how Microsoft needs Yahoo's engineering talent, how Windows 7 will make the keyboard and mouse less essential, though far from obsolete, and what journalism will look like in the future. Read the interview here.

Meanwhile, Yahoo laid out its golden-parachute plans for all of its full-time employees in a filing with the Securities and Exchange Commission. The filing outlines two change-in-control severance plans, should the Internet search pioneer find itself under new ownership, aka Microsoft.

Yahoo, which is facing an unsolicited buyout bid from Microsoft, will offer both full-time employees and executives anywhere from four months to two years of severance pay, depending on their job title.

The parachute, or cushion, will kick into effect should that employee lose his job within two years after a new owner takes over, should the employee get terminated without cause, or should he decide it's time to leave for "good reason."

With the deadline fast approaching for Microsoft to name an opposition slate to Yahoo's board of directors, chances are that the software giant is looking at corporate governance experts, academics, bean-counter types, and former or retired Internet executives.

That's the assessment of proxy solicitors and executive search recruiters, as the March 14 deadline approaches for Microsoft to announce its dissident slate. The software giant, which launched an unsolicited $44.6 billion buyout bid for Yahoo on February 1, is likely planning to offer candidates for 10 director seats that are up for re-election at Yahoo's next annual shareholders meeting. A date for the meeting has not yet been set, but last year's was in June.

The purpose of running an opposition slate is twofold: to put pressure on Yahoo's board of directors to enter into negotiations, rather than remain radio silent; and, if no deal is reached by the time Yahoo holds its annual meeting, to get its dissident directors elected with the hope of paving the way to a merger.

Also of note
The U.S. Supreme Court declined to intervene in an appeal of a lawsuit accusing the National Security Agency of illicit spying on millions of Americans communicating with foreigners...Sellers angry over higher fees and other policy changes launched a weeklong boycott of the auction site in protest...Jai Singh, an internationally recognized pioneer in online journalism, is leaving CNET Networks (publisher of News.com) after more than a decade in executive editorial positions.