Week in review: Net portal wars

Yahoo's one-two combination began when the Cable News Network's online arm tapped it to replace Google to power its search results. The switchover, which went live Wednesday, means that Yahoo will provide algorithmic and paid results whenever CNN users conduct a search query on the site.

Yahoo will also begin offering "virtually unlimited storage" for its paid e-mail customers and will upgrade free users to 100MB from it current 4MB, in a challenge to Google's Gmail service. The upgrade is part of an overall enhancement for Yahoo Mail that will launch this summer.

The announcement comes a month after search rival Google said it would launch a free e-mail service called Gmail that offers 1GB of storage. The company's decision to boost its e-mail storage is not surprising. A day before Gmail details were unveiled, Yahoo sent e-mails to some customers in hopes of gauging their interest in receiving 100MB of storage.

Google fired back by beginning testing of a service that lets people create e-mail discussion groups. Called Google Groups 2, the service lets people create, search and sift through e-mail mailing lists. People can also subscribe to and monitor groups of interest. That service will compete directly with Yahoo Groups, a cornerstone of Yahoo's Web community services.

Google also surprised many on the Net by announcing plans for the first time to sell ads that include images, a reversal for a company that has won regard for its pioneering use of text-only marketing pitches and for keeping its home page religiously free of banner advertising. The new program will allow customers to place image, or banner, ads on third-party Web sites that participate in its AdSense program.

Reading Redmond
Microsoft made as much news for what it said it wasn't going to do as for what it said it would do.

Despite quickly becoming one of the leading sellers of wireless networking products, Microsoft has decided to discontinue its entire line of Wi-Fi gear. A source close to the company said Microsoft entered the Wi-Fi field with hopes of "raising the bar" on security, ease of use and performance and now feels that it has accomplished those goals.

The move is a dramatic turnaround, considering that the company just introduced a Universal Serial Bus version of its 802.11g product in February and has only been in the market since September 2002. The company had quickly gained market share in the wireless networking market but lost some ground when it was slower than rivals in introducing 802.11g products.

The software giant's decision was likely more about sliding market share and profit margins than accomplishing its purported Wi-Fi mission.

Between December and March, Microsoft's share of the Wi-Fi hardware market dropped from 9 percent to 6.6 percent, according to market analyst The NPD Group. At the same time, fierce competition had relentlessly cut into margins for sellers of wireless routing gear, making the market less attractive for the software giant.

Microsoft is also revising its release schedule for advanced search features in its forthcoming Longhorn operating system. Features that Bill Gates has called the "Holy Grail" of the next major version of Windows won't be fully in place until 2009.

The technology, called WinFS, is an add-on the Windows file system Microsoft says will make it easier for users to find data such as documents, e-mail messages and multimedia files--no matter what their format--on local PCs and across the network. The shifting delivery schedules for Longhorn give further indication that Microsoft's goals for the operating system may have outstripped the company's ability to build and deliver the software.

Microsoft laid out its server road map, outlining a series of releases, including Longhorn Server, targeted to arrive in 2007. Among the features of Longhorn Server will be support for Indigo, Microsoft's new Web services architecture, as well as improved manageability and support for dynamic partitioning and other features designed to enable Windows "mainframes."

Plans for Longhorn Server had been an on-again, off-again proposition for some time. Since late last year, the company has said there would be a server version, but until now, it's said little about what that version would contain.

Microsoft also announced a wide-ranging agreement with business software giant SAP to integrate their products, using Web services. The deal, which calls for better links between Microsoft's .Net development software and SAP's NetWeaver integration server, could help big companies more easily tie their SAP business applications to Microsoft Office and other Windows-based software, Microsoft executives said.

The deal extends an existing 10-year partnership between the companies but deepens the technical integration between their products. Microsoft and SAP will now cross-license their intellectual property and participate in cross-marketing and sales calls.

Worm worries
Despite the arrest of an 18-year-old German who confessed to releasing the Sasser worm, antivirus companies discovered a fifth version of the Sasser variant. That variant, Sasser.E, attempts to warn people whose computers are vulnerable that their systems have not been patched for a widespread Microsoft Windows vulnerability exploited by the program.

While antivirus experts are not positive whether Sasser.E started spreading before or after the arrest, Microsoft said it believes that the fifth version of the worm was released four days before the teenager was arrested. A subsequent but less formidable variant appeared midweek.

Computers compromised by the Sasser worm may be vulnerable to a scavenging program that exploits a flaw in the software left behind by the worm. The worm--dubbed Dabber--has started spreading to Microsoft Windows systems but likely won't have a large impact.

Dabber may be the first worm to attack systems, using a flaw in a previous malicious program. In this case, the File Transfer Protocol (FTP) server installed by Sasser to enable the worm to transfer itself to new hosts has a buffer overflow vulnerability. Dabber uses that security flaw to spread to the new machine.

Game on
It seems that Microsoft and Electronic Arts have buried the hatchet. Microsoft kicked off the E3 trade show by announcing an agreement with the leading game publisher to support the online service for the company's Xbox video game console.

EA, which runs several extensive online services for PC games, was the one notable holdout among major game publishers when Microsoft launched the Xbox Live service two years ago.

Sony trimmed the price of its PlayStation 2 game console from $180 to $150, effective immediately. The cut was widely expected as an effort to match Microsoft's new price for its competing Xbox.

Sony also revealed a few more details about the PlayStation Portable, the handheld game player it announced at last year's E3. A representative confirmed that the PSP would be a multifunction device and said the company was working on partnerships with movie and music studios to format entertainment for the device. He also confirmed that the PSP would work with Sony Connect, the company's new music download service.

Also of note
Congress took a step toward revising the Digital Millennium Copyright Act, which has attracted extensive criticism over the past six years...Apple Computer won a patent for the interface of its iTunes music software, underscoring the growing importance of the multimedia business for the company...In the United States and abroad, judges are turning to search engines such as Google to check facts, to look up information about companies embroiled in litigation and to challenge statistics presented by attorneys in court...Dozens of universities, venture capitalists, technology start-ups and major corporations are working on an experimental technology that could give computer networks millions of tiny electronic nerves.