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Week in review: Microsoft to bulk up

Microsoft has hinted that it will flex its checkbook more during the next year--and now we know where it intends to bulk up.

Microsoft has hinted that it will flex its checkbook more during the next year--and now we know where it intends to bulk up.

The company announced last week during its earnings announcement that it would pay out far more than expected in the next 15 months--roughly $2.4 billion, according to estimates--as it bulks up several of its new business efforts, particularly its online services.

This week, CEO Steve Ballmer gave details of just how much of Microsoft's extra spending will be devoted to building up its Internet services business. Acknowledging that Microsoft's stock has plunged over the uncertainty created by its investment plans, Ballmer said the MSN unit plans to spend $1.1 billion next fiscal year on research and development, up from $700 million in planned spending this year. The online unit also plans to spend $500 million on capital expenses in fiscal 2007, up from $100 million in fiscal 2005 and an estimated $300 million this year.

Microsoft also demonstrated its AdCenter engine, which it now uses for 100 percent of its search advertising in the U.S. Until recently, the software maker relied on paid search technology from Yahoo and still uses that company's engine in many overseas markets.

Last quarter, Microsoft shifted the majority of its U.S. queries over to AdCenter. But even with an increase in the number of search queries, the MSN unit faltered. It saw its revenue per search query drop, one of several factors that pushed the unit back into the red.

Acknowledging that Google has grabbed an early lead in search and Internet advertising, Microsoft Chairman Bill Gates pledged that his company would "keep them honest." Speaking to a crowd of MSN's largest advertisers, Gates said that Microsoft would prefer not to be coming from behind.

He also gave credit to his rival, saying Google has "done a great job on search and what they've done with advertising." But he reiterated his position that search today is still too much of a treasure hunt and promised that better things are in store.

"We will keep them honest, in the sense of being able to do better in a number of areas," Gates said.

CNET readers did not waste the opportunity to skewer Gates and Microsoft on this statement.

"This has got to be the most blatant use of "psychological projection" we've ever seen from a company that has made a marketing strategy out of the technique," wrote one reader to's TalkBack forum.

Better living through IT
The rise of information technology has undoubtedly changed the world, but for speakers and panelists gathered at the 2006 World Congress on Information Technology (WCIT), there are still plenty of places that IT has yet to have an impact.

The WCIT gathers every two years to debate what it considers to be the most pressing technology issues affecting the entire globe. This year, it and the World Information Technology and Services Alliance (WITSA) chose access to technology, IT in heath care, and privacy and security as the hot-button issues of the conference.

Unlike those at many sessions at the United Nations, most panelists seemed very much in agreement on the issues discussed. Private industry and governments have to work together, because no group can solve these problems on its own, they said. Global standards need to be implemented, so that programs and policies that work can be implemented in different regions.

With a similar goal in mind, Intel unveiled its notebook for schools in developing countries, with CEO Paul Otellini calling on governments to spread technology's reach around the world. Otellini demonstrated an Intel-developed teaching application on the Eduwise notebook at the WCIT. The company hopes to launch the laptop and offer it for less than $400 by the first quarter of next year.

The CEO reiterated Intel's commitment to developing products that will help close the technology gap between rich nations and poor ones, one day after it announced plans to invest $1 billion in education and training as part of its World Ahead program. In addition, Intel has developed an application that enables teachers to monitor how and when students are using the Internet in a networked classroom.

Intel will also spend more than $1 billion during the next five years to help bring computers, training and Internet connectivity to emerging nations. Called the World Ahead program, the effort essentially expands on other programs Intel has conducted to bring computing to countries like India and China, particularly to people who live in small cities and villages. Though India has become a software powerhouse, it's estimated that a year ago, the country had only 14 PCs for every 1,000 people.

The song (price) remains the same
Apple Computer and four major record labels have renewed deals to sell songs on Apple's iTunes music store for 99 cents. The four major labels--Universal, Warner Music Group, EMI and Sony BMG--had agreed to the deal, Apple said.

Apple has sold songs at 99 cents per song since it introduced the iTunes music store in 2003, and has resisted the calls of labels to change that pricing strategy. The deal is significant because many record labels would like to charge different prices for more popular or newer songs.

Apple seems to have scored a win in France, where the government has apparently reconsidered a proposal to force the company to make the songs it sells through iTunes playable on devices that compete with its iPods. A French Senate committee has removed wording from proposed legislation that would have forced technology companies to license their digital rights management schemes.

While the law must still be voted on, the alterations in the legislation signify willingness by some in the French government to honor the rights of companies that don't wish to share their technology with competitors.

Meanwhile, a patent application filed by Apple in December 2004 appears to cover a method of buying a song, ring tone or music video from an online store over a wireless network. The application describes an invention that allows cell phone or wireless handheld users to interact with an online music store--such as iTunes--and mark a song or video file that can be downloaded to a computer at a later time.

The invention appears to be a way for Apple to capture revenue from music fans with short attention spans. For example, cell phone users on the go who hear a song might want to purchase that tune right away, but by the time they get back to their PC, they've forgotten the name of the song or the artist.

Coming attractions
Samsung brought its Origami tablet to the United States, announcing that the device would go on sale at Best Buy's online store next week and will show up in some of the retailer's outlets this summer. The Q1 minitablet, with its 7-inch screen, built-in Bluetooth connectivity and Wi-Fi wireless capabilities, will sell for $1,099. Optional add-ons include an extended-life battery and a travel case with a built-in keyboard.

Samsung's Q1 device uses Intel's ultralow-voltage Celeron, running at 900MHz, has 512MB of memory and runs a version of Windows XP Tablet PC edition that is customized to enable typing via an on-screen "dial" keyboard. The launch marked the culmination of a marketing push that generated considerable buzz when Microsoft first started hinting about the Origami devices earlier this year. Intel has also been touting the possibilities of such products, which it calls ultramobile PCs.

If one of your primary concerns is how to make it easier to input data or navigate the Web with a device that can't accommodate a traditional keyboard, you may want The Wild Thing. The prototype program from Microsoft Research essentially lets consumers conduct queries with abbreviations and truncated spellings of words.

The query "TR SF" turns up Thai restaurants in San Francisco, complete with search results grouped under a header for local Thai restaurants. It also turns up Tower Records and The Stinking Rose, a local restaurant, but punching in those four letters took less time on a handheld keyboard that the full formal query on a cell phone keypad.

Cell phones are one of the dominant themes of the Microsoft Research road show, a traveling exhibition of technologies and prototypes from its labs.

If taking sharper photos is more to your interest, you can forget megapixels, where the resolution of digital images is counted in millions of pixels. Michael Cohen, a scientist at Microsoft Research, is trying to create a photo that will contain 10 billion pixels.

He's already done 4-gigapixel shots of downtown Seattle. Cohen's work, dubbed Big Panoramas, is an attempt to marry Internet mapping and high-resolution photography. With 4 billion or 10 billion pixels, a single photograph will contain several square miles of real estate in accurate detail. In the Seattle photo, users can zoom in on windows on different buildings, or zoom out to get a view of the entire skyline.

Also of note
Broadband providers and Internet phone companies will have to pick up the tab for the cost of building in mandatory wiretap access for police surveillance...The U.S. Senate took the first serious step toward rewriting the nation's telecommunications laws, a move that raises politically sensitive questions about digital copyright and Net neutrality and that could take years to complete...The draft proposal of the next-generation Wi-Fi standard failed to pass a critical vote.