Week in review: On Microsoft's mind

Tech world waits for word on Yahoo, while Microsoft grapples with software challenges. Also: Net music on the court docket, and how green is our Valley?

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
Expertise I have more than 30 years' experience in journalism in the heart of the Silicon Valley.
Steven Musil
7 min read
As Microsoft's deadline for Yahoo to enter takeover talks expired, many in the tech community were holding their breath to see what the software giant would do next.

Microsoft's board of directors met Wednesday to evaluate options in its attempt to acquire Yahoo. Microsoft is reportedly evaluating an offer of as much as $32 to $33 per share, well over the present $29.12 value of Microsoft's offer, but "major Yahoo shareholders" are angling for $35 to $37 per share. However, the meeting adjourned without an announcement on a decision.

Microsoft CEO Steve Ballmer says he knows exactly what Yahoo is worth and isn't willing to go a dime over that. Ballmer, speaking to Microsoft employees in a so-called town hall conference call Thursday, also said an announcement regarding Yahoo is coming "in very short order," Silicon Valley Insider reported. But what he meant by that is unclear, since he also noted that he had "nothing to say today."

Essentially, the software giant still has the same options it had last week. Microsoft is said to be weighing whether to go directly to Yahoo shareholders and at what price, whether to just nominate its own slate of directors, or whether to walk away from its bid.

Microsoft doesn't want Yahoo's employees abandoning the ship. Redmond plans to set aside $1.5 billion for employee retention at Yahoo, should it succeed in its unsolicited buyout bid for the Internet search pioneer, according to court documents in a shareholder lawsuit. Yahoo's workforce stands at approximately 13,200, following layoffs of roughly 1,000 employees in early February. That translates into an average of $113,636 per employee.

Software is hard
Meanwhile, Microsoft delayed the release of Windows XP Service Pack 3 because of a newfound glitch. The software maker said there is a "compatibility issue" between the XP service pack and Microsoft Dynamics Retail Management System, a retail chain management program for small and midsize businesses.

The glitch also exists between Microsoft Dynamics RMS and Windows Vista Service Pack 1, though that product has already been broadly released. Microsoft started pushing out Vista SP1 last week via Automatic Updates, but halted those updates in the wake of a newly discovered glitch.

Microsoft finalized the code for Windows XP SP3 last week and had planned to make it broadly available starting Tuesday.

Dynamics RMS is the software that enables specialty retailers to handle cash register functions, process payments, and automate purchasing, inventory, and other back-end processes, said Michael Griffiths, the group product manager for the retail part of the Dynamics business. Dynamics RMS is used to manage about 38,000 different store locations, he said.

Another challenge facing Microsoft is how its Windows Vista operating system is perceived. In terms of absolute sales, Vista has done well. More than 140 million computers have been sold with the operating system.

But looking at that figure alone ignores the continued lackluster response that Vista gets from media and analysts as well as the continued demand from businesses for Windows XP. Microsoft is going on the PR offensive this week, with Mike Nash, a Microsoft corporate vice president, trying to make the case to the press that Vista is getting a bad rap.

"The perception of Vista is a lot better for the people that have used Windows Vista than (for) the ones who haven't," Nash said. "At some level a little seeing is believing."

Stay green, Pony boy
Green and clean technologies are becoming a big business in Silicon Valley. Enough so that Valley VC veteran Kleiner Perkins Caufield & Byers is creating a fund dedicated to growing green-technology firms. The Silicon Valley venture capital firm said $500 million out of a larger $1.2 billion fund will go to "growth stage" green-technology companies that need additional capital to commercialize their work.

Kleiner Perkins established a $100 million green-technology fund in 2006 for start-up seed funding. This Green Growth Fund will make investments of $10 million to $50 million to ramp up existing companies. To make a mark commercially, clean-tech companies often need a substantial amount of capital to either develop the technology or demonstrate that their technology can work on an industrial scale.

Washington lawmakers aiming to green both the Capitol dome and the laws made beneath it are turning to Silicon Valley for inspiration while pledging to help renewable energy start-ups get off the ground. Members of the House of Representatives fear U.S. policies aren't combating global warming quickly enough, but they hope that they can at least "green" the Capitol complex enough to call it the world's first carbon-neutral legislative body within the year.

One way that clean-tech start-ups hope Congress will help is by extending renewable-energy tax credits rejected by the Senate in the Energy Act of 2007. A growing priority among tech firms is to green data centers, which consume 4 percent of the nation's energy, by 2012, according to the Environmental Protection Agency. Congressional offices, on the other hand, have not yet overhauled their server systems to improve efficiency.

Indeed, greenhouse gas emissions from data centers rank higher than the countries of Argentina and the Netherlands and right behind airlines, shipyards, and steel plants. Those comparisons were compiled by consulting firm McKinsey and the Uptime Institute, which published a report on the worsening picture--environmentally and economically--of energy consumption from data centers.

McKinsey called for the creation of a metric that combines the energy efficiency of a data center facility with the utilization of IT gear that runs in data centers. When combined, the financial impact of data centers' energy bill will become more clear and cause people to act, which as a whole, has not been happening.

With a similar goal in mind, IBM is ramping up its business of selling power-saving technologies with new tools designed to track and cap data center energy consumption, including power for air conditioning to cool server computers. IBM is also expanding to 27 countries a program begun last year as part of its Big Green Innovations that lets companies earn and trade certificates awarded for verified energy savings.

The song remains to blame
The recording industry filed a lawsuit charging that Project Playlist, a company that provides an embeddable music player used at MySpace.com and Facebook, has violated its copyright. According to the complaint, the Recording Industry Association of America (RIAA) filed suit on behalf of nine record labels and accuses Project Playlist of making unauthorized reproductions of their music.

Representatives from Project Playlist could not be reached. On the company's Web site, Project Playlist said it is "committed to copyright protection" and does not support illegal copying of music files.

Companies that allegedly facilitate the distribution of pirated content have tried to argue that because they don't host unauthorized files they don't violate copyright. That hasn't stopped the RIAA or the motion picture industry from filing suit.

However, the recording industry's music piracy fight was dealt a setback when a federal judge rejected the RIAA's "making available" argument in a lawsuit against a husband and wife accused of copyright infringement.

In Atlantic v. Howell, Judge Neil V. Wake denied the labels' motion for summary judgment in a 17-page decision, allowing the suit to proceed to trial. The argument--that merely the act of making music files available for download constituted copyright infringement--has been the basis for the RIAA's legal battle against online music piracy.

While the couple lacks legal representation, the Electronic Frontier Foundation said it filed an amicus brief on behalf of the pair. The EFF argued against the RIAA's "making available" position, saying in a statement that it "amounts to suing someone for attempted distribution, something the Copyright Act has never recognized."

The judge agreed, saying that "merely making an unauthorized copy of a copyrighted work available to the public does not violate a copyright holder's exclusive right of distribution."

The EFF weighed in on another music usage issue, saying that Microsoft has "betrayed" MSN Music customers and wants the company to make things right by issuing an apology, refunds, and eliminate digital rights management technology from the Zune music player.

A federal district court in New York ruled that the American Society of Composers, Authors and Publishers is owed "reasonable license fees" by online media powerhouses AOL, RealNetworks, and Yahoo for the music streamed and distributed on their sites. The total payments to the group, which represents more than 320,000 songwriters, composers, and music publishers--not record labels--could reach $100 million.

Consumers may be made to share some of that pain. If the final fee structure looks anything like what is prescribed in the judge's written opinion, RealNetworks, Yahoo, and AOL would likely have to raise prices. It may also mean that the cost of doing business for anyone streaming music over the Web just went up.

Also of note
Google has assembled an advisory group of oceanography experts and invited researchers from institutions around the world to the Googleplex to discuss plans for creating a 3D oceanographic map...Apparently, eBay feels that its ownership stake in Craigslist was unfairly reduced following eBay's launch of rival online classifieds service Kijiji, according to a 26-page lawsuit filed last week and made public this week...and Microsoft unveiled a USB drive tool called COFEE that allows law enforcement to run more than 150 commands on a live computer system and save the results on the portable drive for later analysis.