All Things Digital

You wouldn’t know it from the protests over Microsoft’s decision to retire Windows XP at the end of June or the PC users exercising their Windows Vista downgrade rights, but Vista is actually selling quite well. Microsoft (MSFT) Chairman Bill Gates said today that sales of Windows Vista have reached 140 million copies worldwide. “That’s a very rapid sales rate,” Gates explained.

Sure is. Especially for an operating system that’s met with such a middling reception. That said, you’ve got to wonder if the 140 million copies to which Gates refers are deployed copies or licenses sold. Because if it’s the latter, the number would be decidedly less impressive. It wouldn’t really account for volume licenses sold to corporate customers, copies pre-installed on OEM computers, and copies downgraded to Windows XP. And Gates has made exactly this type of oblique statement before, the last time Microsoft announced Vista sales figures.

Microsoft’s chief software architect Ray Ozzie has finally published the sequel to “The Internet Services Disruption,” the 2005 potboiler of a memo that charted Microsoft’s (MSFT) better-late-than-never software-as-a-service strategy. It’s called, intriguingly, “Services Strategy Update April 2008” and it describes in numbing detail Live Mesh, Microsoft’s ambitiously late entry into a rapidly growing cloud-computing market.

Live Mesh, though it takes Ozzie five pages to describe it, is essentially a “software-plus-services” platform that uses the Web to synchronize and share data among devices, applications and people (you’ll find a walk-through here and a good overview here).

“Over the past ten years, the PC era has given way to an era in which the Web is at the center of our experiences–experiences delivered not just through the browser but also through many different devices including PCs, phones, media players, game consoles, set-top boxes and televisions, cars, and more,” Ozzie writes. “It is our mission in this new era to create compelling, seamless experiences that combine the power of the Internet, with the magic of software, across a world of devices. … the Web is the hub of our social mesh and our device mesh.”

“The Web is the hub of our social mesh and our device mesh.”

Wait.

Does Bill Gates know that? Because last year he told CNN’s “American Morning,” “We’re making the PC the place where it all comes together.” Clearly, in the ensuing year, Gates and Microsoft noticed that Google (GOOG) et al. are fast shifting computational relevancy to the Web, away from the desktop and, more importantly, away from Microsoft.

Live Mesh, if it’s successful, will change that. Because, as Joe Wilcox notes over at Microsoft Watch, “Live Mesh is Microsoft’s attempt to turn operating system and proprietary services platforms into hubs that replace the Web. Microsoft is building a services-based operating system that transcends and extends Windows and also the function of Web browsers.” Adds Wilcox, “It’s bold, brilliant and downright scary.”

A brassy little outfit called Psystar is getting a lot of attention today for peddling Leopard-compatible desktops. These “OpenMacs,” as the company’s named them, run on Intel (INTC) chips and feature 2GB of memory, a DVD drive and whatnot. They’re built from PC parts and, if you’d like, Psystar will even outfit them with Mac OS X Leopard.

Sounds like a compelling proposition for folks who would like the Mac OS on cheap hardware. Too bad the Mac OS X EULA specifically forbids installing the OS on non-Apple computers. Apple (AAPL) legal is, no doubt, already half-finished with a cease-and-desist letter.

“Windows is too monolithic.” So says Gartner (IT) analyst Michael Silver who, with colleague Neil MacDonald, told attendees of a Gartner-sponsored conference in Las Vegas that Microsoft’s (MSFT) ubiquitous operating system is “collapsing” under the weight of 20 years of legacy code.

Silver and MacDonald argued that the operating system’s evolution is hamstrung by a vast and unwieldy code base that hampers meaningful change. “This is a large part of the reason Windows Vista delivered primarily incremental improvements,” they said. “Most users do not understand the benefits of Windows Vista or do not see Vista as being better enough than Windows XP to make incurring the cost and pain of migration worthwhile.”

Ob-vious-ly. And?

“Windows as we know it must be replaced,” said the two.

OK. But replaced with what?

It should be replaced with a smaller OS, the two analysts said. A thinner, more robust, more modular OS. One that makes application development, support and, above all, the user experience easier, more pleasant. An elegant OS that encourages users to upgrade, rather than desperately cling to older versions.

You mean an OS like … like Mac OS X (AAPL)? Isn’t Microsoft already working on something like that?

The Internet has evolved from open standards, having a diversity of companies. And when you start to have companies that control the operating system, control the browsers, they really tie up the top Web sites, and can be used to manipulate stuff in various ways. I think that’s unnerving.”

That’s what Google co-founder Sergey Brin had to say about Microsoft’s hostile bid for Yahoo. Apparently he doesn’t see the Web as an operating system. Or the irony of leveling such accusations at Microsoft when the Web today is driven in large part by “made-for-Google-AdSense” online ad-supported business models and Google is the search market’s undisputed master.

(Googlebot illustration by Tyler Jordan, eVisibility Insider)

Apparently unable to stomach the idea of thousands of school children in developing countries running the Linux operating system on their new laptops, Microsoft is working on a version of Windows XP for the One Laptop Per Child project’s XO machine.

The company has assigned some 40 developers to the project and plans to begin limited field trials in January. If all goes well, XP for the XO could be available as early as the second half of 2008. “We want Windows to run on the XO and we are investing significant energy and talent,” James Utzschneider, general manager of Microsoft’s Unlimited Potential Group, told The Wall Street Journal. “We really want to make sure we have a quality experience before we make commitment to governments.”

Quite an interesting turnabout. After all, Microsoft has been slagging the One Laptop Per Child project’s XO machine since its conception. Just a year ago, Bill Gates publicly derided it while presenting Redmond’s ultra-mobile Origami machine at the Government Leaders Forum. “The last thing you want for a shared-use computer is for it to be something without a disk, and with a tiny little screen,” he said. “If you are going to go have people share the computer, get a broadband connection and have somebody there who can help support the user. Geez, get a decent computer where you can actually read the text and you’re not sitting there cranking the thing while you’re trying to type.”

“This is the Gphone. OK, this is not the Gphone.” The words of Iliyan Malchev, a Google engineer, in a video describing the company’s new mobile phone effort, really couldn’t have been more apt. Because what Google’s gone and built isn’t a hold-in-your-hand phone, but a robust open-development platform upon which to build one.

Android, as Google’s calling it, is a complete “stack” of software for mobile phones, backed by a consortium of companies called the Open Handset Alliance. (Interestingly, Verizon, which was rumored to be interested in Google’s wireless efforts, isn’t yet a member.)

“Android is the first truly open and comprehensive platform for mobile devices,” Andy Rubin, Google’s director of mobile platforms, explained in a blog post this morning. “It includes an operating system, user interface and applications–all of the software to run a mobile phone, but without the proprietary obstacles that have hindered mobile innovation. … Through deep partnerships with carriers, device manufacturers, developers and others, we hope to enable an open ecosystem for the mobile world by creating a standard, open mobile software platform. We think the result will ultimately be a better and faster pace for innovation that will give mobile customers unforeseen applications and capabilities.”

The first phones based on Android are expected in the second half of 2008. And no, Google isn’t building one of them, as CEO Eric Schmidt pointed out over and over again during a conference call to discuss Android this morning.

Q: So if this is not the Gphone, when will we see the Gphone, and what will it be?

Eric Schmidt: We’re not announcing anything, but this is the platform for building a Gphone. It starts a whole wave of innovation …

Q: Does that mean there will be NO Google phone you can buy?

ES: Imagine not just one Gphone, but a thousand Gphones as a result of the partnerships … the many other people who will be joining the open initiative. We forgot to tell you that it’s available next week, and the terms are the broadest in the industry.

Q: ………..Gphone?

ES: We are not announcing a Google phone.

Q: Eric, I want to go back to the Gphone–what’s the deal?

ES: The deal is we don’t pre-announce products… if there were to be a Gphone, it would run Android..

Previously:

• Report: Google May or May Not Reveal Phone Project Monday!
• The Mobile Apps Are Great, but the ‘I’m Feeling Lucky’ Dial Function Really Makes It
• First Gphone Line Forms in New York Times Newsroom
• We Believe in One Godphone, the Handset Almighty …
• ‘We’re Not Doing a Mobile Phone’ Added to Norton Anthology of False Denials
• The Gphone: Exclusively From Sprint Nextel and Google?

In August 2005 Google acquired a two-year-old start-up called Android. Founded by Andy Rubin, the guy behind mobile-device maker Danger, Android was rumored to have been developing a mobile-phone operating system.

Google never said much about the acquisition or its plans for Rubin, but he’s been on the company’s payroll ever since, presumably holed up somewhere on its campus in Mountain View, Calif., working on something–perhaps with the “graphics-software fanatics” from Skia, another mysterious mobile start-up Google acquired in 2005. Together they’d make quite a team–Rubin with his passion for location-aware mobile devices and Skia’s engineers with theirs for the robust, but portable, graphics engines that could be used in them. Theoretically, of course.

Why the history lesson? Well, industry sources tell The Wall Street Journal that Google might publicly detail its long-rumored mobile-phone project as early as Monday. “U.S. carriers likely to be part of the announcement are T-Mobile and Sprint, according to our sources, but there could be others by the time Google says its piece,” the Journal reports. “While Sprint appears to be agreeing to work with Google to put the Web giant’s new Linux-based open operating system into phones, T-Mobile will probably go even further: the company has worked with Google for months on plans to build Google-powered phones with a variety of Google software and applications. As far as handset partners for Google, Taiwan’s HTC is a likely bet, our sources say. Samsung, LG and Sony Ericsson are also possible, but we’ll wait and see the full roster. Equally interesting will be who isn’t on the list.”

Indeed. Because whoever’s not on that list could be losing out on a chance to become a true player in the mobile-search advertising business, which research outfit the Kelsey Group recently claimed will grow to $1.4 billion in 2012 from $33.2 million this year–in the United States alone.

In a press conference following Google Analyst Day, company Chairman and CEO Eric Schmidt and co-founder Sergey Brin confirmed Google’s plans to bid in the FCC’s upcoming 700 MHz spectrum auction, but declined to discuss the mobile-phone strategy that might make use of it–apparently leaving that task to The Wall Street Journal.

According to a report in the publication today, Google will officially disclose its long-anticipated plans for Google-powered phones within the next two weeks. The devices will reportedly feature Google’s standard mobile applications (Maps, etc.) and more interestingly, a customized open-source operating system, which would allow third-party developers to build applications beyond those offered by Google. From the Journal:

The Google-powered phones are expected to wrap together several Google applications–among them, its search engine, Google Maps, YouTube and Gmail email–that have already made their way onto some mobile devices. The most radical element of the plan, though, is Google’s push to make the phones’ software ‘open’ right down to the operating system, the layer that controls applications and interacts with the hardware. That means independent software developers would get access to the tools they need to build additional phone features.

“Developers could, for instance, more easily create services that take advantage of users’ Global Positioning System location, contact lists and Web-browsing habits. They also would be able to interact with Google Maps and other Google applications. The idea is that a range of new social networking, mapping and other services would emerge, just as they have on the open, mostly unfettered Web. Google, meanwhile, could gather user data to show targeted ads to cellphone users.”

And don’t forget the mobile commerce element. Google-powered phones might even offer customers a way to pay for goods from vending machines and retailers via text message.

Anyway … The company has approached a number of handset makers and wireless operators about partnering in the effort, which it hopes to bring to market by the middle of 2008.

Previously:

• First Gphone Line Forms in New York Times Newsroom
• We Believe in One Godphone, the Handset Almighty …
• ‘We’re Not Doing a Mobile Phone’ Added to Norton Anthology of False Denials
• The Gphone: Exclusively From Sprint Nextel and Google?

Hard as it might be to believe, people are actually buying Windows Vista. After market close yesterday, Microsoft reported a 27% surge in revenue, to $13.76 billion for the first quarter of 2007, its best quarterly revenue growth in eight years, on robust demand for its new operating system.

Vista appears to be selling far better than anyone anticipated. Perhaps even Microsoft itself. Asked during an earnings call for an update on Vista adoption thus far, Microsoft CFO Chris Liddell had this to say:

Clearly we are very happy with the client division overall. As you’ve seen since we launched Vista, the revenue growth has been in excess of 20% three quarters in a row, so the overall [headline] number, very good.

“In terms of the premium mix, also very happy about that. Now, in this case, premium mix brings in both Vista and XP premium sales as well, and that’s tracking in the mid-70s, so 75% for the quarter, and that compares to I believe 59% in the equivalent quarter last year, so up 16 points year over year. So we’re very happy with the adoption of Vista Premium and also happy with the old XP Media sales as well.

“The other thing I’ll point to is on the client annuity agreements, which is probably the best leading indicator we can think of of people’s intention to adopt, that’s still very early in the adoption cycle for businesses, but the volume licensing portion of our business was up 27% in the client area, so that’s a very good leading indicator from our point of view.

“And sort of finally, as a wrapper, year-to-date sales are now 85 million units for Vista. That compares to about 45 million for XP over the same period, so almost twice as much.

“So it’s still early days but progress, we’re very happy with so far.”

Eighty-five million copies of Vista sold. Interesting, considering Vista didn’t exactly arrive at market with rave reviews. Guess “the wow” has got to start sometime, right?