All Things Digital

XP will hit an end-of-life. We have announced one. If customer feedback varies, we can always wake up smarter, but right now we have a plan for end-of-life for new XP shipments.”

–Microsoft CEO Steve Ballmer, April 24, 2008

Well if this doesn’t count as the sort of feedback that would cause Microsoft (MSFT) CEO Steve Ballmer to wake up smarter, I’m not sure what does. Heeding the cries of their Vista-averse customers, Hewlett-Packard (HPQ), Lenovo (0992.HK) and Dell (DELL) are now offering customers who purchase machines running the Business and Ultimate flavors of Microsoft’s new state-of-the-art OS the chance to replace it with Windows XP Professional. And they’re doing it in a way that will keep Windows XP around well beyond the June 10 deadline Microsoft has set as the end of its retail sales.

How? Well, remember that “downgrade” to XP option Microsoft quietly offered PC makers last summer? The one that Mike Nash, corporate vice president of Windows Product Management, said was designed for “customers who need a little more time to make the switch to Windows Vista”? Well, HP, Lenovo and Dell are exploiting it to their full advantage. HP and Lenovo are shipping XP Pro recovery disks with qualifying Vista machines. Dell has gone one step further and volunteered to exercise those downgrade-to-XP rights on their customers’ behalf, installing Vista on their new machines and then purging it and replacing it with XP.

All of which, seems a bit ludicrous, really. Why bother with such a charade? Perhaps because every downgrade to XP counts as another copy of Vista sold.

“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?

I am not sure how the company lost sight of what matters to our customers (both business and home) the most, but in my view we lost our way. I think our teams lost sight of what bug-free means, what resilience means, what full scenarios mean, what security means, what performance means, how important current applications are, and really understanding what the most important problems [our] customers face are. I see lots of random features and some great vision, but that doesn’t translate into great products.

“I would buy a Mac today if I was not working at Microsoft.”

–Longtime Windows development chief Jim Allchin, Jan. 7, 2004

Allchin wrote that message four years ago, and when it was made public as part of one of Microsoft’s (MSFT) ongoing lawsuits, he claimed he’d written it to be purposefully dramatic. And perhaps that was the case.

Still, it’s hard not to look at the middling, unenthusiastic reviews given the company’s long-delayed Windows Vista OS and think that maybe he was just being honest. Hard, too, not to look at the company’s unexpected (some feel unprecedented) decision to slash the retail price of Vista to spur sales–and conclude that maybe a lot of consumers feel the same way.

Yesterday, Microsoft announced plans to lower OS’s retail price in advance of if its first major update, Service Pack 1 (SP1). The price cuts vary by market, but in general will range from 20% to 40%. In the states, for example, the price of Vista Ultimate will drop to $219 from $299, Vista Home Premium to $129, from $159–substantial cuts, and ones Microsoft hopes will broaden Vista’s appeal.

“Windows Vista has been on the market for more than a year now, with more than 100 million licenses sold in its first year,” Windows consumer marketing Vice President Brad Brooks explained. “While this is great progress … we’ve observed market behavior that suggests an opportunity to expand Windows stand-alone sales to other segments of the consumer market. Over the past year, we conducted promotions in several different markets combining various marketing tactics with lower price points on different stand-alone versions of Windows Vista. While the promotions varied region to region, one constant emerged–an increase in demand among consumers that went beyond tech enthusiasts and build-it-yourself types.”

Analysts, while taken aback by the price cut, seemed to think it a savvy one. “I think this is a smart strategic move,” said NPD Group Inc.’s Chris Swenson. “Vista hasn’t hit their initial expectations.” That said, Swenson doubts the price cut will have Vista flying off the shelves. Microsoft “really wants to help spark Vista sales, though I don’t see it taking off like a rocket like the way Office did after its price was cut.”

We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well. I like to call this idea creative capitalism.”

–Microsoft Chairman Bill Gates, Jan. 24 2008

Just a few hours after Microsoft Chairman Bill Gates called for a “creative capitalism,” the company he founded proved that old-school capitalism is alive and well.

Microsoft reported an impressive second quarter, blowing the doors off Wall Street expectations and offering some optimistic guidance for 2008. Net income rose 79% from a year ago, and
quarterly revenue jumped 30% amid a surge in sales of the Windows OS and the Xbox 360. A strong showing made stronger still by third quarter and full-year forecasts that exceed even the most optimistic projections.

According to last year’s safely-looking-ahead-to-the-year-to-come lists, 2007 was to be “a year of hyperdisruption for the technology industry”; it was to be “a year of significant developments” and “a year of evolution”; it was to be “a year of invention and innovation,” “a year of experimentation” and “a year of slow, but significant, change”; it was to be “a year of carnage,” but it was also to be “a year of great happiness and multiple blessings.” Above all, 2007 was to be “a busy year for technology.”

Which, as you’ll see below (and in our companion video), is pretty much how it turned out. What follows is Digital Daily’s abridged guide to the year in tech news–a fond reminiscence of what was, and our First Annual Year-End List For Year-End List Haters.

1. Yahoo Shareholders Reject Plan to Tie Executive Compensation to Company’s Crappy Performance
   Well, what do you know: Yahoo’s annual shareholder meeting didn’t conclude with CEO Terry Semel’s head piked on the exclamation point of the Yahoo sign outside company headquarters.

2. I Know It Was You, Fredo. You Broke My Heart. You Broke My Heart!
   Apparently, Fred Anderson is the “Fredo” of the Apple options backdating family.

3. We’ve Asked John Williams to Do a Special Performance of the Theme From “The Poseidon Adventure” for Our Q4 Results
   Who’s programming Microsoft’s on-hold music, Apple’s Phil Schiller? Waiting for the company’s third-quarter earnings call to begin yesterday, those listening in were treated to an instrumental piano version of Celine Dion’s “My Heart Will Go On.” From “Titanic,” the disaster movie.

4. I’m Proud to Say Our New “Soylent Green” iPod Is Made of 100% Biodegradable Greenpeace Activists!
   If you’re going to try to smear Apple for reckless environmental practices, you best have some hard epidemiological and toxicological data on hand, because goofy Photoshop treatments of the company’s marketing materials just can’t stand up to a blow from the Apple PR machine.

5. And Online Display Impressions Soared as More Americans Checked Their AOL Accounts for Old Times’ Sake
   To hear tell from Time Warner executives, the company’s better-than-expected earnings for the first quarter owed quite a bit to gains in online-advertising market share by its AOL Internet division.

6. Web 2.0 Audience in Mirror May Be Smaller Than It Appears
   How ironic is it that Web 2.0–the “participatory Web”–has far fewer participants than its architects would have us believe?

7. And for My Next Trick, I’ll Turn Myself Into a Complete Jackass
   If you’re going to demand that YouTube remove a video to which you object under the Digital Millennium Copyright Act, it’s probably wise to make sure that you actually understand the DMCA.

8. War Is Peace. Freedom Is Slavery. Ignorance Is Strength. DRM Is DCE.
   You can’t put frosting on manure, but HBO’s Chief Technology Officer Bob Zitter isn’t above trying.

9. We’re Naming It the Motorola STNKR, After Our Q1 Earnings …
   Carl Icahn was right. Motorola really is desperate for a new product. How else to explain a patent the company was awarded last month for a “communication device having a scent-release feature and method thereof.”

10. The Frienemy of My Frienemy Is My Enemiend
    If Microsoft is planning an acquisition in the online marketing and advertising space, it better act fast, because if it waits much longer there won’t be anything left to acquire.

11. How Would Monsieur Ellison Like His BEA Served? Mixed in a Bucket With Oracle’s Other Acquisitions?
    Looks like we may be in for another PeopleSoft-esque takeover drama …

12. I’m Just Biding My Time Here Until I Can Quit and Study Whale Feces Full Time
    Given the chance, how would you alter the course of your career? Well, if you worked at Microsoft’s Security Response Center, you might consider taking a job as an Olympic drug tester, a gravity research subject, or a “whale-feces researcher.”

13. Much Like Energy, BS Cannot Be Created or Destroyed, It Can Only Be Changed From One Form to Another
    If Steorn’s perpetual motion effort is anything like its e-commerce venture (and by all accounts things do seem to be going that way), the only thing in its future is insolvency.

14. From Now On, We’ll Be Known as Nlsn/NtRtings
    Looks like vowels won’t be the only accoutrements to be tossed aside in the rise of Web 2.0. The venerable page view is to be abandoned as well.

15. The Defendant Stands Accused of Copyright Infringement, Breach of Contract and Misappropriation of Dumb Luck
    According to popular legend Facebook founder Mark Zuckerberg once kept two versions of his business card in his wallet–one with the title CEO, the other with “I’M CEO . . . BITCH.”

16. Well, Here Come YouTube’s Video ID Tools. Guess That Means Godot Will Be Here Any Minute Now
    Google’s apparently finished “educating users about copyright law” and has moved on to the far more important business of making sure not to run afoul of it.

17. Look at It This Way: Now That Yahoo’s an ‘Ecosystem,’ the EPA Can Finally Declare It a Superfund Site
    “Our financial performance is not what we would like to see long-term.” This, from Blake Jorgensen, Yahoo’s chief financial officer who, just six weeks into the job, is already well versed in the company’s fiscal truisms.

18. Gates to Google: My Lyrical Technique Will Leave Your Body Weak
    Much as Microsoft Chairman Bill Gates fancies himself untroubled by Google’s incursions into his software empire, they clearly do chafe him a bit.

19. Newest Yahoo Mail Feature: BCC Beijing
    Sure, Yahoo signed China’s “Public Pledge on Self-Discipline for the Chinese Internet Industry,” a voluntary agreement to monitor and restrict information deemed “harmful” by Beijing, but did it have to take it quite so seriously?

20. Apple: Wham, Bam, Thank You Fanboi
    “I feel like a $200 whore.” That was one iPhone early adopter’s crass assessment of his feelings of self-worth, after Apple unexpectedly cut the price of the device by a third–just two months after it arrived at market.

21. In the Unlikely Event of a Water Landing, Sergey’s California King May Be Used as a Flotation Device
    With its onboard hammocks, full-size sofas and California King beds, it’s a wonder Google’s “party plane” has room for scientific instrumentation befitting the National Aeronautics and Space Administration, but apparently it does.

22. Act Now and Get a Downgrade to the OS You Really Want, ABSOLUTELY FREE!
    It’s looking more and more like the pent-up demand for Windows Vista we’ve heard so much about this past year is really just pent-up demand for Windows XP.

23. Dude, I Work for Friggin Forbes Magazine. Have You Heard of It?
    The year-long guessing game is over. New York Times reporter Brad Stone has outed Daniel Lyons, a senior editor at Forbes magazine, as the author of the Secret Diary of Steve Jobs, the satirical blog lampooning Apple’s iconic CEO (See? Told you it wasn’t me).

24. If Facebook’s Worth $15 Billion, Then My Stupid Idea’s Got to Be Good for $10 Mil
    Apparently the vainglory from which Facebook CEO Mark Zuckerberg appears to suffer is communicable and spreading rapidly throughout the social network’s developer community.

25. A Billion Here, a Billion There, and Pretty Soon You’re Talking Real Bollocks
    MySpace is worth $65 billion in the same way that Facebook is worth $15 billion–hypothetically.

26. “Apple Has Destroyed the Music Business”–Not That We Didn’t Try Our Best
    Many, many years ago, when the digital-music business consisted of little else besides Napster and the Recording Industry Association of America’s lawsuits against it, Apple proved that there was indeed a decent business to be had in selling music online for $1 per song.

27. It’s Not an Unpaid Endorsement, It’s a “Social Ad”
    Facebook’s Social Ads aren’t endorsements, they’re a “representation” of user activity.

28. Obama Announces “No Tech Policy Left Behind” Plan
    If Google’s mission is to organize the world’s information and make it universally accessible and useful, then Democratic presidential candidate Barack Obama’s is to do the same to its tech-policy issues.

29. Sounds More Like the “Zune of Reading” to Me
    If Jeff Bezos truly hopes to create “the iPod of reading,” observers say he’s going to have to do a hell of a lot better than Amazon’s new Kindle e-book reader.

30. Fiascobook
    What Facebook CEO Mark Zuckerberg lacks in foresight, he certainly makes up for in disingenuous hair-shirt remorse.

Microsoft’s gone and killed Vista’s infamous “Kill Switch,” a service that hamstrings unlicensed versions of the operating system.

Responding to complaints, the company said today that the upcoming Service Pack 1 update for Windows Vista will remove “Reduced Functionality Mode” from the OS’s copy-protection scheme.

That’s great news for innocent Vista users who’ve had their systems “reduced” for no good reason, although to be frank some users may find the nagware service with which it’s being replaced equally annoying. “Although our overall strategy remains the same, with SP1 we’re adjusting the customer experience that differentiates genuine from nongenuine systems in Windows Vista and later in Windows Server,” Windows product marketing Mike Sievert explained. “Users whose systems are identified as counterfeit will be presented with clear and recurring notices about the status of their system and how to get genuine. They won’t lose access to functionality or features, but it will be very clear to them that their copy of Windows Vista is not genuine and they need to take action.”

Recurring notices, huh? My God … they’ve finally found a new use for Clippy, haven’t they?

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.

September is shaping up to be a lousy month for Microsoft. With the European Union scheduled to issue a crucial judgment in its antitrust case on Monday, a group of six states and the District of Columbia have asked that the terms of Microsoft’s antitrust consent decree be extended through 2012.

The decree was scheduled to expire in November, but the states argue that court oversight of the software giant should continue in light of its continued dominance in the OS and Web-browser markets. “They still have the ability to undercut the market,” Stephen Houck, the attorney representing the group, said during an antitrust compliance hearing in federal district court in the District of Columbia. “There hasn’t been enough time to fulfill the remedy [of the consent decree]. We need a continuation of remedial structures. If Microsoft practices what it preaches–and we hope it will–it will have a minimum impact on Microsoft. Microsoft’s market power remains undiminished.”

Microsoft met the states’ demand with barely restrained incredulity, surprised that the same states that complained last month that the decree was ineffective were now asking for its extension. “These are the same plaintiffs who in August issued a filing saying they didn’t like the decree,” said Rick Rule, an attorney for Microsoft. “Now they’re asking for it to be extended.”

Microsoft confirmed yesterday what anyone with a Web browser and a BitTorrent client has long presumed: Windows Vista Service Pack 1 (SP1) really does exist, as does a schedule for testing and availability. After dancing around the subject for months, Microsoft finally came clean yesterday and said it will release Windows Vista SP1 in the first quarter of 2008. But don’t expect any grand changes to the operating system when it does. SP1 won’t deliver any major new features, just improvements to reliability, security and performance.

“SP1 will contain changes focused on addressing specific reliability and performance issues we’ve identified via customer feedback, supporting new types of hardware, and adding support for several emerging standards,” said Microsoft product manager Nick White. “SP1 also makes additional improvements to the IT administration experience. We didn’t design SP1 as a vehicle for releasing new features.”

Of course not. How could you reasonably devote resources to new feature development when, as David Zipkin, senior product manager in Microsoft’s Windows Client group, eupehmistically explained: “People are having some variety in their experiences with Windows Vista.”

Yeah, the sort of “variety” that inspires some Microsoft Gold partners to rip it off the systems they’ve installed it on 99% of the time …

Anyway, the release of SP1 will likely inspire the corporate customers who’ve put off upgrading to Vista until Microsoft works out its kinks to finally invest in the OS. As IDC analyst Al Gillen told the Seattle Post Intelligencer: “It’s a watershed event for a lot of customers. … Mentally, it’s still an important milestone, I believe. For a lot of customers, they still wait to see a service pack because they feel that is the point in time where a Microsoft product has gotten to a level of testing or reliability where they have the confidence that the product is going to be stable enough for them to use.”