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Filter - Cynthia L. Webb
Microsoft Unbuttons Its Lawsuits

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_____About Filter_____
Filter looks at the day's top technology news through snapshots and analysis of what the world's media outlets are covering. Washingtonpost.com's new Mon.-Fri. feature is penned by technology reporter Cynthia L. Webb. If a technology story breaks, a company falters or triumphs, or there's a new trend in technology, Filter wants you to know about it.

_____Filter Archive_____
Kerry Gets Cozy Online (washingtonpost.com, Jul 6, 2004)
Hollywood's Internet Avenger? (washingtonpost.com, Jul 2, 2004)
Court Pours Cold Water on Porn Law (washingtonpost.com, Jun 30, 2004)
Divorce Court, Toy Story Style (washingtonpost.com, Jun 29, 2004)
Microsoft's Momentary Reprieve (washingtonpost.com, Jun 28, 2004)
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The "MSN unit will no longer intersperse paid advertisements with free internet search results, a move the software giant claimed would put the quality of its search results on a par with those from Google. The decision to strip out paid ads from free search results is one of several improvements introduced by Microsoft in hopes of attracting more customers to its search service," the Financial Times reported. CNET's News.com explained more: "The new MSN Search features fewer clearly marked sponsored ads. In addition, MSN will host a dedicated 'light' search page that the company boasts will out-Google Google in its minimalism. Microsoft also took a step that could distance it from Yahoo, removing search links for now from marketers that pay a fee for inclusion in Yahoo's search index. The changes are expected to improve search results by 50 percent, Microsoft claims. More significantly, MSN will introduce a homegrown Web crawler and algorithmic search engine in test form, giving Webmasters the chance to vet the system before it is set to launch later this year, according to the timeline of Microsoft Chairman Bill Gates."

The Wall Street Journal said Microsoft's search engine changes are "elements of its secretive push to be No. 1 in the increasingly lucrative business of searching the Internet." More from the article: "The software maker is replacing the search page on its MSN Web site with a cleaner and simpler design that resembles that of market leader Google Inc. For now, Microsoft will continue to rely on Yahoo Inc. technology for its search results and related text ads. But also starting today, Microsoft is releasing a trial version of its own search technology. That trial, contained on a separate Web site, offers a much-awaited glimpse at the software giant's expensive, yearlong effort to create a Web-search engine to rival those of Google and Yahoo. By the end of the year, Microsoft plans to replace Yahoo's non-advertising technology on its site with its own. The twin announcements are important milestones in Microsoft's ambition to become a major player in search technology, increasingly seen as central to online advertising, commerce and communication. The company won't disclose how much money it is devoting to this effort overall, but puts a $100 million price tag on the new MSN search site alone."
Financial Times: Microsoft To Reveal Online Search Changes
CNET's News.com: MSN Launches Revamped Search Engine
The Wall Street Journal: New Sleuths For Searching (Subscription required)

The company's top target is clearly Google. "Microsoft's $100 million investment in the new MSN Search site, available a search.msn.com, reflects competition for the loyalty of consumers searching the Web and for ad revenue from companies trying to reach them. Google, the world's most-used search engine, generated $961.9 million in sales last year, almost triple its revenue from 2002. 'This is about taking some of those loyal Google customers and getting them to try MSN,' said Matt Rosoff, an analyst at research firm Directions on Microsoft in Kirkland," the Seattle Post-Intelligencer reported.

"Microsoft executives had acknowledged that by some measures, their previous search service was a distant third behind Google and Yahoo because it was clunky and cluttered with advertisements. This upgrade is aimed at keeping MSN users -- and their revenue-generating clicks -- from straying to rival sites every time they want to search," the Los Angeles Times reported. "We really have an opportunity to get back in the game and establish our position -- if we do this right," Yusuf Mehdi, the Microsoft vice president who heads MSN, told the paper.

The Washington Post reported that Microsoft is rolling out "what it is billing as a faster, fresher and sleeker-looking search site, www.search.msn.com. Analysts cautioned, however, that Microsoft has much to prove to win over computer users, and formidable obstacles to overcome, given the widespread popularity of Google and Yahoo. 'This is a huge announcement for the search engine industry as a whole,' said Andy Beal, vice president of WebSourced Inc.'s KeywordRanking.com, a search engine marketing firm. 'Microsoft finally getting involved with search is going to send shock waves through the entire industry. Google has already seen the competition Yahoo is putting up. With Microsoft and their billions of dollars entering the arena, Google is going to be fighting attacks from two sides.'"
The Seattle Post-Intelligencer: MSN Search Site Will Have Sleeker, Leaner Look
The Los Angeles Times: Microsoft To Launch Search Site (Registration required)
The Washington Post: Microsoft Enters Search Market (Registration required)

Microsoft's new search strategy is getting good reviews from one analyst. "Microsoft is late to the search table, but it has combined its observations of the market with its own usability testing in smart ways, said Susan Feldman, an analyst at IDC. She said she doesn't think the delay has put Microsoft at a disadvantage because search still a new industry," The Seattle Times reported. "The business of search has been unclear," Feldman said. "The popularity of it has been very clear, but how you make money at it has been almost a mystery. It's only in the last year that it's become quite apparent that search can turn into a big business."
The Seattle Times: Microsoft Revamps Search Site At MSN

$56 Billion to Play With

The Wall Street Journal reported that the appeals court's ruling clears the way for Microsoft to dip into its mammoth cash reserves. "The ruling, though expected, removes an impediment that has stood in the way of Microsoft announcing a plan for working down its staggering cash hoard, which stood at $56.4 billion at the end of March. Analysts such as Rick Sherlund, of Goldman Sachs, predict that Microsoft could announce stock buybacks of as much as $40 billion between now and the end of July. The possibility that an appeals court could change legal ground rules for the company was an uncertainty that affected Microsoft's planning."

The Seattle Post-Intelligencer picked up on the same theme: "Even before the decision was released, financial analysts were expecting Microsoft to reduce its cash pile significantly by repurchasing a large amount of its stock, or substantially increasing its dividend to shareholders, or possibly both. The company yesterday reiterated that it intends to announce a plan for its cash by the end of this month. If there was previously any doubt, yesterday's ruling makes it clear that 'something rather significant should happen here in the next month or so,' said Alan Davis, an analyst at McAdams Wright Ragen in Seattle."
Seattle Post-Intelligencer: Microsoft Antitrust Accord Upheld

The company's bank account took a small hit this week. The company has ponied up a $600 million to pay a fine slapped on the company by European antitrust regulators in the spring, The New York Times reported today. "European antitrust cases that are subsequently appealed, the company typically pays with a bank guarantee -- a letter of credit -- pending the outcome of the appeal. But with an estimated $50 billion in cash reserves, the fine was never going to be a problem for Microsoft to pay. The company faced a three-month deadline on the payment. Tom Brookes, a Microsoft spokesman in Brussels, confirmed Wednesday that the payment had been sent to an escrow account, where it will be held pending the outcome of the appeal, which Microsoft formally requested last month."
The New York Times: Microsoft Pays Fine Imposed By Europe (Registration required)

Invoking the Ghost of Bill

Oracle chief Larry Ellison's testimony in Oracle's antitrust trial lavished a lot of attention on the company's arch-rival, Microsoft. Though Microsoft is not part of the trial, the company has become central to Oracle's defense of its plans to acquire rival business software developer PeopleSoft. Ellison testified yesterday "that Microsoft's strategy of driving down prices was a crucial reason Oracle moved to take over the PeopleSoft," The New York Times said. "Ellison also said that Oracle was continuing to consider three or four other acquisitions, even while its bid for PeopleSoft is pending. He declined to name the companies, but said they were all publicly traded and included a business applications company, a company involved in 'business intelligence' and a software infrastructure provider. In a taped deposition last week, Mr. Ellison listed BEA Systems, Siebel Systems and Lawson Software as past takeover candidates." Ellison said "Oracle believed that acquisitions were essential to its ability to compete with Microsoft, which -- along with SAP -- was clearly poised to put pricing pressure on the market for corporate application software," the paper reported. "The second Microsoft enters a market, prices drop like a rock," Ellison said. "Microsoft's strategy is always to be the low-cost provider, up to and including zero. It was fundamental to our decision to buy PeopleSoft."
The New York Times: Oracle Said Fear of Microsoft Led To PeopleSoft Bid (Registration required)

The Los Angeles Times said when Ellison was asked "why Oracle couldn't get more customers just by lowering prices, Ellison replied: 'That's what Netscape did. They went out of business.'" The San Jose Mercury News said Ellison explained why the company wants PeopleSoft: "I know that Silicon Valley has this view that it's forever young," Ellison said. "But Silicon Valley has been around for a long time. There was a lot of consolidation going on around us. And we wanted to be a survivor," he said in explaining Oracle's yearlong pursuit of PeopleSoft," the paper reported. More on this theme from The Wall Street Journal: "We wanted to be a consolidator and survivor," Mr. Ellison testified. "We thought the only way to survive was to be an acquirer."

Merc technology columnist Dan Gillmor said: "Microsoft seemed to be the true fear factor for Ellison because of its record of entering a line of business and driving prices down as far as necessary -- including to zero -- to grab market share. And anyone who doubts that Microsoft does intend to move into the high end of the software business, no matter what it says, just isn't paying attention to history."
Los Angeles Times: Ellison Gives His Reasons For Wanting PeopleSoft (Registration required)
San Jose Mercury News: Ellison: We're Just Trying To Stay Alive (Registration required)
The Wall Street Journal: Ellison Testifies On Oracle's Need For PeopleSoft (Subscription required)
San Jose Mercury News: Ellison's Day In Court Devoid of any Drama (Registration required)
Associated Press via The Washington Post: Acquisitions Essential, Oracle CEO Asserts (Registration required)
CNET's News.com: Ellison: 'Radical' Industry Shift Rose Bid

Someone to Watch Over Me

It's probably good to assume that what you write in e-mails is not safe from the prying eyes of your company or even Uncle Sam, especially after a recent federal appeals court ruling.

"A company that provides e-mail service has the right to copy and read any message bound for its customers, a federal appeals court panel has ruled in a decision that could expand e-mail monitoring by businesses and the government," The Washington Post reported. "The 2-to-1 decision by a panel of the U.S. Court of Appeals for the 1st Circuit in Massachusetts alarmed privacy advocates, who said it torpedoes any notion that e-mail enjoys the same protections as telephone conversations, or letters when they are sorted by mail carriers. The court ruled that because e-mail is stored, even momentarily, in computers before it is routed to recipients, it is not subject to laws that apply to eavesdropping of telephone calls, which are continuously in transit. As a result, the majority said, companies or employers that own the computers are free to intercept messages before they are received by customers."
The Washington Post: Court Limits Privacy of E-mail Messages (Registration required)

The Associated Press had this reaction from the Center for Democracy and Technology. "It puts all of our electronic communications in jeopardy -- voice mail, e-mail, you name it," said Jerry Berman, president of the center. "I think it violates the letter and spirit of the statute."
Associated Press via The San Jose Mercury News: Court Allows E-mail Interception, Raising Privacy Questions (Registration required)

Filter is designed for hard-core techies, news junkies and technology professionals alike. Have suggestions, cool links or interesting tales to share? Send your tips and feedback to cindyDOTwebbATwashingtonpost.com. (Yes, those spammers have been having a lot of fun with my e-mail address lately.)

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