Microsoft

Microsoft shocked the security industry on Tuesday by announcing that it will stop selling its consumer-focused Microsoft OneCare security software. Instead, Microsoft said that it will offer a new free alternative dubbed "Morro" in mid-2009. What does this sudden change in direction mean?

1. Microsoft is cutting its losses
After two years of hawking OneCare, the company barely made a blip in consumer security market share and was probably bleeding red ink. It is cheaper to give away Morro than to package, distribute, and promote OneCare.

Windows Live OneCare logo

(Credit: Microsoft)

2. There's a reason to remain in the market
So why not kill endpoint security altogether? Good question. As long as Microsoft continues to offer Forefront (i.e., its commercial endpoint security product), Morro is a relatively easy thing to support. Alternatively, I can't see Microsoft walking away from any PC software. The PR implications of doing so are too dire.

3. Morro won't kill other alternatives
Free is pretty compelling, but it is nothing new. Users could opt for a strong free alternative today called Clam AV, but Symantec, McAfee, Trend Micro, and Kaspersky still do pretty well with consumers. Users either don't know about Clam or believe that "free" software must have a catch. On another note, about 40 percent to 50 percent of consumers still buy security software at their local Best Buy, Frye Electronics, or Staples. With no revenue stream, I can't see Microsoft boxing up Morro and paying for shelf space, so Morro won't even be available to a large percentage of the potential market.

4. Microsoft won't bundle Morro in consumer Windows
Ten years ago, I have no doubt that Microsoft would have made security part of the operating system. Heck, Microsoft gave away its antispyware software as recently as 2006. Pursuing this course of action doesn't make sense in this case, however. Aside from the obvious antitrust issues, there is another strategic reality here. Netscape and Internet computing threatened the Microsoft franchise. Symantec Endpoint Protection does not.

Whether industry pundits admit it or not, Microsoft has made great strides in security over the past five years, both in terms of products, processes, and industry leadership. These advances are extremely visible in the enterprise market, but even Microsoft couldn't extend this momentum into the brutal and fickle consumer space. There are too many other fast-growing, highly profitable market segments for Microsoft to pursue, so it simply makes no sense to keep fighting in a crowded market with dwindling margins.

Microsoft consumer security may become free, but expect to hear a lot less about Morro once Microsoft pulls OneCare from retailers' shelves.

Microsoft may no longer be looking to buy Yahoo outright, but I'm guessing it is not averse to picking up some of its talent.

Valleywag reported on Wednesday that Sean Suchter, a top search executive at Yahoo, is leaving the company and speculated that he is headed to Microsoft. Kara Swisher, at All Things Digital, says she's hearing the same thing.

The move comes the same week as Yahoo announced that Jerry Yang will step down as soon as the company finds his replacement.

Suchter's colleagues didn't try to sugarcoat the news of his departure, according to an e-mail posted by Valleywag.

"Unfortunately, I have to give some bad news to you," Tuoc Luong wrote in a note to folks on the Yahoo search team. "Sean Suchter has resigned. Sean's last day will be December 19th. Some of you will find this news shocking given that Sean has been a Gibraltar rock at Yahoo and in particular for the Search team. I understand this."

Then again, if Steve Ballmer gets his way, maybe Microsoft will end up as Yahoo's search partner and Suchter will be reunited with his colleagues.

No official comment yet from either Microsoft or Yahoo.

Update 11:45 a.m. PST: Yahoo confirms he's leaving.

Microsoft CEO Steve Ballmer threw his daily bucket of cold water on the notion that the software maker will return with a new bid for all of Yahoo.

"We are done with all acquisition discussions with Yahoo," Ballmer said, adding that he has said this a bunch of times but that some people remain "confused."

"We did our best," he said. "We've moved on."

His comments came at the company's annual shareholders meeting Wednesday in Bellevue, Wash., not far from the company's Redmond headquarters. Ballmer, whose address was offered live via Webcast, made no reference to Yahoo in his prepared remarks, but it was the first shareholder question.

Speculation was rekindled this week after Yahoo announced that it is searching for a new CEO to replace Jerry Yang, who will step down once the new executive is hired.

Yahoo's shares plummeted Wednesday in response to Ballmer's comments, falling about 15 percent to $9.79 a share in morning trading. The reaction comes just a day after Yahoo's shares jumped as high as 16 percent in intraday trading, following the news about Yang.

While Ballmer rejected the notion that Microsoft would return with a new offer to buy Yahoo, he reiterated that the idea of a search partnership remains "an interesting possibility."

"There's no active discussion on that front, but we'd be very open to it," Ballmer said.

Dawn Kawamoto of CNET News contributed to this report.

Microsoft CEO Steve Ballmer told shareholders Wednesday he expects the company's move to slow its hiring will continue beyond the middle of next year.

Headcount, he said, will experience "much, much slower growth for the remainder of this financial year and I suspect into next year." Microsoft's current fiscal year runs through June, with the coming fiscal year stretching until mid-2010.

His comments came at the company's annual shareholders meeting Wednesday in Bellevue, Wash., not far from the company's Redmond headquarters. Ballmer's address was also offered live via Webcast.

Microsoft has denied an all-out hiring freeze, but the company has significantly curtailed its hiring and it appears some departments have halted hiring.

As could be expected, Ballmer made the case that Microsoft should be able to weather the storm better than most. "Our strong financial position allows us to reinforce our competitive advantage by continuing to invest" in research and development, as well as to make careful, targeted investments, he said.

Still, he said that both Microsoft and the industry will suffer the effects of the bad economy.

"They certainly will," Ballmer said. "Our industry and our company will not be immune. We are looking at every aspect of our business" to cut costs, he said.

Ballmer was joined at the meeting by Chairman Bill Gates, who talked about where technology is headed as well as his own transition away from full-time work at the company.

Gates joked that he thought it would be so hard to leave Microsoft that he might find himself driving to Redmond out of habit.

"I do get there for some important meetings, but I haven't driven there accidentally yet," Gates said.

Microsoft and Novell said Tuesday that they are nearly ready with a beta version of Moonlight--a Firefox add-on that allows Silverlight content to play on Linux PCs.

The software is being announced as the companies tout the second anniversary of their peace deal.

Work on Moonlight began in May 2007 and an alpha version was shown a month later. Novell's Miguel De Icaza, who is heading the Moonlight effort, said on his blog last week that the beta version should be out within days.

The move helps Microsoft in its effort to position Silverlight as a rival to Adobe's Flash. Flash already runs on Linux and is installed on an overwhelming percentage of PCs. Both Flash and Silverlight also run on Macs.

Silverlight's biggest early win was Microsoft's deal with NBC that saw the technology used to power the video on NBCOlympics.com. Silverlight suffered a blow earlier this week when Major League Baseball said it was switching to a Flash-only player for the 2009 season.

In addition to the Moonlight announcement, Novell is releasing a management pack that plugs in to Microsoft's System Center product that will allow IT managers to more easily oversee mixed deployments of Suse Linux and Windows.

As for the broader work between the two companies, they now have more than 200 joint customers, said Susan Heystee, Novell's general manager global strategic alliances. That's up from fewer than 70 customers at the end of the first year.

"That really goes to the value proposition and the focus we've really had around interoperability," Heystee said. "Many of these companies are deploying Linux and windows in their data centers."

See also:
• MLB.com drops Silverlight for Adobe Flash
• Adobe bringing full-fledged Flash to phones

Microsoft's decision to discontinue OneCare in favor of a new free antivirus product also means an end to Equipt, a $69-per-year subscription version of Office and OneCare that the company had been selling on the shelves of Circuit City.

A box shot of the Equipt product, which only briefly has graced Circuit City's shelves.

(Credit: Microsoft/Circuit City)

The copies will be headed out of retail stores in the coming weeks, although the subscription will run through some time next year. But since Microsoft plans to offer free licenses of Office to Equipt customers when their subscriptions end, those existing copies look like a pretty good deal for those who need Office Home and Student--the version of Office included in Equipt.

The company had announced Equipt as something tailored for so-called "tech benches"--services like Best Buy's Geek Squad. However, in the U.S., Circuit City was the only retailer that had started selling Equipt.

Microsoft had hoped to capitalize on the fact that people were already buying subscription security software to upsell them on Equipt. But with Microsoft now planning on giving away security software, that opportunity appears to have gone away.

"It was a very difficult decision for us to shut down Equipt but the fact of the matter is there is this higher order need (to offer free antivirus software)," said group product manager Bryson Gordon. Gordon declined to say how many Equipt subscribers there are, but said the product had met internal sales goals.

"The decision to end-of-life Equipt was not in any way based with sales performance," he said.

Equipt, initially known by the code name Albany, is unlikely to be the last Office subscription service, particularly as Microsoft moves into Web-based versions of its productivity software. The company has also sold prepaid Office subscription cards in some countries.

"What we really are going to turn our attention to is other places where we can build a software plus service offering of Office like we sold on a subscription basis," Gordon said.

As for existing Equipt subscribers, they not only will get a free license to Office Home and Student, they can also call and cancel their subscription, get a pro-rated refund and still get the copy of Office. Gordon said that Equipt buyers tended to be Microsoft's early adopters and said that "We really want to make sure they are taken care of."

With the economy tanking and the holidays looming, Microsoft is hoping to salvage some Zune sales by chopping prices.

(Credit: Microsoft)

The software maker plans to announce on Wednesday a price cut for its flash-based models. The 4GB version will drop to $99, the 8GB model will drop by $10 to $139, and the 16GB model will sell for $179, down from $199.

Microsoft is also cutting prices for several of its Zune accessories. The cuts take effect on Wednesday in the U.S. and on Friday in Canada.

Zune marketing director Adam Sohn said in an interview on Tuesday that the moves were being made to "ensure hopefully we have a good holiday season." The prices put Zune's flash players cheaper than a similar capacity iPod Nano, though Sohn said that wasn't the explicit goal of the price cuts.

"We're trying to take into consideration what the realities of the market are," Sohn said.

The company introduced the latest Zune models, as well as the version 3.0 update to its software in September. Microsoft introduced a few new games and other device features on Tuesday as part of a version 3.1 firmware update.

Microsoft also kicked off a new wave of TV ads on Monday that aim to get more people to download the free Zune software, even if they haven't yet decided to plunk down for a Zune player or Zune Pass subscription.

"We think we need to attack it from both sides," Sohn said. The ads will run in prime time as well as on national cable and online, he said.

The latest celebrity tour guide of the universe is Wall-E, the animated robot and star of the Disney/Pixar movie, which came out on DVD on Tuesday.

(Credit: Microsoft; CNET News)

Microsoft's Worldwide Telescope has a new celebrity tour guide: Wall-E.

One of the features of the telescope software is the ability for both experts and amateur stargazers to offer their own guided tour of the universe to share with others. The latest such tour is by Wall-E, the animated robot from the Disney/Pixar movie of the same name.

"WorldWide Telescope is about making science fun for everyone," Curtis Wong, manager of Microsoft's Next Media Research Group, said in a statement. "By working with Disney/Pixar, we're enabling kids and families to discover the magic of the universe for themselves in an even more engaging way. What could be more fun than exploring space with a famous robot?"

The telescope software is a Windows-only Internet application, available as a free download from Microsoft Research. At the heart of the software is a new "visual experience engine" that Microsoft hopes to use for things beyond the telescope.

Microsoft Research chief Rick Rashid noted at last month's Professional Developers Conference that his unit is also updating the telescope software with new features.

As for Wall-E, he's been busy with the DVD release this week. At Adobe's Max conference on Monday, the robot was seen as part of a demo showing the abilities of Flash Player 10.

In an interview Monday, Microsoft senior vice president Chris Capossela said that, at least initially, the browser based versions of Excel, Word and PowerPoint won't have an offline mode.

"In the first generation we are certainly looking at having them be connected," he said. "For offline usage of course the Office suite is incredibly powerful." (See YouTube video below for his full comments on the matter. Apologies in advance for the bad sound quality.)

Google has been working to add an offline ability to Google Docs, while Zoho was even earlier to add the ability to work within a browser while offline.

Capossela's comments came following the launch of Microsoft Online, the company's hosted versions of Exchange and Sharepoint.

Microsoft confirmed at last month's Professional Developer Conference in Los Angeles that it was bringing to market browser-based versions of its Office applications. The company has said that a technology preview version should be available still this year.

Tim Tisdale, CEO of Atlanta-based ThoughtBridge, explains how his company is using Microsoft Online as part of an "HR in a box" service it sells to businesses.

(Credit: Ina Fried/CNET Networks)

SAN FRANCISCO--For perhaps the first time in its history, Microsoft made the case on Monday that businesses shouldn't run its software. Instead, Microsoft argued that corporations should let it run the software for them.

During the past several years, Microsoft has been testing out the idea that it can host and run business software cheaper and more effectively than individual enterprises can do on their own. The effort started in 2005 with a single customer--battery maker Energizer--which had Microsoft essentially handle all of its PC desktops.

Over time, Microsoft narrowed the service to an option in which it hosts Exchange and SharePoint, runs the software in its data center, and charges customers on a monthly basis. Microsoft officially launched the products, known as Microsoft Online, at a customer event at the St. Regis hotel here.

"We can help you save money," Microsoft Business Division President Stephen Elop told the crowd, saying Microsoft estimates that companies can save at least 10 percent by letting Microsoft run their messaging and collaboration software for them.

One of the early customers is video retailer BlockBuster, which has been using Exchange Online for about six months. Blockbuster CIO Keith Morrow said in an interview that Microsoft's online services came at a good time for the company, which was on a several-generations-old version of Lotus Notes.

Morrow said the video rental company needed to make a change of some kind, and the option to move to Exchange without having to bring that skill set in-house was a key selling point, as was the ability to offer better mobile options, including Outlook Web Access and iPhone support.

Another Notes switcher in the crowd was Eddie Bauer, which has been a Microsoft Online customer for about five weeks. Chief Information Officer Rich Mozack said the clothing retailer wanted to move off Notes but couldn't make the numbers work to run Exchange on its own.

"We just couldn't justify the up-front investment," Mozack said.

Microsoft's Ron Markezich said about two-thirds of early customers are moving from Notes to Exchange. But even as Microsoft continues to target those moving from Lotus Notes, the company faces the threat of its own Exchange customers moving to other hosted options, including Google Apps.

Just last week, Serena Software said it was switching to Google from Exchange in a move it said would save it $750,000 a year, according to several reports.

At the event, Elop made Microsoft's familiar case that, while the cloud is great, customers are better served by an option that allows software to run on customers' own machines as well as over the Internet.

Elop said Microsoft is adding thousands of servers to its data centers every month. Although Microsoft Online is initially aimed at Exchange and SharePoint, the goal is to offer a hosted option for all of Microsoft's server software.

"We expect all of it be available in this way in the near future," Elop said.

The software maker said last year that it would offer the hosted option for large businesses, later expanding the offer to businesses of all sizes. At last month's Professional Developer Conference in Los Angeles, Microsoft also confirmed that it would offer Web-based versions of its Office applications, including Word, Excel, and PowerPoint.

While many of those at Monday's event were the company's early customers and partners, not everyone at the event was ready to sign off. I spoke with a municipality that was highly interested in Microsoft's product, particularly as it plans to move from GroupWise to Exchange. Still, with a dearth of other governments to point to, this CIO told me that he still faced challenges in getting the city's upper management and government to sign off on the deal.