Microsoft faces new browser foe in Google

This time, Microsoft's opponent is Google, a familiar foe.

On Tuesday, Google will release a free Web browser called Chrome that the company said would challenge Microsoft's Internet Explorer, as well as the Firefox browser.

The browser is a universal doorway to the Internet, and the use of Internet software and services is rapidly growing. Increasingly, the browser is also the doorway to the Web on cellphones and other mobile devices, widening the utility of the Web and Web advertising. Google, analysts say, cannot let Microsoft's dominant share of the browser market go without a direct challenge.

Google already competes with Microsoft in online search and Internet advertising. They both make operating software for cellphones. Google is increasingly competing with Microsoft head-on in software that handles basic productivity like word processing, spreadsheet, presentation and e-mail programs.

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Ballmer becomes lone voice at Microsoft's helm

Steve Ballmer has been CEO at Microsoft Corp for eight years, but he will finally get to move into the corner office vacated by Bill Gates, the college friend who brought him to the company nearly three decades ago.

The pressure of leading the world's largest software maker will only escalate in the wake of a bungled attempt to acquire Yahoo Inc, a move that forced the Web pioneer into the waiting arms of Microsoft's arch rival, Google Inc.

Adding fuel to the fire has been a lukewarm reception by customers for the company's flagship product, Windows Vista.

"The pressure is certainly on," said Alan Davis, analyst at investment firm D.A. Davidson.

For the first time in his career, the 52-year-old Ballmer, whose public histrionics often overshadow a sharp intellect and a gift for numbers, must shoulder the weight of Microsoft's future without Gates, who stepped down on Friday from the company he co-founded to focus on philanthropy.

Their partnership was forged at Harvard University, where the pair formed an unlikely friendship: Gates, the middle child of a prominent Seattle family, and Ballmer, a Detroit native whose parents never went to college.

They both lived in a dormitory full of "anti-social math types," according to Gates. Ballmer, outgoing and involved in many social clubs on campus, seemed to be a study in contrast to the aloof Gates, who preferred all-night programming sessions and poker games.

However, the pair shared a love of math and bonded over their reputations as energetic guys. To this day, they still engage each other in numbers games, calling it "math camp."

After college, Ballmer went to work at Procter & Gamble Co, sharing an office with current General Electric Co CEO Jeffrey Immelt, who has said the two disliked a common boss and would pass the days playing garbage-can basketball.

Ballmer spent a year at Stanford University business school before Gates persuaded him to drop out and become Microsoft's first business manager. A month after joining, he found it was running behind on orders and its engineers were overworked.

"I decided to quit," Ballmer said at an employee event to mark Gates's last day at Microsoft. "I said, 'Jeez, I just dropped out of business school to come to a 30-person company as the bookkeeper'."

Gates persuaded Ballmer to stay at the company over dinner, explaining Microsoft's ambitious vision: to place a computer on every desk and in every home.

"SCARY" MANAGEMENT

Microsoft executives talk about Ballmer's ability to digest large chunks of data, while carefully probing business proposals for weaknesses in logic or reasoning.

Ballmer's sales and marketing prowess complemented Gates's technical acumen as Microsoft grew from a fledgling start-up into a world-beating software company.

He worked up the ranks, becoming Microsoft's president in 1998 and replacing Gates as CEO in 2000. Ballmer is Microsoft's second-biggest shareholder after Gates with a 4.3 percent stake in the company, valued at more than $11 billion.

Michael Silver, analyst at research firm Gartner, describes Ballmer's management style as "scary," but credits him for being a good listener to the needs of his customers.

"Steve's a bright, tough guy and a good marketeer," said Silver. "His personality can be very imposing."

Ballmer often grabs headlines with sharply worded jabs at competitors. He once called free Linux software "a cancer" and dismissed Web search leader Google as "a one-trick pony."

His exuberance for all-things Microsoft has also earned him viral video fame on par with lonelygirl15 or Obama Girl. Video of Ballmer's enthusiastic support for software developers has been viewed more than 1 million times on YouTube, a performance that earned him the unflattering nickname of "Monkey Boy."

"He was always the foil to Gates," said Mary Jo Foley, author of "Microsoft 2.0: How Microsoft Plans to Stay Relevant in the Post-Gates Era."

"Gates is such a serious, plodding, methodical guy and Ballmer knew that to be part of the dynamic duo with Bill, he needed to be the opposite."

Shareholders try to kill Yahoo severance plan: report

A Yahoo employee severance plan meant to protect workers after a merger with Microsoft should be scrapped, according to a shareholder lawsuit against Yahoo and its directors, The New York Times reported on Tuesday.

Both the plaintiffs and billionaire investor Carl Icahn, who is waging a battle for control of the Yahoo board, have criticized the severance plan as costly and said it was an obstacle to any merger, the Times said.

The plaintiffs, two Detroit pensions, said if Icahn wins control of the board, Yahoo could be faced with up to $2.4 billion in potential severance payouts under the plan, according to the Times, the same amount that the plan could cost Microsoft.

A spokesman for Yahoo said that figure was an estimate based on many assumptions, including that all Yahoo employees would be fired or otherwise be able to claim severance benefits, the Times reported.

The plan offers enhanced benefits, cash and accelerated vesting of stock options, to any Yahoo employees who are fired or leave because their roles are diminished after a merger or change in control of the company, it said.

Lawyers representing the pension plans are reported to have asked a judge in Delaware to hold a trial to determine the fate of the plan ahead of the company's August 1 shareholder meeting.

Legal experts told the paper a trial could shine a light on Yahoo's talks with Microsoft and affect the outcome of the proxy fight.

Yahoo has said the suit is without merit, the Times said, which said Icahn did not return a call seeking comment.

Microsoft proposes alternative deal to Yahoo

Microsoft Corp said on Sunday it proposed an alternative deal to Yahoo Inc rather than a full acquisition, but the move was unlikely to win favor with financier Carl Icahn, a person familiar with his thinking said.

Icahn launched a proxy campaign on Thursday to replace Yahoo's board with directors who would reopen talks with Microsoft, saying Yahoo had acted irrationally in refusing the giant software company's $47.5 billion bid.

Microsoft walked away from its pursuit of Yahoo two weeks ago after three months of negotiations when Yahoo's board rejected Microsoft's sweetened offer of $33 a share, saying the company was worth at least $37 a share.

The software giant's move on Sunday was likely to prompt the billionaire investor to press Yahoo to further pursue a possible alliance with Google, the source said.

"Microsoft is trying to get the milk without buying the cow, and if you look at Icahn's history, he has never been used that way," said this person. "He does not want to see Yahoo pushed into some joint venture with Microsoft and is not going to be used to push Yahoo into it."

Microsoft's statement on Sunday said it was "considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo." It did not clarify what that alternative might be.

The New York Times reported that Microsoft and Yahoo may form a partnership or joint venture for search-related advertising to take on Google Inc, which dominates the search market with a share significantly larger than a combined Yahoo and Microsoft.

For its part, Yahoo continues to talk with Google Inc about a search advertising partnership and a deal could come as early as this week, a source familiar with the talks said on Thursday.

Microsoft emphasized it was not proposing to make a new bid to buy all of Yahoo, after recently being rebuffed, but could reconsider.

Yahoo replied later on Sunday that it continued to consider a number of strategic alternatives and was "open to pursuing any transaction which is in the best interest of our stockholders."

The company's board will "evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value," Yahoo said in a statement.

It added it had confirmed with Microsoft that it was not interested in "pursuing an acquisition of all of Yahoo at this time."

ANALYSTS SPLIT

Analysts were split on the benefits of an alternative scenario to a full-fledged takeover.

"I definitely think an alternative deal is better than a full acquisition," said Toan Tran, analyst at Morningstar. "It is positive for both companies, because you are getting the benefits of a Yahoo acquisition without the negatives, namely the integration risks."

But Kim Caughey, a senior analyst at Fort Pitt Capital Group, said the market will probably send Yahoo shares higher while pushing down Microsoft shares when the market opens on Monday.

Caughey said a joint venture or minority investment with Yahoo could cause confusion about who was in charge.

"Microsoft walking away from Yahoo was a total head fake," said Caughey. "Microsoft is a terrible poker player if it thought people were going to believe that the deal was dead."

Meanwhile, Microsoft and Icahn have not held discussions about Yahoo, said another source close to the company.

In a letter to Icahn last week, Yahoo board Chairman Roy Bostock said a new board would not be in the best interests of Yahoo investors, adding Yahoo would consider any deal from any party, including Microsoft, if it offered the company full value.

Icahn, who has said he had accumulated 59 million shares and options in Yahoo, also has the support of Paulson & Co, a $30 billion hedge fund that has amassed a 3.4 percent stake in Yahoo, and other investors upset by the board's handling of negotiations with Microsoft.

Nokia sees half of cellphones with GPS in 2010-12

Nokia plans to add navigation to half of the phones it sells within a few years to find new revenue streams amid decreasing handset prices, a senior official at the world's top cellphone maker said.

Michael Halbherr, the head of Nokia's location-based activities, told Reuters he remains comfortable with Nokia's year-old goal for seeing up to 50 percent of its phones equipped with global positioning system (GPS) chips in 2010 to 2012.

"We are planning to ship 35 million GPS units this year," Halbherr said, adding "and many more location-enabled phones that use cell-towers to orient themselves on the map".

"You will see few 'E' or 'N' Series phones without GPS," he said.

Last year Nokia sold 437 million phones, and it expects the volume to grow more than 10 percent this year. It sold 38 million phones in its multimedia range "N Series" and some 7 million "E Series" business phones.

GPS chips use orbiting satellites to pin point the where abouts of a phone user, thereby enabling a host of location-based services. SiRF Technology Holdings Inc is the world's largest maker of GPS chips.

Last October, when unveiling an $8.1 billion offer for U.S. based digital map supplier Navteq , Nokia said it would have tens of navigation-enabled phones on the market by end-2008.

It sells five models with built-in GPS and has unveiled four more which will ship in the coming months.

Halbherr said his company's GPS phone strategy goes far beyond the phones themselves.

It's part of a comprehensive strategy to make location-enabled, context-aware phones available across its product line, he said.

Beyond phones specially equipped with location-finding technology, all Nokia phones stand to benefit as GPS phone users move about and effectively update Nokia Maps in real time for other phone users.

"Location will ultimately be in every device," Halbherr declared, not just the half of phones with special GPS chips.

In addition to GPS chips, Nokia's strategy involves pushing Wi-Fi enabled devices that use local wireless network antennas to achieve more or less the same location-awareness in these devices. Even phones without GPS or Wi-Fi can use local cellphone towers to identify their position on maps, he noted.

Nokia Maps, first introduced in early 2006, will come out with a version 2.0 for phones worldwide later this month.

Halbherr mocks the current rush by Internet companies such as Google, Yahoo and Microsoft to deliver all their services as centralized, Web-based services over the network, rather than using the growing powers of the device in users' hands.

"I believe memory and computation speed will grow faster than bandwidth," he said. "I am not a believer in cloud computing."

"All the American navigation solutions are basically server based, which overloads the network and degrades the consumer experience," Halbherr said, referring to both Internet map services and companies specializing in car navigation.

Yahoo seeks AOL tie: Microsoft talks to News Corp

Yahoo Inc, which was widely believed to be running out of alternatives to accepting Microsoft Corp's takeover offer, has become a target of two warring camps of technology giants and their media allies, sources said on Wednesday.

News Corp is considering joining Microsoft in a bid for Yahoo which would bring in News Corp's MySpace online social hangout and create a more formidable rival to Internet juggernaut Google Inc, newspaper reports said.

But Yahoo, which announced earlier on Wednesday it plans to test Google search ads alongside Yahoo Web search services, is closing in on a deal with Time Warner to merge with its AOL unit, several sources told Reuters.

The game of musical chairs among the titans of the Internet follows two years of on-again, off-again talks to strike industry-reshaping mergers among different configurations of the same players.

Google, unaccustomed to being back footed by its rivals, is considered a secondary player unlikely to enter the merger bidding as its growing dominance in Web search and search-based advertising could be blocked by competition regulators.

"The whole situation seems to be very unstable," said Sanford C. Bernstein analyst Jeffrey Lindsay, adding that Microsoft's bid for Yahoo precipitated a cascade of offers.

"There are so many pent-up moves for consolidation but it's hard to say what moves will be successful," Lindsay said.

Reports were sketchy on exactly how a Microsoft deal with News Corp might be structured, making Wall Street analysts reluctant to speculate on which combination might prove the superior offer.

But several agreed that Yahoo has regained some of the negotiating momentum it appeared to have lost with Microsoft.

Yahoo's talks with Time Warner are getting near to a deal that would fold AOL's business, excluding its legacy dial-up Internet access operations, into a combined Yahoo company, a person familiar with the talks said. Such a deal would value AOL at $10 billion, the person said.

Yahoo would receive cash from Time Warner in exchange for 20 percent of a combined Yahoo-AOL, the source said. Other sources confirmed the outlines of the talks but provided no further details.

The Wall Street Journal cited sources saying Yahoo would use the Time Warner cash and other funds to buy back several billion dollars worth of Yahoo stock at a price somewhere in the middle of the range between $30 and $40 a share.

The New York Times reported that Microsoft had begun talks to bring News Corp in on its effort to acquire Yahoo.

This combination would bring together three of the biggest Web site publishers on the Internet: Yahoo, Microsoft's MSN and News Corp's MySpace, creating a formidable counterweight to Web pacesetter Google, but also drawing antitrust scrutiny.

Yahoo said it was beginning a two-week test on whether it can use Google to sell ads alongside Yahoo Web search services. The initial test is small, covering only 3 percent of Web searches performed on Yahoo, the companies said.

But sources familiar with the talks said the tests could lead Yahoo to a broader deal in which it lets Google sell search advertising for it in order for Yahoo to concentrate on online brand ads. Lindsay has estimated that, by turning over search ad sales to Google, Yahoo could boost its revenue by 10 percent and free up money to invest in stronger businesses.

Microsoft General Counsel Brad Smith said Yahoo and Google would consolidate more than 90 percent of the search ad market in Google's hands. Herb Kohl, the Democratic head of the U.S. Senate antitrust subcommittee, chimed in to say he was watching Yahoo's deal closely to ensure it does not harm competition.

Microsoft had threatened on Saturday to launch a hostile bid for Yahoo and could lower its offer in about three weeks if it does not get a deal from Yahoo, a Web pioneer which argues it is worth more than Microsoft's $42 billion bid.

Any of the combinations, or another yet to be determined, would fundamentally change the Web. Major players have been circling each other as the first decade of growth in the Internet market has begun to slow dramatically.

The talks with News Corp, which previously had discussed working with Yahoo as a counter to Microsoft's unsolicited bid, are at a sensitive stage, the New York Times said. The Wall Street Journal called those talks "serious".

Microsoft, News Corp, Time Warner, Google and Yahoo all declined to comment on the talks.

Terms of the proposed Microsoft-News Corp union are still being worked out, the New York Times said. News Corp would likely contribute its Fox Interactive Media unit, which owns MySpace, and possibly cash to a partnership with Microsoft as part of a Yahoo acquisition, the newspaper said.

Gates urges United States to free up more spectrum for Wi-Fi

Microsoft Corp co-founder Bill Gates urged U.S. communications regulators on Thursday to free up more vacant television airwaves to be used for wireless services such as broadband Internet access.

During an appearance before a Northern Virginia technology group, Gates said the so-called "white space" spectrum between analog broadcast channels could be used to expand access of wireless broadband service using Wi-Fi technology.

"We're hopeful that that will be made available so that WiFi can explode in terms of its usage, even out into some of these less dense areas (of the United States) where distance has been a big problem for Wi-Fi," Gates said in response to a question from the audience.

Microsoft is part of a coalition of technology companies that has been lobbying the U.S. Federal Communications Commission to allow unlicensed use of white space spectrum.

The group also includes Google Inc, Dell, Intel Corp, Hewlett-Packard Co and the north American unit of Philips Electronics.

However, the idea is opposed by U.S. broadcasters and makers of wireless microphones, who fear the devices would cause interference.

"Broadband penetration could be drastically improved through a fixed, licensed service without interference to TV reception. Unfortunately, Microsoft continues to push for an unlicensed technology that simply does not work," said Dennis Wharton, a spokesman for the National Association of Broadcasters.

"TV viewers should not be inundated by the inevitable interference caused by such faulty devices," Wharton said.

A proposal being studied by the FCC would create two categories of users for the airwaves: one for low-power, personal, portable devices like Wi-Fi and a second group for fixed commercial operations.

The proposal would require that the devices include technology to identify unused spectrum and avoid interference.

The FCC currently is testing prototype devices to see if they can make use of the white space spectrum without interfering with TV broadcasts.

Also appearing with Gates was Craig Mundie, Microsoft's chief research and strategy officer, who said a shortage of spectrum could hurt U.S. competitiveness. He said past decisions have not made enough spectrum available.

"White space activity today is sort of our last hope to get some good spectrum," Mundie said.