Revealed: The Costs of Microsoft’s Yahoo Deal

Rumor has it that Microsoft CEO Steve Ballmer, flummoxed over press leaks, decreed that password protection be added to Office 2003. Ironically, Ballmer inadvertently detailed the transition costs of the company’s ten year search deal with Yahoo during his presentation at the Microsoft’s Financial Analyst Meeting (FAM) yesterday.

A slide marked “not for disclosure” found its way into the CEO’s PowerPoint deck. The slide itemized $675 million in transition costs, and revealed that Microsoft expects to absorb a $300 million loss during the first two years of the deal. Over time, the company expects to begin earning a “decent return” of “$400 million steady-state.”

The cost breakdown is: $90 million in retention costs, $170 million in R&D costs for paid search, $145 million for Cost of Goods Sold (hosting costs), $150 million in sign-on costs, $70 million for search algorithm R&D, and $50 million for advertiser migration.

The costs could conceivably have been disclosed in annual reports as a footnote or rolled up into other costs, but under SEC rules, Microsoft is allowed to be vague in its forecasts. I also don’t see why revenue would have to be reported separately for the partnership. Ballmer might be big on passwords, but there is no accounting for human error.

The Feds Look Into Apple’s Google Voice Rejection. Good!

People keep saying that there’s no court of last resort when Apple rejects an iPhone application. Heck, nobody can even demand that Apple explain its actions. But the one guy who can order even Steve Jobs around is Uncle Sam. And the FCC is now looking into Apple’s refusal to release Google’s Google Voice application on the iPhone App Store. It wants to know why Apple rejected the app, what role AT&T played in the decision, and what the situation has been with other Google apps.

I know I’d like to use the Google Voice app on my iPhone. I know that I believe Apple’s app approval process should be less restrictive and more open. But I’m not a lawyer–and I don’t know whether Apple’s actions to date violate any laws or FCC regulations. Neither does the FCC presumably, which is why it’s written letters to Apple, AT&T, and Google to collect information.

I’m enough of a libertarian that I don’t reflexively want the federal government deciding how Apple should run its application store. But I’m also a believer in competition–and so I think it’s important that we know if AT&T was involved in Google Voice’s rejection, and if so, if the FCC considers that to be acceptable behavior. Telecommunications remains a rather heavily-regulated industry for a reason, after all.

Of course, the happiest possible outcome from all this is obvious: Apple could save itself some potential legal headaches by approving the Google Voice application without being forced to do so. Is there an iPhone owner on the planet who would be displeased with that outcome?

[UPDATE: TechCrunch has published copies of the FCC's letters to Apple, AT&T, and Google.]

Toshiba’s Mini NB205 Netbook: The Technologizer Review

When Toshiba announced its first netbooks last month, it said that it had waited to start selling inexpensive little notebooks in the U.S. until it felt like it could do them justice. I’ve just spent time using the Mini NB205–which Toshiba likes to call a mini-notebook rather than a netbook–and found that it’s indeed one of the most highly-evolved netbooks to appear to date. There’s nothing spectacularly new or different about its design or specs, but it’s a pleasing machine that doesn’t feel compromised 0r chintzy, and there are multiple areas in which Toshiba erred on the side of doing things right rather than doing them cheap.

The Mini NB205-N312BL I reviewed lists for $399.99 and sports the components and features you’d expect to find in a current $400 netbook: a 10.1-inch screen with 1024-by-600 resolution and LED backlighting, a 166-MHz Intel Atom N280 CPU, 1GB of RAM, a 5400rpm 160GB hard drive, 802.11G Wi-Fi, Ethernet, Bluetooth, three USB ports, an SD slot, VGA output, a Webcam, and a six-cell battery. And oh yeah, it runs Windows XP Home SP3.

The $399.99 version of the Mini is available in blue, brown, pink and white; all versions have two-tone cases and a bit of texture to the plastic on the lid. They’re among the slickest-looking netbooks at their price point. (There’s also a $349.99 version with a black case, a more basic keyboard, and no Bluetooth; I’d spring for the extra $50 for the top-of-the-line version.)

Continue reading this story…

Apple Patches iPhone SMS Security Flaw

It sounded alarming–even if the scariness was theoretical–but now Apple has patched it up. Details here.

Windows 7 Family Pack: Now You See It, Now You Don’t

Microsoft has finished up announcing pricing details for Windows 7 by disclosing the cost for the three-user Windows 7 Home Premium Family Pack and for Windows Anytime Upgrades. (The latter option lets you the unlock features from higher-end versions of Windows.)

The Family Pack will go for $149.99, or $50 per user– $10 more per user than Apple’s five-user Leopard Family Pack, but an attractive deal considering that three stand-alone copies of 7 Home Premium list for $359.97. But the odd thing is, the Family Pack isn’t so much a new version of Windows as a limited-time sale. The Microsoft blog post says it’s be available “until supplies last.” (I think they mean “while supplies last” or (“until supplies run out,”) but you get the idea.)

Microsoft’s entitled to charge whatever it wants for Windows, but it’s a shame that it’s not making the extremely appealing idea of buying Windows in bulk at a discount into a permanent option for its customers. If Apple is able to do it, why not Microsoft? And the notion of doing it with no well-defined deadline smacks of infomercial hype. (If supplies run out, I suspect Microsoft could crank out some more copies if it chose.) We don’t know whether supplies will run out halfway through October 22nd, Windows 7′s launch date, or whether copies will still be plentiful on October 22nd, 2010.

Meanwhile, pricing for Windows 7 Anytime Upgrades involves a complicated matrix of original Windows 7 versions and upgrade versions. It makes my head hurt just to think about it, but ZDNet’s Ed Bott has done the math and says that Microsoft will gouge people who move from Windows 7 Professional to Windows 7 Ultimate Edition. Ultimate has very few features that aren’t in Professional, and Microsoft has said that only a “small set” of customers will want it. So maybe it’s just discouraging people from performing an unnecessary upgrade by making the pricing unattractive…

We’re From Microsoft, and We’re Here to Help You

Microsoft’s Alex Kochis has blogged about this week’s compromising of a Lenovo key for Windows 7 activation, which allowed hackers to activate unauthorized copies of Windows 7. He says that Lenovo’s customers won’t be affected when they buy Windows 7 PCs, but that Microsoft will “seek to alert” people running copies of Windows 7 that have been hacked with the leaked key.

Kochis also says this:

Our primary goal is to protect users from becoming unknowing victims, because customers who use pirated software are at greater risk of being exposed to malware as well as identity theft. Someone asked me recently – and I think it’s worth noting here — whether we treat all exploits equally in responding to new ones we see. Our objective isn’t to stop every “mad scientist” that’s out there from dabbling; our aim is to protect our customers from commercialized counterfeit software that impacts our customers’ confidence in knowing they got what they paid for. That will continue to be our focus as we continue to evolve our anti-piracy platforms, and respond to new threats that we see emerge in the future.

Really? The primary goal of Microsoft’s copy-protection technologies is to prevent people from unwittingly buying pirated copies of Windows? The impact that piracy has on Microsoft’s wallet is apparently a secondary issue–one that’s not even worth mentioning in this post or on this page about the “Windows Genuine Advantage” program.

As I’ve often said, Microsoft is entitled to protect its intellectual property, and nobody is entitled to get Windows without paying for it. I buy the idea that one reason to avoid using pirated copies of Windows–either knowingly or unknowingly–is because it can be dangerous. And I acknowledge the fact that Microsoft has done a good job of fixing earlier aspects of activation that caused hassles for paying customers.

But I still don’t understand why all discussion of Windows Activation and other Microsoft anti-piracy technologies can’t begin with the honest disclosure of one simple fact: They exist to prevent people from stealing Microsoft software. If Microsoft took that approach rather than devoting 98% of its communications about copy protection to insisting that they exist mostly to help Microsoft customers, it would make me take its efforts more seriously, not less so.

With Windows 7,  Microsoft is planning to rename the patronizing “Windows Genuine Advantage” program to the much more straightforward Windows Anti-Piracy Technology. Wouldn’t that provide a good opportunity to usher in a new era of grownup-to-grownup communications about its copy protection efforts?

5Words for Friday, July 31st, 2009

Apple fixing iPhone security flaw?

Skype licensing issue: possibly fatal?

Is Android killing Windows Mobile?

Gmail eliminates “on behalf of.”

San Francisco parking meters: hacked!

IM+ brings Skype to Pre.

Steve Ballmer on Apple competition.

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The No-Google-Voice-on-iPhone Uprising Continues

TechCrunch’s Michael Arrington says (in a post that’s loading only sporadically for me) that he’s dumping his iPhone for a T-Mobile myTouch 3G over Apple’s rejection of Google’s Google Voice app. Developer Steven Frank is similarly irate. Six Apart’s Anil Dash is calm but concerned.

I’m glad to see that discontent over the Google Voice situation hasn’t died down yet. If Apple continues with the secretive and capricious attitude it’s had towards app approval long enough, the day is going to come when it makes a move that angers enough people that it’ll have to reassess its practices. If the Google Voice situation turns out to be that tipping point, it’ll be good news for iPhone users–and, I’m convinced, for Apple itself in the long run. There are certainly countless examples of consumers forcing companies to do things that are in the companies’ best interest–call it the New Coke Backlash phenomenon. And even Apple usually responds when enough of its customers are seething.

I remain enough of an optimist to believe that Apple will get all this right sooner or later. I even think it’s possible that it’s listening to the discontent right now and will decide to let the Google Voice app onto the App Store after all in the not-too-distant future.

Will Windows 7 Win Back Defectors to the Mac? Probably Not. And That’s OK.

Daring Fireball’s John Gruber has posted a piece titled “Microsoft’s Long, Slow Decline.” As with most of what he writes, it’s both provocative and thought-provoking, whether you agree with all of it, some of it, or none at all.

Gruber writes about such matters as Microsoft’s recent lackluster financial results, the recent news of Apple’s utter domination of the high-end retail PC market, and the cartwheels Microsoft COO Kevin Turner supposedly turned in the hallways over Apple’s response to Microsoft’s “Laptop Hunters” commercials. He mentions Windows 7 and says:

But no one seems to be arguing that Windows 7 is something that will tempt Mac users to switch, or to tempt even recent Mac converts to switch back. It doesn’t even seem to be in the realm of debate. But if Windows 7 is actually any good, why wouldn’t it tempt at least some segment of Mac users to switch? Windows 95, 98, and XP did.

I haven’t heard anyone contend that Windows 7 will convince Mac switchers to come back, either. Then again, I haven’t heard anyone say it’s not good enough to change the game. But it’s an interesting question.

It’s also one that’s hard to answer just yet. For one thing, while Windows 7 looks quite promising, we don’t yet know what PC manufacturers are going to do with it, and there’s a real chance that at least some of them will muck up a respectable OS with demoware, adware, and various other forms of unwantedware. For another, Windows 7 will compete against Apple’s Snow Leopard, an OS which doesn’t go on sale until September and which–unlike Windows 7–has had no period of public preview.

Based on the months I’ve spent running pre-release versions of Windows 7, I think there’s a good chance it’ll have a meaningful impact on the whole “PC or Mac?” question. It significantly narrows the gap between OS X and Windows for usability and overall polish, and while it doesn’t eradicate OS X’s lead, it should leave Windows users at least somewhat less likely to abandon ship.

But Gruber wasn’t talking about whether Windows 7 will stop more people from leaving Windows; he was talking about whether it’ll convince Mac users to switch from Macs, and saying that if Windows 7 is really good, it will.

I’m not so sure. History suggests that people don’t like to switch operating systems and the most striking significant shifts in operating-system market share have happened when one OS has been on alarmingly shaky ground. Back when the exodus from Macs to Windows 95 and Windows 98 that Gruber refers to happened, Apple’s OS was floundering and it wasn’t clear that the company was going to survive. And Apple has made major inroads over the past couple of years in part because Windows Vista was such a mediocrity.

Apple is positioning Snow Leopard as an OS that’s very much like Leopard, except faster, sleeker, and more reliable. Unless it somehow turns out to be a less appealing Leopard, it’s going to be really pleasing. People tend not to dump pleasing OSes, even if there are also other pleasing OSes. S0 I’m not going to judge Windows 7 based on there whether are meaningful quantities of Mac users who are drawn to it…

Analysts call for Microsoft to drop the Zune

MarketWatch published a story today that could light a fire under Microsoft’s shareholders: it all but wrote an obituary for the company’s Zune portable media player. However, I do not think that the Zune is on the chopping block–yet.

Sales for the Zune dropped 42% over the last quarter to $211 million, according to Microsoft’s Q4 financial reports. In comparison, Apple iPod sales declined just 11%, for total sales of $1.5 billion, MarketWatch reports.

In terms of market share, the best-case scenario cited in the report was an IDC survey from last fall that found that the Zune holds 4.8% of the market. Recent numbers for the NPD group lower that estimate to a dismal 2%, compared to 70% for the iPod.

Microsoft is expected to ship the Zune HD, a touch screen interface device that offers high-def video output and radio, in the fall. Sales will likely continue to falter until then.

Continue reading this story…

Ten More Super-Duper Firefox Add-Ons

I love it when you write and pass along handy ideas. After I wrote about my favorite Firefox enhancers,  I received hundreds of messages (okay, 50, but who’s counting) sharing other Firefox add-ons, extensions, and tips–and I’m successfully using many of them. Here are some of the most useful of the bunch.

But first some advice.

The day after I wrote about my Firefox favorites, the world almost ended for Firefox fanatics: A major security hole was discovered in Firefox. Great timing, no? Not to fret, if you upgrade to Firefox 3.51, the world will be okay again.

You’ll be happy to know if you’re still using Firefox 3.06 or so, all of the add-ons I mention will work. But if you’re a worrier, and already upgraded to 3.51, you’ll find a few won’t install. My guess is that individual add-on developers are working overtime to satisfy your overwhelming need for updates. If you continue feeling stressed, just up the meds for a week.

Most important is that you experiment with these add-ons and extensions one at a time. I don’t want to hear any whining (you will anyway, I know it) if you enable them all at once, cause new sunspots, and feel faint.

Continue reading this story…

Playstation 3 Now 70% Cheaper … To Build.

Here’s a tidbit from Sony’s recent investor conference call that everyone but TotalVideoGames apparently missed: The Playstation 3 is roughly 70 percent cheaper to build than it was at launch.

This is according to Nobuyuki Oneda, Sony’s executive vice president and chief financial officer, who provided the figure when pressed by investors. More than any of the rumors we’ve been hearing ad nauseum for months, this is the best indication that the Playstation 3 will have a lower price tag this fall.

Nonetheless, it was only a few weeks ago that Sony’s chief executive, Howard Stringer, said the company would lose money on every console sold if the price were lowered. Both claims can’t be right, so one of these Sony execs doesn’t have his facts straight.

Sony hasn’t disclosed the PS3′s original manufacturing cost, but a couple estimates have pegged the number at $800 at launch, dropping to $400 in January 2008. iSuppli’s estimates from last December said the console costs $448.73 to build, so there’s room for error in the unoffficial estimates.

But let’s just say the PS3 build cost was $800 per unit initially. Knock off 70 percent and you’re left with $240 per unit. That means Sony not only gains from each console sold at $400 each, it can afford to bestow the now-mythic $100 price drop and still profit.

Not that a price cut would surprise anyone. Game publishers have on several occasions raised their cries for a cheaper PS3 to a crescendo. The logic says more console sales equals more game sales, but Sony has always insisted it can’t take the hit up front.

The problem is, both console sales and software sales were down last month, and Sony is taking huge losses. There will eventually come a point where it’s more economical for Sony to invigorate both sides of the equation than to keep maxing out earnings on console sales alone. I think that time is coming sooner than later.

Take Back the Beep!

My friend David Pogue of the New York Times is a man on a mission. He’s become irate over the time that cell phone company voicemail systems spend playing a recorded message telling you to leave a message, explaining how to send a page, and suggesting that you hang up when you’re done leaving the message. The messages are pointless little annoyances every time you hear them–and since they take fifteen seconds or so to play, they eat up the monthly minutes of the person who called.

David is trying to rally phone users to bury carriers in such a surging sea of complaints that they enter the 21st century by ditching these obsolete recorded messages. It’s a great idea. His post about all this includes instructions on how to tell your carrier you’re part of the crusade.

Of course, it’s not just that 15-second message that’s irritating–voicemail systems in general tend to sport the most aggravating user interfaces this side of automated supermarket checkouts. One of the nice things about using an iPhone and/or Google Voice is getting to avoid those convoluted menus…and David says that Apple insisted that AT&T eliminate the 15-second message for iPhone voicemail. Which proves it can be done–you know of anyone who’s called an iPhone owner, been bounced into voicemail, and gotten confused by the lack of instructions?

Your GSM Phone is (Probably) Vulnerable to Malicious Text Messages

Virtually all GSM phones (such as Apple’s iPhone) and GSM wireless operators (such as AT&T and T-Mobile) on the planet appear to be vulnerable to attacks using specially crafted SMS text messages discovered by security researchers Zane Lackey and Luis Miras. At the Black Hat Briefings this morning, the two researchers demonstrated several different ways they could bypass anti-spoofing protection in cellphones, and as a result, could send phones hidden commands, profile phones, or even exploit vulnerabilities that remotely disable a targeted phone’s ability to send and receive calls or text messages.

The researchers described how they set up test systems which could read the header data sent along with text messages, then used software to craft their own custom headers and messages and sent those messages to various types of GSM phones. Based on the behavior of the phones they tested, they were able to create several kinds of automated attacks for various phone models, and determined a method an attacker could use to silently connect to mobile phones and retrieve information that permits the attacker to identify the make and model of phone, and other profiling information.

One aspect of the vulnerability not well understood is how different models of phones will behave when they receive these specially-crafted messages. Some, like the Sony Ericsson model shown at right, provide the user no context as to whether information pushed down to the phone comes from a legitimate source.

In a final coup for the conference, Lackey and Miras demonstrated an iPhone app they call TAFT which can, at the click of a few buttons, transmit various types of attacks against specific, vulnerable phone models, including iPhones, and phones running the Windows Mobile 5 and pre-”cupcake” Android operating systems.

The researchers are currently working with all major carriers and phone manufacturers to fix the problems, but warn that it may take some time before the vulnerabilities have been patched.

5Words for Thursday, July 30th 2009

Google: Microsoft/Yahoo partnership bad.

3Jam launches Google Voice competition.

AT&T shirks Google Voice blame.

Apple Time Capsule hits 2TB.

The problem with digital frames.

I want a Gorillamobile mount.

Absurdly small 32GB USB drive.

Black Hat: Internet Rendered Safe for Buying Stuff

Dan Kaminsky once again brought a full batch of his grandmother’s lacey cookies, along with their maker, to his session at the Black Hat Briefings security conference in Las Vegas yesterday afternoon. On this, her third visit, grandma heard about another major security  breakthrough.

Kaminsky’s talk focused on website certificates, one component of performing SSL-encrypted transactions over the Web. The session drew a standing-room only crowd in one of the largest halls available at the conference. The problems Kaminsky discovered, if they had remained unfixed, could have put at risk virtually any online transaction where money changes hands. In this scenario, criminals might then use such certificates, issued in the names of legitimate businesses, to boost the legitimacy of phishing attacks.

The bottom line is good news. Kaminsky worked with software companies in advance of the talk, and the various issues he reported have either been fixed already, or are in the process of being fixed, in every major OS and Web browser. Thanks, Dan, for saving the Intarwebs once again.