Microsoft

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RE: Microsoft

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Microsoft - Bloomberg

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27-Apr-07

Microsoft Shares Rise; Outlook Eases Vista Concerns

April 27 (Bloomberg) -- Shares of Microsoft Corp. rose the most in three months after the world's biggest software maker reported a 65 percent jump in third-quarter earnings and forecast sales in the next year that may exceed analysts' estimates.

The stock advanced $1.02, or 3.5 percent, to $30.12 at 4 p.m. New York time in trading on the Nasdaq Stock Market. The increase boosted the company's market value by about $10.1 billion to $297 billion.

Microsoft allayed investor concern profit in the year beginning July 1 would fall short because of rising costs and lower Windows revenue. The forecast may help the stock, which had fallen 6.7 percent during the third quarter as shareholders said the release of Windows Vista and Office 2007 may not produce enough sales to meet estimates.

``The forecast they gave out clearly damps concerns on the stock,'' said Patrick Becker Jr., who oversees $2.5 billion, including more than 1 million Microsoft shares, at Portland, Oregon-based Becker Capital Management. ``There was a bit of a bear case on Microsoft. Even Intel Corp.'s CEO Paul Otellini mentioned he thought the Vista cycle was a year away.''

Analysts at CIBC World Markets and Citigroup Inc. raised their ratings on Microsoft shares after the report. CIBC boosted them to ``sector performer'' from ``sector underperformer,'' while Citigroup elevated them to ``buy'' from ``hold.''

Microsoft Chief Executive Steve Ballmer darkened investors' view of Vista in February when he told analysts some of their growth estimates for the coming year were ``overly aggressive.'' Otellini, head of the world's largest chipmaker Intel, told analysts last week that most companies won't start deploying Vista until at least October or November.

Analysts' Take

Since then, analysts made sufficient cuts to their estimates to be in line with Microsoft's forecasts, Chief Financial Officer Chris Liddell said. Some analysts also didn't take into account a change in the way Microsoft accounts for Windows revenue, he said in an interview. That will boost sales by $660 million next year and put Microsoft's forecast ahead of the analysts.

With the fourth-quarter guidance ``looking conservative, we expect the stock to trade well as we get further into the Office, Vista and Server product cycles this fall,'' J.P. Morgan Securities Inc. analyst Adam Holt said today in a report.

Microsoft said sales next year will rise to $56.5 billion to $57.5 billion, which may exceed the $56.6 billion average analyst estimate. Profit will be in line, increasing to $1.68 to $1.72 a share, compared with an estimate of $1.70.

Office

Net income for the third quarter climbed to $4.93 billion, or 50 cents a share, from $2.98 billion, or 29 cents, a year ago, beating the 46-cent average projection of 20 analysts surveyed by Bloomberg. Sales increased 32 percent to $14.4 billion, the company said today.

Sales of Windows and Office software surged, helped by $1.67 billion in orders held over from the previous quarter for accounting reasons.

Vista pushed revenue in the unit that sells Windows for PCs to exceed Microsoft's forecast by $300 million to $400 million last quarter, Liddell said. Sales of Office 2007 spurred results in the business division that beat company forecasts by $200 million, he said.

``The negativity on Vista was just so horrible that this has got to look better,'' said Jane Snorek, a portfolio manager at First American Funds in Minneapolis, which invests $55 billion, including Microsoft shares. ``Microsoft is seeing good Vista uptake and healthy Office '07 uptake.''

Share Declines

Microsoft's share decline in the quarter compares with the 0.2 percent gain in Standard & Poor's 500 Index. The stock had beaten the benchmark index the two previous earnings periods on enthusiasm for Vista.

Investor sentiment on the stock has been ``horrible,'' Sarah Friar, who started covering the company for Goldman Sachs during the quarter, said in an interview before the earnings. When the San Francisco-based analyst removed Microsoft from Goldman's ``conviction buy'' list April 10, she said clients asked why she left the rating as a ``buy.''

Questions remain about Microsoft's ability to build Internet businesses that can deflect attention and sales from Google Inc. Ballmer, 51, is boosting spending as Microsoft works to draw more users to its Internet services and develop its search engine to compete with Google.

Earned a Billion

The value of Ballmer's stake rose about $416.4 million thanks to today's stock gain, based on shareholder data compiled by Bloomberg. Founder and Chairman Bill Gates's share climbed about $936.3 million.

Cost of goods sold will rise more than $600 million in fiscal 2008 as the company expands networks to run Internet services. Operating costs will also increase on investment in new initiatives and ongoing spending on Microsoft's online unit, Ballmer said.

Catching Up?

Friar, in her April 10 note initiating coverage on Microsoft, said Google and Yahoo! Inc. ``continue to out-execute and outmaneuver Microsoft,'' requiring significant investments from the company in a bid to catch up.

This lifts the concern that has been plaguing the stock for the past few weeks, said Kim Caughey, an analyst at Pitt Capital Group Inc., which manages $1.1 billion including Microsoft shares in Pittsburgh ``What remains is the longer-term concern -- is Google going to eat Microsoft's lunch.''

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Microsoft

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BT, February 23, 2007, 6.16 am (Singapore time)

Microsoft hit with US$1.52b patent suit damages

NEW YORK - A US federal jury found that Microsoft infringed audio patents held by Alcatel-Lucent and should pay US$1.52 billion in damages, Microsoft said on Thursday.

Microsoft said it plans to first ask the trial judge to knock down the ruling and will appeal if necessary. It said the verdict is unsupported by the law or the facts.

Alcatel-Lucent had accused the world's biggest software maker of infringing patents related to standards used for playing computer music, or MP3, files.

'We made strong arguments supporting our view and we are pleased with the court's decision,' said Alcatel-Lucent spokesman Joan Campion, declining to discuss details of the decision.

Microsoft said it has already properly licensed the MP3 technology from a German company called Fraunhofer for US$16 million.

'We are concerned that this decision opens the door for Alcatel-Lucent to pursue action against hundreds of other companies who purchased the rights to use MP3 technology from Fraunhofer, the industry-recognised rightful licensor,' Tom Burt, Microsoft's deputy general counsel, said in a statement.

Microsoft and Alcatel are locked in a number of patent disputes including a suit over the video-decoding technology in Microsoft's Xbox 360 video game console. -- REUTERS

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BT, February 9, 2007, 10.37 am (Singapore time)

Microsoft Vista spurs computer sales

SAN FRANCISCO - US sales of computers carrying Microsoft's new operating system Vista soared in the week after it was launched, defying the expectations of analysts who gave Vista lacklustre reviews. Personal computer sales for the week following Vista's debut to succeed Microsoft's Windows XP in January were 67 per cent higher than those in the same week in 2006, and nearly triple those of the preceeding week, according to Current Analysis.

Adding to the achievement was the fact that computer sales are usually sluggish during the end of January and the beginning of February.

As Microsoft executives predicted, the majority of people opting for Vista bought the higher-priced Home Premium version and only 22 per cent went for the more economical, scaled-down Basic edition.

Slightly more than half of the Vista-based personal computers sold for the week ending February 3 were made by Hewlett-Packard.

Microsoft spent five years and US$6 billion dollars creating Vista as the successor to its Windows XP operating system.

Critics maintain that Vista's complexity forces aspiring users to upgrade computers to meet memory and graphics demands. Computer game developers have complained Vista's security features can block or break their software.

Longtime Microsoft followers advised people to put off upgrading to Vista until flaws and kinks are exposed and fixed, as has been the historical pattern with the company's previous operating systems. -- AFP

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Microsoft - Windows Vista

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Microsoft

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BT, August 19, 2006

Microsoft shifts most of big share buyback later

SAN FRANCISCO - Microsoft Corp said on Friday it expects to complete less than one-quarter of a US$20 billion share buyback this week, shifting the rest of the buyback to later dates - a move that traders said was boosting its stock price.

Microsoft now expects to repurchase about 155 million shares, or 1.5 per cent of its shares outstanding, at US$24.75 each this week for a total of US$3.8 billion, based on preliminary results from a self-tender that expired on Thursday.

Microsoft had said on July 20 that it planned to buy back as much as US$40 billion of its stock, with up to US$20 billion to be repurchased through a tender offer in August and up to US$20 billion more through 2011.

The world's largest software maker said the remaining US$16.2 billion worth of shares sought in the tender have been added to its longer-range buyback program, which runs through June 30, 2011. Microsoft is now authorised to buy back a total of US$36.2 billion in stock between now and 2011. -- REUTERS

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Seattle Times, July 22, 2006

Microsoft confirms its rival to iPod

Microsoft confirmed Friday that it will sell a music and entertainment product later this year under the brand name "Zune," the first of a family of devices designed to compete head-to-head with the dominant Apple iPod. The first player, scheduled to be on store shelves this holiday season, will have a hard drive and a wireless connection that lets users share music, Microsoft said in an interview with Billboard magazine. Later on, the company could release players for video and video games.

These details have been rumored for months as Microsoft held talks about the devices with the entertainment industry. Some analysts said Friday that Microsoft confirmed the news to ensure that the speculation doesn't drive expectations beyond what the products would actually deliver.

Microsoft released little information Friday, but people briefed on the project said Zune will work with a Microsoft service that allows users to listen to a vast library of songs for a monthly subscription fee. These services act more like a rental service for music, although users can pay more to purchase permanent copies of songs. The model is used in RealNetworks' Rhapsody service. It isn't a direct competitor to Apple's market-leading iTunes Music Store, which is not subscription-based and sells songs and videos on a for-purchase basis. A subscriber will be able to share an entire play list of favorite songs with another person, as long as both are paying the monthly fee. The Zune service will also go beyond previous services in terms of allowing artists to connect directly with users in new ways. An artist could offer weekly releases over Zune, for example. One week might be a tour of that person's home or a spoken message to fans.

"Where Apple, I think to a certain extent, focused on the user, Microsoft is taking a different approach and really focusing on the artist and trying to create a system that would best allow that artist to speak to their fans," said technology analyst Rob Enderle.

Microsoft released a geometric, Tinkertoylike logo for Zune on Friday and set up a Web site, at comingzune.com, to promote the devices.

One music-industry executive said Microsoft is planning a huge marketing and promotional launch for Zune. So far, however, the hype seemed to be centered on a whisper campaign that got its first stamp of legitimacy with Friday's announcement.

Analysts said Microsoft will have to pull out all the stops to launch Zune in a way that can make any significant dent in the 70 percent share that Apple owns in the digital music player market. Already, Microsoft took an unusual tactic in choosing Billboard as the vehicle for its first Zune announcement."This isn't the type of product that's going to be announced at some kind of industry conference by Bill Gates or Steve Ballmer talking about the technical specs," said Jupiter Media analyst Michael Gartenberg.

Microsoft is also parting with history in that it will begin competing directly with partners who have their own digital music players. Microsoft has worked closely with Creative Technology, Toshiba and iriver on devices, but they haven't made many inroads against the iPod.

To really compete with Apple, Microsoft felt it had to go its own way, even if that meant sacrificing some partner relationships, Gartenberg said. "Microsoft has been preaching that the market really cares about choice in platform," he said. "But consumers are saying the only choice they care about was should they get an iPod Shuffle or iPod Nano. At the end of the day, the partners failed to deliver any meaningful market share."

But to really get in the ring with Apple, analysts suggested that Microsoft needs to have its own counterpoint to Steve Jobs, the enigmatic Apple chief executive who personally introduces new products at closely watched company events. Jobs regularly fires up the technology crowd in ways that Microsoft executives do not but may need to, for a Zune launch.

Don't expect Apple to step to the sidelines for Zune. Jobs predicted a Microsoft digital music, or MP3, player in a January interview with Newsweek. "What's going to happen is that Microsoft is going to have to get into the hardware business of making MP3 players," he said. "This year." And in a conference call with analysts Wednesday, Apple Chief Financial Officer Peter Oppenheimer said he was excited about the company's future products. "We are very confident in the products in our pipeline and I just don't imagine that the creativity at Apple could ever be low," he said.

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BT, February 11, 2006, 8.27 am (Singapore time)
Microsoft, partners to work on iPod dominance

REDMOND (Washington) - Microsoft and its hardware partners will continue to develop new digital media devices aimed at challenging the dominance of Apple Computer's ubiquitous iPod music player, Bill Gates said on Friday. 'I don't think what's out on the market today is the final answer,' he said, speaking to a group of minority students. 'Between us and our partners, you can expect some pretty hot products coming out over the next few years.' The Microsoft founder said the software giant was talking with hardware partners to create media devices that can be less expensive and easier to connect and can handle pictures and video better.

He said the market share for digital music players compatible with Microsoft software is around 20 per cent, a figure that is lower than he would like. Microsoft's strategy has been to allow various device manufacturers to create players that would be compatible with its software, arguing that it offered consumers more options. However, BusinessWeek reported last week that Microsoft is mulling its own media device in an effort to cut into Apple's nearly 70 per cent US market share. Mr Gates did not disclose any plans for a Microsoft-branded device on Friday. -- REUTERS

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BT, November 9, 2005, 6.45 am (Singapore time)

Microsoft expects sale of 3m Xbox consoles in 90 days post-launch

Microsoft Corp expects to sell up to three million of its new Xbox video-game consoles within 90 days of the product's launch, an executive said on Tuesday. Bryan Lee, chief financial officer with Microsoft's Home and Entertainment unit, told investors and analysts at the Harris Nesbitt Media and Entertainment Conference in New York that Microsoft aims to sell 2.75 million to three million consoles worldwide within 90 days of its debut in North America.

The North American debut on Nov 22 will be followed by a Dec 2 launch in Europe and a Dec 10 launch in Japan. Mr Lee also said he expects consumers to spend US$1.5 billion in the first 90 days after the Xbox 360's launch on the console and peripherals such as games and subscriptions to its Xbox Live online gameplay service. In North America, the company will charge US$399.99 for the Xbox 360, and US$299.99 for a scaled-back version. The company will initially lose money on the consoles but hopes to eventually break even on the hardware and make money on games and other peripherals.

Mr Lee said production of the consoles was going smoothly and Microsoft remains on track to meet its previously stated goal of shipping 4.5 million to 5.5 million consoles by June 2006, when the Redmond-based software company's fiscal year ends. Microsoft has said it hopes to supply retailers with a steady stream of consoles, rather than providing a big spurt of shipments followed by a long lull.

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Last Updated: October 27, 2005 19:14 EDT

Microsoft Net Rises 24%; Sales Forecast Falls Short

Oct. 27 (Bloomberg) -- Microsoft Corp., the world's biggest software maker, said profit rose 24 percent after customers bought more Windows software for personal computers and servers. Sales this quarter may miss analysts' estimates. Net income rose to $3.14 billion, or 29 cents a share, from $2.53 billion, or 23 cents, a year earlier, when profit was hurt by legal costs, the Redmond, Washington-based company said today in a statement. Sales gained 6 percent to $9.74 billion.

Microsoft's forecast signaled sales of the new Xbox video- game machine and SQL server software may not boost revenue this quarter as much as analysts expected. Sales last quarter benefited from demand for PCs during back-to-school season and a 13 percent rise in sales of software for servers, which run corporate networks. ``When you look at their guidance for the current quarter it looks a little light,'' said Alan Davis, an analyst at Seattle- based McAdams Wright Ragen, which manages $2 billion including Microsoft shares.

Chief Executive Steve Ballmer accelerated a plan to buy back stock, a decision analysts such as Heather Bellini at UBS AG had said was likely. About $19 billion of shares will be repurchased by December next year, Microsoft said. Microsoft had been buying back $2 billion in stock a quarter. ``We're very confident about our growth outlook -- so confident that we announced today we're accelerating our stock- buyback plans,'' said Ballmer today in an e-mail to employees obtained by Bloomberg.

The shares, down 7 percent this year, fell 40 cents to $24.45 in extended trading. Thirty-one analysts suggest buying the stock, four recommend holding it and one says sell.

`Steady Pattern'

Revenue this quarter will be $11.9 billion to $12 billion, Microsoft said today, falling short of analysts' estimates of $12.3 billion. Per-share profit will be 32 cents to 33 cents. Analysts expected 35 cents.

Microsoft is preparing the release of the new Xbox and SQL software, two events that analysts had anticipated may spur sales. Instead, Chief Financial Officer Chris Liddell said sales will show ``a steady pattern through the fiscal year.'' ``There was some expectation of a spike this quarter,'' Liddell said in an interview. ``In Xbox we see steady demand and companies tend to buy when they need, rather than at a launch date.'' Microsoft expects to sell 4.5 million to 5.5 million units this year, Liddell said.

Sales for the year will be $43.7 billion to $44.5 billion, compared with Microsoft's July forecast of $43.7 billion to $44.7 billion. Profit will be $1.26 to $1.30 a share, including an expense of 2 cents.

`Bit of Softness'

Microsoft in July forecast sales and profit for the first quarter that trailed analysts' projections and said purchases would pick up later in the fiscal year, which ends next June. The company at the time said sales would be as much as $9.8 billion, short of analysts' $9.92 billion predictions.

In the first quarter, Microsoft bolstered revenue from Windows software for servers and SQL databases and took sales from competitors such as Unix and Oracle Corp. Profit before one-time items in the first quarter was 31 cents a share, compared with the 30-cent average estimate of 27 analysts surveyed by Thomson Financial. Analysts expected revenue of $9.78 billion. ``I was expecting a little bit higher revenues and I was expecting better guidance,'' said Michael Cohen, an analyst with San Diego-based Pacific American Securities who rates Microsoft shares ``accumulate'' and said he doesn't own them. ``It seemed like a little bit of softness across the board.''

Reshuffle

Ballmer pared Microsoft's units to three from seven in the first quarter to help drive revenue by speeding up the development of new products. Microsoft is facing competition from companies such as Google Inc., which is rolling out new features for its search engine more quickly and attracting more customers. Microsoft today named Bob Muglia as senior vice president of the server and tools business. His predecessor Eric Rudder moved to a software strategy role, reporting directly to Chairman Bill Gates. Muglia, previously senior vice president of the Windows server unit, will report to Jim Allchin, co-president of the platform, products & services division.

In contrast to Microsoft, Google reported profit last quarter jumped sevenfold. The stock has risen 83 percent this year and the Mountain View, California-based company's market value has now surpassed $100 billion.

Revenue in Microsoft's MSN unit, which competes with Google, gained 0.9 percent to $564 million. Operating income gained 3.8 percent to $83 million. Google last week said its third-quarter revenue doubled to $1.05 billion.

Servers

Microsoft's Windows for servers revenue jumped to $2.53 billion. Sanford C. Bernstein & Co.'s Charles Di Bona expected a 13 percent rise. Di Bona, based in New York, is the No. 3 software analyst according to Institutional Investor and rates the stock ``outperform.'' Profit rose 28 percent to $896 million. The unit won orders because its products are less expensive than older Unix programs, and the company is courting database clients from Oracle and International Business Machines Corp. Microsoft will accelerate competition with the Nov. 7 release of its SQL database, the first update in five years.

``Microsoft stepped up their server business late in the June quarter with their 64-byte server operating system,'' said New York-based Stahlman. ``They have been effective in their sales efforts.''

Windows for PCs

Sales of Windows for PCs, which runs more than 90 percent of the world's personal computers, rose 7.1 percent to $3.19 billion. Sales gained 7.3 percent to $2.58 billion, benefiting from unexpectedly high demand for PCs.

Microsoft in July predicted 10 percent growth in PC shipments in the quarter. Instead, shipments soared 17 percent, according to Gartner Inc., a Stamford, Connecticut-based research firm. Microsoft expects PC shipments to grow by 10 percent to 12 percent in the second-quarter and by 9 percent to 11 percent in fiscal 2006, Liddell said in a conference call. Server shipments are likely to grow 11 percent to 13 percent in 2006, he said.

Growth in the Office word-processing unit slowed from 14 percent last year as some customers put off buying the software ahead of the new version of Office, which is due in the second half of 2006. Sales gained 4.1 percent to $2.68 billion, in line with Di Bona's estimate. Profit rose 1.4 percent to $1.93 billion.

Microsoft had costs of $537 million, or 4 cents a share, in the first quarter last year to settle an antitrust case with Novell Inc. The company on Oct. 11 agreed to pay RealNetworks Inc. $761 million to settle a separate antitrust lawsuit and didn't say when it would book the expense.

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Microsoft joins Yahoo on digital library alliance
Wed Oct 26, 2005 10:51 AM ET

SAN FRANCISCO (Reuters) - An alliance including Microsoft and Yahoo says it is fast gaining backers to challenge Google in digitizing many of the world's great books. The grouping -- the Open Content Alliance (OCA) -- is making its pitch even as Google Inc. and the publishing industry lock horns over Google's ambitious plan to create a digital library.The OCA, unveiled earlier this month by a group of digital archivists and backed by Yahoo, H-P and Adobe, says it has also signed up Microsoft Corp. and more than a dozen major libraries in North America, Britain and Europe.

Danielle Tiedt, general manager of Microsoft's MSN Search, said the world's largest software maker would fund the digital duplication of 150,000 old books over the next year. "This is just the start," Brewster Kahle, founder of the Internet Archive and the organizing force behind the OCA. "One hundred and fifty thousand books is just an initial test for Microsoft," he said. Backers say the dream of creating a digital library of the world's greatest books is an homage to the Library of Alexandria, the great repository of books in ancient times. "It's interesting to see everyone jumping on the digital library bandwagon," said Doron Weber, a program director at the Sloan Foundation in New York, which provides funding for the Internet Archive, the original organizers of the OCA.

Many university libraries have had separate projects to digitize out-of-print works, but progress has been slow. That changed when Web powerhouse Google unveiled plans last year to work with publishers and five major libraries on dual projects to make many of the world's great books searchable on the Web. "Google's push has galvanized everyone else," Doron said.

At the OCA's first public meeting, Kahle spelled out his vision for joining libraries, publishers, printers and hi-tech suppliers to create a universally available digital library. "If we go and bring universal access to all human knowledge it will be remembered as one of the great things humankind has ever done," Kahle said, comparing the potential of the project to the Gutenberg printing press or putting a man on the moon.

COMMON FRAMEWORK

Leaders of the OCA said a host of academic libraries had declared their support for the three-week-old project to create a common framework for digitizing and storing books, photos and video. The new libraries join founding member libraries from the University of California and the University of Toronto.

Canadian libraries pledging support for the OCA include McMaster, Memorial University of Newfoundland, the University of Ottawa, University of British Columbia and York University. U.S. libraries joining the OCA include Columbia University, Emory University, Johns Hopkins University, the University of Virginia, Rice University and the University of Pittsburgh.

"This is really hard. There are reasons why people have never done it. It will take all of the energies of the companies assembled here and many more who have yet to join," said project supporter Gart Davis, president of Lulu Inc., a publisher of out-of-print books that is working with OCA. Kahle said the project was looking to ensure that the decades-old project to digitize the collections of the world's great libraries does not fall victim to the legal debate between publishers and Google.

Last week five major book publishers filed a U.S. lawsuit that aims to block Google's plan to scan books from five of the world's greatest libraries -- Oxford, Harvard, Stanford and Michigan and the New York Public Library. Opponents argue that Google's plan to scan books is a massive infringement of copyright, something the Web search company denies, saying its plans are similar to a huge electronic card catalog that can be searched on the Web. "Google welcomes efforts to make information accessible to the world," Google spokesman Nate Tyler said in a statement. "We're proud that our own Google Print offers people access to a growing diversity of full text public domain books and portions of copyright works at http://print.google.com."

Backers of the Google Print project have expressed their disappointment that the two groups are not working together. But leaders on both sides say it is only a matter of time before the two library projects find common ground. "I think it's only a matter of time before we reach agreement," said Rick Prellinger, board president of the Internet Archive and the director of the newly formed OCA.

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Google suit against Microsoft halted
Tech leaders to appear before Federal judge Friday over Google's hiring of a former Microsoft exec.
October 14, 2005: 11:47 AM EDT

SAN FRANCISCO (Reuters) - A U.S. judge ordered a tentative stay in Google Inc.'s suit against Microsoft Corp., a court Web site said, dealing a blow to Google's legal fight over hiring a former Microsoft executive.

The parties are scheduled to appear before Judge Ronald Whyte in U.S. District Court in San Jose, California, Friday to make arguments in support of their respective motions in the federal case brought by Google. Google (down $2.95 to $294.49, Research) hopes to override the jurisdiction of a Washington state court in a related action brought by Microsoft (down $0.07 to $24.52, Research) that accuses Google and manager Kai-Fu Lee of violating a noncompete agreement that Lee had signed with Microsoft.

The stay order by the federal court, if maintained by Judge White, would set the stage for the Washington state case to go to trial on January 9, 2006, according to attorneys working for Microsoft.

Lee, 43, was hired away from Microsoft by Google in order to head up the Web search company's research efforts in China. He had established Microsoft research and development center Beijing before moving to Microsoft's Redmond, Washington, headquarters to work on software that allows computers to process speech using conversational language.

Google has argued that California, a state that generally does not recognize noncompete clauses, is the proper jurisdiction for the legal dispute. Microsoft's position is that Lee's employment contract was signed in Washington and that the deal contained a provision whereby issues arising from the employment contract would be adjudicated under Washington state law, its attorneys said. In testimony last month, Lee said that he left Microsoft after becoming frustrated with the company's approach to doing business in China.

A Washington state judge ruled last month that Lee can begin helping Google set up operations in China, but placed tough restrictions on him, pending a trial scheduled for January. Whyte's tentative order did not specify how long the suit would be stayed.

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Oct. 11 (Bloomberg) -- Microsoft Corp., the world's largest software maker, agreed to pay RealNetworks Inc. $761 million in a settlement that removes the last major antitrust lawsuit brought by a Microsoft competitor. RealNetworks shares surged as much as 48 percent after Microsoft said it will pay $460 million in cash and provide services worth $301 million to promote RealNetworks' Rhapsody online music service and digital games, the companies said today. The agreement silences one of the most vocal critics of Redmond, Washington-based Microsoft, which has agreed to pay more than $4 billion to settle antitrust cases. RealNetworks's Rhapsody site will be featured on MSN's home page, giving both companies more ammunition to compete with companies including Apple Computer Inc., operator of iTunes. ``RealNetworks wins by getting an enormous chunk of cash and Microsoft wins by getting the lawsuit behind them,'' said Kit Spring, a Denver-based analyst for Stifel Nicolaus. ``It also helps Microsoft focus on competing against Apple, who they view as the real competitor.''

Shares of Seattle-based RealNetworks, down 12 percent this year, surged $1.96 to $7.70 at 4 p.m. New York time in Nasdaq Stock Market composite trading after rising as high as $8.50. Microsoft slipped 5 cents to $24.41.

`Up to Regulators'

RealNetworks's settlement leaves the European Commission without one of its biggest backers in its antitrust case against Microsoft. The European Union relied in part on RealNetworks' testimony in its decision to fine Microsoft a record 497 million euros ($598 million). The EU also required Microsoft to offer a version of Windows without the Windows Media Player, after finding the company abused its dominance to squeeze competitors. Microsoft is appealing the case. ``It's up to EU and the regulators now,'' said Robert Kimball, RealNetworks' general counsel. ``We have fully resolved all antitrust issues with Microsoft.'' Jonathan Todd, a commission spokesman, said the settlement won't have any impact on the regulator's case. ``Typically regulators are interested in settlements and we share that information with them,'' Microsoft General Counsel Brad Smith said in an interview. ``They are looking at the marketplace as a whole and this has been an important part of that.''

MSN, Rhapsody

Under today's agreement, Microsoft's MSN search engine will promote and market Rhapsody and RealNetworks' digital games will be offered through MSN and Microsoft's Xbox machines. The placement on MSN will help Rhapsody keep customers as it faces increased competition among online music providers. Rhapsody uses a subscription-based model, allowing users to pay a fee to listen to unlimited music. Rhapsody competes with Yahoo! Inc.'s Yahoo! Music Unlimited and Napster Inc.'s Napster to Go. Apple's iTunes is a pay-per-track service.

Microsoft chairman Bill Gates and RealNetworks chief executive Ron Glaser said in a press conference today that the agreement marks the beginning of an ongoing relationship between the two companies to develop new digital entertainment products. ``It's important to see it goes beyond settlement, it's also integration into Windows and MSN software, said Gates. ``This is just the beginning. There's a lot still to be done.''

RealNetworks will now consider how to use the money, which is equal to more than half the company's current market value. ``Our board will have to sit down and look at future best prospects for using the money'' said Kimball. ``There is nothing in the settlement that constrains our use of the money.'' The windfall gives RealNetworks options including acquisitions and returning cash to shareholders, according to Spring, who has a ``market perform'' rating on RealNetworks and doesn't own the stock. ``My guess is that they will look for acquisitions, probably not find any and do a combination of a special dividend and a buyback,'' Spring said.

KK · Guru

Microsoft may be shipping fewer next generation video game machines than expected, say analysts.
October 7, 2005: 2:25 PM EDT

While Microsoft has still not given precise shipment numbers for the Xbox 360, two sector analysts say the numbers seem to be slipping. That could lead to even higher priced game sets in a market that already seems to be on the verge of price gouging. Wall Street has been expecting Microsoft to deliver more than 2 million of its next generation consoles to retailers worldwide this year. On Monday, though, P. J. McNealy of American Technology Research lowered his expectations to the 1.8 million to 2 million range. Friday, Banc of America's Gary Cooper said he believes the company will ship just 1.4 million to 1.6 million.

There was never any question that the first 'next generation' video game machine would sell out this holiday season. A cocktail blend of enthusiastic players and Santa's helpers virtually guarantee that demand for the machines will outstrip supply. It happens with every major holiday gaming hardware launch. (Skeptical? Think back to last year's desperate hunt for a Nintendo DS.)

Complicating matters is Microsoft's plan for a worldwide launch of the 360. That means those initial shipments, whatever they turn out to be, will be split between North America, Europe and Japan. McNealy said he expects Microsoft to send roughly 900,000 to 1 million units to North American retailers, 600,000-800,000 to Europe and another 100,000-200,000 to Japan.

Cooper's prediction is more dire, saying there will only be between 300,000 and 350,000 units available in the U.S. on Nov. 22, when the system launches. (Cooper, in a note, said he expects two shipments from Microsoft (Research) this year ? one before launch and another in December.) "Concerns about shortages, parts problems and other associated inventory qualms are typical of any console hardware transition," wrote McNealy.

Microsoft representatives were not immediately available for comment.

The expected shortages could prove beneficial to entrepreneurs and select retailers. Officially, there are two price points for the Xbox 360: $299 and $399 (one bare bones and one tricked out). And while you might be able to buy just the machine if you're willing to camp out at your local Wal-Mart (Research) or Best Buy (Research) the night before they go on sale, many retailers are only selling their allotted units in outrageously expensive bundles. GameStop (Research), for example, offers five different pre-order packages for would-be owners of the machine, ranging in price from $700 to $4,500. That $4,500 bundle, for those of you gasping for air, includes (among other things) 20 games, three extra wireless controllers and a 42-inch plasma TV. It's eBay (Research) where I suspect the real fortunes will be made, though. Already, those lucky enough to receive early accessories for the system have been making tidy profits from selling that merchandise to enthusiasts. The faceplate given out at the E3 press conference, for example, has fetched as much as $306.99 ? more than the basic version of the machine itself.

How far will bid prices go for an actual Xbox 360? It's anyone's guess. But if you're planning to pad your bank account by flipping one, you'd better hurry. January will bring a new round of shipments and a likely drop-off in demand.