As part of the latest MSN renovation, last week Microsoft introduced messaging software to compete with similar offerings from America Online and Yahoo!. The program, MSN Messenger, provides e-mail and chat services to its users - intended to draw people from AOL to MSN. But Microsoft didn't come up with their own chat system, instead creating software that uses America Online's own message servers to communicate with that company's service. But it only works in one direction - MSNM users can see AOL's Instant Messenger customers, but people using AIM won't be notified when MSNM users come online. That would force Instant Messenger customers to use the MSN service to keep in contact with anyone using MSN Messenger.
Shortly after the software was made available for download, AOL reconfigured their AIM servers to block MSN Messenger. Microsoft reconfigured their software to avoid the blockages, but then AOL blocked them out again. A spokesman for America Online defended the decision, citing potential security risks in how MSNM deals with passwords (the passwords for AOL's regular customers are the same ones used to access their AIM accounts). Microsoft said the passwords go directly to AOL's own servers and are secure, then called the kettle black by accusing their competitor of being against open standards. Then Yahoo! and Prodigy - both of whom recently came up with their own AIM-compatable software - chimed in and said America Online is going back on promises it recently made to create messaging standards.
Last year AOL published a standard for instant messaging clients and allowed the development of open source versions of AIM for several platforms like X-Windows on Unix and the BeOS. Yahoo! and Microsoft used those standards as a basis for their own products, but both companies tied the software to features on their Web sites (to Yahoo!'s credit, their features aren't required, while Microsoft forces MSNM users to register with Hotmail first). The battle over this is continuing, so we'll keep you updated.

With little fanfare, Microsoft announced on July 19 that its profit for last quarter rose some 62 percent from the year before. According to Chief Financial Officer Greg Maffei, The Behemoth pulled down some $2.2 billion last quarter, a figure that equals out to 40 cents a share. Last year during the same quarter Microsoft made a mere $1.36 billion, or 25 cents per share. Maffei cited the release of Windows 2000 and Windows 98 SE as key factors in the climb, since new software releases naturally sell much faster than older versions.
But just as he has for several years, Maffei warned investors that the future may not be so bright because the market for new computers is leveling off and the Y2K bug may hurt software sales. Microsoft's head accountant also noted that the company's recent investments and buyouts (over $7 billion so far this year) will have some effect on the bottom line.

Shortly before releasing any numbers on earnings for last quarter [see story above], Microsoft stock hit an all time high on rumors that MSN would be spun off as a separate company with its own stock. According to the rumor, Microsoft has plans to publicly sell up to 15% of MSN, a group containing Hotmail, Expedia, LinkExchange, Slate, half of MSNBC and the MSN Internet Access service (among many others). That would give Microsoft's Internet offerings a bit of the clout recently acquired by Internet properties spun off by NBC and Disney/Infoseek, as well as take a money pit off of the company's balance sheet. A Microsoft spokeswoman denied the rumors, saying the company has examined the possibility, but "at this time" has no plans to proceed with it.

In possible preparation for the MSN spinoff, last week Microsoft finally sold one of its most disappointing ventures to a competitor. MSN Sidewalk, a guide to entertainment and events in 77 cities, will be bought by Ticketmaster Online-CitySearch Inc. in exchange for 7 million shares of TM-CS stock - about 9% of the company. Later this year Ticketmaster Online-CitySearch will become a content provider for MSN, providing some of the same content Sidewalk does now along with ticket sales and other merchandise. Microsoft is reportedly not including Sidewalk's online yellow pages or interactive buying guide in the sale.

Despite the awaiting-verdict government antitrust case against Microsoft and a past refusal to use Windows for critical tasks, the US Department of Defense has decided to buy $250 million of Windows CE-based systems. The purchase contract with Symbol Technologies doesn't specify an operating system, but a Symbol spokesman said the only way to meet all of the DoD's specifications was to use CE. 3Com's PalmOS, the primary competitor to WinCE, was passed up because its design only works with one size of display. Symbol wouldn't go into detail about the intended usage of the devices, saying only that they would be devices involved with tracking, transportation, and shipping of materials and personnel for all branches of the US military throughout the world.

Earlier this month Microsoft filed a lawsuit of its own, accusing a former development partner of breaking a contract. The suit says Timeline, a developer of analytical business software, licensed a database-analysis patent to Microsoft last month, but now refuses to let The Behemoth give its third-party developers the right to create their own products with the technology. Timeline defends its decision, saying that the agreement only permitted Microsoft to provide technology to their direct customers, not sublicense to other independent developers. Perhaps this will show other Microsoft partners just how dangerous it is to dance with the grizzly bear...

Adding another company to its portfolio of handheld technologies, last week Microsoft purchased Suffolk England-based STNC for an undisclosed sum. STNC specializes in products for mobile phones and handhelds, particularly on the EPOC operating system. Microsoft apparently plans to roll STNC into its productivity appliances division to flesh out its meager portable phone offerings. A spokesman said STNC's partnerships with Ericsson, Symbian and other mobile phone manufacturers (none of whom currently use Windows CE) will continue to be honored.

After officially separating Windows 2000 Consumer from Windows 2000, Microsoft gave the forthcoming Windows 9X-based product a separate code name - Millennium - and a later release date. Microsoft will reportedly be releasing Windows 2000 as an upgrade to NT sometime early in Winter 2000, with the officially unnamed Millennium product shipping sometime "shortly thereafter."
During the company's annual investors meeting [see story above], Microsoft COO Bob Herbold said he intends to spend a record $150 million in fiscal year 2000 promoting Microsoft's products and image on television around the world. The $50 million increase is reportedly designed to offset negative images portrayed during the government antitrust trial.
Last week Microsoft released a beta version of the next NT 4.0 service pack. The 3-year-old operating system's 6th major upgrade is expected to contain patches for memory leaks, DNS problems and all the patches included in previous packs. A final version of NT4 SP6 is expected in 60 to 90 days.

_{Microsoft sees threats over developers
Don't Worry, Everything Will BO2K
Same Hole, Different Exploit
Microsoft reaffirms commitment to Macintosh}