Telegraph reports: But within hours of announcing the launch of Windows Mobile 6.5 at the Mobile World Congress in Barcelona, a phone fitted with the new generation software was stolen from an executive’s pocket.

The theft will no doubt embarrass Australian telecommunications giant, Telstar, whose CEO Sol Trujillo was reportedly given the device by Microsoft to test the system ahead of the launch.

He in turn handed the top secret product to an unnamed executive who was pick-pocketed during an evening function at the trade convention.

A spokesman for the Australian company confirmed the theft had happened. “One of our product executives was given the phone to test the system. He had it with him at an organised evening event and it was stolen from him – we don’t know by whom.”

There are fears that leaks regarding the features and early bugs in the software could mar the launch of Windows Mobile 6.5 which the company hopes will give it the edge over the iPhone and the new Google Android operating system. The new product includes support for touch-screen technology similar to that found on the Apple iPhone.

Among the features offered in the new service unveiled by Microsoft’s chief executive, Steve Ballmer, on Tuesday, is a version of Windows Marketplace for Mobiles, which is set to compete with the popular Apple’s App Store and provide easy ways to download music and products to mobiles.

“I’m not clear on what the security implications of the theft will be,” said the Telstar spokesman. “That is for Microsoft to say.”

As Fortune notes, Barcelona is known for having the best pick-pocketing thieves in the world. So, while the news is shocking, after it resonates for a second, it is understandable.

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Microsoft did not announce the number of stores they are planning to open, which products would be sold at the stores, or when they were planning on unveiling the first locations.

Former DreamWorks Animation executive David Porter was named Microsoft’s new Vice President of Retail Stores, and with the position comes most of the decision making responsibilities. Porter will report directly to Microsoft COO Kevin Turner.

Microsoft Appoints David Porter as Corporate Vice President of Retail Stores
Twenty-seven-year retail veteran will focus on transforming the PC and device-buying experience for retail consumers and developing and rolling out new Microsoft-branded stores.

REDMOND, Wash. — Feb. 12, 2009 — Microsoft Corp. today announced that David Porter will join the company as corporate vice president of Retail Stores. He will lead Microsoft’s efforts to create a better PC and Microsoft retail purchase experience for consumers worldwide through the development and opening of the company’s own retail stores. Porter will report to Microsoft Chief Operating Officer Kevin Turner. He is joining Microsoft from DreamWorks Animation SKG, where he was head of worldwide product distribution.

“I am delighted to welcome David to Microsoft,” Turner said. “This is an exciting time with our strong lineup of upcoming product releases including Windows 7 and new releases of Windows Live and Windows Mobile. We’re also working hard to transform the PC and Microsoft buying experience at retail by improving the articulation and demonstration of the Microsoft innovation and value proposition so that it’s clear, simple and straightforward for consumers everywhere. David’s unique and diverse background, coupled with his deep retail roots and distribution understanding, will be an invaluable asset in this long-term effort.”

“There are tremendous opportunities ahead for Microsoft to create a world-class shopping experience for our customers,” Porter said. “I am excited about helping consumers make more informed decisions about their PC and software purchases, and we’ll share learnings from our stores with our existing retail and OEM partners that are critical to our success.”

Defining the time frame, locations and specifics for planned Microsoft-branded retail stores will be Porter’s first order of business. The purpose of opening these stores is to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy.

Porter, whose new role and focus will complement the work Microsoft is already doing with its retail partners, will work in close partnership with leaders of existing retail programs in Microsoft’s Entertainment & Devices Division.

Before joining DreamWorks Animation in 2007, Porter spent 25 years at Wal-Mart Stores Inc. in roles of increasing responsibility and seniority in store operations, merchandising and information technology. In his last role at Wal-Mart, Porter was vice president and general merchandise manager of Entertainment, where he served as a strategic point of influence throughout the Wal-Mart business.

Porter’s first day at Microsoft will be Feb. 16, 2009.

Rumors regarding plans for Microsoft branded retail stores have been around for some time. The official announcement from Microsoft does not come as a shock. Retail expansion has been proven incredibly lucrative for Apple, with past reports explaining that Apple nets over $4,000/year for every square foot of retail space it operates.

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As SiliconAlley notes, the layoffs will be happening in all of Microsoft’s divisions, such a “Research & Development, marketing, sales, finance, legal, HR, and IT,” and will completed over the next 18 months.

From: Steve Ballmer
To: All Microsoft FTE
Subject: Realigning Resources and Reducing Costs

In response to the realities of a deteriorating economy, we’re taking important steps to realign Microsoft’s business. I want to tell you about what we’re doing and why.

Today we announced second quarter revenue of $16.6 billion. This number is an increase of just 2 percent compared with the second quarter of last year and it is approximately $900 million below our earlier expectations.

The fact that we are growing at all during the worst recession in two generations reflects our strong business fundamentals and is a testament to your hard work. Our products provide great value to our customers. Our financial position is solid. We have made long-term investments that continue to pay off.

But it is also clear that we are not immune to the effects of the economy. Consumers and businesses have reined in spending, which is affecting PC shipments and IT expenditures.

Our response to this environment must combine a commitment to long-term investments in innovation with prompt action to reduce our costs.

During the second quarter we started down the right path. As the economy deteriorated, we acted quickly. As a result, we reduced operating expenses during the quarter by $600 million. I appreciate the agility you have shown in enabling us to achieve this result.
Now we need to do more. We must make adjustments to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency.

As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will occur today. We’ll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs.

Our leaders all have specific goals to manage costs prudently and thoughtfully. They have the flexibility to adjust the size of their teams so they are appropriately matched to revenue potential, to add headcount where they need to increase investments in order to ensure future success, and to drive efficiency.

To increase efficiency, we’re taking a series of aggressive steps. We’ll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We’ve scaled back Puget Sound campus expansion and reduced marketing budgets. We’ll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year.

Each of these steps will be difficult. Our priority remains doing right by our customers and our employees. For employees who are directly affected, I know this will be a difficult time for you and I want to assure you that we will provide help and support during this transition. We have established an outplacement center in the Puget Sound region and we’ll provide outplacement services in many other locations to help you find new jobs. Some of you may find jobs internally. For those who don’t, we will also offer severance pay and other benefits.

The decision to eliminate jobs is a very difficult one. Our people are the foundation of everything we have achieved and we place the highest value on the commitment and hard work that you have dedicated to building this company. But we believe these job eliminations are crucial to our ability to adjust the company’s cost structure so that we have the resources to drive future profitable growth. I encourage you to attend tomorrow’s Town Hall at 9am PST in Café 34 or watch the webcast .

While this is the most challenging economic climate we have ever faced, I want to reiterate my confidence in the strength of our competitive position and soundness of our approach.

With these changes in place, I feel confident that we will have the resources we need to continue to invest in long-term computing trends that offer the greatest opportunity to deliver value to our customers and shareholders, benefit to society, and growth for Microsoft.

With our approach to investing for the long term and managing our expenses, I know Microsoft will emerge an even stronger industry leader than it is today.

Thank you for your continued commitment and hard work.
Steve

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Cygnus Systems is suing the three companies saying that they infringed on its patent (#7346850) which was filed back in 2001, but only granted to them in March of this year.

As PCWorld explains, Cygnus Systems claims that products such as Windows Vista, Internet Explorer 8, Google Chrome, Mac OS X, the Finder, iPhone and Safari all infringe on its patent. Quite a massive claim, clumping such a ubiquitous technology between all three companies shouldn’t hold over well in court.

It seems as though Cygnus Systems is just another company trying to exploit the legal system. A few quotes from the law firm representing them even further that argument. Matt McAndrews, a partner with Niro, Scavone, Haller & Niro, says the following: “They were a logical starting place for us…We’ve identified many other potentially infringing products that we’re investigating.” Sounds just like any other company hoping to cling on to legal loopholes, in the hopes of falling backwards into money. McAndrews continues to explain that Cyngus’ owner and president Gregory Swartz developed the “file previewing” technology while working on IT consulting projects. If the case gets into patents regarding the development of User Interface elements, Cyngus may as well cut their losses. Battling these tech juggernauts over “file preview” would not make any waves at all, let a lone a splash.

Cyngus Systems is looking for “a reasonable royalty” in addition to a court injunction preventing further infringement.

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Seadragon mobile (iTunes link) lends itself well to the cloud computing movement that has revolutionized data storage over the last few years. Presenting large amounts of data in increasingly convenient and efficient ways is a challenge for even the biggest companies, and the most talented developers.

Seadragon Mobile brings the same smooth image browsing you get on the PC to the mobile platform. Get super-close in on a map or photo, with just a few pinches or taps of your finger. Browse an entire collection of photos from a single screen. You can browse Deep Zoom Images that you can create from your own pictures or your Photosynth collection (or anybody else’s).

Google leads the front on organizing, collecting and intelligently presenting large amount of data, however Seadragon is a novel attempt at making this accessible for end-users.

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Tgdaily points out that the Windows XP downgrade option is listed on Dell’s website with the Inspiron 1525 notebook and 530 desktops with a $150 price-tag. Dell however, did not hike up the downgrade option pricing on its Vostro desktops and notebooks. The price for the XP downgrade on those was raised in October and remains at $99.

Analysts are unable to determine whether this shows a declining or increasing demand for the operating system. Some believe that netbook demand (sub-$500, Linux based notebook) has taken the load off of downgraded PC options with Windows XP. According to Devil Mountain Software, a market research firm that collects “real-world” metrics from Windows computers, nearly one third (35%) of PC users that purchased a PC between February and August 2008, downgraded to Windows XP from Windows Vista.

Perhaps most interesting is that Apple sells brand new versions of Mac OS X Leopard for $129 (single user – family pack is $199). If you’re in a tax-free state like Oregon, that’s exactly $21 less than Dell’s Windows XP downgrade option. And even with all of the negative press surrounding Microsoft and its less-than-capable operating system, Dell continues to ship machines with Vista pre-installed, while charging customers for a Windows XP downgrade.

Microsoft is promising a lot with Windows 7, and the industry is waiting anxiously for anything to move it along after Vista. They are keeping strong with the focus of being fully compatible with as many existing device drivers, applications, and hardware configurations as possible. Unfortunately, early developer builds and statements from Microsoft’s CEO Steve Ballmer himself lead us to believe Windows 7 may just be more of the same.

As Apple remains focused on delivering an increasingly refined version of OS X with Snow Leopard, healthy competition between the two operating systems has been rather difficult given Vista’s failures. For the sake of the industry, let’s hope Microsoft delivers something heavy with Windows 7.

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For years Windows has been buggy, slow, clunky, unrefined, and rather disappointing when compared to smooth, refined operating systems with stable foundations like Linux and Mac OS X. Bottom line, Windows needs to be rewritten. It may seem impossible, but unless it’s done the OS will never be a contender in user experience. The problem with Windows is that it grew too rapidly, and now Microsoft is stuck in a pile of quicksand as they need to adapt to every PC vendor and their subsequent hardware.

The Solution: Microsoft needs to setup a support system for every version of Windows that has been released thus far. This way no backlash will be felt throughout the industry as Microsoft transitions away from the boggy, clunky registry that Windows currently relies on. Next, allocate resources and form an elite braintrust to spearhead the development of the new Windows. And start naming the versions after variations of different Windows styles or something, like Skylight, Bay, Oriel, Stash and Awning. This would at least establish a cohesive branding and release cycle your customers could rely on. Get rid of the registry, incorporate a more linux like foundation and integrate cloud computing directly into the OS. Microsoft is just delaying the inevitable as the focus on bringing multi-touch to Windows 7. They need to swallow their pride, and move on. This way, in ten years Microsoft may actually have a true competitor on its hands. Whether it be in our lifetime or not, if Microsoft doesn’t rewrite Windows, the market share will eventually fizzle out.

2. Internet Explorer

Instead of adopting an open source engine like Webkit or Gecko, Microsoft has been stubborn in sticking with their own solutions for Internet Explorer. Aside from creating downright enemies in the web development world, “DAMN YOU IE !!!” has become a catch phrase our culture has become accustomed to shouting.

The Solution: Adopt an open source web engine, make Internet Explorer adhere to web development standards and show the industry that you’re not just in it for market share. If rumors hold true and Google pays PC vendors to install Chrome as the the default web browser, IE could become extinct unless it is completely overhauled, from the ground up.

3. Search

Microsoft’s current offering in the search space is Live.com. It’s supposed to compete against industry leaders Google, Baidu, and Yahoo! The service has been previously named Windows Live Search and MSN Search, and at this point, users have given up trying to find the search engine. The search results are not as consistent as Yahoo!’s and not even comparable to Google’s. The crawling technology is years behind what Google offers and from a web development standpoint, writing code for Live.com crawlers is a nuisance. Most of the development firms I have known over the years, including firms that deploy enterprise level applications and solutions, time and time again have chosen to ignore Live.com. This within itself, represents a huge problem for Microsoft.

The Solution: This one might be toughest. Microsoft needs to bite the bullet and head hunt some search gurus. They need to put together a team of people that can at once index a mountain of data, and at the same time, formulate a plan to attract users. Microsoft will need to seek out and partner with people, and companies that otherwise may have not been considered. Acquisitions of small private firms with high talent pools should be considered. Once again, a major push into cloud computing could bring Microsoft’s search offerings into better light.

4. Windows Mobile

Windows Mobile has become a nuisance to develop for. The mobile operating system has become clunky, slow, boggy and provides a generally frustrating user experience. Any way you look at it, Windows Mobile has become aggravating. As RIM has sliced out an enormous piece of the pie with the Blackberry, WinMo is becoming increasingly useless. Over the years Microsoft has designed it to become similar to the desktop version both feature-wise and aesthetically.

The Solution: Microsoft may have the easiest time with this one. They’ve been making major strides lately towards showing off a snappy, responsive interface for future versions of Windows Mobile. This wouldn’t have to wait until the new Windows was done, it could be developed within a few years and unveiled long before a rewritten Windows. Google’s Android is an open source alternative to WinMo and Apple’s iPhone is a completely closed platform, so there is plenty of space for Microsoft. The mobile market is just beginning to explode.

5. Silverlight

With Silverlight, Microsoft primarily set out to compete against Flash video streaming. Silverlight is Microsoft’s solution to web content streaming. Just like most of their other products, Silverlight ignores the use of common web standards. Microsoft claims that the use of XAML in Silverlight is positioned to replace the cross-platform HTML standard, which is a frustrating argument for most content providers. If enough users adopt Silverlight, Microsoft could leverage accessing the content forcing users into purchasing Microsoft products.

The Solution: Instead of offering another product that directly competes with open standards, tailor Silverlight to compliment existing codecs that the industry has adopted. Adobe has made a huge push with Flash, and even though Apple forbids it for web content, streaming video has embraced Flash. It has largely become the go-to codec for streaming video sites, YouTube loves Flash, and even though its not going mobile, it’s here to stay. Silverlight could be a welcome addition to the streaming video world and it could enhance cross platform compatibility between content providers. At this last year’s olympics, NBC chose to stream the events live through Silverlight. It turned out to be a disaster, and a slew of users couldn’t access certain content because of their specific setups. It was a prime example of consumers suffering from Microsoft’s anti-compliant stubbornness.

6. Steve Ballmer (Bonus)

Steve Ballmer has been Microsoft’s CEO since January 2000. Under his leadership, many products have floundered aimlessly trying to gain traction. He is a salesmen by nature, and although passionate about the industry, does not understand tech culture as Microsoft’s CEO should. Ballmer spearheaded a hostile takeover bid for Yahoo which led to disastrous results. Yahoo did not want to become part of the Microsoft machine, and Ballmer’s business initiative has had a lot to do with Microsoft’s inability to innovate. Since he has become CEO, Microsoft has fallen behind the rest of the industry in almost every way.

The Solution: Fire him. Replace with Chief Software Architect Ray Ozzie, a Bill gates protoge and self made software entrepeneur. Ozzie has both deep technical software know-how (top 5 in the world, says Bill Gates) and proven ability to develop products people want. Microsoft needs to get back on the innovation bandwagon and listen to consumers. Ballmer is too much of a salesman and computers are not used cars.

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Lindsay Blakely over at Bnet has dug up some numbers regarding Apple’s entire annual advertising budget, and when compared to Microsoft’s annual ad budget, it’s a rather surprising find.

According to Apple’s recent 10-k filing, the company spent $486 Million on advertising in fiscal year 2008. This may perhaps be more than most people would have estimated, however Apple’s push with Leopard and the iPhone 3G has been massive. Not to mention how hard they’ve been touting the iPod touch as a gaming device. Comparatively, Microsoft’s “Vista only” advertising budget was $300 million, while they spent $1.3 billion when combined with everything else (Xbox, Office, Windows, enterprise).

It’s important to point out that Microsoft is a much bigger company. When comparing these advertising budgets, Microsoft’s $300 million was specifically allocated towards advertising Windows Vista, which is in direct competition with Mac OS X. Apple’s $486 million was spent on advertising everything the company has to offer. Which comparatively cost Microsoft around $1.3 billion.

TechCrunch’s Erick Schonfeld seems shocked that Apple spends so much money on advertising. However when marketing products such as OS X, the iPhone 3G and the iPod touch, $486 million doesn’t seem like an exorbitant amount of money. The $300 million Microsoft spent on trying to “change Vista’s image,” seems like an astronomical amount of money to spend on a campaign which has had very little effect in actually moving copies of Vista. The difference between both approaches garners varying results among consumers. A quarter into Leopard’s launch, 19% of Apple customers had installed the new OS. More than a year after Microsoft released Vista, only 13% of its customers had upgraded. Microsoft has even had to deal with reissuing copies of Windows XP, Vista’s successor, because of the dissatisfaction with Vista. A problem Apple has never had to face. Arguably, Apple’s customer base are the most devoted and loyal, however those same customers would be the first to point out flaws in Apple’s products.

Both advertising campaigns have their flaws. While some may find Apple’s commercials to be childish and too aggressive, focusing more on thrashing Vista, then touting OS X. Others may find Microsoft’s commercials to be completely irrelevant and totally out of touch.

When comparing both advertising campaigns and budgets to each other, it’s difficult to determine which one is more “effective.” Both attract eyeballs, which is essentially any advertising campaign’s ultimate goal. Whether you love the PC commercials, love the Mac commercials, or don’t care either way, the campaigns were a big part of technology culture this year.

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The advertising battle between both companies has become very heated recently. Apple is known for showing very little restraint when it comes to poking fun at Vista, and Microsoft’s blown $300 million ad campaign, which first started out with the Seinfeld+Gates bits.

As it turns out, Apple’s ‘Get a Mac’ commercials have received twice as many placements (unique copies of the videos) as many times as Microsoft’s. “The Apple ads — which were part of the same “Get a Mac” campaign that has been running for a long time now — attracted 70% of the total first-week viral video views as the brand-spanking-new “I’m a PC” campaign. And while it’s tough to predict future view count growth, these Apple ads have garnered twice as many video placements (140+) as the Microsoft campaign (70+),” Cutler explains. “Apple’s recent additions to its Get a Mac series have received significant viral video interest so far, generating over 140 different placements that collectively have driven almost 1.2 million views and attracted over 800 comments. These results indicate that this long-running campaign has managed to stay fresh and maintain the audience interest over the long haul.”

To see if Apple was able to blunt Microsoft’s attempt to reshape consumer perception of Windows, we tapped our Viral Reach Database to identify and measure the viral video placements from each campaigns. And since Microsoft’s campaign has been in-market for over a month while the Apple ads were released in mid-October, we compared only the first seven days for each campaign, Matt Cutler explains for Visible Measures.

These first week results reveal that Apple’s viral video offensive made significant headway against Microsoft’s message. Apple’s three new spots scored 70% of the viral video views that the much-discussed “I’m a PC” initially generated. And the view count totals are only part of the story, as these new Apple ads have inspired twice as many viral video placements (i.e. distinct videos with their own URL) as the Microsoft “I’m a PC” campaign.

As shown in the results above, Microsoft’s original Seinfeld+Gates were the most successful for the company. Perhaps if they had stuck with the campaign, it would’ve been more effective. Having spied on Cupertino for so many years, a company as big as Microsoft should understand that developing strong brand loyalty and recognition isn’t an overnight thing. In all fairness, we first heard that the Seinfeld+Gates commercials were “just on hold,” not canceled. It’s believed that Microsoft has a few more commercials/segments done, only they aren’t airing them.

Apple’s most recent commercials (Bake Sale, V Word and Bean Counter) weren’t totally digested positively by many people. They were so strikingly aggressive, that many wondered whether they were doing good, more so than they were tarnishing the Apple brand. When the commercials first aired, it wasn’t long before they were being compared to slanderous political campaigns. Even though Apple is known for not showing restraint, many believed these particular ads to be slightly more “cut-throat” than the others.

Both companies are actively airing their latest commercials, appealing to the target demographic they believe is the most important. While Microsoft focuses on showcasing Windows as “life without walls” and claiming that “everyone in the world” is a PC, Apple aggressively pokes fun at Microsoft’s blunders with Vista, and their inability to fix its ailing issues.

Both Apple and Microsoft’s commercials attract eyeballs, which at the core is most important for any advertising campaign. So for each respective company, the directly measured “buzz” around each ad, might be more than sufficient. After all, it doesn’t matter what we’re saying, as long as we’re talking about it.

All of the data in the research was collected from Visible Measure’s Viral Reach Database. Which as they put it best is a “a constantly growing video repository of analytic data on 100+ million Internet videos from 150+ video-sharing destinations.”
Thanx to our friends at Visible Measures for the data.

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VentureBeat points out that while Apple closed the quarter with $24.5 billion in the bank, Microsoft is hovering around $20.7 billion when factoring cash, cash equivalents and short-term investments.

From the revenue report: Microsoft’s business outlook reflects a balance of risks and the likelihood of a continued economic slowdown. The trends seen late in the first-quarter are now forecasted to continue, whereas previous expectations were for the economy to improve in the second half of the fiscal year. In this economic environment, the company is focused on three main actions; working with customers to provide high value products at the lowest total overall cost of ownership, increasing focus on expense management and targeting investment into the highest priority strategic opportunities.

Microsoft is not afraid to use the current economic downturn as a reason to drastically change the focus of their company. In a very wordy way, Microsoft is preparing people for hard times. VentureBeat’s Dean Takahashi runs through a few scenarios that could explain this. “Microsoft is still a cash machine in Windows and Office, but it has been pouring its money in recent years into shareholder dividends, stock buybacks, and acquisitions. Apple, meanwhile, hasn’t been as aggressive on those fronts.”

Additionally, Microsoft has been entangled in a depreciating acquisition deal with Yahoo!. If the deal were to go through though, Microsoft was hoping to finance the acquisition, and buy the company with some debt. In other words, they don’t even have enough cash on hand to buy Yahoo! outright.

While it may seem like a natural progression for Apple to surpass Microsoft in terms of “cash piles,” this is a huge deal. Many never thought they would see this day, and the speculation about what Apple is doing, or isn’t doing with that money, continues to grow. As Apple CEO Steve Jobs has mentioned, the pile of money is not burning a hole in Apple’s pocket. The current economic situation can prove to be extremely beneficial to those with cash on hand, and enough moxie to make moves during turbulent waters. Rest assured Apple’s money is being managed by some of the best financial advisers in the world. If and when the company wants to make a move with the cash, we will here about it.

Read – Microsoft Revenue Report
[MacDailyNews]

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