Windows 7 sales topped Vista in first weeks, but economy still a drag on PC sales

It wasn't a high bar, but Windows 7 made it.

Consumer retail sales of Microsoft's newest computer operating system topped those of Vista by 234% on a unit basis within the first few days of launching on Oct. 22, according to a report released this morning by the NPD Group. (The report did not include sales to businesses and large organizations.)

That Windows 7 would do better than Vista is not too surprising. Critical buzz for Windows 7 was relatively positive and largely void of the savage language that reviewers heaped on Vista when it launched in January 2007.

This time around, Microsoft also attempted to woo reluctant buyers with discounts and specials, such as a 50% discount on a copy of the software when buyers spring for a new PC, or a free upgrade from Vista for those who bought a PC after June 26.

"We definitely saw the results of aggressive pricing," said Stephen Baker, NPD's computer software analyst. 

Though helpful for pushing volume, the discounts may have crimped Microsoft's overall revenue from the product. (The NPD report is mum on the sales impact on Microsoft's topline.)

The fly in everyone's ointment, of course, has been the economy. With consumers making do with their old computers or opting for ultra-cheap netbooks, average PC prices have dropped around 20% since last year, Baker said.

While unit sales of Windows 7 software were up in the first days of launch over Vista, sales of computers with Windows 7 were actually down 4% compared with sales of Vista-based computers when Vista launched. The comparison is not a fair one, Baker cautioned, because Vista launched in a January, when PC sales tend to do better, and Windows 7 launched in October, one of the slowest months for PC sales.

Still, the gruesome economy may have helped Windows 7 sales in one respect, according to Richard Shim, a PC analyst with IDC.

"Usually upgrades are not very popular. People have tended to buy new PCs when new operating systems come out," Shim said. "Windows 7 seems to be an exception. One reason is that it can work well with older computers because it's designed to be streamlined."

In other words, instead of spending $500 for a new computer, some consumers are springing for the $120 to $220 Windows 7 upgrade and souping up their old machines.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.

Searching for an improved online shopping experience? Google has a new plan

Google offered this example of how an online store using Google Commerce Search could look, with searchable products sortable by category, color, size or price. Credit: Google.

Just in time for the holidays, Google Inc. took the wraps off a new business, one designed to help big online retailers make their websites easier to search.

With Google Commerce Search -- a service that will cost retailers $50,000 or more for an annual subscription -- the Internet giant will set up a search function on an online retailer's website, which Google says will dramatically improve user experience and drive sales. The product represents a challenge to Google's archrival Microsoft Corp., as well as to Oracle Corp., Endeca Technologies Inc. and other firms that run retailers' websites.

The main selling points are that everything that has made Google a dominant company -- vast computing resources, algorithms that provide right results, and even the ability to fix your typos and find what you're looking for -- will help people navigate clunky retail websites that cause a major stumbling block to sales.

"Search was the most important aspect of an e-commerce experience," said Nitin Mangtani, a lead product manager at Google. People go to a website looking to buy, say, a laptop, and they search the site for the item they want. "If the users are able to find that laptop easily, they are more likely to buy the product," Mangtani said. "If it takes them eight to 10 seconds, and they can't find it easily, they leave the website."

Whereas people have high expectations, websites weren't delivering, so Google saw an opportunity, the company said.

Search engine analyst Greg Sterling said...

Microsoft partners with Pasadena's OpenX to share online advertising technology

Microsoft Corp. and OpenX Technologies Inc., a Pasadena-based Web advertising firm, have brokered a deal to mutually promote their ad-selling technologies and share customers.

Under the deal, OpenX will offer some of Microsoft's online advertising products to its own customer base of more than 150,000 websites, which collectively serve 300 billion ads per month.  Microsoft will also refer individual business customers to OpenX, which designs custom advertising products for paying clients.

Most of the software offered by 3-year-old OpenX is based on open source technology and has become an attractive option to smaller websites, which can install the OpenX advertising platform for free and begin to make revenue from selling ad space.

Microsoft touted the partnership as an early step into a more diverse and flexible online advertising market.

"Partnering with OpenX for us is emblematic of a desire to accelerate an open ecosystem," said Maggie Finch, manager of Microsoft's business publishing group.  "We want to provide multiple choices and options for publishers of all sizes."

OpenX's technologies allow website owners to efficiently find advertising targeted to their readers. The company's competitors include Google's DoubleClick and Microsoft's aQuantive division, now called Microsoft Advertising.

The companies did not disclose the specific financial terms of the multi-year deal, stressing that it was primarily a way to cross-promote advertising products. Microsoft, however, said there would be no revenue shared as part of the agreement.

"It's the beginning of a partnership," said OpenX chief executive Tim Cadogan, a former advertising executive at Yahoo Inc., with which Microsoft signed a major search advertising deal earlier this year.  "I think it's a good legitimization of what we're doing and hopefully kicks us up to another level in terms of industry awareness."

Corrected, 3:00 p.m.: An earlier version of this post said the OpenX plaftorm served 3 billion ads per month.  The actual number is 300 billion.

-- David Sarno

Los Angeles adopts Google e-mail system for 30,000 city employees

The Los Angeles City Council voted unanimously today to outsource its e-mail system to Google Inc., making it the largest city in the nation to make the move and handing the Web search giant a major victory in its quest to become a software provider to the world's cities and businesses.

After more than two hours of debate, council members voted 12-0 to approve the $7.25-million contract that would move all 30,000 city employees to Google's so-called cloud over the coming year.

"The City of Los Angeles, the second largest city in the nation, made a world-class decision today to support a state-of-the art e-mail system," said Councilman Tony Cardenas, who made the motion to approve the Google system.

Before the vote, several council members had voiced objections to the contract, including whether the city would see any real cost savings, as Google had contended, and when the new system would be ready to store data from law enforcement, where security standards are more rigorous.

Because Los Angeles will be among the earliest adopters of the Google system, council members expressed concern that the city might be signing on before Google's cloud system was fully proven.

"It's unclear if this is cutting edge, or the edge of a cliff and we're about to step off," said Councilman Paul Koretz.

The contract was approved pending an amendment that would require Google to compensate the city in the event that the Google system was breached and city data exposed or stolen. No such clause existed in the contract.

The vote today ended a nearly year-long process during which Google competed furiously with other software vendors, including rival Microsoft Corp., to secure the city's valuable stamp of approval. Parties on all sides believe that if smaller cities see Los Angeles successfully transition to Google's cloud system, they may be more likely to follow suit.

It is that type of cascade effect that Microsoft lobbied hard to prevent, sending executives and paid advocates to Los Angeles to make the case against Google.

The city plans to complete implementation of the Google system by June and will begin with a pilot period during which a limited number of employees will test the system. City law enforcement agencies including the Los Angeles Police Department will migrate to the new system once they are satisfied with the security and functioning of the system.

Update:  Several readers have asked about the $7.25 million cost of the contract.  That price covers five years of e-mail for the city.

-- David Sarno [follow]

Microsoft dumps 'Family Guy' variety show

Seth MacFarlane. Credit: FOX One.

It was pretty exciting and edgy when Microsoft Corp. said it would team with "Family Guy" creator Seth MacFarlane on a variety show airing next month.

The software giant was going to be the only advertiser on the show and would collaborate with MacFarlane and his partner in laughs, Alex Borstein. The pair would write jokes and skits into the show that would promote Microsoft's latest operating system, Windows 7, which came out last week.

Now comes word that Microsoft has pulled out. Apparently "the content was not a good fit," according to a statement the company e-mailed out this afternoon:

We initially chose to participate in the Seth and Alex variety show based on the audience composition and creative humor of Family Guy, but after reviewing an early version of the variety show it became clear that the content was not a fit with the Windows brand.  We continue to have a good partnership with FOX, Seth MacFarlane and Alex Borstein and are working with them in other areas.  We continue to believe in the value of brand integrations and partnerships between brands, media companies and talent.

The show will go on, Microsoft said, but without help from Redmond. Maybe Jerry Seinfeld is as edgy as Bill Gates wants to get.

-- Dan Fost

Microsoft stock soars despite downturns in sales and profit [Updated*]

Microsoft Corp., fresh from yesterday's Windows 7 launch, this morning reported a 14% slip in sales and an 18% plunge in profit for its fiscal first quarter. Its shares immediately soared, briefly flitting to a 52-week high of $29.35 before ending the day up $1.43 to $28.02.

Is Wall Street out of its mind?

To understand why, it's helpful to look at the unofficial currency of financial markets -- expectations. Analysts had forecast that the Redmond, Wash., technology giant would report per-share earnings of 32 cents. Microsoft instead earned 40 cents a share, better than investors had anticipated.

Expectations were also behind yesterday's stock move. After Microsoft launched its most important product in three years, investors added just a penny to the company's shares. That's because the release of Windows 7 proceeded exactly as planned. Every aspect about Windows 7 had already been public knowledge, including its price, features and even consumer reviews.

So what did investors like so much about today's earnings? Let's take a closer look.

Net income for the quarter ended Sept. 30 was $3.6 billion, or 40 cents a share, down 18% from $4.4 billion, or 48 cents, a year earlier. Sales slipped 14% to $12.9 billion.

Many had expected the decline given the recession, which has all but paralyzed businesses that may be considering buying new computers. Instead, many organizations either made do with their old machines or opted for cheap netbook computers. Costing little more than $200 apiece, netbooks are so cheap they offer little or no profit for their manufacturers or for Microsoft, which sells the operating system software for these devices.

"Microsoft, like the rest of the PC industry, is struggling with low average selling prices," said Richard Shim, analyst with research firm IDC. 

Still, Microsoft was able to beat expectations by aggressively cutting costs. Operating expenses fell 8% from a year earlier to $8.4 billion.

Another reason for Wall Street's counter-intuitive euphoria: It could have been worse.

The results, Technology Business Research analyst Allan Krans wrote in a note to investors, "though still weak, reflect stabilization of the economy and Microsoft's revenue streams."

*This post, which was written prior to the close of Nasdaq, has been updated to include Microsoft's closing price.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.

Windows 7: Can Microsoft reboot reputation and give the tech sector a jolt?

Microsoft CEO Steve Ballmer speaking at CeBit in March. Credit: Kay Nietfeld / European Press Photo Agency.

With more than 8 million "beta testers" using Windows 7 since January and dozens of reviews already published, virtually every aspect of Microsoft's new operating system is already public knowledge prior to this morning's "launch" -- except one.

Can Windows 7 repair Microsoft's reputation and trigger enough sales to pull the technology sector out of the economic funk?

Steve Ballmer certainly hopes so. The Microsoft chief executive and impresario known for his highly energetic speaking style this morning kicked off the launch of its latest computer operating system by saying, "Today is an important day for the computer industry, certainly for Microsoft and I hope perhaps even most importantly for all of the customers around the world."

Much rides on the success of Windows 7. Microsoft is counting on it to lift its sales, which fell last fiscal year for the first time since the company went public in 1986. Computer makers and software companies are praying that Windows 7 will set off a wave of demand for their products, which have been dampened by the recession as buyers postponed PC purchases or opted for ultra-cheap netbooks over full-fledged computers.

Even consumer electronics companies see Windows 7-based computers as a way to make their devices sexier as gateways for entertainment programs on-demand.

"Windows needs to be an incredible opportunity innovation for hardware companies and software companies," Ballmer said at the company's kick-off event in New York. "Windows 7 takes us a step closer to the vision we articulated ... around the three screens -- the PC, the phone and the TV, all communicating across the cloud, the Internet backbone."

Ballmer tried to nail the point home by ...

City committee declines to recommend Google e-mail contract

Budget and Finance Committee Chairman Bernard C. Parks.
Credit: David Sarno / Los Angeles Times.

The Los Angeles City Council's Budget and Finance Committee agreed Monday evening to abstain from voting on a proposed contract with Google Inc. to replace the city's e-mail system, passing the decision on to the full City Council amid unresolved concerns about the cost and necessity of the contract.

The budget committee, chaired by Councilman Bernard C. Parks, adjourned after nearly two hours of testimony in which the merits of upgrading the current system were hotly debated by an array of city officials, as well as Google, Microsoft Corp, Novell Inc. and consumer advocates.

The full council is tentatively scheduled to vote on the contract Oct. 27.

At the heart of the deliberations is whether the city should go to the expense of replacing its longstanding e-mail system -- considered slow and clunky by many employees -- with a system wholly owned and operated by Google.

The Mountain View, Calif., Web giant would use its own far-flung network of computer servers to store and secure e-mail for many of the city's 30,000 employees.  That would likely include city law enforcement agencies, such as the Los Angeles Police Department, where sensitive data is often exchanged over e-mail.

Though critics of the $7.25-million contract have pointed to security concerns of Google's storing city data in its so-called cloud of servers, the main focus of attention Monday was the extent to which the agreement with Google would deliver budgetary savings to the city.

Indeed, Google's main selling point for its e-mail and document software is that it is a "dramatically lower cost solution," as a Google executive recently described it to The Times.  Officials in the city's Information Technology Agency, which selected Google's bid from among 15 submitted to the city (seven of them were from Microsoft), have also said that the Google system would save the city millions of dollars.

But a recent city analysis found that, instead of offering clear budgetary savings, installing and  running Google Apps would actually exceed the cost of the current Novell system by $1.5 million over the five-year life of the contract. 

"It didn't give me a warm feeling in my stomach that we should jump off this cliff together," Parks said of the disputed savings.  "It looks like we're going on a promise -- and it just doesn't look like, substantively, it's being supported."

Google argues that if the city were to hire the company to handle all of its email, L.A. technology officials could free up many resources now tied to the operation and upkeep of their current system.  Moreover, moving to a next-generation cloud system could offer a variety of other benefits, including the ability to more quickly rebound from a disaster, and stronger security than the city's current offering.

Even so, Parks said with a clear note of skepticism, "the urgency case hasn't been made."

Council members Jose Huizar and Bill Rosendahl agreed to abstain from voting on the contract, saying that more due diligence needed to be performed on the costs and risks involved.

When asked whether he thought the committee's decision to skip voting on the issue was a good or bad sign for the contract, Dave Girouard, the President of Google's Enterprise division, said, "I really don't know -- I've never been in a process like that."

According to the terms of the contract negotiation, the City Council has until Dec. 1 to approve or reject the plan.  If no action is taken by that date, the contract is automatically approved.

-- David Sarno

Microsoft says lost Sidekick data will be restored to users

A 2007 Microsoft/T-Mobile Sidekick. Credit: Krisopher Avila / Flickr

The unusual case of the missing Sidekick data may be nearing its conclusion.

Microsoft Corp. announced this morning that most or all users of its Sidekick mobile device might indeed see their lost data again. The announcement came after a week of worry that users' contacts, notes, photos and other virtual property may have been lost for good when company servers failed.

"We plan to begin restoring users’ personal data as soon as possible," wrote Roz Ho, Microsoft's corporate vice president of Premium Mobile Experiences, adding that the company now believed the outage affected a minority of Sidekick users.

"We have determined that the outage was caused by a system failure that created data loss in the core database and the backup," Ho explained in a statement. "We rebuilt the system component by component, recovering data along the way. This careful process has taken a significant amount of time, but was necessary to preserve the integrity of the data."

Ho said Microsoft would offer another update on the data restoration by Saturday.

If indeed the data are restored, Microsoft may dull the negative echoes of the episode, which initially looked to be one of the worst incidents of online data loss in memory, with many of the device's reported 1 million users suffering a complete wipe of many months of irreplaceable information. At least two lawsuits have been filed against Microsoft and Sidekick carrier T-Mobile.

In an e-mail Wednesday evening, Microsoft sought to show that the problem was isolated to servers run by its Danger Inc. subsidiary, which it said was not part of its main "cloud" infrastructure. "Other and future Microsoft mobile products and services are entirely based on Microsoft technologies and Microsoft’s cloud service platform," the company said.

-- David Sarno

On Sidekick troubles, Microsoft points finger at Danger, its own subsidiary

Credit: psd / Flickr.

Microsoft Corp. is now putting space between itself and Danger Inc. -- the now-ironically named subsidiary that created the Sidekick and was responsible a computer network that failed, causing many of the device's loyal users to lose substantial amounts of personal data.

Microsoft is now emphasizing that the data loss, and the problems that led to it, were limited to a segment of the company's network that is separate from its core cloud infrastructure. 

“The Danger Service platform, which experienced the outage, is a standalone service operating on non-Microsoft technologies, and is not related to Microsoft’s cloud services platform or Windows Live," Microsoft spokesperson Tonya Klause wrote in an e-mail. “Other and future Microsoft mobile products and services are entirely based on Microsoft technologies and Microsoft’s cloud service platform and software."

The Sidekick outage was severe enough that users were warned that their data might not be recovered, an unusual outcome in a technology environment where users are increasingly entrusting their data to large Web firms -- who in turn invest heavily in keeping the data backed up in case of problems.

This was apparently not the case with the Danger Service platform. 

Microsoft drew a further distinction between Danger and its other data assets, saying that "it’s important to note that for native Microsoft services such as Windows Live, Hotmail, Azure, etc., we write multiple replicas of user data to multiple devices so that the data is available in a situation where a single or multiple physical nodes may fail," Klause wrote.

Microsoft did not immediately respond to a question about why Danger would have been subject to different standards for data integrity and redundancy, unlike other parts of the company's worldwide network of servers.

The Sidekick appears to have been taken off the market by Microsoft and its carrier, T-Mobile, on whose site the device is marked "temporarily out of stock."

-- David Sarno