Microsoft makes $44.6bn offer to buy Yahoo

Microsoft has offered to buy the search engine company Yahoo for $44.6bn (£22.4bn) in cash and shares.

The offer, contained in a letter to Yahoo’s board, is 62% above Yahoo’s closing share price on Thursday.

Yahoo cut its revenue forecasts earlier this week and said it would have to spend an additional $300m this year trying to revive the company.

It has been struggling in recent years to compete with Google, which has also been a competitor to Microsoft.

“We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” Microsoft chief executive Steve Ballmer said.

Chairman quit
There has not yet been any comment from Yahoo.

Its chief executive, Jerry Yang, announced on Tuesday that he intended to lay off 1,000 staff as part of a restructuring plan.

Terry Semel, who stepped down as chief executive last June, also quit as non-executive chairman on Thursday.

Microsoft said that Yahoo shareholders could choose to receive either cash or shares.

Yahoo shares have fallen 46% since reaching a year-high of $34.08 in October. They rose 54% in pre-market trading.

“Ultimately this corporate marriage was forced by the rise of Google, which has grown into a serious competitor for both Microsoft as a software company and Yahoo as an internet portal,” said Tim Weber, business editor of the BBC News website.

“It is a shotgun marriage, but the person holding the shotgun is Google.”

‘Exorbitant premium’
According to its letter to Yahoo, Microsoft attempted to enter talks about a deal a year ago, but was rebuffed because Yahoo was confident about the “potential upside” presented by the reorganisation and operational activities that were being put in place at the time.

“A year has gone by, and the competitive situation has not improved,” Microsoft’s letter said.

But there has been some concern about the price that Microsoft is offering.

“To me, the premium seems exorbitant, for what is a dwindling business,” said Tim Smalls from the brokerage firm Execution LLC.

“I personally don’t see how the synergies of Microsoft-Yahoo is going to take on Google.”

Other analysts were more enthusiastic about the offer.

“It is a fantastic offer. It is game on,” said Colin Gillis from Canaccord Adams.

“This consolidates the marketplace down to Google versus Microsoft. These two companies will be going head to head.”

SQL Server 2008 delayed until third quarter

Microsoft said on Friday that it has pushed back the delivery date of its SQL Server database until the third quarter of this year.

The company is planning to have a launch event, called Heroes Happen Here, on February 27 that will be a public coming-out of Windows Server 2008, Visual Studio 2008, and SQL Server 2008.

Rather than release the final product at that time, Microsoft will have a “feature complete” preview, according to a Microsoft employee blog dedicated to SQL Server.

A release candidate for SQL Server 2008 will come out in second quarter with final general availability in the third quarter, according to the blog’s author, Francois Ajenstat, director of marketing for SQL Server.

The blog noted that the timing falls within Microsoft’s previously stated goal of getting SQL Server 2008 out two to three years after SQL Server 2005, which itself suffered from a series of significant delays.

Despite the delays with SQL Server 2005, it has been a successful product. Market research indicates that Microsoft’s database revenue is growing faster than that of rivals Oracle and IBM. Microsoft’s server and tools business is one of the company’s largest and fastest-growing divisions.

Windows XP outshines Vista in benchmarking test

New tests have revealed that Windows XP with the beta Service Pack 3 has twice the performance of Vista, even with its long-awaited Service Pack 1.

Vista’s first service pack, to be released early next year, is intended to boost the operating system’s performance. However, when Vista with the Service Pack 1 (SP1) beta was put through benchmark testing by researchers at Florida-based software development company Devil Mountain Software, the improvement was not overwhelming, leaving the latest Windows iteration outshined by its predecessor.

Vista, both with and without SP1, performed notably slower than XP with SP3 in the test, taking over 80 seconds to complete the test, compared to the beta SP3-enhanced XP’s 35 seconds.

Vista’s performance with the service pack increased less than 2 percent compared to performance without SP1–much lower than XP’s SP3 improvement of 10 percent. The tests, run on a Dell XPS M1710 test bed with a 2GHz Core 2 Duo CPU and 1GB of RAM, put Microsoft Office 2007 through a set of productivity tasks, including creating a compound document and supporting workbooks and presentation materials.

In response to the test, a Microsoft spokesperson said in a statement that although the company understood the interest in the service packs, they are “still in development” and will continue to evolve before their release. “It has always been our goal to deliver service packs that meet the full spectrum of customer needs,” the spokesperson said.

If SP1 does not evolve sufficiently, it could be another setback for Vista, with many businesses waiting to adopt the operating system until the service pack is released.

A year after its launch, only 13 percent of businesses have adopted Vista, according to a survey of IT professionals.

Microsoft admits that the launch has not gone as well as the company would have liked. “Frankly, the world wasn’t 100 percent ready for Windows Vista,” corporate vice president Mike Sievert said in a recent interview at Microsoft’s partner conference in Denver.

Microsoft has not done enough to make users aware of the benefits of Vista, NPD analyst Chris Swenson said at the conference. “The problem is that there are a lot of complex new features in Vista, and you need to educate consumers about them…much like Apple educating the masses about the possibilities of the iPhone or focusing on a single feature or benefit of the Mac OS in the Mac-versus-PC commercials. Microsoft should be educating the masses about the various new features in a heavy rotation of Vista in TV, radio, and print ads. But the volume of ads (for Vista) has paled in comparison to the ads run for XP.”

XP has proved to be more popular than its younger sibling, with the first six months of U.S. retail sales of box copies of Vista 59.7 percent below those of XP’s in the equivalent period after its release.

Microsoft has had to allow PC manufacturers to continue to sell XP on new PCs, setting a deadline for the last sale at January 31. However, the pressure from manufacturers and consumers has been so great that Microsoft has been forced to extend the deadline another five months, until June.

According to Microsoft, sales of Vista have been picking up, with the software giant reporting 88 million units sold.

Windows 7 “top feature request list” leaked to the public

With Windows still managing to find its way to over 95 percent of the desktop computers sold each year, it’s not surprising that one can find plenty of people interested in giving their feedback about what future versions of Windows should be able to do. A few years ago, before Windows Vista had even shipped, Microsoft sent out a wish list form asking people what features they would like to see in the next version of Windows, currently code-named Windows 7. The top wished-for features in this list were recently leaked to the public and have popped up at various sites (e.g., Neowin). While anonymous sources at Microsoft tell us that they bear no relationship to the actual feature set Microsoft is currently writing for Windows 7, the list does provide interesting insight into what the Windows-using public most wants from Windows.

The features are listed in no particular order, but they break down into various categories depending on what part of Windows the feature request falls under. Many requests for improvements in Internet Explorer, such as a session restore function, are fairly obvious wishes for features that already exist in competitive products such as Firefox and Opera. Other suggestions, such as a tabbed Windows Explorer, look for features from web browsers to migrate into the general user interface.

Some of the feature requests are clearly unrealistic, such as the desire to “back up” Xbox 360 games to the PC (yeah, I don’t think Microsoft will be doing that one). Others are minor user interface enhancements that would be nice additions but wouldn’t really change the Windows experience, such as a progress bar when hibernating the system. However, there are a few that make good sense and would be welcome additions to the operating system, such as a built-in video and audio codec manager.

A Windows 7 insider who wishes to remain anonymous told Ars that the leaked feature list was gathered before any real development on Windows 7 was started, and readers should not expect to see requests from the list necessarily implemented in Microsoft’s next major Windows release.

The Windows 7 team was directed to look at all major desktop operating systems, including the latest Linux distributions and Apple’s OS X Leopard, but this was more for general impressions than to look for specific features to implement. Development of Windows 7, which is being built off the Windows Vista code base, is apparently proceeding at a fairly brisk pace, with about half of the desired features already implemented. Unlike the tortuous development process for Windows Vista, the Windows 7 team is actually ahead of schedule at this point, although as with all major software projects, this may not last.

One thing that Windows 7 is likely to contain is a new look for the user interface. The same Microsoft insider told Ars that several options are currently being considered, with the general goal being a cleaner look rather than adding on more gloss and shine. Of course, this too could change before Windows 7 hits the shelves. Microsoft has not committed to a firm release date for Windows 7, but a target date of somewhere between late 2009 and early 2010 is the current goal.

Microsoft bribes users to use Live Search

How do you win in the search engine wars? Two approaches suggest themselves: 1) build a better search engine or 2) bribe users. Microsoft is trying option two in hopes of gathering enough data to make option one a reality.

Microsoft sent out an e-mail to Hotmail users this week, asking them to participate in the “Live Search Trial Program.” The program rewards users with “tickets” every time they use Live Search to find something, which can then be redeemed for prizes later on. These prizes include everything from t-shirts to video games, and the promo will extend through February of next year.

The promotion isn’t just to bring in new users, but also to help Microsoft test things out and get feedback. The prizes will ultimately help the company improve the search experience, a Microsoft spokesperson told MarketWatch, which in turn will “improve our understanding of the types of searches users perform each day and the search engines they utilize.”

Microsoft revamped its Live Search in late September, quadrupling its index size. The company also made a number of tweaks to the the search engine’s query algorithms, results page, and the way it analyzes clickstream data. The changes were significant and welcome to regular users, but didn’t offer much that was innovative when compared to the competition. If anything, they brought Live Search more in line with features that were already offered by search giant Google.

The promotion suggests that Microsoft is still in search of a sizable user base from which to get feedback data. This is also not the first time Microsoft has tried such a promotion. When it launched a similar effort earlier this year, the company managed to increase its share of the search market to 13.3 percent, according to Nielsen numbers. It has since dipped again in recent months, however, and continues to place a distant third after Yahoo and Google.

Prizes may help in increasing small levels of market share, but Microsoft won’t be able to overtake the big dogs unless it launches something truly unique that will be able to set Live Search apart from the rest.