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Microsoft is applying its tried and true formula of creating software platforms that can attract millions of users and developers to the hosted applications world. It will be the next major frontier for Microsoft to conquer, competing with companies such as Amazon.com, EMC, Google, IBM, and others. And it’s safe to bet that Microsoft becomes one of the major players in the cloud. More to come at Microsoft’s PDC event later this month.

In this week’s EIC Squared podcast, ZDNet’s Larry Dignan and I talk about how the economic crisis will impact the tech sector. Both the House and Senate have passed the bailout package, but the legislation doesn’t mean that tech or any other industry sector will reverse the downward spiral. Tech companies and financial analysts are rapidly cutting estimates to prepare for a potential nuclear winter in the global economy.

We also discuss Microsoft’s forthcoming moves into cloud computing and the state of citizen journalism following the fake Steve Jobs heart attack story that showed up on CNN.

Currently, Verizon doesn’t sell a 3G-enabled Netbook, but chief rival AT&T does. AT&T sells Acer Netbooks for $99 with service through RadioShack, and also sells Dell Mini Inspirons through the wireless provider’s Web site. Though Verizon isn’t confirming the report, a move to sell Netbooks is widely seen as a way to keep up with its rival.

Netbooks are the fastest-growing category of PCs in the last year. Starting from virtually zero in late 2007, 10 million Netbooks were shipped by the end of 2008, accounting for 7 percent of all portable PCs shipped.

The report suggests Verizon is working with more than one PC vendor, and Dell seems like an obvious candidate as one of them, though a Dell representative did not have an immediate comment. Dell already has a relationship with Verizon parent company Vodafone, which has sold Dell Netbooks in Europe since September 2008.

Verizon Wireless is poised to sell at least one Netbook in the next few months, according to reports in Bloomberg and TheStreet.com.

Is Verizon getting ready to sell 3G-enabled Netbooks?

Both outlets cite unnamed sources, but Bloomberg’s source, said to be someone close to the project at Verizon, says a partnership is being negotiated with more than one PC maker. No word on what the service contract for a Netbook from Verizon would entail.

(Credit:
Dell)

So who could be the other Netbook maker? A similar rumor floated around the Web last week regarding HP hooking up with Verizon. HP had no comment, but provided a statement from Kevin Frost, HP’s general manager of consumer notebooks: “It’s natural for carriers the world over to be interested in HP’s broad portfolio of thin and light minis. We are talking with carriers all over the world. We are talking with carriers all over the world.”

The limited capability of Netbooks is also intended to be their appeal: they’re basically good for getting online and doing light word processing. But their small size makes them easily transportable, and having the ability to access the Web easily and from anywhere only increases their value. Though the bundled Internet-service model has failed in the U.S. in the past, our reliance on the Web makes it seem like this model could fare better this time around.

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Interestingly, if Microsoft wants some tips on how to do this, it might want to look toward Apple. Essentially, this has been Apple’s challenge all along: make the
Mac experience enough better than a generic PC that it is worth the added cost.

In short, Google is aiming to render desktop software irrelevant. To thwart them, Microsoft needs Windows to do things that a browser can’t–or do the same things significantly better.

The announcement of Google’s Chrome OS plan puts an exclamation point on the challenge faced by Microsoft, but actually doesn’t really change the core threat to Microsoft.

Next week, Microsoft is expected to talk more about Office 2010, the next version of Office, which is due out next year. Microsoft is taking a two-pronged approach.

The Mac’s resurgence came when it had a strong OS–Mac OS X–combined with iLife applications that really nailed the experience for the tasks that people wanted to do on their computer at the time.

Microsoft also has to do something that Apple doesn’t–aim for the masses. Part of Apple’s success story has been about choosing its battles and accepting that it can’t win everywhere. The Windows model depends on ubiquity, so it needs answers
with nearly universal appeal.

(Credit:
Apple)

If Microsoft wants a blueprint on how to make the PC worth paying for, it might want to take a page from Apple's playbook.

First, it is taking Google Apps head-on with lightweight browser-based versions of Word, Excel, PowerPoint, and OneNote that can run on Safari,
Firefox, and Internet Explorer.

Microsoft has some time, but not a ton. Google’s operating system won’t even arrive on PCs until the second half of next year. Plus, for now, Windows has the advantage of legacy application support–i.e., businesses and consumers want to run their existing programs. But to stay in front for years to come, it will have to do better than that. It needs to figure out–and quick–the next set of tasks users want to do with their computer and how to make those tasks demonstrably better on a PC.

This is an area where Windows has been languishing in recent years. Although most people wouldn’t want to give up their favorite desktop applications (Windows or Mac), the Web has been gaining ground. Even areas that were once squarely in the desktop’s domain–such as photo editing, productivity software, and personal finance–are making their way onto the Web. What Windows really needs is a new generation of killer apps.

The path for Microsoft is clear. The big question, though, is whether Google will be able to be “good enough.”

One area where Microsoft has been investing is around the area of doing the same things better. Its focus on touch screens in
Windows 7 is an example of this. Although multitouch is likely to remain a niche in the short term, it shows the power that a desktop interface can have.

The company also has another option as well. It can work on Windows’ successor. It could be that it needs a lightweight browser-based OS of its own.

Microsoft is toast.
Google is the new Microsoft.
I’ll be all Google all the time.
Meh. I’m happy with Mac OS.
Linux under the hood. Hurrah!

It will offer them to consumers via its Windows Live service–a service that today is free–and businesses will also be able to give the browser-based apps to their workers.

Microsoft also needs to minimize the downsides associated with Windows. On that score, Microsoft has made significant strides with Windows 7. The operating system boots quicker and behaves better than its predecessor.

On the Office side, Microsoft needs to create software that is enough better than Google’s that companies want to pay for it.

My guess is Microsoft will take both approaches, but hold off on the latter unless and until it needs to. That’s pretty much what Microsoft has done with Office vis-a-vis Google Apps. It was only after large business customers started threatening to go to Google Apps that Microsoft conceded that it needed to offer full-on browser apps.

CNET News Poll Reflections on Chrome
What was your first reaction to Google Chrome OS?

But Microsoft is also doing more on the desktop, adding in the kinds of features it hopes will make the Office suite worth paying for.

Indeed, the thinking beyond its Gazelle research project is that the browser needs to be more like an operating system. In that case, the browser doesn’t actually take on the operating system’s complete role, but rather relies on Windows. However, Microsoft has other operating system work under way as well, including its top-secret Midori project.

Bradbury has stated in blog posts and forum messages that he hopes this will open FeedDemon to a wider audience, but the road to prepare FeedDemon for Google Reader has not been a smooth one. Many fans of the program have expressed frustration with the loss of features such as authenticated feeds and synced clippings.

FeedDemon 3 RC 4 syncs with Google Reader faster and more cleanly than RC 3, but users with high unread counts will still lose most unread feeds.

In FeedDemon 3 RC 4, the synchronization scripts have been re-written to be faster and more accurate, and those changes show when compared to the third release candidate. The fourth RC only used 42 MB of RAM, as well. However, the conversion process won’t be able to handle large numbers of unread posts, and limits the unread count to 10 per RSS feed. This is because Google Reader is limited to considering only 10 feeds unread from the past 30 days when subscribing.

As FeedDemon closes in on finalizing the code for version 3, FeedDemon 3 RC 4 abandons its proprietary online synchronization at newsgator.com. The fourth release candidate syncs only with Google Reader, as FeedDemon’s creator Nick Bradbury announced it would last week.

(Credit:
Screenshot by Seth Rosenblatt/CNET)

Most of the other improvements in this release candidate are geared towards streamlining the conversion process to Google Reader. There’s a new startup option to convert NewsGator subscriptions to Google Reader, and there’s a link to create a Google Account from the Google Account window. Tags have gained prominence over clippings in the new version. Clippings will exist only if grandfathered in from a previous version.

Entertainment software company Real Networks laid off 12 employees within its music division or about 9 percent of the division staff, the company said Thursday.

The cuts come a week after RealNetworks reported marked decreases in the number of subscribers at its Rhapsody music subscription and online radio units.

In addition, a partnership with telecom company Comcast ended and that was blamed for a dramatic drop-off in RealNetworks’ radio subscribers, from 1.2 million down to 75,000, the company reported. That’s not a typo. When Comcast discontinued the service, more than 1.1 million no longer had access to Rhapsody.

No matter what the reasons, Rhapsody’s performance will not be welcomed news to for proponents of music subscription services. The sector is a favorite of many at the major record companies, but has failed to catch on.

RealNetworks CEO Rob Glaser said the slide in Rhapsody subscribers was partly due to a rise in the number of credit card defaults, which he said was likely brought on by the bad economy.

Rhapsody, which is partly owned by Viacom’s MTV Networks, lost 50,000 of its 800,000 subscribers over the past three months, RealNetworks said last week in its second-quarter earnings report.

This post was updated at 1:40 p.m. PDT with RealNetworks’ correction of the percentage of employees laid off.

RealNetworks’ revenue for the second quarter fell 11.1 percent to $135.7 million, the Seattle-based company said.

In addition to the developers and waiting list, Google also plans to open Wave up to a limited number of Google Apps enterprise customers for testing, Rasmussen said. A few companies, such as SAP and Salesforce.com, have already started playing around with the technology but Google is seeking feedback from other organizations on how Wave might work within their environment.

Google Wave is an attempt to re-engineer Internet communication, blending elements of e-mail, instant messaging, social networking, and workplace collaboration software into a single Web application. It was first unveiled at Google I/O in May before Web developers who were a bit dazzled by the possible uses of the technology.

As promised, Google plans to open Google Wave beyond an extremely limited preview on Wednesday, granting access to users who have signed up in hopes of getting a chance to try the service. Google received more than 1 million requests to participate in the preview, said Lars Rasmussen, engineering manager for Google Wave, and while it won’t be able to accommodate all those requests on Wednesday it is at least ready to begin the next phase of the project.

At present, however, Google Wave is one big bug bash, perhaps half a year away from launching as a stable product. Google engineers have solved many of the more persistent bugs that were hampering the product a few months ago, but there is still a long way to go and Wave should not be considered anything but a “preview,” Rasmussen said. Still, that’s better than “developer preview,” the status previously attached to Wave that implied only hardcore techies should venture within.

Google Wave is ready for wider testing.

Google Wave is ready for its next step: a more thorough test of its scalability and stability as more than 100,000 new users crowd onto the service.

(Credit:
Screenshot by Rafe Needleman/CNET)

The study suggested that we live in a digital version of the Dark Ages. I’m talking about it now because I think the messages from the study are still very relevant to both IT administrators and consumers.

Two years ago, the Storage Networking Industry Association’s Data Management Forum reported the results of a landmark study that looked at the state of long-term storage, i.e. preserving a digital object for more than 10 years. Some disturbing results jumped out.

One more result from the study still has me puzzled. Slightly more than half of the 276 organizations surveyed reported the need for “permanent” storage. What might fall into the permanent category? I thought of the Founding Fathers writing the U.S. Constitution and wondered what that process would have been like if they were all using a collaborative work-flow tool like Microsoft SharePoint. For sure, they’d print out the final version for all to see–on parchment maybe? But what about all the draft versions and messaging back and forth–in short, all the supporting documentation that clue us in on their state of mind and tell us what they really intended? Would they have printed out all of that, too? I dare say that insight would be gone forever.

Here’s one for consumers: How many of you using Internet photo services sites think that your digitized images will still be there 50 years from now? You haven’t thought about that, right? You and your spouse take pictures of the newborn today, you store them online, and maybe you store them at home, too. Here’s a suggestion: make sure to print them and preserve the prints for as long as you can because if the enterprise-level storage administrators who have been doing digital storage for decades have little confidence in their ability to do long-term digital preservation, you shouldn’t have much confidence either.

We rarely, if ever, think of saving our digitized thoughts for the sake of posterity. But for the sake of historians, lawmakers, sociologists, and scientists yet to be born, we should–or people centuries from now might look back on this as the digital version of the Dark Age centuries from now.

A whopping 80 percent of the 276 organizations included in the study reported a need to retain electronic records for more than 50 years, so let’s start there. How many of you storage administrators out there actually think you can do 50 years of electronic records retention given current technology? Without data loss? OK, so you won’t be doing the same job 50 years from now, so why care? Next question: How many of you think that you can do more than three migrations of archival data from one storage media to the next without data loss? According to the study, the answer was very few of you.

So there’s a big gap here. A group of concerned vendors and academic advisers have formed the 100 Year Archive Task Force under the auspices of the Storage Networking Industry Association’s Data Management Forum wants to start filling the gap. You can follow their progress or become involved yourself here.

There is a big disconnect between how long people think they should be storing data and how long they actual can. One group of vendors and academics is trying to change that.

(Credit:
CNET)

AlertBox’s way of tracking new content is an in-box-style counter down in the bottom of your browser. When clicked, it takes you to a page of Web clippings that are constantly updated with whatever the latest text is of the page elements you had selected. To be honest, this part of the add-on could use a little work, as it’s just a text rip that loses all of the formatting on the page. And all of these alerts are housed not in the cloud, but on your local machine, which has two big downsides: One is that you need to have Firefox going at all times for it to alert you. The other is that you can only access those alerts on that particular machine.

The AlertBox in-box lets you keep track of all your alerts, and delete ones you no longer use.

RSS is great technology, but one of its shortcomings is that it doesn’t always represent all of a site’s content stream. Many times there are parts of a news or content site that change either through an editorial hand, or with items chosen by users. A new Firefox add-on called AlertBox helps track these “scraps” of content, and can be used to keep an eye out for any changes. This includes things like price changes, edits or updates to a news story, and the top stories on content sites.

Faults aside, I really like the idea of creating a simple in-box of changing content that does not rely on RSS. I think this, with a little bit of archiving to let you track changes in content throughout the day (like Web archiving service Iterasi does), would make for a very useful alternative to widget start pages and feed readers.

AlertBox lets you choose particular sections of a site to keep an eye on for updates.

(Credit:
CNET)

To make sure it’s not looking for activity on an entire Web page, AlertBox is designed to let you grab bits and pieces of any site–not the entire thing. Once installed, you can summon it by clicking the little bell shape in the bottom corner of the browser, or using a keyboard combination. It then pops up with a selection screen that, similar to Apple’s Web clips widget, lets you pick what part of the page you want it to track. You can then choose how often you want it to check for future changes in increments of two minutes, up to one day.

Foster is familiar with the LegitScript study and said that its results were consistent with her organization’s own findings.

A study by LegitScript and KnujOn takes Microsoft to task for sponsored search ads on its Bing site that lead to sketchy Internet pharmacies. (Click image to enlarge.)

(Credit:
LegitScript)

The NABP says that when informed of the study, Google responded that it would start using the association’s list of certified Internet pharmacies to filter out rogue sites, while Yahoo said it was relying on PharmacyChecker to help screen out illegal drug vendors.

As immediate fixes, the blog noted that Microsoft has reviewed all pharma-related keywords to filter out any advertisers in violation of company policy. Microsoft also said its editorial team is validating the claims in the LegitScript report to investigate the hijacking and misuse of landing pages. For the longer term, the company said it is reviewing its processes to document how these advertisers got onto the system.

Washington jumps in
It’s not just the private sector that’s targeting rogue pharmacies. Congress last year passed the Ryan Haight Online Pharmacy Consumer Protection Act, which went into effect this past April. Named for an 18-year-old who died from an accidental overdose of drugs he bought online, the legislation bans the sale of prescription drugs over the Internet without a valid prescription.

Horton said that LegitScript has tracked more than 41,000 Internet pharmacies, and at best only about 2 percent to 3 percent of those are legitimate.

In an April 2008 study of 558 Internet drug outlets, the NABP discovered that nearly half were selling prescription drugs illegally or unprofessionally. Out of 258 rogue pharmacies, 191 did not require a valid prescription, 118 offered foreign or non-FDA approved drugs, and 91 were located outside the U.S. but offered to ship to U.S. customers, all of which is illegal.

The authors took a closer look at 10 of the 69 online drugstores. None of the 10 required a valid prescription. Orders were placed with two of them. Of the two drugs received, both were tested and one was found to be counterfeit.

The Bing study is supposed to be the first in a series of reports from LegitScript, but it’s unclear who’ll be next on the list, or when such a report might come out. Asked if LegitScript had tracked or plans to track ads on Google or Yahoo, Horton said he couldn’t comment. (Editors’ note, 5:47 a.m. PDT: On Tuesday, LegitScript and KnujOn released their report on Yahoo (PDF), charging that more than 80 percent of the pharmacy ads that turn up in Yahoo searches violated state or federal laws.)

“It will clarify the law,” she said. “The problem was that the Controlled Substances Act (passed in 1970) was written prior to the Internet, so there were questions about the online sale of drugs and what was a legitimate doctor/patient relationship.”

The Ryan Haight act should be a significant step in the right direction of trying to control this open channel of distribution, according to Susan Foster, director of policy research and analysis for Columbia University’s National Center for Addiction and Substance Abuse (CASA).

Back to Bing
Overseas pharmacy sites are a stubborn problem when it comes to online drug ads, as is the involvement of criminal networks responsible for a significant portion of the world’s spam, fake drugs, and cybercrime. (The Ryan Haight act regulates only online drugstores in the U.S.)

But the problem isn’t confined to Bing. For all the buzz generated by Bing–which debuted in June, replacing Microsoft’s Live Search–it’s still only the third most-used search tool, dwarfed by first-place Google and also well behind Yahoo. And those search engines themselves are no strangers to ads for illicit pharmacies.

Sponsored ads are links, paid for by companies hawking products and services, that turn up at the top of search results pages alongside noncommercial links.

The response from Redmond
Microsoft disputes LegitScript’s claim that 90 percent of the sponsored Internet pharmacy ads on Bing are fake or illegal, adding that it is working to weed out the rogue advertisers that do slip through. The company uses an Internet pharmacy verification service called PharmacyChecker–a competitor of LegitScript–to ensure that its sponsored prescription drug advertisements are legitimate.

When asked by CNET News to discuss this issue, Google declined to comment. The company’s Pharmacy Qualification requirements are available online. Yahoo did not respond to a request for comment.

And in a statement this week to CNET News, Microsoft said: “At this point, we believe that PharmacyChecker’s system worked as designed. It is important to note, however, that PharmacyChecker’s list of validated pharmacies is only one part of a complex system of editorial processes that enforce policy. We do expect this experience will drive system-wide improvements.”

“We were able to purchase potentially addictive drugs without a prescription or any age verification via Bing.com ads,” LegitScript President John Horton told CNET News. “We also received counterfeit medication. Microsoft profits from these illegal ads, which put Internet users at risk.”

The NABP’s own analysis of search results from Google and Yahoo turned up many drug ads from sketchy purveyors.

“In the early years of the Internet, it was a case of entrepreneurs not understanding the legal requirements for the dispensing of drugs. Later, it was the push by senior citizens and public officials to obtain drugs that were cheaper than medications available in the U.S.,” said Carmen Catizone, executive director of the trade group National Association of Boards of Pharmacies.

In the LegitScript study, researchers found a total of 69 pharmacies by running random searches on Bing for prescription drugs, using terms such as “online pharmacy” and “buy Viagra” to find sponsored ads. Of the 69 drug vendors uncovered, only seven were certified as legitimate by LegitScript. The rest were considered to be operating illegally in one way or another.

LegitScript says that nearly 90 percent of the sponsored ads on Bing for online pharmacies were from fake or illegal sites. Microsoft says the rate of violation is closer to 15 percent and that it’s taking steps to combat the abuses.

Rogue online pharmacies sell a wide range of medications, from the sleep aid Ambien to the muscle relaxant Soma and the erectile dysfunction treatments Viagra and Cialis. The NABP lists only 18 certified and recommended online drugstores at its Web site, while more than 3,800 are non-compliant and not recommended

The authors said they also uncovered security holes in Microsoft’s online advertising program. A rogue Internet pharmacy called store.k2med.com was able to advertise under the name of a U.S.-licensed pharmacy but redirect traffic to the fake Web site. This same security flaw was found in other cases.

(Credit:
LegitScript)

Over the last decade, the situation has evolved to bring new challenges.

“Our editorial system used PharmacyChecker’s list of approved advertisers as our guideline in this case,” Microsoft said in a statement to CNET News. “During a quality analysis of the sponsored results for the most frequently used Pharma terms (a more exhaustive set than was used in the study), we found that the actual rate of violation was closer to 15 (percent).”

With Bing, Microsoft is trying to reinvigorate its role in the search business. It has also inadvertently brought renewed attention to the problem of illicit pharmacies operating on the Internet.

CASA’s July 2008 report was its fifth annual study examining the online availability of prescription drugs, and it focused on substances including Valium, Xanax, and Ritalin. CASA found that the number of Web sites selling prescription drugs rose each year from 2004 to 2007, then dipped somewhat in 2008.

A significant risk posed by sketchy online pharmacies, according to groups that monitor such sites, is that they don’t require a prescription for potentially dangerous medications.

In response to the LegitScript/KnujOn study, an August 7 blog post written by Microsoft AdCenter Community blogger Carolyn Miller said the company believes “the advertisers noted in the report found a way to work around the PharmacyChecker.com verification process after being validated to advertise on Bing. These rogue advertisers manipulated the system by ‘hijacking’ and/or misusing landing pages. Our internal teams are continuing to investigate how these advertisers sidestepped the policy.”

In 2008, the number of online drugstores CASA found that didn’t require a prescription was around 85 percent. Out of 365 sites discovered advertising or selling prescription drugs, only two were certified by the NABP as legitimate. The group found sponsored ads for rogue pharmacies prominently displayed on both Google and Yahoo, and also spotted similar ads on MSN/Live Search. CASA was unable to issue another study this year due to lack of funding.

The problem has also been around since consumers began flocking to the Internet more than a decade ago. In 2003, for instance, Yahoo’s Overture unit bowed to pressure from pharmacy groups and stopped selling search-related advertising to unlicensed online pharmacies. That also spelled an end to the troublesome ads on Microsoft’s MSN portal, at that time a significant partner of Overture.

“At the present time,” said Catizone, who vouched for the research by LegitScript, “the Internet has become a haven for drug seekers and abusers, particularly (regarding) controlled substances. It is a much more serious and dangerous phase of the Internet.”

The attention on Bing came earlier this month with the results of a study that examined Internet pharmacy ads (PDF) on Microsoft’s revamped search engine. The study, conducted by LegitScript, an online pharmacy verification service, and KnujOn, an Internet compliance company, found that 90 percent of the reviewed Internet pharmacy advertisements were from fake or illegal Internet pharmacies. It also found that most of the Internet pharmacies reached through sponsored ads on Bing did not require a valid prescription.

“It is important to emphasize that the ten advertisers analyzed are not engaged in minor violations of pharmacy law,” the report says. “Rather, they are wholly fraudulent websites run, in most cases, by criminal networks. They sell unapproved or counterfeit drugs, including addictive medications, without any requirement of a prescription. The drugs come from places like Calcutta, India, which is a violation of US drug safety regulations. In several cases, the websites are operated by individuals in Russia or Eastern Europe, not US-based pharmacists. In short, these ‘Internet pharmacies’ are neither pharmacies at all, nor run by pharmacists: they are simply online street corners run by drug dealers.”

(Credit:
LegitScript)

Microsoft says that its guidelines clearly require online pharmacies that advertise on Bing to adhere to U.S. laws.

“These Bing.com ads aren’t real pharmacies,” said Garth Bruen, president of KnujOn, which tracks spam and other online and e-mail-based threats and conducted the Bing study along with LegitScript. “These types of sites are usually the product of organized crime and vast illicit drug networks, many of them based in Russia and Eastern Europe, that deceive, defraud, and poison Internet users.”

Intel’s share of the global CPU market hit a four-year high in the second quarter of 2009, says a report released Monday by market researcher iSuppli.

“Intel benefited as the global PC market took a first small step toward recovery in the second quarter,” said Matthew Wilkins, principal analyst of compute platforms for iSuppli. “AMD didn’t benefit from the small sequential rise in PC sales because its average microprocessor pricing was lower than that from the first quarter.”

(Credit: iSuppli)

Intel saw gains in its CPU market share across all segments, including desktops, notebooks, and servers. But the notebook sector was the only one to grow, climbing 13 percent over the second quarter of 2008. Both the desktop and server segments declined year over year.

The sluggish economy still took its toll. Overall, CPU sales shrunk for both Intel and AMD, since shipments were down from a year ago.

The gain in Intel’s market share came at the expense of AMD, which saw its share sink to 11.5 percent from 12.8 percent in the first quarter and 11.9 percent in the year-ago quarter.

Thanks to a slight uptick in PC sales, Intel captured 80.6 percent of microprocessor revenue worldwide, growing from 79.1 percent in the first quarter of the year and 79.2 percent in the second quarter of 2008. This is the largest slice of the market Intel’s had since its 82.4 percent share in 2005.