Think that's a scary, Big-Brother invasion of privacy? The conference attendees I talked to didn't seem to mind. In fact, one wanted Google to collect even more data.

Google planted 525 powered sensors around the halls of San Francisco's Moscone Convention Center, and began collecting data from them on Wednesday, according to Michael Manoochehri, a developer programs engineer at Google. The company began measuring temperature, humidity, light, pressure (including nearby footfalls), motion, air quality and both RF and ambient noise. All of the data is sent back at intervals of 20 seconds or so, collected by Google's App Engine, with analysis performed by its BigQuery Big Data analysis tool. You can see the results at the Lab's dedicated Web site. 

Among other things, Google's I/O developer conference has focused this year on improving developer tools and better integrating the services that it already owns via a more intelligent cloud. The unnamed sensor project, part of Google's Data Sensing Lab, encompasses a bit of all of that. By itself, knowing that the air quality diminished at 4a.m. might be intriguing, but not all that significant. But by correlating that information with a peak in another data stream - ambient noise, say - it becomes possible to guess what's going oin; in this case, perhaps, the arrival of the cleaning crew.

Manoochehri said that Google could build in queries against the sensor network into its Google I/O app, to identify the quietest spots on the floor for a phone call or a brief nap.

Crossing The Creepy Line?

Eric Schmidt, then the chief executive of Google, famously described Google's policy as "to get right up to the creepy line, but not cross it." When Google unified its privacy policy in March 2012, the company suggested that its unified services could anticipate an afternoon meeting and direct you to leave at a certain time. A year ago, that notion prompted righteous outrage from members of Congress, users and privacy advocates. A year later, that feature (now called Google Now) has been lauded as the herald of anticipatory search. (Six privacy advocates from the EU are still threatening action.)

Source: Google

It's probably fair to say that attendees of Google I/O give Google a bit more leeway than the general public. That certainly proved to be the case for those sitting near the sensors. Alan Holzman, a retired venture capitalist who last worked for Intel Capital, shrugged it off. "My life is tied to Google in much more significant ways," he noted.

Ditto for Sam Napolitano, who was covering Google I/O for the Huffington Post. Napolitano said he believed that the sensors were probably picking up on the NFC tag embedded within his name tag - something that Google employees said wasn't true. In any event, Napolitano said, he didn't care, as he had no expectations of privacy in a public space. "As long as it's not under my toilet seat, I don't care," Napolitano said of the sensors.

And "Rachid," an employee of Motorola Mobility who declined to give his last name, said he wanted to Google sample more data. More data and more correlation often derives more interesting results, he said, such as the various causes of depression. 

The Internet Of Things

Collecting data from sensors is increasingly seen as part of the rise of the so-called Internet of Things, and Google clearly wants to be a leader in this growing domain. Google already collects some location data via Android phones to better improve its knowledge of traffic, and provide better solutions via Google Maps. 

(See also How The Internet Of Things Will Revolutionize Search.)

We know that Google is very good at parsing user data - pulling keywords from emails, for example, and selling ads against them. (Selling ads against search terms is child's play.) Likewise, it can make recommendations for where to eat, where to go, the route to take and when to leave - building more comprehensive, personalized and valuable profiles along the way.

But the I/O conference project suggests that Google is prepared to take the same value proposition - collect data, analyze it, and provide and sell services against it - far beyond today's core businesses. Imagine sensors placed on Google Street View cars, and selling a comprehensive snapshot of air quality to the communities it maps. Or mounting similar sensors on the light poles from which it strings  it Google Fiber broadband connections.

It will be interesting to see how far Google takes this. Remember this is the company that attempted to track the spread of influenza via search terms. Google said that it wants attendees and other users to be able to interact with its new sensor data via the project's website. How soon will it be when we'll be able to do the same for, say, San Francisco?

Now Google is preparing to use technology from a recent acquisition, QuickOffice, to close that gap.

In recent weeks, Google sources have told me that Google has been internally testing, or "dogfooding," QuickOffice, which began life as a standalone productivity app that offers better compatibility with Office than Google's own Apps. Now, however, Google is testing QuickOffice as a cloud-based service in its own Chrome browser.

(Google already provides QuickOffice as part of its Google Apps subscription, specifically as an app for customers with Android tablets or iPads.)

Why QuickOffice?

QuickOffice uses the same .DOCX file format that Office does, allowing users to quickly edit and share the same files as Office users. QuickOffice compatibility probably means that more businesses and users will see Google Apps as a viable alternative to Office, wounding Microsoft's Office cash cow. 

Google sources also say they're confident that Microsoft won't be able to block QuickOffice with licensing issues or other legal threats. Eventually, these individuals say, QuickOffice will become the foundation of Google Apps, although that's still a ways off.

The target, Google sources said, isn't the full PC-based version of Office itself - although that might be a bit of spin. Instead, Google claims to think of QuickOffice as a competitor to Microsoft's own Web-based versions of Word, PowerPoint, and Excel - which often deliberately fall short of full Office functionality. For now, that means running QuickOffice as a browser app, probably using Google's Native Client technology, until Google's engineers can integrate it directly with Apps.

It's another example of the growing tension between Microsoft and Google, evidenced by the Microsoft's "rule-breaking" YouTube Windows Phone app and its use of an open API to talk to Google+ users via its Outlook.com Web site.

Google chief executive Larry Page, for example, used his Google I/O keynote to call out Microsoft's behavior as "really sad," and said that Microsoft took advantage of the open API. "Being negative is not how we make progress," Page said. "And most important things are not zero-sum. There's a lot of opportunity out there."

Google Tipped QuickOffice Plans At Pixel Launch

Google acquired QuickOffice last year for an undisclosed sum, and the team went quiet. But we know that Google plans to add QuickOffice to the Pixel, because Google said so.

At the launch of the Pixel a few months ago, Google's Chrome chief, Sundar Pichai, said that it would take two to three months to add QuickOffice to the Pixel, but that it would be included with it. Since it wasn't available when Google handed out thousands of Pixels to developers Wednesday, it must be coming soon.

Looking back, Pichai actually spoke quite a bit about QuickOffice's role within Google at the Pixel launch- but the media (probably correctly) focused on the Pixel hardware itself. Pichai set the stage for the Pixel handout by emphasizing, again and again, that the Pixel represented the best Chromebook experience for developers and early adopters: "if you're living in the cloud, this is the best experience you can use," Pichai said then.

Microsoft Strikes... Too Soon

Microsoft clearly anticipated a QuickOffice launch at Google I/O. On May 10, it published a blog post that directly attacked the compatibility of Google Apps as well as QuickOffice. Jake Zborowski, a senior product manager at Microsoft, wrote:

Productivity software is built to help people communicate. It's more than just the words in a document or presentation; it's about the tone, style and format you use to convey an overall message. People often entrust important information in these documents -- from board presentations to financial analyses to book reports. You should be able to trust that what you intend to communicate is what is being seen.

Zborowski's post included several sample documents that users could download themselves for comparison's sake, as well as a funny YouTube video that included Rob Schenider and Pete Rose, poking fun at the "gamble" that is Google Apps. In a supporting comment, Zborowski pointed out that Google doesn't support the Open Document Format, suggesting that Microsoft is more open than Google.

Google representatives shrugged off the post, noting that the example documents relied on Office functions typical users rarely touch, such as watermarks and odd text spacing. 

However, Microsoft's post also noted that Office Web Apps can now be used within Android, leaving the Microsoft-Google competition within the Android tablet space as an app - Google's QuickOffice - versus a cloud solution, Microsoft's Office Web apps.

The whole point of the Pixel, according to Pichai, is to show off the power of the cloud. Microsoft, for its part, is still largely wedded to the desktop application, and the $23 billion or so that its Business Division pulls in on an annual basis. (Office 365 doesn't live in the cloud, although it has cloud hooks in SkyDrive and its subscription delivery system.) That's a target that Google has attacked for several years now, with dueling customer announcements from both sides marking the ebb and flow of the battle.

Micosoft may be right that Google Apps and QuickOffice don't offer the full capabilities of Office. But they come close - and "close" has been the selling point behind Apps all along. QuickOffice looks like it could close the gap.

Image Source: Google

But 1-Click has been slow to expand beyond Amazon's walls. While Amazon offers the convenient checkout service to retail-website builders, competitors are understandably loath to embrace the e-commerce giant's tools.

Now a wiser, bloodier Google has re-entered the fray, taking lessons learned from Amazon and applying them to its own "1-Click" solution for Google Wallet, Instant Buy.

But Google's road to riches won't lie through a button on a website. That's the route it took in traditional Web e-commerce, with its older Google Checkout service, which Wallet replaced after it failed to unseat PayPal and other, more traditional credit-card-processing services. Instead, Google's placing its bet on terrain where it has the upper ground: Android apps and Gmail.

Google announced Google Wallet Instant Buy on Wednesday at its annual I/O conference. Instant Buy, a set of tools for Android developers, is a complement to the Google Wallet API that the company announced last fall. Instant Buy should probably be thought of an evolution of the Wallet API - the older API filled in payment information, while the new version offers a button to "Buy with Google". Instant Buy serves to both authenticate the shopper and actually pay for the purchase, with an intermediary step to confirm. It's a two-click solution the first time a shopper logs in, but then it's down to one if they save their Google login information with the app.

Why is this important? Because buying products via a smartphone can be a brutal experience, requiring dozens of steps to enter payment and shipping information - and users aren't inclined to stick around if they get frustrated. More than 90 percent of mobile users leave a mobile site without buying anything, according to Mike Putnam, vice president of mobile at fashion site RueLala. 

For a merchant, a simple, painless buying experience is a virtual necessity, given the rising numbers of mobile shoppers. Last Cyber Monday, for example, about 11 percent of all purchases were made via smartphone, according to IBM, about 90 percent more than the year before. This year, about 15 percent of all online retail sales will take place via mobile, according to eMarketer. 

But payment buttons aren't exactly new. So how does Googl plan to get an edge? The familiarity and ubiquity of Gmail, for one. Google also added the ability Wednesday to pay by email, clicking a "$" sign to "attach" a few bucks, much like a document or picture. The funds simply go into the recipient's Google Wallet, where they can be redeemed for real money (via a connection with a bank account) or used to buy movies, games and apps from the Play Store.

PayPal and Dwolla, among others, have offered pay-by-email for years. But PayPal and Dwolla don't have one of the most popular email platforms in the world, tacitly encouraging users to send money at the push of a button. That's one of the more important hooks that the new Wallet offers, a Google spokeswoman said. Eventually, it's possible that Google could push Wallet back into the real world - where it first started out, of course. 

What Are The Secrets To Success? Lock-in And Context

In a horse race, a jockey's tools are the whip and blinders. So it is in mobile payments. The most effective way of retaining customers is to eliminate the possibility of going elsewhere. Within the mobile space, the most effective blinder is the app. If you click Amazon's mobile app to buy a router or garden hoe, chances are you're not going anywhere else. Amazon knows that you can shop elsewhere, pay a higher price, and enter your information across all of those dozens of fields - or you can simply stay and buy with one click.

Payments by Amazon, of course, is Amazon's one-click solution, ported to the Web. But check out Payments by Amazon's customer list: the biggest name is probably Ace Hardware. Payments by Amazon offers the same one-click payment that Amazon does, but for the consumer,  without the context of Amazon.com, it's just another provider. And for most merchants, Amazon is the enemy.

Google's hold over the customer is weaker. Within Gmail, users simply don't have the choice to send funds via any other provider, but they can simply use PayPal or Dwolla and send money to the same email address. But what Google offers is what Payments by Amazon can't: context. Within the Play Store, Google is building recommendations for movies, music, and apps, based on your own preferences and what your friends have recommended. 

Payment providers have a number of arrows in their quiver. PayPal offers the ability to pay via its service at retail locations. Dwolla users can pay via Facebook and Twitter. But attendees at Google I/O suspect that the next step is for Google to begin building profiles of real-world purchases, so that if the Gap adopts Google, visitors to its online store will know what their Google+ friends bought. Virtually every other payment provider lacks the social integration that Google includes. 

The idea behind products like Google Wallet—where you could leave your wallet at home and pay for everything by tapping your phone—never really took off. Why? Numerous technical reasons have been suggested—a lack of infrastructure, resistance from financial institutions—but the conversation so far has focused on the problem of paying for things. And paying for things isn't as important as the shopping experience itself, and providing the context for an informed decision that the customer is excited about.

"I’m not saying that there are no advantages to mobile payments," Nick Holland, a former Yankee Group payments analyst, recently wrote. "However, the opportunity for consumer/merchant value addition seems to be less around the transaction and far more around augmenting the retail experience. The mobile payments obsession is missing the point."

And that happy coincidence may well benefit Google.

Photo by Nick Statt for ReadWrite

Google used its I/O keynote to describe how its vast array of servers is now applying intelligence from everything from music to maps. Google drew cheers when it launched a suite of photo-enhancement apps, including tools to automatically pull put the best pictures from a camera roll, enhance them, and feature them in a selected list of photos.

Google Maps will now automatically generate recommendations to preferred restaurants and destinations, and dynamically reroute users aroudn traffic. Google will even read your Google+ posts — if you allow it — and analyze their content, providing a hashtag for your readers to go deeper and explore the topic of your post even further.

Wow. All this makes Apple's Genius music recommendation engine look positively ancient.

The Next Step: Putting Your Data To Work For You

Google's currency has always been user data, and the transaction has always been a simple one: users contribute data, Google sells ads against it, and both sides prosper. Recent Google I/O conferences have placed a strong emphasis on devices as entry points for that data, especially photos and location.

This year, Google executives appeared to be ready to take the next step.

"We have almost every sensor we've every come up with" right in your smartphone, CEO Larry Page told attendees. Devices are used interchangeably, Page said, implying that data and how it's interpreted should do the same. 

"Technology should do the hard work, so people can get on with doing things that make them happiest in life," Page said.

Photos

Vic Gundotra, the senior vice president responsible for engineering at Google, introduced the new Photos experience. Google said earlier this week that it will now spread 15 GB of data among a user's Photos, Drive, and Gmail storage.  But the new Photos experience will make "Google's servers your new darkroom," Gundotra said.

Specifically, Photos will now intelligently scan your photos and pull out the best ones, supposedly eliminating blurry and duplicate images. Enhancements like skin softening aim to smooth out wrinkles, and red eye reduction and noise filters will help sharpen photos automatically. Google will hunt for and display images that include smiles, not frowns. And an "auto awesome" feature wil automatically pull out a few photos and stitch them together, essentially making them an animated GIF.

For years, Google's servers have only been used for storage. Now, the computing elements within them are being applied to the digital objects within them. Artists may dispute the results - shouldn't I be able to take pictures of scowling children? - but enhancing user photos boosts Google+ and gives users another reason to upload their photos to Google.

Search 

Google, Microsoft, and Wolfram Alpha have engaged in an ongoing war in search for years, with Google jumping out to an early, enormous lead. Wolfram shifted the struggle away from results to answers. Microsoft's point of attack is social. On Wednesday, Google called anticipatory search as the next frontier.

What is anticipatory search? It's the sort of back-end data processing that would allow Google to answer the question "What time does my flight leave?" because it knows what flight you're on based on your email, when the flight leaves thanks to the airline's flight-status API, and how long you'll need to get to the airport based on your location, traffic, real-time transit schedules and the like.

Google first introduced that capability with Google Now, the "cards" feature that shipped with Android 4.0. But the new Cards feature significantly broadens the scope of Google's vision, adding elements like music, games, and public transportation, but also drawing further connections between the two. Being able to command Google to "show mew all my photos from New York" also takes Facebook Graph Search and adds a personal, Google-esque twist. 

Pulling out a feature from Google Glass - voice-triggered actions - Google also announced that a future version of search will "listen" for you to say "OK, Google" and then automatically trigger a search. 

Music

Google's least important announcement of the day involved its new All Access subscriptions, where users will be able to stream milions of tracks from the Google Play library for $9.99 per month. Quite frankly, most of what Google announced has been done already by companies like Pandora, which auto-generates a stream of music based on a seed of a song or artist.

But Google Play's new Listen Now capability will auto-suggest music based on tracks the user already owns, and what it knows about the genre, artist, tempo, and other components. Yes, it seems like an afterthought - and that's sort of the point. 

Maps

Google also unveiled a rethinking of its Maps application, where Google now doesn't provide directions, it directs: to places that the user frequently visits, to restaurants and other destinations that other users or reviewers recommend, and to locations that Google attempts to personalize in other ways.

You might argue that offering directions itself applies intelligence, sorting through numerous routes to the best destination. But the new Maps experience takes it to another level. 

Basically, here's what it all means: data isn't necessarily being devalued in the new computing landscape, but drawing relationships between the disparate elements have become increasingly important. From a consumer perspective, users should expect Google to ask for more and more data, fusing it together and increasingly adding context to it all.

That, increasingly, is becoming the business model of today's Web. Google is just doing it as well or better than anyone else.

Enter the Declassification Engine, which aims to harness Big Data analysis and some old-fashioned crowdsourcing to peer through the "black bars" of redacted documents and reveal what the government doesn't want you to know. 

Using publicly available, declassified documents as its sources, the Declassification Engine aims to eventually make informed guesses about what those black bars are hiding, providing a "word cloud" of likely possibilities. Is that blacked out word "Aurora," for example, potentially referring to new types of advanced aircraft? And, if so, does that imply that similar redacted memos refer to the same key words? 

A Tool For Historians And The Public

The Declassification Engine could be an instrument for historians and conspiracy theorists alike. For now, though, it's basically just a set of data-analysis tools developed by researchers at Columbia University.

One finds correlations between specific words and often-classified memos, for example. Another was designed to help train the system to pick up on differences between redacted documents, and what was revealed years later when the government declassified them for public eyes. Eventually, they'll form a more cohesive whole, the Engine's creators say.

To take the next steps, the Engine's founders are asking for help. Last week, historians, journalists, legal scholars, statisticians, and computer scientists met at Columbia University to formally launch the Engine — and to ask for money. The Declassification Engine hopes to raise $50,000 to fund the project, and its founders have only raised a few hundred dollars at present.

Matthew Connelly, a historian at Columbia and one of the creators of the Declassification Engine, explained that the group is consciously trying to put the Declassification Engine on the "white hat" side of the fence — the opposite side, in other words, from organizations like Wikileaks.

The Engine's source material consists of documents that have already been declassified and released by the government for public scrutiny. Furthermore, its users aren't "cracking" redactions; they're simply making guesses. What they hope are good guesses, but guesses nevertheless.

How The Engine Revved Up

Declassification straddles a long-standing fault line in American politics, as Marc Trachtenberg, a professor of political science at UCLA explains:

There is thus a built-in conflict between the consumer and the supplier of historical evidence: we historians want to see the 'dirt,' but those responsible for the release of documents want to make sure that the material released does not damage the political interests they are responsible for protecting.

A redacted memo, made public by the Freedom of Information Act. (Source: http://www.foia.cia.gov/)

Declassified documents are often a tool to better understand our own history. But getting at that understanding sometimes requires teasing out decades-old data.

One of the first things the team did last year was to analyze which keywords were most closely associated with federal decisions to withhold documents among 1.4 million State Department cables. They then created a tool to analyze diplomatic activity over time depending on which terms were used, and the likelihood that a cable that included a specific term would still be classified.

That analysis revealed that 1970s cables that contained the word "Boulder" or phrase "Operation Boulder" were much, much more likely to be withheld, Connelly said. As it turned out, Project Boulder was President Nixon's plan, hatched following the hostage crisis at the Munich Olympics, to increase FBI scrutiny of Arabs entering the United States. In other words, 1970s-style ethnic profiling.

In this case, Connelly said, the archive of scanned documents could have served as a historical context when people began discussing the treatment of Arab-Americans thirty years later, after Sept. 11. But without the digital archive of source documents, that context wasn't readily available.

"The reason that these historians have never even heard of it is because the vast majority of the documents have been withheld, in the archives," Connelly said. "Without those documents, we can't even begin to try and derive some of these lessons."

The government originally held back the majority of memos that contained the word "Boulder". (Source: Matthew Connelly)

Is It Legal?

Given the political climate surrounding security in the decade-plus since September 11, the Declassification Engine's creators said last week that they were somewhat nervous that the U.S. government might try to clamp down on it. (The creators, naturally, believe that it's perfectly legal.) Connelly, however, said that the discussion during Friday's conference gave him reason to believe that the Engine's creators aren't likely to face any investigation from law enforcement agencies. 

Nevertheless, on Friday, the FAQ portion of the site was modified to eliminate all references to the project's legality, including that the group sought input from the State Department and the National Archives to better understand the declassification process.

"In some cases, we are using statistical methods to predict what is still classified," the Declassification Engine's FAQ said Thursday night.

How The Tools Work

Connelly gave ReadWrite an early glimpse of one component of the Engine on Thursday night. That's the Redaction Visualizer, which compares redacted and unredacted documents and highlights the differences. On the surface, this seems pretty obvious. 

Comparing an unredacted and redacted memo. (Source: Declassification-engine.org)

But the Visualizer is also the basic equivalent of your math homework: the redacted document provides the problem to solve, and the unredacted document is the "answer". This supervised data will  "teach the computer to teach itself about what's in the redaction," Connelly said.

The text that the Redaction Visualizer pulls out. (Source: Declassification-engine.org)

The real work for the Engine, though, lies in deciphering the redactions themselves. And the biggest arrow in its quiver is context. In total, the Engine uses 117,509 documents from the DDRS, with the most from the Eisenhower and Johnson administrations.

The text of the documents themselves are just one part of the puzzle. But there's a surprising amount  of unredacted metadata attached to each as well: the date, the author, the subject, who classified it, when it was declassified — 68 fields in all, Connelly said. All can be used as clues to make guesses as to what the redacted content contains. Connelly admits that he's not even clear on how well the Engine could work, once it's up and running.

What the Declassification Engine hopes to do for each redaction is generate a "word cloud" of the words that are statistically likely to be hidden by the redaction. Granted, this is a lot easier to do with a short series of letters, such as a name or date. Still, any guesses could be used to tease out further possibilities, and cross-correlated with other, similar documents to make further guesses.

Eventually, the Declassification Engine could become a Web site, where users could upload their own declassified documents, run them against the tools, and also add their own insights. "It would create a virtuous circle, and [users] would be able to make more and more powerful and accurate predictions," Connelly said.

Obama Turbocharges The Engine

The Declassification Engine received an unexpected boon from the Obama Administration on the eve of its launch: an executive order making machine-readable government documents the law of the land.

"Government information shall be managed as an asset throughout its life cycle to promote interoperability and openness, and, wherever possible and legally permissible, to ensure that data are released to the public in ways that make the data easy to find, accessible, and usable," President Obama wrote. "In making this the new default state, executive departments and agencies shall ensure that they safeguard individual privacy, confidentiality, and national security."

The order could remove the need to optically scan some government documents, allowing the Engine to more quickly process bunches of files. It remains to be seen how executive agencies will protect their electronic documents, however. 

But, as Connelly noted, the order begs the question: if machines are now allowed to read government documents, shouldn't they be allowed to guess what they're hiding?

Intel announced a new revision to the Atom chips, known as "Silvermont," this week, something that consumers should cheer about. Like an engine that can power cars, trucks and boats, the Silvermont architecture will end up in everything from phones to PCs.

That's where the problems begin. Intel needs the Atom, a low-cost, low-power, Windows-capable chip, to compete with ARM in the phone market — something earlier generations of the Atom notably failed to do. But what if PC buyers actually prefer the Atom to Intel's high-priced Core? What does Intel do then? It takes it in the shorts, that's what. And likes it.

Intel vs. Intel

It's not an abstract concept. Intel executives promised that Silvermont Atoms will deliver twice the performance and consume four times less power than its rival processors, and - more important - deliver about two to three times the performance of the last-generation Atom chips that powered the early convertible tablets.

From a performance standpoint, that means that you'll be able to buy far more powerful Windows tablets that push closer to what the Core offers. And from a price perspective, those tablets will cost about $200 or so - about the price of the Core processor, by itself.

Sure, Intel's Core chips will improve, too, with the "Haswell" revision due this summer. But we're seeing a stagnating traditional PC market in part because there most people don't have much need for constantly increasing processor performance. Remember, Windows 8 was designed to be more efficient than Windows 7, and thus requires less memory and raw computing power.

In other words, Microsoft was intrinsically designing toward the Atom, not the Core.

But if consumers see that the new generation of Atoms provide good-enough performance, that result should be an acceleration of low-cost PCs - possibly even enough to give the PC market a real jolt. That would certainly help Microsoft's hopes for a resuscitated PC market, but it would leave Intel holding the bag. Microsoft has another motive, too: Either it adopts the new chips, or its Surface tablet gets priced out of the market.

Why Does Intel Need the Atom And The Core?

In some ways, the Atom is Intel's do-over. Intel was built upon performance: raw computing power that powered PCs and servers, driven by manufacturing that always remained a step ahead of the competition. Intel really didn't care about low-power chips until a company called Transmeta pushed it into the mobile market. And even then, Intel was trading off power for improved performance, even into its most recent Core chips.

That opened the door for yet another Intel competitor, ARM, a technology company that licenses its chip designs to the likes of Qualcomm and Nvidia for use in phones by Apple, Samsung, and Motorola. (That is, virtually all of the smartphones made today.)

Intel had its own shot to enter the phone market with an ARM design, the StrongARM, but squandered its shot in the early 2000s. Eventually, Intel decided to meet the ARM challenge with an x86, Windows-compatible chip, and designed the Atom.

The industry, however, never really expected the Atom to actually succeed in the phone space. Lenovo's announcement of the Atom-powered K800 in 2012 represented Intel's first smartphone design win ever, and it was certainly the equal of any phone at the time. Unfortunately, the K800 never made it to U.S. shores, being designed for China Telecom. More Atom-powered phones have followed, all in Asia. But a handful of design wins in Asia is a lot better than nothing. 

So we know this: Intel can't give up on the Atom, because of the potential market of billions of phones and tablets it hopes to capture. But within the PC market, Intel runs the real risk of cannibalizing the Core.

So What Happens?

Is Microsoft About To Buy Nook For $1 Billion?

TechCrunch reported Thursday that Microsoft is considering paying $1 billion for Nook Media, the division of Barnes & Noble that includes both the Nook tablet as well as its e-book business. That works out to a discount of about $700 million to $800 million compared to what Barnes & Noble valued the Nook at just a few months ago. A deal at that level would be a clear indication that B&N wants out of the digital business.

So much so, in fact, that there have been rumors that Barnes & Noble plans to kill the Nook by the end of April 2014, instead selling its e-book content on apps from "third-party tablets" from an undisclosed manufacturer or manufacturers. That could mean Microsoft's own tablet, the Surface, steps in to replace it - and we're already getting reports of smaller, Nook-like Windows tablets in the works. Of course, Nook is already available on the iPad and non-Amazon Android tablets.

(See also Microsoft, Barnes & Noble Release Windows 8 Nook App: Is A "Nook Surface Next?)

TechCrunch's report suggests two key factors: developing, manufacturing and selling a tablet like the Nook isn't a profitable business. But e-books are. By itself, the Nook unit lost $262 million on $1.2 billion for the fiscal year ended April 30, TechCrunch's secret documents alleged. Meanwhile, B&N itself publicly disclosed that its Nook segment revenue dropped 26% last quarter, but e-book sales grew 6.8%. (Some 10 million Nook tablets and e-readers have been sold, and the service boasts more than 7 million subscribers.)

We also know that Microsoft has already forged ties with software developers, including game creators; has established relationships with the music business to create Xbox Music; and has developed a network of cloud servers which can serve that content up virtually anywhere. Adding book publishers to the list should be relatively simple.

Microsoft has already proved its interest in the Nook platform. In 2012, Microsoft dumped $300 million into Nook Media, which later generated a Nook app for Windows 8 and not much else. It certainly looks like Barnes & Noble isn't heavily invested into the relationship. It's time for Microsoft to take over.

Patching The Windows App Store With Books

People need a compelling reason to buy a new device, and Microsoft hasn't given them much of one. Microsoft's Surface is a terrific piece of hardware, but is overpriced compared to rival tablets. Meanwhile traditional PCs are on the decline, perhaps even being pushed down the slope by Windows 8. Microsoft's platforms simply lack the app support of iOS and Android.

Windows Store apps, as measured by MetroStore Scanner.

Moreover, if apps are now a key tablet selling point, Microsoft doesn't have that much to offer. Microsoft's app store is growing quickly - but that's due to the fact that it's starting from a very small base. As of Thursday, MetrostoreScanner, which tracks the apps that appear and are updated on Microsoft's Windows Store, showed a total of 70,182 apps in the Store - about double what it had at the end of December. Google and Apple, on the other hands, each claim about 800,000 apps in their respective app stores.

In the company's defense, Tami Reller, Microsoft's Windows chief, has argued that the Windows Store has aggregated more than the number of apps that iOS did during the same period. She also said that almost 90% of the entire app catalog is downloaded every month - a puzzling statement, meaning that either Microsoft is doing an excellent job promoting app discovery, based on its Mimvi technology - or that Windows uses really don't have that much to choose from. 

E-Books Complete The Windows Store 

Adding e-books won't make Microsoft's app problems go away. But they could provide a pretty big distraction. Not to mention that owning the Nook platform would dramatically broaden Microsoft's content strategy to include iPads and Android tablets. Microsoft has also hinted at plans to integrate Nook content in Office, putting its digital content in front of millions more users. That would be a welcome change from Microsoft's decision not to rush out Office for iOS and Android. 

(See also Why Microsoft Is Tying Barnes & Noble's Nook To Windows, Office And Bing.)

Finally, it may seem simplistic, but one of the more compelling reasons to add Nook content is simply what users see - or don't see - on the Windows 8 Start screen: Games, Music, Video - but not Books. It's a glaring omission, and one that Microsoft could solve with a single stroke of the pen - and a billion dollars.

Image Sources: Pearson Media (Nook App) Barnes & Noble (Nook)

Changes Coming For Windows 8

In a Wall Street Journal blog post earlier this week, Windows marketing chief Tami Reller described how Microsoft is working to overcome the perception that Windows 8 is frustrating and difficult to use - and said the company is working to both make Windows 8 easier to use and to better explain to shoppers the new operating system's benefits and how to take advantage of them:

Without offering many details yet, Ms. Reller outlined how Microsoft is working on changing software features, helping people overcome obstacles to learning the revamped software, altering the shopping experience for consumers, getting more of people’s favorite apps available for Windows 8 and making sure a wider array of Windows 8 computing devices will be on sale.

The Journal also said Reller confirmed that Windows Blue is "both the codename for a coming update to Windows 8 – with additional features and improved services – as well as a name for a broader strategy shift to provide faster changes to its key software." Significantly, Reller also promised a Windows Blue update "before late June" that would address user complaints about Windows 8.

How Is Windows 8 Selling?

Reller's six-month update also revealed that Microsoft claims to have sold 100 million Windows 8 licenses, and that 250 million apps have been downloaded from the Windows Store in the same period, surpassing what Apple's iOS store accomplished during the same period. The number of apps within the Store has grown six times since launch, Reller said, and almost 90% of the company's app catalog has been downloaded each month.

Bob O'Donnell, an IDC analyst whose firm has blamed Microsoft for holding the PC industry back, told Bloomberg that he didn't understand where Microsoft was getting its numbers, given that his sources at the PC were telling a different, less optimistic, story. 

Changing Perceptions Of Windows 8?

Whatever the numbers, the first small signs of the push to change perceptions bout Windows 8 were visible at Fry's:

• Placards that refer to the "familiar" Windows 8 desktop experience
• Shifting the older, cheaper non-touch laptops away from the main floor
• The constant attention from sales staff.

That last bit is a big deal: Fry's is known for its sprawling stores and massive selection, but customer service and friend salespeople traditionally haven't been its strengths. 

My wife and I were doing a bit of showrooming to find a touch-based Windows 8 notebook for the house. Fry's Concord location boasted five or six aisles of notebooks. Each PC boasted two placards: one touting the benefits of a Fry's card or financing, and one that promoted an Office discount. Microsoft's card also highlighted ow to learn more about the PC, how to get to the "familiar" desktop, and how to "go back to Start." Clearly, Microsoft does recognize that using Windows 8 isn't as natural as it originally claimed, and is trying to help.

Several times during our visit my wife and I were approached by a salesperson offering to answer any questions - and one specifically offered more information about Windows 8. When we wandered back into the rear aisles with the older, cheaper, non-touch Windows notebooks, however, no one followed. Unfortunately, there were about four or five rows of these older PCs versus just two specifically dedicated to Windows 8.

(For comparison, at Best Buy a week earlier, I found an aisle of rather lonely Windows 8 machines sitting by themselves, with Microsoft promotional materials but little sales support.) 

Is This A Mea Culpa From Microsoft?

What matters here is that Microsoft finally seems willing to listen to its customers, to work with them to craft an experience that's both productive and entertaining. And yes, when the occasion calls for it, help them over the purchasing hump. 

To be honest, though, after looking at them, my wife didn't really want a Windows 8 machine. She seemed to like the Start screen, and swiping back and forth, but she didn't really grasp how to launch a program within the Start screen by typing its name, nor how to how to enable the Charms by swiping in - or even what they were used for. 

Microsoft and the PC industry now seem to feel that the solution to the Windows 8 problem is a little hand-holding, and making sure everyone feels comfortable. That's the right approach, let's hope the coming changes to Windows and renewed emphasis on helping customers upgrade hasn't arrived too late.

Here's how it would play out: After an airline magazine declared 3D printers the next new thing, boss Michael Scott would buy one, install it in the office, and christen it by printing out a coffee cup. Ten hours later, after the cup was completed, Scott would hold the cup aloft as he outlined his vision of the future. Employees would watch silently as the hot coffee slowly distended the cup into a plastic teardrop, eventually rupturing and spilling scalding coffee all over Scott's lap.

Staples, Dunder-Mifflin's real-life competitor, undoubtedly has a different scenario in mind. But right now, that's about all most offices can hope to do with the $1,299 3D Systems' Cube 3D printer that Staples now offers. 

What Could A 3D Printer Do For An Office?

In all seriousness, 3D printers - which layer many tiny sheets of melted plastic on top of one another to build up the shape of a 3D object - have any number of possible applications. If you can work with a material strong enough, you can recreate virtually anything you'd like, from a plastic geegaw to, yes, even a gun. Car aficionado Jay Leno even uses them to create replacement auto parts.  

Manufacturing could use a 3D printer to "sketch out" parts. 3D gaming companies could print out 3D versions of their monsters for promotional use. Artisans can create objects that you can only imagine. If your business deals with the tangible, you might argue that you should have a 3D printer in your office.

(See also Just How Hard Is It To Get And Use A 3D Printer?)

But there's an argument to be made that 3D printing, in its present form, just isn't ready for general office use. And even if it was, the Cube 3D printer doesn't seem like the right device to break the 3D printing barrier.

With a few exceptions, today's 3D printing remains a hobbyist's tool, nothing more. I asked Staples to put me in touch with someone who could convince me of the need of a 3D printer as a general office tool. Instead, the company's public relations guy referred me to this sentence in the Staples press release: "For companies creating new products, 3D printing can make it easier to design and test new concepts, and decrease the time to market". 

Like what? Well, a restaurant could use a 3D printer to create new kitchen tools. Could you actually eat with those? Probably not.

Cube 3D: Locked Down And Complex

Even if you could come up with practical uses for a 3D printer, the Cube 3D printer might not be your best bet. While fairly easy to set up and use, a PCMag.com review of the Cube 3D found that of objects the site's reviewers tried to print - a Tardis, an owl, a teacup and others - success varied considerably: "About five were beautifully rendered; most of the rest were of decent quality though with some flaws, and about four were basically ruined," the site said. And that doesn't count a half-dozen aborted starts. 

Yes, you can print in either ABS or compostable PLA plastic, but just five inches to a side. And while some sample objects looked great, others looked covered in cobwebs. 

Neither the PCMag review nor an extensive CNET review revealed the printing times: on the order of two hours. CNET does, however, point out that the Cube requires online activation, can detect "third-party" print materials and requires leveling the print tray, applying glue to it, then soaking the print platform in water to remove the printed object. And that's if everything goes right.

Then there's the cost. $1,300 for a hobbyist's toy isn't cheap. And that's not counting the $50 per plastic cartridge holding 320 grams of material (0.7 pounds). Printing is expensive, whether it's 2D or 3D.

Perhaps feeling the competitive pressures that forced Office Max and Office Depot to merge: Staples seems to be looking for ways to entice customers into its stores. And being the first major retailer to stock 3D printers could help addressthat problem. For looky-loos and hobbyists, getting a first-hand look at 3D printing is a fascinating diversion - heck, you can even print out a doll and put your face on it. For general productivity, though, it's literally a waste of time of time and money.

(See also Why 3D Printing Will be The Next Big Copyright Fight.)

Lead image via Cubify

But to Rob Berman, the company's chief executive officer, CTI is actually standing up for the little guy. "When small companies file [patent infringement] suits, they're called patent trolls," Berman said in an interview. "When big companies assert their technology, it's called good business."

What some call "non-practicing entities," others call "patent trolls." Either way, companies like CTI don't actually make anything; they merely buy up patent portfolios, go after companies they believe are infringing, convince others to license the patents and use the proceeds to fund more purchases and litigation. Their entire business is quite literally predicated on suing people, or at least threatening to. For them, patents are just another commodity to buy and sell. And it's big business: the patent industry racks up $1.33 million per average settlement, and about $1.75 million per defense, according to companies like Google.

That kind of strategy drives entrepreneurs and established companies up the wall - as they see it, instead of working to add value, patent trolls are often seen as parasites feeding off the efforts and innovation of others.

That's no doubt why U.S. Sen. Charles Schumer (D-NY) will introduce a legislative countermeasure next week to subject patent suits to U.S. Patent & Trademark Office (USPTO) oversight. The USPTO would be required to "vet" patent suits, apparently trying to determine the validity of affected patents before the suit got to court.

CopyTele's Checkered History

Is there more to the story? That depends on who's doing the telling. CTI, in particular, has a long and checkered history.

If you Google CopyTele, you'll receive the following summary: "Designs and develops telecommunications products incorporating ultra-high resolution charged particle flat panel displays." That's what CopyTele used to do. In September of 2012, Berman and two other veterans from the so-called "patent monetization" business were brought in to revitalize the company.

Turns out that CopyTele was sitting on 53 patents that the company didn't know what to do with. CopyTele's board decided to make a management change, kicking out the 85-year-old chief executive Denis Krusos in the process. But before you feel too sorry for the senior citizen, take a closer look at CopyTele's sordid past. According to a fascinating 1986 Fortune tale, Krusos claimed at least some of his business ideas were founded on "visions" he had while walking the Greek isles, and his' Steve Jobs'-style launches of revolutionary mobile displays were in fact non-working prototypes. Meanwhile, CopyTele's stock was pumped and dumped by outside investors, the magazine wrote.

Nevertheless, CopyTele still had the "patented electrophoretic display technologies" that it had designed. Those patents are at the center of suits the company has filed against display manufacturer AU Optronics (whose own executives have been found guilty of price fixing) and E Ink Holdings. But that was only the beginning. Since then, CopyTele has gone on to acquire windows patents (the kind you look through, not click) as well as five other patent collections. To date, CTI has litigated only its own display patents, as well as the encryption patents it bought that are at the heart of the Microsoft suit. The others will be enforced in the future, Berman said.

Berman’s Patent-Troll Credentials

Berman, meanwhile, has taken his own fascinating journey to this crossroads. He was an early employee of Acacia Technologies Group, which bought up the patent rights to the V-chip, the electronic nanny that was supposed to automatically weed out television programs that were inappropriate for children. Berman, who was at Acacia from 2000 to 2007, launched the company’s "patent assertion business," demanding that potential V-chip licensees pay up.

In 2002, Acacia took on the porn industry, even winning over Larry Flynt, who licensed Acacia's streaming media patents in 2003. "That was me," Berman recalled cheerfully, describing how he "went undercover," visiting adult-industry trade shows to "better understand the business… It was a rough job, but somebody had to do it."

Are Patents Just Another Form Of Currency?

As Berman sees it, there’s nothing wrong with maximizing the value of patents. Without those patent suits, Berman claimed, CopyTele would be in bankruptcy.

To him, patents are just another way of doing business. "We've gone from a product-based society to a service-based society to a knowledge-based economy," he said. "One of the most effective ways of protecting knowledge is patents… I don't think that there's any other time in history, except for maybe after the Revolutionary War, where patents have played as important a role as they do today."

Basically, Berman's position boils down to this: Companies like CopyTele and Acacia buy up patents from the little guys, giving small patent inventors the chance to make money that they'd otherwise never see.

He conveniently ignores how "patent trolls" effectively levy tariffs on other, legitimate products, adding costs that eventually get passed along to consumers - and not really contributing in any way to innovation or productivity or any other social good.

Legal, But That Don’t Make It Right

But Berman is correct in pointing out that that's the way the world currently works. While he may be exploiting legal loopholes, what patent trolls do is not illegal. Of course, that doesn’t necessarily make it right, either.

The conundrum seems to require more legislation – hence Schumer’s bill to vet patent suits before they proceed to court. But new laws can have their own pitfalls – for example, if some patents are intrinsically "bogus,” maybe the better approach would be to tighten restrictions on granting patents in the first place.

Maybe the answer isn’t to target the patent trolls, no matter how loathsome, who are only exploiting patent law as it stands. Maybe the real need is a clearer definition of what role patents should play? Or a re-evaluation of whether or not software patents should even be granted? Berman thinks that legislation should be enacted to allow companies to discuss patent settlements privately, without the need to first go to court.

In the end, it all comes down to how you see the world. Is a business’ obligation only to follow the letter of the law, or must it also behave morally as well as legally? As a company, Berman says, CTI has an obligation to maximize revenues for shareholders without breaking the law. In his eyes, at least, that’s all there is to it.

Troll image via Flickr.

It's hard to escape a back-to-the-future feeling with the Krzanich announcement, which basically represents the company's continued focus on making chips smaller, cheaper and, now, less power-hungry — Intel's traditional secret sauce. Like outgoing CEO Paul Otellini, Krzanich served as chief operating officer and previously held several manufacturing positions across the company since he joined Intel in 1989. 

Intel CEOs generally emerge from the president's office or that of the COO — Krzanich's old job, and one that Intel hasn't filled yet. Intel historically has swapped CEOs when they've turned 60; Krzanich, 52, will have eight more years before a successor takes over.

Last November, when Otellini unexpectedly declared his intention to step down later this month, chairman Andy Bryant took the unusual step of naming what some saw as four possibilities to replace him: Krzanich, James, Dadi Perlmutter, the head of Intel's chip business; and Arvind Sodhani, head of the company's internal VC unit, Intel Capital.

The Rise Of Intel Software

Of the four, only James represents something strikingly new for Intel. In a company traditionally dominated by old, balding white engineers, James has been the face of Intel's software business since joining the company via its acquisition of Bell Technologies in 1988.

Although she holds business degrees from the University of Oregon, that's not necessarily a black mark; Otellini himself was an economics major. But James also served as chief of staff for former chief executive Andy Grove, giving her the stamp of legitimacy. James even carries a red pen — a notorious Grove trademark — as a reminder of her roots.

James was instrumental in three major acquisitions: Intel's 2007 acquisition of physics middleware developer Havok for an undisclosed amount, the 2009 acquisition of embedded software company Wind River for about $884 million; and Intel's $7.68 billion purchase of security giant McAfee in 2011. Intel contributes to the Linux kernel, developed its own Hadoop implementation, co-developed the Tizen mobile OS with Samsung, and writes its own software compilers for its microprocessors.

"I can see a day where a future Intel CEO could have extensive software experience," Patrick Moorhead, a former executive of Intel rival AMD and now an independent analyst, said. About 70 percent of a smartphone's research and development costs now derive from software, Moorhead said.

Wait A Second. Software? Intel? Really?

Can software really mean that much to Intel? After all, this is a company that owns over 80 percent of both the PC microprocessor market, about as much in the server market, and is busy trying to make inroads into phones, tablets, and low-power convertible Windows tablets. 

Sure. Moorhead, for instance, argues that Intel's strategy is to combine chips and software in a way that make each indispensable to the other. Rolling your own software and fabricating your own silicon can allow a company to optimize their combined performance in ways that other manufacturers can't match. In a business sense, selling the software and silicon together also allows customers to save money and simplify their own development efforts.

Put that way, Krzanich's appointment as chief executive, with James just below him on the executive ladder, makes sense. Intel's not about to try a RIM/BlackBerry-styled double chief executive, but for a number of years, Intel operated out of a two-in-the-box strategy, where responsibilities for certain divisions were shared not by one, but by two executives.

For Now, Krzanich Minds The Store

Manufacturing prowess remains key to Intel. When the company ships its next-generation "Haswell" processor this June, the chip's smallest features will be just 22 nanometers wide, putting it a full generation ahead of AMD's expected "Piledriver" chip. Smaller chips with finer "linewidths" are traditionally more powerful; now that the focus has turned to mobile, Intel can reduce the power those chips consume instead.

Which isn't to say Intel doesn't have a lot of catching up to do. It has fallen badly behind in producing processors for smartphones and tablets, in an eerie repeat of the way it was initially late to the notebook PC market. 

Krzanich's job will be to turn that around. Ideally, Intel needs to design the best chips it can, shrink them down as small as possible, and then them them with optimized software to maximize their potential.

James' appointment is as much reward as recognition of her strategic role. In 2009, soon after the Wind River acquisition, the notoriously grouchy Grove was asked to characterize Intel's history in software. “The results have been very consistent,” Grove, then 73 and retired, told The Oregonian. “They amounted to nothing.” Now, they're everything.

Last week, Forrester Research released a report claiming that Microsoft's Windows 7 is used in about 50% of all enterprise installationss, based both on its own surveys as well as a sampling of the Web traffic across it own servers. That's not surprising, given that Windows 7 was released to enterprises years ago, in mid-2009.

But what's more shocking - and more worrisome to Microsoft - is a survey of IT professionals polled by Dell's KACE systems management unit last week. It seems that even now, companies who are finally upgrading from Windows XP are turning away from Windows 8 in droves, selecting instead the older Windows 7 operating system. Of the 273 IT professionals who said that they're upgrading from Windows XP, just 2% said they're choosing Windows 8. The vast majority - 69% - said that they're choosing Windows 7 instead.

2013: A Key Transition Year From Windows XP

For Microsoft and many of its customers, 2013 represents a key transitional year. Many of its enterprise customers will be forced to move away from Windows XP,  which Microsoft plans to cease supporting on April 8, 2014. Microsoft is eager to sell those customers an upgrade to Windows 8, Office 2013, and other services, while PC makers hope they'll buy all new PCs, too.

In September of 2012, though, research firm Gartner warned enterprises that they should upgrade to Windows 7, not Windows 8. Gartner vice president Richard Kleynhans said then that he was aware of many enterprises doing just that. "Get Windows 7 done, and then you can start to experiment and dabble with Windows 8, but don't let Windows 8 derail your Windows 7 upgrade project," Kleynhans said.

That's a lesson Dell customers apparently have apparently taken to heart. The reason, explained Lisa Richardson, a senior product manager for Dell KACE, is simple: complexity equals cost.

Transition Fatigue

"For a lot of them, it's fatigue. It's OS fatigue," Richardson said. "It's, 'OK, we're making this huge shift to Windows 7, we know it's been tested, it's been around, we have to move onto it.' What we're hearing from IT administrators is that there's a challenge from moving to Windows 7 and its ribbon interface. But Windows 8 is an ever bigger shift in terms of user experience. And what I'm finding out is that because it's such a big shift in user experience, such a huge jump from Windows XP to Windows 8, support calls are going to go up. That drives up support costs, and that turns off many IT administrators."

The other big transition concern is applications compatibility, especially with line-of-business programs developed in house, Richardson reported. Compatibility issues, however, can crop in both Windows 7 and Windows 8.

In case you're wondering, operating system upgrades are what Dell KACE does. The Dell KACE Deployment Appliance manages OS upgrades across enterprises (including apps, files, and operating systems), so IT admins participating in the survey have skin in the game. The survey participants represented a mix of existing KACE customers as well as prospective clients, Dell said.

Richardson added that 15% of the survey participants said they plan to deploy both Windows 8 and Windows 7, and 10% said they wouldn't install either one. A second survey question indicated that 17% of participants had completed their upgrade, 18% were three-quarters done, and that an additional 13% said they were at least halfway done. But almost half (49%) said either that they were either less than halfway done or hadn't even begun.

Forrester's data, meanwhile, also gives an edge to Windows 7 over WIndows 8. The firm found that its Web traffic was about 50% Windows 7, with 47.5% of IT managers saying they've installed it. Windows XP still accounted for about 22.3% of traffic, or 38.2% of systems; Macs are about 14.6% of traffic, and 14.3% of self-reported employee PC ownership. Windows 8 was too new to make the IT survey, but represented just 1% of Forrester's traffic from May 2012 through January 2013.

Windows 8 Or Windows 7: It's Still Good News For Hardware Makers

No matter OS enterprises are upgrading to, Dell found, the time seems ripe for a hardware refresh. A lot of IT customers reported that PCs were being asked to last far longer than the previously standard three-year refresh cycle because of the effects of the recession - often five to six years. "Those systems couldn't support either Windows 7 or Windows 8," Richardson said, in part because they don't have big enough hard drives.

And hardware still matters, even as the trend toward mobile devices implies that the cloud is shouldering more of the workload. "A stylized view suggests that computing is moving to the cloud and that platforms don’t matter anymore," Forrester's report concluded. "This stylized view couldn’t be more wrong — today and for the next five years or longer. The mobile revolution continues afoot, as users shift computing minutes from traditional PCs and Macs to tablets, smartphones, and new classes of devices like hybrids and convertibles."

And that's where the good news for Microsoft may be found. Richardson reported strong IT demand for Windows tablets - as supplemental devices, not as laptop replacements - to the point where Kace plans to add support for Windows 8 deployments on tablets.

The War For Windows? Or For PCs?

Forrester's message is that platforms still matter. But listen closely to what Microsoft's saying these days, and the interpretation changes.

"Businesses continue to value the Windows platform," Chris Suh, general manager of Microsoft's investor relations, said during the company's recent conference call. "Volume licensing of Windows is on track to deliver almost $4 billion in revenue this year, and nearly three quarters of enterprise agreements that we’ve signed this year include Windows. Additionally, this quarter we saw continued progress in the transition of Windows XP to Windows 7, and now two thirds of enterprise desktops are running Windows 7."

It's all Windows, Windows, Windows. But notice the careful phrasing. Microsoft's message is that businesses value Windows, not necessarily Windows 8.

For a company reacting to the alarm bells analysts are sounding on the future of the PC, Microsoft's statements signify an important strategic retrenching: for years, Microsoft fought to establish its latest operating system to spearhead continued growth. As this data from Forrester and Dell shows, though, Microsoft may be forced to acknowledge that Windows 8 is a lost cause within the enterprise. The new, lesser goal may be simply trying to hold on to the Windows PC - any flavor of Windows PC.

Lead image of Tami Reller discussing Windows 8 and images of Windows XP, 7, 8 via Microsoft.

As of today, a select group of Outlook.com users in the UK can begin placing video or voice calls, or sending instant messages, to their existing Skype contacts. Within Outlook, users will have a choice: traditional email will work as before, although the new "Messaging" options will trigger the Skype capabilities. Users can either type in a friend's name within People, or — in a nice touch — simply click on their picture to launch a message.

Microsoft paid $8.5 billion for Skype two years ago in order to "adapt to a changing market, primarily characterised by permanent and ubiquitous connectivity," as the IT analyst outfit Duquesne Group put it at the time. So far, Microsoft has steadily moved Skype forward as its ubiquitous communications interface across PCs, Windows tablets, and smartphones. That leaves the Xbox.

Video Kinect To Xbox Skype?

It's virtually a given that Skype will come to the living room. In February, Giovanni Mezgec, a Skype enterprise product marketing manager, told me that Skype users at home might use a "set-top box" — like, say, the Xbox! — to access the service.

"You are the same time a consumer, the same time a mother, the same time an employee, the same time a person that travels on the bus, you get the idea," he said in an interview at the time. "What we wanted to do was to offer a set of tools from the living room to the boardroom, a communication platform that is rationalized, but different."

Officially, though, Microsoft is keeping mum. "We are always thinking about what is next for our platform, but we have nothing further to share at this time," a spokeswoman said in an email. Rumors of the Skype-Xbox integration popped up earlier this year, following a Microsoft job posting.

And Microsoft's Xbox already has a videoconferencing solution: Video Kinect, which allows Xbox players to set up video chats with their Xbox Live friends of they own the Kinect depth camera peripheral. 

Separate But Equal

In many ways, Skype is playing catchup to features already offered by Video Kinect and the Xbox Live service itself. There's the video chats, of course, but Xbox Live also supports presence (who's playing or watching what, provided that users allows their friends to see this); group chats or play experiences, known as "parties"; text and video messages; and private chat. 

So far, Microsoft has kept its Xbox Live community separate and distinct from its other online services. That means that each Xbox user can have several collections of friends: Outlook contacts, Messenger contacts, Skype contacts, and an Xbox Live group. If you include Facebook, Twitter, and LinkedIn, which Microsoft also integrates with, that's seven separate groups. Granted, many of these contacts overlap — but many don't. (Note that Microsoft asks you for a Microsoft Outlook.com or Hotmail account when you sign up as a new user on the Xbox, for support purposes.)

Microsoft may not be able to do much with how Facebook, Twitter, and LinkedIn manage their own contact databases, but if and when it integrates Skype with the Xbox, will it merge a user's Xbox contacts with his or her Skype contact list — or even Outlook contacts?

Turns Out Ubiquity Has A Downside

The question is really a cultural one. Does it make sense for a company like Microsoft to obliterate the distinction between work and play this way?

If you own a Surface tablet, and set up Skype for the first time, Microsoft will ask you to merge your Hotmail contacts with your Skype contacts. That's not really that big of a deal. But do you really want your boss calling you when you're playing Lego Batman with your son? I don't.

What might be interesting, however — from either Skype or Video Kinect — would be the option to replace video avatars with actually small video screens of my friends. I might not like losing screen real estate in Gears of War, but it might add more of a communal sense while playing Hearts or Xbox poker.

Anything else, though, runs the risk of alienating users who just want to be left alone in the evenings. Slowly, we're all being forced to integrate our jobs into other aspects of our lives. Microsoft may want to eventually push Skype into the Xbox, but it needs to do so delicately.

Betas is one of the eight comedy pilots that Amazon has been featuring on its Instant Video page. If enough voters back Betas - or any of the other comedies - then Amazon will greenlight its development into a full-fledged original series, taking on shows like House of Cards and Lilyhammer on Netflix.

Betas = Heart, Surrealism And Desperation

To its credit, Betas integrates much of what made 1980s comedies great - heart, a touch of implausibility that borders on surrealism - and swirls it all together with the desperation and ambition of the Silicon Valley feeding frenzy. For many entrepreneurs, the right handshake seems to be all that separates them from poverty or untold riches, a cruelty that can instantly reduce months of work to ashes. Chasing that dream is frustrating. And funny.

Betas reminds us that Silicon Valley has become high school writ large: geeks may be the new jocks, but the popular kids still have all the money and dweebs are still dweebs. And owning all the toys is still the high score.

Betas begins in the sort of community workspace many techies could imagine working in, if they weren't, you know, working: Employees chase each other around with Nerf guns, others grind Cheetos into their keyboards. "Nash," the neurotic, socially inhibited engineer played by Karan Soni, can't take it. He freaks out and hides in one of the telephone booths the workspace has put against the wall, a quasi-ironic homage to older technology. Nash, despondent, tells his company's founder, Trey (Joe Dinicol), that the latest build of their Highlight-like social discovery app, BRB, bricked the phone.

"Who cares? Investors are making investments from napkin sketches made by high school dropouts!" Trey responds.

"I don't make napkin sketches!" Nash wails. 

The plot of the pilot revolves around a meeting that Trey is convinced BRB needs with George Murchison (Ed Begley, Jr.), who plays electric flute with Moby and slices his own "Ferrari of trout" with an Asian shortsword. Part of the reason is one-upping the team behind "Valet Me," a parking app whose sudden success makes the douche bag developers instant stars. Trey is convinced that the when Murchison hears BRB's pitch, he'll invest - and talks his way into Murchison's home using "Larry Page" as an alias.

The other members of the BRB team include Hobbes (Jonathan C. Daly), a bearded, jaded developer whose idea of relaxing is watching Webcam porn at a local laundromat, and Mitchell (Charlie Saxton) a pudgy dweeb whose biggest goal is to talk to Mikki (Maya Erskine), the cool Asian chick who's looking for just about anything to spark her empty life. "I would never say damp," Mikki muses. "It makes my vaj seem like the Dagobah system." 

Betas Brings Silicon Valley To Life

Betas may be a scripted comedy, but it feels a hell of a lot more real than Randi Zuckerberg's reality TV fiasco, Startups: Silicon Valley that debuted last year. Then, a cast of pretty wannabes partied their way from meetup to meeting to hangout to loft party, leaving everyone in Silicon Valley muttering, "What the hell is this?" Startups' worst crime, however, wasn't that it was vapid; it was just boring, and we'd seen all the tricks that reality series could throw at us before. It's hard to fathom how anyone got beyond an episode or two.

(See also Startups Silicon Valley: The Painful Truth Behind A Caricature Of Excess.)

The Big Bang Theory may hold the crown of TV's geekiest show. But BBT mocks geeky science culture - Star Trek, Iron Man and the ins and outs of academic life - without really touching on what makes a life in technology so great. Betas tosses you in the deep end; it assumes you know what "Series A" funding is, and who Mark Zuckerberg and Page are. Little touches - bumping phones to swap digits, for example - lend the series the "oh yeah, people really do do that" feeling. Silicon Valley will hit the big screen this summer, when The Internship looks inside life at Google - but do you really think a sanctioned look inside the Googleplex is going to end up all that funny?

(See also Geek Movies: The Top 10 Most Inspirational Films For Techies.)

Think Scrubs: Silicon Valley

Think of Betas as Scrubs Silicon Valley: the four members of BRB are starting at the bottom, hoping to climb to the top. In Scrubs, there's a natural progression: the young residents must earn their way up the medical ladder to become full-fledged doctors. What makes Betas so compelling is that Silicon Valley isn't like that. Instead, it's a roller-coaster ride: This week it's a funding deal, next week it's a show-stopping bug. What happens if Trey and the team accidentally leak their user information? What if they're hacked? Do they attract the attention of Anonymous? Does Microsoft make a pitch to buy them? Does IBM?

Look, crazy stuff happens in Silicon Valley every day. But there's no reason why we can't watch it on our TVs at night, too. So watch Betas. Vote for it. Let's make this happen, people.

Perhaps, eventually — but Microsoft is still treating the symptom rather than the disease. The problem is the PC itself, not the operating system that runs it. And that's what Microsoft (and, secondarily, its Wintel partner Intel) really needs to transform.

At this point, it seems clear that the tiled, touch friendly Start screen and the lack of a boot option to the familiar "desktop" interface scared off some people who might otherwise have upgraded to Windows 8. Instead, those PC users stuck with their familiar Windows 7 or Windows XP interface, or powered down their PCs altogether and turned to their phones or tablets.

Wintel Panic

All of which has the onetime Wintel duopoly in a bit of a panic. Microsoft needs an OS that will delight consumers. It's so far failed in that, so it's apparently retrofitting Windows 8 for folks who need more handholding to move to the new OS. Similarly, Microsoft needs a robust apps environment, so it's looking to entice developers to its Windows Store. That's not going so well, either.

Intel, meanwhile, continues to push down the cost of its microprocessors to a point where Windows tablets running on its Core microprocessors can compete with the Android and iOS markets. By the holiday season, Intel executives said, we should see Core-based laptops at between $499 to $599, with new, more powerful Atom options in the $200 price range.

Put those together, and here's what needs to happen.

1. Downplay The Start Screen

If Microsoft brings back the boot-to-desktop option, the company faces an interesting marketing dilemma: Should it still promote the tiled Start screen that turns off at least some of its customers? No. That doesn't mean that Microsoft should change the Windows 8 interface — the Start screen was designed as a tablet interface, and should remain so. But Microsoft should make the Start screen the face of the Surface tablet, and make the Windows desktop the face of its Windows 8 advertising for PCs.

2. Gently Push New Users To The Desktop 

Clearly, a portion of Microsoft's customer base has been traumatized by its initial reaction to Windows 8. There's a real risk that these users may never return to the Windows fold.

But gently managing a boot-to-desktop option may mitigate some of that. Boot-to-desktop should be presented as one of the first options in the Windows installation, perhaps accompanied by something like this: "Would you like Windows 8 to boot to the Windows Desktop? The Windows desktop provides a familiar environment for users of Windows XP and Windows 7."

From there, let them explore and do as they wish. If the Start Screen is as compelling as Microsoft seems to think, at least some users will eventually move over of their own volition.

3. Solve The Blah Windows Apps Problem

One of the bigger problems with the Start screen that Microsoft so far hasn't been able to address is that most of the applications featured there are basically uninspiring (Fresh Paint excluded). With Windows XP and Windows 7, those applications were tucked away behind the Start button, where users were free to ignore them. With the Windows 8 Start screen, they're out there for the world to see and grow disillusioned with. And it's not immediately clear how booting to the desktop's empty expanse will be much of an improvement.

But by making the Windows 8 Desktop the focus, Microsoft's advertising, at least, can encompass the broad expanse of Windows apps out there. Mix and match! Steal a page from Apple. Highlight the flashiest apps, whether they be from the Windows 8 world or even from Windows 7. Legacy OS support is a feature, too. And free advertising for Adobe, EA, or some other developer can only engender goodwill.

4. Make Windows Shine On Tablets — Cheaply

Microsoft also desperately needs a successful mobile strategy. And the only real way to to do that is to offer more for less.

In other words, if Microsoft wants to leverage Windows in the mobile space, it needs to really leverage Windows. The Windows RT version of Surface failed in part because it was a crippled version of Windows 8; it's time to retire it. The Surface with Windows Pro, by contrast, could be a hit if its price falls far enough. And if Microsoft pushes hard to convince buyers that they can accomplish a whole lot more with a full-fledged Windows tablet than they can with competing products.

Microsoft needs to show that a Windows tablet — derivative of the Surface, or one based on the new quad-core "Bay Trail" chips — can offer desktop PC-class performance at tablet prices. We know tablets are mobile. Microsoft Stores need to feature a Windows tablet or convertible running the flashiest piece of software it can, on a conventional desktop monitor, with the price tag prominently displayed. The message: all this for $299??!! Why would I ever want an Android tablet?

5. Find A Mobile Apps Tiger Team

Tucking your Android or iOS phone in your pocket is an unconscious decision. And as more game developers choosing to write for iOS and Android, fewer are around to focus on Windows. There's another key advantage for iOS and Android, too: chances are that you can play the same game on your iPad and iPhone, or your Android phone and tablet. You can't often say the same for Windows Phone and Surface.

If users can't share apps, files, and other documents between the PC, notebook, tablet and phone, they're going to start looking elsewhere. Microsoft's realized this with its core apps, including Office and the Xbox. Netflix traverses the range of Microsoft's platforms, but that's about it.

There is no easy fix here. If Microsoft can't develop the apps it needs itself, it's going to have to go out and buy them. This is the Nintendo problem, writ large. Without AAA third-party software, Microsoft will have to go it alone. 

Delaying The Inevitable

IDC's right; the PC is dying. It's inevitable, and Microsoft is merely rearranging desk chairs on the Titanic. But in this case, there's a chance the ship could make harbor before it sinks.

Notebooks will eventually give way to tablets, whether or not they have a keyboard attached to them. Microsoft won the desktop, and it won the notebook. Now it needs to win tablets. If it shows weakness now, it will be buried. 

Can Microsoft throw enough money at these problems to fix them? It may have to. It can patch Windows 8, and Intel can help keep prices falling. But the apps and mobile problems require more extensive surgery, and the time to act is now.

Image Source: Flickr/yoshimov

But don't get too excited about the possibility for reforms that would safeguard an open and innovative Internet just yet. The legislator in question, House Judiciary Committee Chairman Bob Goodlatte, has been carrying water for Hollywood and other Big Copyright interests for years. In other words, this smells like a trap for reformers.

(See also: The Internet Assault On TV Is Working)

There's no shortage of things to fix in the U.S. copyright system, which was last overhauled back when networking mostly meant dumb terminals connected to a minicomputer or a mainframe. Yet here's where Goodlatte is coming from:

• He supported SOPA, which would have let federal agencies effectively censor alleged copyright infringers from the Internet without due process or much of an appeal;
• He co-sponsored CISPA, which would allow private business to share your personal information with federal agencies without sufficient privacy protections;
• He's generally considered one of the bigger copyright maximalists in the U.S. Congress.

So what's he really up to? Here's what Goodlatte said in a statement:

The Internet has enabled copyright owners to make available their works to consumers around the world, but has also enabled others to do so without any compensation for copyright owners. Efforts to digitize our history so that all have access to it face questions about copyright ownership by those who are hard, if not impossible, to locate. There are concerns about statutory license and damage mechanisms. Federal judges are forced to make decisions using laws that are difficult to apply today. Even the Copyright Office itself faces challenges in meeting the growing needs of its customers – the American public.

Compensation for copyright, digitizing published works, licensing, and cutting through the complexity of existing copyright law — these are all ripe subjects for reform. There's just little reason to think Goodlatte is the right person to craft compromises that offer fair compensation for copyright holders without stifling the development of new digital-media services or crushing individual privacy.

Confederacy Of Dunces

Generally speaking, the odds are against innovation-friendly copyright reform in the current Congress. Democrats have, by and large, been captured by Hollywood when it comes to discussion of copyright terms, digital rights and piracy. in their thinking on this issue. Republicans, meanwhile, have occasionally shown glimpses of original thinking on these subjects — often as not, only to recant them as quickly as Hollywood lobbyists could pick up a phone.

Last November, for instance, the House Republican Study Committee released a position paper debunking various copyright "myths," among them the notions that the current system compensates creators, benefits the public, and promotes innovation. It does no such thing, staffer Derek Khanna wrote; instead, the report called out copyright as an institutional monopoly that crushes new markets before they can prove themselves.

Within twenty-four hours, the GOP had retracted the report, walking the party's position back to the same tired arguments that we had all heard before. Not much later, Khanna himself was out of a job. Techdirt, which has followed the issue extensively, has also noted that Register of Copyright Maria Pallante has suggested that enforcement agencies focus on large-scale piracy (a good idea) but that copyright never inhibited innovation (incorrect).

Absent a SOPA-style revolt by major Internet companies against the current copyright regime, which favors owners over creators and old media industries over the digital world, the best we can probably hope for is that Goodlatte's review doesn't make a bad situation worse.

With more than a billion users around the world to support and just three wholly owned data centers (Forest City, North Carolina; Prineville, Oregon; Luleå, Sweden, with the latter two still being built out) Facebook may have needed another location. (The company has also stashed servers in at least two co-location facilities owned by other companies, on both the East and West Coasts.) But why Altoona, Iowa?   

Why Iowa?

According to The Des Moines Register, which deserves credit for breaking the story on Monday, Altoona officials sold Facebook on four key selling points:

1. The site sits on the nexus of an interstate fiber optic system, providing connectivity to the rest of the nation.
2. A power substation sits within half a mile of the campus.
3. Transportation access.
4. Environmental stability.

The last is an increasingly important consideration. Data-center providers that went down during Superstorm Sandy in New York last year learned that lesson well; hurricanes, earthquakes, tornadoes and other natural disasters can bring a cloud services down just as effectively as a power outage. 

A Facebook blog post, meanwhile, cited "an abundance of wind-generated power" as well as proximity to "a great talent pool that will help build and operate the facility" as reasons for building in Altoona. Apparently, Des Moines and Ames are the new Silicon Valley and Boston when it comes to technical skills. The new facility will break ground this summer and begin serving traffic in 2014, Facebook said. According to the Register, Facebook's facility "will join what’s becoming a data center corridor of sorts in Altoona. LightEdge was built in 2006, and Enseva will break ground this spring."

Facebook hasn't confirmed the size of its new data center, but the Register earlier this month claimed that planning documents put it at 1.4 million square feet and said Monday the total investment could hit $1.5 billion. That's about four times the size of the company's Prineville facility - and 50% larger than Apple's $1 billion investment in its new data center in Maiden, North Carolina. 

Apple's data center in Maiden, N.C. (Source: Apple)

"In the coming years, as our service continues to grow and people share and connect in more ways, we need to make sure that our technical infrastructure also continues to scale," Facebook's Jay Parikh said in the blog post. "Our goal is not just to deliver you a fast, reliable experience on Facebook every day – we also want to help make connectivity a universal opportunity. Our data centers are essential for making that happen."

How Facebook "Hacks" Its Data Centers

Facebook has put almost as much technology effort into its data centers as its core services. Earlier this year, Facebook disclosed that its Luleå facility would be entirely built on hardware constructed by no-name server manufacturers using designs developed by the Open Compute Project, which shuns "vanity" hardware sold by traditional server vendors like Dell and Hewlett-Packard in an effort to minimize cost. Rather than pay top dollar for the most sophisticated and powerful equipment, this kind of "open source hardware" approach adds capacity by just adding ever more cheap, generic servers.

(See also Can Servers Save PC Manufacturers? Sadly, No.)

Facebook's Lulea, Sweden data center. (Source: Facebook)

Facebook also has been a pioneer in using natural or ambient cooling its data centers. Traditionally, data centers place servers on raised floors cooled by mechanical "chillers," or air conditioners, that push away heat from the servers to keep them running properly. 

Facebook's Prineville facility uses a combination of evaporated water and ambient air to cool the servers without the need for energy-hogging chillers; its Swedish site uses the frigid near-Arctic air to do the same thing. (Google, meanwhile, is building a data center in Hamina, Finland, which pumps water - and exchanges heat - from a nearby canal.) Although Facebook hasn't disclosed how its Altoona servers will be cooled, it's likely to employ some form of evaporative cooling.

Last week, Facebook was the first to offer a near-real-time look at the Power Usage Effectiveness (PUE) — the all-important batting average of a data center's energy efficiency  — of both its Prineville and Forest City facilities. A few years ago, a PUE of 1.8 was considered average; the Prineville facility's PUE now regularly pushes below 1.10, close to the 1.0 ideal.

Lead image via Facebook.

The ad highlights IE's use of Do Not Track and its Tracking Protection Lists as effective tools in preserving online privacy, implying that Google's Chrome, Mozilla's Firefox, Apple's Safari and Opera fail to keep up with Microsoft's principled stand on privacy.

Six months ago, Microsoft might have had a point. Now, however, many privacy advocates say that IE is the browser now falling behind in the privacy wars - because it doesn't block third-party tracking cookies by default.

(Many websites store a small snippet of code called a cookie on your hard drive when you visit the site. Typically, these cookies contain login information or other preferences. Since many websites serve up content or ads from third-parties, those third-party sources may also place tracking cookies in your browser - even though you never visited their site.)

Microsoft does allow users to manually exclude third-party cookies, as does Chrome. But Safari and soon Firefox will do this by default, stealing the wind from Microsoft's sails. 

And given Microsoft's history in terms of privacy and competition, it's easy to see the new ad - and Microsoft's whole privacy strategy - as a cynical ploy to acquire new IE users while denigrating its competitors. Even if that's true, privacy advocates said, Microsoft is at least doing something to address privacy issues. 

IE Trumpets Do Not Track, Tracking Protection

As a piece of advertising, Microsoft's spot does a fine job highlighting what users don't mind sharing, and what users would rather keep private. Microsoft focuses on two features in the 30-second ad: Do Not Track, which is turned on by default; and its Tracking Protection Lists. "Your privacy is our priority," is the tag line.

Do Not Track (DNT) merely asks a site not to track the user visiting it. At this point, Do Not Track is completely voluntary, and privacy advocates note that the vast majority of online advertising agencies decline to honor it. Microsoft's implementation of Do Not Track is little more than a symbolic gesture unless and until the online ad agencies agree to play ball. 

"Microsoft's DNT setting is fine, although it will likely be ignored until the W3C finishes the DNT standard, if ever," said David Jacobs, the Consumer Protection Counsel for the Electronic Privacy Information Center (EPIC), in an email.

Consumer watchdogs can still rattle their sabers, as Federal Trade Commission chairwoman Edith Ramirez did last week (PDF) in a speech to the American Advertising Federation. Ramirez warned that now was the time for industry stakeholders to nail down a Do Not Track agreement once and for all:

One can forgive stakeholders for thinking that it will always be so – for believing that 'not all the water in the rough rude sea can wash' the shine off this cyber-economy. But an online advertising system that breeds consumer discomfort is not a foundation for sustained growth. More likely, it is an invitation to Congress and other policymakers in the U.S. and abroad to intervene with legislation or regulation and for technical measures by browsers or others to limit tracking.

Tracking Protection lists are far more effective - they prevent websites from capturing information that the user doesn't wish to be shared. Right now, they're probably the most effective weapon that Microsoft has in protecting user privacy - but they rarely get used, according to Dan Auerbauch, a staff technologist with Electronic Frontier Foundation (EFF).

Which Browser Leads In Privacy Protection?

"Firefox and Safari I would say are in first place right now in terms of protecting user privacy," because of third-party cookie blocking by default, Auerbach said.

Safari blocks third-party cookies by default; Mozilla has begun blocking third-party cookies by default in its alpha or Aurora build, with the expectation that the standard build will block them by summer. Chrome users must turn on the feature themselves by following a few simple instructions. Microsoft IE users can do this as well - but again, not by default.

"I would hope that Microsoft would follow soon, and I think that they're well-positioned to be the leader [in privacy]," Auerbach added. "We're encouraged by this campaign from Microsoft, and we think that they have the ability to do really good things here."

What's Microsoft Really Up To Here?

Is Microsoft genuinely interested in user privacy, or is it simply raising the specter of intrusive advertising to win new converts to IE? If Microsoft hadn't run its Scroogled campaign, which has highlighted all the ways that Google allegedly misuses user data to its own commercial ends, the answer might be yes. As it is, it's difficult to see Microsoft's efforts as truly altruistic, given its past history.

"Ultimately, I'm not sure how successful the campaign will be, but I think it's generally good when companies compete on privacy," said EPIC's Jacobs. "I don't know what Microsoft's underlying motivation is, but regardless of whether it's altruistic concern for user privacy or self-interested profit maximization, consumers can still benefit."

Unfortunately, Microsoft hasn't said when or whether it will block third-party cookies by default, and company representatives weren't able to comment. Microsoft does seem to be making strides in protecting user privacy, but its competitors are poised to pass it by, if they haven't already.

Image: Flickr/Scubadive67

The Tale Of The Whale

The Whale was the work of artist Yiying Lu, whose now-iconic image was picked up by Twitter in 2007 to jokingly commemorate the site's accumulated days of outages. Since then, the image of a whale borne aloft by several tiny birds has  inspired its own Twitter fan club and Facebook page, along with an online repository of dozens of illustrations.

But now that Twitter's online performance has dramatically improved, there's a new Twitter icon that you probably will never see: the Success Loch Ness.

On the evening of April 8, following the Shorty Awards, Lu and other employees from Twitter were hanging out at The Pony Bar in New York City, when Tom Spano, the events coordinator at Twitter, asked Lu, "Since Twitter’s now became more and more stable, there’s less chance for folks to see your image. How about something opposite from the Fail Whale? Success Whale?"

The proposal was shouted down, Lu describes on her blog, because it didn't rhyme. Instead, Lee Semel, the founder of the Shorty Awards, suggested the Success Loch Ness - named after the infamous Loch Ness Monster, often called Nessie. And the rest, as Lu suggests, is history.

Twitter Gets Its Act Together

Go back far enough in Pingdom's logs of Twitter's uptime, and you'll find what could be the nadir for the site: an abysmal 92% uptime in March 2007, equivalent to being down more than two days in that month alone - just after Twitter hit the big time at South by SouthWest (SXSW). For the next few months, Twitter's uptime averaged about 98% - better, but still not great. In Dec. 2007, Twitter moved to a new data center, which helped significantly. Twitter still suffered occasional outages during the next few years, including slowdowns when Michael Jackson died in 2009, a denial-of-service attack that same year and more slowdowns during the 2010 World Cup.

But over time, Twitter slowly improved its performance to the point where the service now reports stellar uptime results. In seven out of the last twelve months, for example, Pingdom credited Twitter with a perfect 100% uptime.

All that has put Twitter in a celebratory mood.

Here's Twitter's Tom Spano holding both the original Fail Whale and the new Success Loch Ness:

The launching of the "Success Loch Ness", taking over from the "Fail Whale" vine.co/v/btLajquBZg0

— Jason Seed (@jasoncseed) April 12, 2013

Birth of the #SuccessLochNess, Vined, with Musika! vine.co/v/bUOzVuvwQlM

— Yiying Lu (@YiyingLu) April 18, 2013

Too Bad "Success Loch Ness" Doesn't Make Any Sense

It's great that Twitter has been able to move beyond the Fail Whale, but while its replacement may be far more positive, the new creature has its own grammatical, style and content issues. Loch Ness is a lake, after all. The Loch Ness Monster, if it exists, lives in the lake. More to the point, Success Loch Ness just doesn't trip off the tongue with quite the same ease. 

Image courtesy of Yiying Lu.

Hewlett-Packard, Dell, IBM, Fujitsu and Cisco sold the most servers during the fourth quarter of 2012, according to data released by IDC. But it's the "other" category that's scaring the pants off the others. That's a throng of second-tier and "white box" server vendors who collectively sold 879,711 servers during the quarter. Number one HP, by contrast, sold 663,598.

Look no further than IBM's reported plans to sell off its low-end serve business to Lenovo — likely Big Blue's attempt to escape an increasingly commoditized market while it still can.

True, IBM, HP, and Dell still each pull in more revenue than the the $1.86 billion amassed by the "others" horde. But that's cold comfort, given that low-cost unbranded servers are quickly eating into their markets. The commoditization trend is getting a hard push from companies like Google, Facebook and Rackspace, who are busily designing and building their own servers to power their huge data centers.

Server manufacturers are trying to shield themselves with software, services and support, three defenses against the Mongol horde of white boxes. Arguably, though, that hasn't worked for Big Blue, at least at the low end of PC-based servers. And there's no particular reason to think it will save HP or Dell over the long term, either.

On the surface, none of this will really disadvantage consumers or developers. It really doesn't matter to end users whose name is on the boxes that power Netflix, Evernote, Apple's iCloud, or Amazon. And there will always be a need for some sort of server, from somebody. In fact, commodization is an indirect but very real plus for users, since it lowers costs for Web providers, making possible  an increasing lineup of innovative, and often free, Web services.

But it's definitely bad news for the server makers themselves. 

This Has Been A Long Time Coming

Traditional PC manufacturers like IBM, HP and Dell have taken one hit to their businesses after another over the past decade or so. Desktop PCs started declining in price with the rise of the Internet, reducing the need to upgrade PCs. Then laptops ate further into that market as they began to rival desktop power while offering mobility.

Finally, tablets and smartphones tapped the cloud for computing and location, and far more cheaply, limiting the need for people to buy expensive laptops.

That left PC-based servers — and that market is now under siege as well. The days of the mainframes came and went, and most server infrastructure now runs on the Xeon processor, Intel's PC processor optimized for the enterprise. Traditional mainframe processors — IBM's Power, Oracle's Sparc — retreated to the ivory towers of research computing. Meanwhile, companies like former Taiwan motherboard makers Supermicro or Asus realized that they can assemble a notebook or server just as well as a Dell or HP, and for less.

As prices of traditional PCs fell, hardware makers turned to new tactics, loading up new machines with "crapware" ranging from trial versions of AOL to antivirus programs to games. Consumers hated it, but the revenue crapware provided, directly or indirectly, helped keep hardware makers afloat.

Unfortunately, there's no way to duplicate that strategy in the server space. IT managers don't want servers cluttered up with Adobe Flash, Cyberlink PowerDVD, Roxio Creator, or any of the other bloatware that Dell places on its PCs. They do, however, want some help just making sense of it all.

Geek Squad On Steroids

Enter "solutions," the jargon that dominates enterprise discussions. Suddenly, the PC turned server makers weren't selling a PC, monitor and printer; they were packaging together a server, associated storage, a network switch, security, migration, and engineering services and support to tie it all together. Put extremely simplistically, an enterprise solution is everything that the Geek Squad offers, just scaled up by orders of magnitude.

In 2012, for instance, Dell bought Clerity in order to help Dell Services "reduce the cost of transitioning business-critical applications and data from legacy computing systems and onto more modern architectures, including the cloud." In the PC space, that's called dumping the contents of Mom and Dad's old PC onto a USB key and loading it into Google Drive.

Then again, Dell's enterprise "solutions" business climbed 4 percent last quarter, and pulled in $19.4 billion for its last fiscal year — about a third of its revenue. Cha-ching.

The central idea of the enterprise solution isn't the packaging. It's the customization, and the investment. Hewlett-Packard, for example, offers a fairly substantive list of industry-specific solutions for aerospace, automotive, and media, among others, with each pitching an additional value-added service. This was a tactic the same companies never really deployed in the PC market, perhaps because they never saw the need — or couldn't justify the investment — in designing PCs optimized for, say, tax professionals. 

Adding Value to a Commodity Business

Still, the "other" category is compelling evidence that a sizeable portion of the market seems to be unwilling to pay hardware makers for their services. Instead, they're pooling their resources. Massing and deploying large arrays of commodity hardware is the underlying principle behind everything from Hadoop — an open-source project for managing huge stores of data across distributed commodity servers — to the Open Compute Project. In that sense, the commodity server business is thriving.

And the PC makers themselves are helping it along, believing they can surf the trend by offering software and services on top of commodity hardware.

Dell's Data Center Solutions business, for instance, is a small but growing custom solutions business within Dell's larger server sales business. In January, Tracy Davis, the general manager of Dell DCS, attended the Open Compute Summit, whose principles include stripping the "vanity" logos from servers and replacing them with as much cost-optimized hardware as possible. Why would Dell participate in a forum seemingly designed to kill it off?

Davis told me that Dell is able to engage — and sell — everything from engineering services to Dell's ability to buy components all over the world. That's a competitive offering, not necessarily reflected in the bottom line, that still adds value to Dell's business versus a no-name, commodity server maker.

The Writing Is On The Wall

In some sense, things came to a head this week after CRN and other outlets reported that IBM was in talks with Lenovo to sell its low-end X86 server business for between $5 billion and $6 billion — an eerie parallel to the way Big Blue sold off its ThinkPad notebook business to Lenovo years ago. IBM hasn't confirmed or denied the talks.

"Assuming IBM divests [its] low end (low margin) x86 biz to Lenovo, HP and Dell should be concerned because Lenovo can make [money] and disrupt [the] space,” Matt Eastwood, an IDC server analyst, wrote on Twitter. The idea, Eastwood and others suggested, was that IBM couldn't squeeze money from a commodity business. Lenovo can.

But what's the commodity? Generic servers? Not necessarily. 

Solutions Can Be Commodities, Too

IBM's highest-profile service is Watson, the natural-language technology that beat several past "Jeopardy" champions and is being used in financial services and to help treat cancer patients. Watson and other related services run on servers based on its Power chips, not x86. Yes, IBM deploys a whole slew of services on its line of x86 servers — but they're awfully similar to what everyone else does, too.

Eventually, companies like ARM say, we'll all be running servers on the sort of low-power processors that power our cell phones, with the Web's basic functions — serving up static Web pages, for example — running on cheap, purpose-built machines. These aren't just commodity servers; these are commodity solutions. Meanwhile, companies like Google and Facebook are quietly building their own custom servers to fit their own, specialized needs.

Here's what IBM may be thinking. Since its highest-value, unique service offerings run on Power, they justify further investment. And if IBM can offer uniquely high-value services on top of the cheaper x86 boxes, then it should hold onto those, too. But if the company can't see customers turning to IBM for those solutions — either now or in the future — then IBM's justified for ditching them while the getting is good.

IBM led the way in pulling away from the PC in 2004, a controversial move at the time that now seems more than justified. If IBM takes the same approach with its x86 server business, it may be a similar harbinger of doom for other makers of x86 servers.

Image courtesy of Hewlett-Packard