If the Xbox One is the future of gaming, then that future is as grim as everyone feared.

In an event Tuesday morning that felt like a casual bar conversation compared to Sony's brain-exploding extravaganza back in February, Microsoft unveiled the next-gen Xbox — not in a giant conference center, but in a tent set up on a soccer field at its Redmond campus.

With a hard-line focus on the One's television connectivity and a smart decision to actually show off the physical console, Microsoft pulled off a tight one-hour presentation that glazed over the trickier undercurrents at play. But the devil is in the details, and it's now apparent that while the Xbox One will definitely not require a constant Internet connection, as many had feared, it's still the most restrictive console ever made. 

As the event highlighted, the One is an aggressive grab for the living room from the get-go. But for gamers, long the core market for the Xbox, two really important questions remain. How much of the hardware we buy do we really own, and how far can and should a manufacturer go in telling us how to use our console?

Microsoft drew some very serious lines in the sand today. It's up to consumers to decide whether or not to play ball. 

Microsoft's Iron Grip

The rumor of a universal always-online requirement was finally quelled, but even more mysterious news boiled up in its place. Microsoft openly revealed that the One will require users to download all games to the console's hard drive to play, but Wired's Chris Kohler reported that to do this a second time with the same disc will require a player to pay an unspecified fee.

Microsoft quickly responded by saying that the Xbox One will "enable customers to trade in and resell games" and that the company will have more details to share later, likely at the Electronic Entertainment Expo next month. But the same spokesperson also added this ominous note in a comment to the game-news site Polygon:

Xbox One’s support for used games and these other scenarios may not look like they have on previous console generations, and that’s what we’ll be explaining as soon as we’re able.

That's as clear as mud, of course. But tacking on fees for re-using an already-purchased game disk could seriously damage the used game market, or even kill it entirely. Not only would used games get more complicated to rebundle and price, resellers would likely offer less for used games in the first place.

That would antagonize retailers and consumers alike. It would be a giant step backward in an era where a game that provides maybe 8-10 hours of gameplay will still cost $60. Such a policy could even boomerang on game developers themselves, since many gamers finance their purchase of new games by trading in their old ones. If the trade-in market vanishes, so does that source of cash for new purchases.

The good news here is that a used game fee was "a surprise" to GameStop President Tony Bartel when he spoke to Polygon. Bartel went on to call the fee requirement "speculation." In a separate statement to ReadWrite, the company replied, "GameStop is working closely with Microsoft to ensure there is an opportunity for customers to take advantage of our popular buy-sell-trade model and provide a seamless transition for consumers to enjoy the next generation of console gaming." 

While the Xbox One will be able to operate without an Internet connection, the always-online issue won't go away entirely. Microsoft announced that it will be handing that ability over to publishers, who can designate certain game functions that will only work on Microsoft's Azure cloud platform — in other words, effectively requiring an Internet connection to play.

This isn't great news, especially considering Electronic Arts took the stage at the One unveiling. EA, voted the worst company in America two years in a row, recently tried to play nice with its consumer base by discontinuing its insane Online Pass program, which charged gamers a fee to access some online levels or items via a used game disk. But you can bet the company will be near the front of the line when it comes time to bake core game functions into the cloud to make an online-only gaming world an unavoidable, and unpleasant, reality.  

Say Goodbye To Your Current Collection

So what about that huge library of Xbox 360 games you've collected so far? Sorry, those won't work on the One. (PlayStation 3 games won't work on Sony's upcoming console, either, so there's plenty of blame to go around on this front.)

But what about all those awesome indie games you've downloaded through Xbox Live Marketplace or the full 360 titles you bought digitally? Those will carry over, right? Nope. It turns out that only music, movies, and TV shows purchased through Xbox Live will follow you to the One.

Then there's the Kinect. While it sports very impressive voice recognition and motion control, reports quickly surfaced that the updated camera-sensor combo will need to be plugged in at all times to use the One. For starters, that's both annoying and a bit creepy, considering the Kinect will be on all the time watching everything you do. But this bit of news also suggests that the One itself might be pretty pricey, if it comes with the next-generation Kinect bundled.

Your Move, Sony

To be sure, Sony's PlayStation 4 could be equally bad, or even worse; we won't know until Sony really unveils it at E3 next month. For the moment, though, Sony at least stands a chance of offering a more consumer-friendly future for console gaming.

Is it inevitable that both the software and hardware we buy in the gaming realm, be it the new SimCity or the next-gen Xbox, are simply no longer ours to own, let alone to hack and mod and use in the way we're most comfortable?Microsoft may not have come out and said so outright, but it's certainly taken quite a few steps down that gloomy manufacturer- and publisher-dominated road.

Photos by ReadWrite's Taylor Hatmaker for ReadWrite

Today in Redmond, Microsoft unveiled the Xbox One, its vision for the future of home entertainment. The Xbox One will expand Microsoft's Xbox agenda well beyond gaming, blurring the boundaries of gaming and interactive TV further than ever.

Let's take a look.

The Xbox One isn't much of a departure when it comes to design — but the tech under the hood is on steroids and then some.

With integrated Blu-Ray, Kinect and a whole new batch of hyper-responsive voice and gesture controls, Microsoft is angling for casual gamers and the hardcore set alike.

Microsoft's "futureproof" Xbox One features a reimagined (but not wholly reinvented) controller with developer-programmable buttons and "vibrating impulse triggers" that provide tactile feedback.

The Xbox One soaking up the spotlight... literally.

Microsoft hosted its Xbox One event in a tent at the center of at its Redmond, Washington Xbox campus.

Don Mattrick takes the stage for the biggest reveal moment of the day: the name of Microsoft's new console.

If the Today Show is any indication, the Xbox ain't just for l33t gamers these days — it's a console designed for the whole family.

Microsoft's new Xbox Live design takes after the successful formula of its predecessor rather than reinventing the wheel.

The Xbox One's multitasking chops on display, featuring a live Skype video chat demo.

With a demo of Call of Duty: Ghosts for the Xbox One, FPS fans are in understandable throes of ecstasy today. The new shooter will take the hit franchise in a new direction, setting the player up as the underdog in a ragtag team of post-apocalyptic warriors, who are presumably ghost-like in some capacity.

Since we can only assume that a handful of gamers out there won't be so into the Today Show thing, Forza Motorsport 5 will launch with the Xbox One.

The Xbox One may have made its photo op, but one big question remains: price. With so many advanced features on board, it's hard to imagine that the console will be able to match the $299 bill of its predecessor's base model. If Microsoft really wants to stave off the competition when the console becomes available—"later this year," executives said—the Xbox One's price tag needs to be as impressive as its spec sheet.

Photos by Taylor Hatmaker for ReadWrite

It's not every day one of the big three gaming powerhouses announces a new console. In fact, we've been waiting a solid eight years. In an event on its Redmond, Washington home turf today, Microsoft announced the Xbox One, its next generation Xbox gaming console — and more.

In fact, the Xbox One is pretty much an audacious land grab by Microsoft, an attempt to stake out your living room as its undisputed turf. Here's how.

The new console packs 8GB of RAM, a base 500GB hard drive, USB 3.0, wi-fi direct, and built-in Blu-Ray. The One runs on a custom eight-core AMD chip and will come bundled with Kinect, the motion-based controller system that Microsoft introduced with the Xbox 360.

 

Contrary to rumors, the Xbox One will not require an Internet connection at all times. Though it may crimp your ability to play used games and apparently won't play Xbox 360 games at all. 

 

On stage in Redmond, Head of Xbox Don Mattrick touted the Xbox team's ability to stay agile with trends — not always the company's strong suit — by feeding the voracious appetite of avid gamers. "Nearly 8 years after our launch, the Xbox 360 remains a vibrant platform," Mattrick said. "We made an early bet on Xbox live. Gamers were hungry to adopt emerging technologies... we doubled down on Xbox Live. Today it's time for technology to step behind the curtain."

But it is in the living room that the Xbox One stakes its major claim to fame. A new generation of Xbox Live will be the revamped, beating heart of the console, weaving together interactive TV, real-time major broadcast events like sports and awards shows and connected gaming, naturally.

The new Xbox Live interface enables quick-switching between Xbox Live's homescreen, movies and live TV — and in the demo, quick meant quick. ""You can switch to your game like it's a TV channel flip" according to Xbox Live head Marc Whitten. The quick-switching is thanks to "snap mode," a multitasking feature that allows apps to remain running in the background so that they can pop back up instantly.

By hosting its own event on its own terms, Microsoft is jumping the gun on E3 — the biggest North American gaming conference, and traditional grounds for big, flashy hardware announcements. Of course, Microsoft is also beating Sony to the punch, considering that the rival's PlayStation 4 reveal is just around the corner too. 

All photos by Taylor Hatmaker for ReadWrite

As cloud computing services become ever more popular, you might begin to wonder how much you can really trust them to perform when you need them? I decided to find out - by testing the top file-transfer/file-storage/file-backup services.

In many ways, getting a file from one computer to multiple computers is the most challenging task for the cloud. And because I like to use multiple computers running multiple operating systems, including Linux, Windows and the Mac, that function is particularly important to me.

Cloud Services Can Lag

I am pretty agnostic when it comes to cloud providers - as long as they are free or close to it. However, as I was moving files around while preparing my most recent book A Week at the Beach The 2013 Emerald Isle Travel Guide I was a little surprised at the lags I sometimes experienced using the big-name cloud-based file-transfer services.

More than once when I wanted to use a file from one computer to another, I was disappointed by my cloud services. There were a few times that I got so tired of waiting for a file to show up on my other computer’s cloud drive that I resorted to sneakernet using a USB thumb drive.

After my book was published, I decided to go back and run some simple tests to see just how long the four best-known file-transfer/backup services actually take to put the files where you want them.

To compare Dropbox, Google Drive, Amazon Cloud, and Microsoft’s SkyDrive I started by exporting a 500K JPEG test image from Lightroom on my Windows 8 computer directly to each of the four services.

Fighting The Randomization Factor

After running the tests a few times, I noticed what can only be described as random operating system differences. Sometimes the file would pop up first on my Mac and other times it showed up first on my Windows 7 laptop.

In order to eliminate the operating system differences, I restarted the tests and this time stopped the timer when the file showed up on either my Mac running Mountain Lion or my Windows 7 laptop. I also reran my tests with a variety of sizes and types of files. In all I ran twenty-five sets of tests.

The differences were significant, if not overwhelmingly huge. The fastest synchs took less than 3 seconds, while a few others took several minutes. The biggest chunk of tests clocked in between 10 seconds and one minute. A few synchs never completed. But which service recorded the best times with the fewest problems?

Dropbox FTW!

Dropbox ended up being fastest 56% of the time. Even more importantly, it was slowest only 4% of the time.

Skydrive brought up the rear. It was fastest on 12% of the tests, but but slowest on a whopping 80% of the tests. It also had two files that never showed up on the Mac and one that never showed on the Windows 7 laptop.

The Amazon Cloud slightly outpaced Google Drive - which had one file that never showed up on the Mac and another that took a very long time to complete.

If my tests convinced me of anything, it is that Skydrive is a work in progress and has a long way to go. I even had trouble setting up the tests on Skydrive.

My tests also revealed a number of odd results. When testing files saved from Word, strange extra files sometimes showed up on all the cloud drives except Dropbox. The file names always began with the characters “~$”. Sometimes the mystery files disappeared and sometimes they hung around.

Cloud Drive Recommendations

So here are some quick recommendations:

• First, do not treat your cloud drive as one huge dumping ground. Create folders and try to force a little organization on yourself.
• If you save a file to the cloud in order to work on it from another computer, quit the application or close the file on the first computer after you have saved the file to the cloud drive.
• Make sure you have a local copy of important files in your documents folder - not just the replicated cloud folder on your computer. Interesting things sometimes happen when cloud files get updated or deleted from another computer. When you come back to the computer where you first created a file, you could be in for a nasty surprise.
• If you cannot get a cloud folder on your computer to update, trying quitting the cloud application or rebooting your system.

Dropbox and Amazon appear to be the most reliable solutions with only occasional delays. Google isn't far behind, and I can't imagine that Microsoft won't work hard to improve Skydrive - the company's subscription model depends on it.

Even so, I have no plans to throw away my USB thumb drives.

Google's alternative to Microsoft Office, Google Apps, has always suffered from the fact that it offers a sort of "good enough" compatibility — fine for most basic document and spreadsheet tasks, but not enough to match certain Office features.

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

Google has formally demanded that Microsoft yank its new YouTube app for Windows Phone, which allows users to skip ads and download YouTube videos — both of which violate YouTube's terms of service. The Verge has the full text of Google's cease-and-desist letter, which is dated today.

ReadWrite reported on the Microsoft app's apparent rule-breaking last week.

Updated 10:24am PT on May 16: A Microsoft PR representative emailed us a statement in response to Google's letter:

YouTube is consistently one of the top apps downloaded by smartphone users on all platforms, but Google has refused to work with us to develop an app on par with the apps for other platforms. Since we updated the YouTube app to ensure our mutual customers a similar YouTube experience, ratings and feedback have been overwhelmingly positive. We’d be more than happy to include advertising but need Google to provide us access to the necessary APIs. In light of Larry Page’s comments today calling for more interoperability and less negativity, we look forward to solving this matter together for our mutual customers.

Microsoft's much-anticipated updated to Windows 8 will be free, will be called Windows 8.1 and will be out "later this year."

All this news came on Tuesday when Tami Reller, the CMO and CFO of Microsoft's Windows Division, addressed JP Morgan's Technology, Media & Telecom Conference. Reller wouldn't commit to a launch date, but promised a public preview edition when Microsoft's Build 2013 developers conference opens on June 26.  Some reports interpreted Reller's remarks to hint at a full release around the Holidays.

Windows 8.1 will work on both Windows 8 and Windows RT, the version of the operating system that runs on ARM processors. 

See also:

• Microsoft Is Trying To Build - And Sell - A kinder, Gentler Windows 8
• Windows Blue's Goal: You Will Love Metro (Eventually)

Tami Reller image is from an earlier Microsoft event.

A quiet upgrade to Bing's language translator today has added Klingon, in both the Latin and Klingon alphabets. 

That's great news if you wanted to ask, "How does one get 'Scroogled'?" in the elegant tongue of Star Trek's most warlike species. The answer, of course, is "chay' Qu' 'SchrooghleD' wej wa'?" 

Or perhaps you were wondering the best way to phrase, "How much, in fluid ounces, does Steve Balmer sweat every time he's onstage?" A Klingon would say: "'ar, tlhluID ouncheS, Qu' Sweat steve balmer Hoch poH ghaH onStaghe?"

The feature also works for translating entire webpages and in the Bing translator app for Windows Phone. Check out a screenshot of the translator's use of the Klingon alphabet below, and feel free to retire that paperback Klingon Dictionary you've been keeping in your bag for special occasions. 

Image courtesy of YouTube video Klingon Style.

Bill Gates was the subject of last night's 60 Minutes and he and host Charlie Rose touched on a wide array of topics, primarily the billionaire's humanitarian efforts under the Bill & Melinda Gates Foundation. 

While the focus may have been on life after Microsoft, the interview also included emotional recollections from Gates as he recalled the last time he saw longtime rival Steve Jobs alive in May of 2011. He recalls Jobs being very forward-looking, focusing both on heavy subjects like where technology had failed education as well as personal ones, like finishing his 260-foot yacht Venus despite the somber realization from both he and Gates that it was unlikely he would ever set foot on the finished vessel. 

When asked, as he often is, what he think Jobs was better at, Gates immediately responds, "His sense of design, that everything had to fit an aesthetic...it shows that design can lead you in a good direction and phenomenal products came out it."

Watch the unaired footage from the interview below: 

All the computers on the International Space Station that used to run Windows XP now run Linux, reports Extreme Tech. The reason: Microsoft's OS just wasn't "stable and reliable" enough, according to the United Space Alliance, the spaceflight operations company that manages the hardware onboard the ISS in conjunction with NASA.

Image courtesy of NASA. 

Who needs apps? Microsoft buying Nook Media would be a a brilliant move: Microsoft would add millions of e-books that consumers want, to supplement tens of thousands of apps that, well, they don't.

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)

Microsoft appears to be sticking a finger in Google's eye with the launch of its new YouTube app for Windows Phone. The app, ReadWrite has confirmed, strips out YouTube ads when it plays back videos and allows users to easily download video by way of a prominent "download" button.

Both behaviors violate the cardinal rules YouTube imposes on developers who use its service. To get around those restrictions, it appears that Microsoft reverse-engineered some portion of the software used to access YouTube's basic functions, which are generally known as application programming interfaces, or APIs. If so, that could mean Microsoft can do just about whatever it wants with its YouTube app.

Google had previously declined to build a YouTube or any other Google apps for Windows Phone 8, citing the lack of users on the platform.To get an official YouTube app on Windows Phone, Microsoft decided to circumvent Google and just build the app itself. 

YouTube's restrictions, found in section II of its terms of service, are fairly explicit:

Your API Client will not, and You will not encourage or create functionality for Your users or other third parties to:

[...]

7. modify, replace, interfere with or block advertisements placed by YouTube in the YouTube Data, YouTube audiovisual content, or the YouTube player;

[...]

11. store copies of YouTube audiovisual content;

In a variety of tests, ReadWrite found that the Microsoft YouTube app indeed appears to be stripping pre-roll ads from videos that would normally appear. Ads appear on both this video from BuzzFeed on the Web and Android as well as this video from popular YouTuber Jenna Marbles. Neither of the videos had pre-roll ads when viewed via the Microsoft app.

As for downloading, that's fairly easy to spot in Microsoft’s YouTube app — there's an entire button dedicated to it. See the screenshots below.

Microsoft admitted to Neowin.net, a technology website that focuses on Microsoft, Apple and Linux news, that it had re-architected some of YouTube’s APIs to get the app to work. A Microsoft PR rep confirmed the statement below and offered no further comment:

Windows Phone invested additional engineering resources against existing APIs to re-architect a Windows Phone app that delivers a great YouTube experience, including support for unique Windows Phone 8 features such as Live Tiles and Kids Corner. Microsoft did not receive any additional technical support to create the Windows Phone YouTube app.

Neither Microsoft nor YouTube had responded to requests for further comment as of this morning. We'll update the story when and if we hear back.

This wouldn't be the first time that Microsoft has reversed-engineered Google. In February 2011, Google caught Microsoft's Bing search engine copying Google search results. Google had set up a “honeypot” trap to catch Microsoft in the act.

It's official: patent litigation is a fool's game. As reported in The Wall Street Journal, the past few years of patent litigation in the mobile industry have yielded participants very little, as courts have swatted down suits on the basis of prior art, obviousness of the technology or other reasons. However, Microsoft, by quietly, consistently threatening without overtly suing, has managed to pull in billions of dollars in license fees from Android licensees.

In other words, speak softly and carry a big stick?

Suing Competitors: It Seemed Like Such A Good Idea

For years the mobile industry has been a morass of patent suits and countersuits. Everyone seems to be suing everyone. Yet, as the Journal reports, the industry has little to show for this except tens of millions of dollars in legal fees.

Not only have courts been prone to strike down the lawsuits, even when they've accepted a patent litigant's claims they've tended to take years to actually settle on anything and even then have rendered judgments that give the prosecution far less than they'd hoped. In technology, which moves at a blistering pace, court cases that take years are largely irrelevant, whatever a court may ultimately decide. By the time courts get around to rendering judgment, the industry has moved on.

Hence, for all Apple's attempts to kill Android in the womb, Google's open-source mobile operating system now dominates the industry, and its primary licensee, Samsung, bests Apple in market share.

This leads Stanford law professor Mark Lemley to quip, "buying up a few patents and trying to get rich off them by suing is a questionable pathway to profitability." It has also pushed Microsoft to take a different tactic: threaten, don't sue.

Profiting From The Threat Of Litigation

Microsoft has never been one to sue. In its long history, the company has only taken someone to court a small handful of times, and itself has had to pay out more than $9 billion in damages. Perhaps because of how hard Microsoft has been spanked by the courts, it has taken a different tactic with Google Android.

As reported by Reuters, Microsoft now makes far more on Android patent royalties than it does on its own Windows Phone OS. (For some this might make Microsoft a patent troll, but we'll leave that for a separate blog post.) In fact, by some estimates Microsoft will clear $3.4 billion in Android royalty fees in 2013, and is on pace to top $8.8 billion within the next few years.

Not a bad haul for simply sending lawyers to sell fear about its patent portfolio. 

Commenting on Microsoft's claim that it now collects royalties on 80% of all Android devices shipped, Google spokesman Matt Kallman declared: "This is the same tactic we've seen time and again from Microsoft. Instead of building great new products, Microsoft attacks the competition and tries to drive up the prices of Android devices for consumers."

Patent Infringement? You Bet

Of course it's possible that Microsoft's patents are rock-solid; that their quality is super-high and could never fail in court. It's also possible that Steve Ballmer is Santa Claus.

Here's the reality of patents: everyone violates everyone's patents, all the time. The US Patent and Trade Office has been issuing patents of such dubious quality for so long that this isn't merely speculation: it's an absolute given.

Perhaps for this reason Microsoft prefers to do its patent "litigation" in the quiet conference rooms of LG, ZTE, Asus and other Android licensees. Behind closed doors, Microsoft can persuade listeners that its patents are being violated (they likely are) and that a court would find for Microsoft (it likely wouldn't). The risk to these licensees is enough that they sign on the dotted line, and Microsoft mints money without actually having to sell anything.

Microsoft: We Come In Peace

Microsoft, not surprisingly, articulates its strategy much differently. It is the injured party, Microsoft Corporate Vice President and Deputy General Counsel Horacio Gutierrez intones:

"Much of the current litigation in the so called “smartphone patent wars” could be avoided if companies were willing to recognize the value of others’ creations in a way that is fair. At Microsoft, experience has taught us that respect for intellectual property rights is a two-way street, and we have always been prepared to respect the rights of others just as we seek respect for our rights. This is why we have paid others more than $4 billion over the last decade to secure intellectual property rights for the products we provide our customers."

I don't doubt Gutierrez's $4 billion figure. I do doubt that it's in any way commensurate with the amount of money Microsoft is extracting from the Android market for patents that likely wouldn't win in court.

Standing Up To Microsoft

This was Microsoft's same strategy on the server. Microsoft tried to shake down enterprise IT and enterprise software vendors. Despite proclaiming to the industry that Linux violated 235 Microsoft patents, the strategy largely went nowhere, except with Microsoft's partner, Novell. For years, Microsoft trotted out Novell to show how "responsible" companies worked with Microsoft.

Fortunately, few took the bait. The industry stood firm, Linux founder Linus Torvalds demanded that Microsoft actually name the allegedly infringed patents publicly and stop its whisper campaign, and Microsoft ultimately had to compete on the merits of Windows Server, not patent litigation. Guess what? Microsoft has done very well. It didn't need patent litigation to compete.

It would be nice to see Microsoft do the same in mobile or, at least, to have the mobile industry stand up to Microsoft.

Yes, there's a risk of going to court but, as recent court cases have shown, that risk is becoming smaller all the time. Courts don't like competition-via-lawsuit, particularly when the lawsuits are fueled by specious claims and dubious patents. Microsoft has shown it can compete when its whisper campaigns fail.

It's time to give Microsoft the chance to prove itself in mobile, too, rather than collect fees on others' hard work.

Last weekend, the busiest spot at Fry's Electronics in Concord, Calif., was the notebook PC aisle, where eager salespeople buzzed about from customer to customer, eager to show off Windows 8. It appears that this new, kinder, gentler approach to selling Windows 8 is part of a larger Microsoft strategy that involves both altering the software itself and improving the retail experience. 

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.

If you believe companies formed to litigate patent suits aren't worth a lick of spit, then meet the new Dr. Evil: CopyTele Inc. (CTI), which sued Microsoft on Wednesday over encryption technologies used in Skype.

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.

VMware has a firm if fading grip on the server virtualization market, but according to IDC analyst Al Gillen, virtualizaton serves as a convenient on-ramp to private cloud, which in turn leads to the public cloud. Is VMware paving IT's path to Amazon, Microsoft Azure, Rackspace and other public cloud providers?

Not exactly.

Virtualization: Still Relevant, Mostly VMware

According to Gillen, who spoke at the Open Business Conference (OSBC) in San Francisco earlier this week, VMware continues to dominate the virtualization market, with just under 60% market share. VMware's installed base, coupled with CIO resistance to change, mean that VMware's hold on virtualization should persist for years. 

That's the good news.

The bad news is that VMware faces fierce competition from Microsoft's Hyper-V, currently claiming over 25% of the market, as well as a strong and growing threat from KVM, now bolstered by a rising OpenStack. KVM deployments grew 50% last year, according to IDC. Xen, the other open-source virtualization alternative, remains robust but isn't growing as fast, though its move to the Linux Foundation may help to revive its growth.

By themselves, however, none of these virtualization competitors poses much near-term risk to VMware. Of far greater importance is a distinct trend toward multi-hypervisor environments, as well as an enterprise shift from virtualization to cloud.

Each of these trends threatens VMware.

Multi-Hypervisor Trend No Friend To VMware's Cloud

According to Gillen, some 15% of enterprises deploy multiple hypervisors today, but Gillen expects that number to double in the next one to two years, with cost being a primary driver for experimentation with new virtualization technologies. The more enterprises experiment with non-VMware virtualization technology, the more likely they will also diverge from VMware's cloud offerings.

Why? Because virtualization is a clear precursor to cloud adoption.

According to IDC's Platform Migration MCS, January 2012, roughly 80% of servers that enterprises are migrating to the cloud are already virtualized, rather than being virtualized as part of the migration. Often, enterprises will rely on their virtualization vendor to walk them into the cloud, with private clouds the first stopping point on the way to public clouds.

As such, VMware has actively been building out both private and public cloud options, creating a clear "upgrade" path for its enterprise buyers. As Matthew Lodge, VMware'e vice president of Cloud Services, emphasizes, VMware enables enterprises to stitch together “what they have in their data centers and their public cloud instance.” All running on VMware technology.

It's a compelling strategy, one also being adopted by Microsoft (Windows Server + Hyper-V + Azure) and Red Hat (Red Hat Enterprise Linux + Red Hat Enterprise Virtualization + OpenShift or OpenStack), among others. 

Virtualization Not The Only Path To The Cloud

But not all workloads follow this single vendor path. Indeed, Gillen cited IDC's 2012 Cloud System Software Survey, which found that transitions to the cloud allow vendors to "sell cloud system software on its own merits and embed a hypervisor as part of the package." Some 53% of those surveyed indicated that they were using a new hypervisor in their cloud deployment, compared to the 47% using their existing technology. 

In Gillen's words, this "opens the door for non-installed alternatives such as KVM into VMware-dominated shops." 

This is particularly true for new applications that are born in the cloud, especially public clouds, rather than old workloads being migrated there. We're already seeing a class of applications skip the private cloud altogether, starting up on public clouds like Amazon. And while many enterprises still haven't dipped into the cloud, it's interesting to see what little variance there is between private and public cloud adoption:

Add to this Rightscale's finding that 77% of enterprises are using multiple clouds, and it seems doubtful that any vendor will be able to gently lead enterprises from its virtualization technology to its cloud. Fragmentation is the norm.

The Cloud? It's Complicated

VMware isn't going away anytime soon, in part because the enterprise moves slowly, and in part because VMware has a compelling cloud story for enterprises when they do decide to graduate from simple virtualization to private and public clouds.

But that "graduation" path is messy, with plenty of room for enterprises to find their way to different hypervisors and competing clouds. For these reasons, the virtualization and cloud markets may well be among the most competitive technology markets we've seen in a long time.

Image courtesy of Shutterstock.

While Microsoft is obviously having trouble convincing consumers to adopt Windows 8, its message is that enterprises have been far more accepting. It turns out that might not be true, either.

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.

After months of promises, Microsoft finally integrated Skype with Outlook.com, its cloud email and calendaring service. But for its next act, Microsoft may well put Skype on its Xbox console — a move with far more intriguing, and even disturbing, ramifications.

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.

Windows Phone got some good news and some bad news today from the consumer research firm Kantar. The bad: Microsoft's smartphone OS accounted for a meager 5.6% of all U.S. smartphone sales in the first quarter. The comparable number for Android was 49%; for iOS, 44%.

The good: Windows Phone's showing was a significant improvement, up a full 1.9 percentage points over a year earlier. By contrast, Blackberry — which is rolling out its new operating system, BlackBerry 10 — saw its U.S. share crater in the quarter to less than 1% from 3.7% a year ago. 

In a statement, Kantar analyst Mary-Ann Paralto noted that Windows Phone is "now at its highest sales share figure" ever in the U.S. 

Possibly in anticipation of the good news, Microsoft has just released a new Windows Phone commercial. It doesn't show off the platform nor offer any reason why Windows Phone is a better choice than its rivals. Rather, it takes a page from Samsung and mocks both iPhone and Android users.

When you're far behind in the market, casting yourself as a viable alternative to the market leaders — while simultaneously mocking said leaders — can be a winning strategy. Or, you know, it can smack of desperation.

In this case, however, the ad is so over-the-top, and Microsoft appears to be having so much fun making fun of iPhone and Android users, that it works. Android users are silly hipsters. iPhone users are old. Siri doesn't work. Samsung devices are ridiculously large.

Will the ad help Microsoft sell more Windows Phone phones? Doubtful.

The problem is that the ad is focused on the wrong audience: current iPhone and Android users. Even at the end, Microsoft says, "don't fight, switch." Only, those existing users aren't Microsoft's logical target. Microsoft needs to target folks who haven't yet chosen a side — that is, owners of non-smartphones (what the industry, for its own unfathomable reasons, calls "feature phones"). The Kantar survey noted as much (emphasis added): 

Windows strength appears to be the ability to attract first time smartphone buyers, upgrading from a featurephone. Of those who changed their phone over the last year to a Windows smartphone, 52% had previously owned a featurephone.  

Building market share based on getting iPhone and Android users to switch is likely not a winning strategy, at least not yet. An analysis of U.S. smartphone owners, for example, found that 91% of current iPhone owners planned to stay with the platform — and the majority of those who were likely to switch planned to switch to Android. A smaller, though still sizable 76% of Android users planned to stay with the platform. Most of those likely to switch intend to get an iPhone, not Windows Phone.

But there's no reason to expect the rational from Microsoft — not when it's so far behind. With the new mocking ad, and the large gap between Windows Phone and leaders iPhone and Android, expect Microsoft's marketing to become even more aggressive and in-your-face.

Earlier this year, founder Bill Gates publicly stated he was not pleased with Microsoft's mobile device sales and he characterized the company's smartphone strategy as a "mistake." That no doubt lit a fire under Steve Ballmer and company. Who knows, maybe the scenes inside Microsoft's Redmond headquarters are as acrimonious as those in its newest commercial. 

Along with the U.S., Kantar tracks smartphone sales data in 9 countries, including China, Australia, Japan, France and Great Britain. Now that Symbian has been effectively deprecated, Windows Phone appears set to take third place — a very distant third place — in all of them, with the possible exception of Japan.  

Lead image from Windows Phone video

Let's say the rumors are true, and that Microsoft does in fact bring back the Start button and a boot-to-desktop option to address longstanding user complaints. Can that fix what's ailing Windows 8? 

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