Microsoft is making its antipiracy check mandatory for Office.

The company introduced Office Genuine Advantage in April as a voluntary way for people to ensure that they only used licensed and legal copies of the productivity software. But as of Friday, Office Online templates downloaded from within Microsoft Office System 2007 applications will require validation of the Office software in use.

And as of January 2007, people will also have to complete the authentication test if they want to use Office Update.

The move means that users who are caught using software that can’t be proved to be 100 percent legal won’t get access to add-ons and updates from Microsoft. Those denied access because their version does not pass the authentication test will need to prove that their software is valid before they can proceed.

Microsoft says it will “continue to provide a complimentary copy of Microsoft Office to help qualifying customers who unknowingly acquired counterfeit versions of Microsoft Office 2003.” But users will need to “fill out a counterfeit report, provide proof of purchase and send in their counterfeit CDs” to prove their entitlement to a free replacement copy of Office.

Customers who have “unknowingly acquired” a counterfeit version of Office and can’t provide these details will have to pay a license fee, Microsoft said. This will be $359 for the Office Genuine Advantage kit for Microsoft Office Professional Edition 2003, while the Microsoft Office Small Business Edition 2003 costs $269 and the Microsoft Office Student and Teacher Edition 2003 costs $139. This offer is available for November, the company said.

Tony Lock of analyst firm Sageza said that the licensing changes were not unexpected. He believes it makes sense for Microsoft to bring its licensing strategies for Office and Windows in line. “But I think most of the problems come from Windows and not Office,” he said.

Microsoft has escalated its battle with software pirates during the past two years through the “Genuine Advantage” add-ons for Windows and Office, its biggest cash cows. The company is now expanding its push by putting antipiracy features in its new products and taking more drastic action when it finds that a product was illegitimately acquired.

Earlier this month, Microsoft owned up to problems with Windows Genuine Advantage when some validated customers were denied access to their applications because of a software problem.

Microsoft Corp. posted an 11 percent rise in quarterly net profit on Thursday, boosted by a strong performance at its database division and shrinking losses from its Xbox 360 video game console.

The world’s largest software maker also said it will defer revenue of $1.5 billion related to the upcoming launches of a new Office software suite and Windows Vista, the first major upgrade of its operating system in five years.

Including the effects of the deferral, which will reduce profit this quarter by 11 cents per share, Microsoft forecast second-quarter profit of between 22 cents and 24 cents per share on revenue of $11.8 billion to $12.4 billion.

Analysts, on average, had forecast second-quarter earnings of 36 cents per share on sales of $13.4 billion, according to Reuters Estimates.

In after-hours trade, Microsoft shares rose to $28.50 from a close of $28.35 on Nasdaq.

The revenue deferral stems from a coupon program announced this week to allow buyers of personal computers to upgrade to Vista and Office 2007 when they debut next year.

“People might be concerned that operating income may drop in the next quarter, but what’s happening is that they’re deferring revenues for an upgrade program to Windows Vista,” said Toan Tran, an analyst with Morningstar.

“It really has no effect on the cash flow Microsoft has. It just won’t be recognized until the third quarter.”

The company also gave a full-year earnings outlook range of $1.43 to $1.46 per share on revenue of between $50 billion and $50.9 billion. Wall Street analysts have been looking for a full-year profit of $1.44 per share on sales of $50.3 billion.

Microsoft Chief Financial Officer Chris Liddell told Reuters in an interview that the full-year outlook was stronger than it might first appear.

A $20 billion tender offer for shares set for August was not fully completed, leaving a larger share base that would lower earnings by 4 cents per share more than previously anticipated, he said. But the company aimed to make that up with a better performance and other share repurchase programs.

“That’s primarily due to the fact that the tender was not fully subscribed, but we’re obviously very happy that we are able to maintain the range we previously had,” Liddell said.

“The way I look at it, we are able to make up all of that shortfall.”

In its first quarter ended Sept. 30, net profit was $3.48 billion, or 35 cents per diluted share, up 11 percent from $3.14 billion, or 29 cents per diluted share, a year ago. Sales rose 11 percent to $10.8 billion in the quarter.

Analysts, on average, had forecast earnings per share of 31 cents on revenue of $10.7 billion, based on Reuters Estimates.

Microsoft posted sales and profit growth at its server and tools business, powered by a 30-percent year-on-year rise in sales of its database software platform, SQL Server, and solid demand for its Windows server software.

The company also said it had sold 6 million Xbox 360 video game consoles since the launch last November, and losses at its entertainment and devices division shrank to $96 million from $173 million a year ago and $414 million the previous quarter.

“We’re progressively lowering the manufacturing costs of the console,” Liddell said. “So even for the ones we do sell, we are in a better shape from a loss-per-console perspective.”

He added that the number of games sold per Xbox rose in the quarter. While video game machines often sell at a loss, the games themselves are highly profitable.

Microsoft shares have risen about 25 percent since June, hitting a near-two-year high on investor optimism that the much-anticipated Windows and Office upgrades will pay off.

Microsoft is expected to launch Windows Vista and Office 2007 for corporate customers this quarter, and for retail consumers early next year. The two product lines comprise more than half of Microsoft’s revenue and almost all of its profit.

Source - CIOL

Despite relatively good earnings, GM has much more work to do before it can claim that it is actually turning around

by David Welch

General Motors (GM) looks pretty good these days when you compare its performance to the huge losses reported this week by rivals Ford Motor (F) and DaimlerChrysler’s (DCX) Chrysler Group. But GM’s meager profits and burning cash pile show that the struggling automaker still has a long way to go before management and shareholders can start popping champagne corks.

GM made $529 million in the quarter if you exclude $644 million in special charges, including a big one for the sale of 51% of its GMAC finance arm. That’s a $1.6 billion turnaround from last year. But dig in to the numbers a bit and all but $81 million of that came from a few one-time tax windfalls. “These are baby steps in a long road to recovery,” says Gimme Credit analyst Shelly Lombard. “The quality of earnings was disappointing because most of it came from tax benefits and they are still burning cash.”

The bottom line for GM is that the company still has a very long way to go. The latest results, while much better than last year’s $1.1 billion third-quarter loss, are hardly enough to keep dissident shareholder Kirk Kerkorian from trying to woo shareholders should he decide to launch a proxy fight. Kerkorian was displeased when GM nixed his proposal to form an alliance with Renault-Nissan (NSANY) early this month, prompting his deputy, Jerome B. York, to quit the board that he joined only in February.

Cash Concerns

The arguments on the two sides are this: GM says that its small operating profit is evidence that Chairman and CEO Richard Wagoner Jr.’s turnaround plan is taking hold. Kerkorian’s camp argues that the company still has most of the long-term problems that got the company into its big mess in the first place.

Without a doubt, GM has big problems still to manage. While some new vehicles are generating strong margins, GM still has a lot of older models for sale that don’t drop much to the bottom line. GM also burned through $5 billion in cash in the quarter, including restructuring costs, and can’t yet say when the company will stop the burn. “Relative to where we came from, there is significant improvement,” GM Vice-Chairman and CFO Frederick “Fritz” Henderson said in an interview. “But our starting point was really bad.”

Henderson readily admits that turning GM’s cash flow around is still a big job. Even though GM—which has $20.4 billion in cash—will realize about $6 billion in cost cuts this year, only $2.5 billion of that is in real cash savings. The rest is purely savings on an accounting basis. Even the $448 million tax windfall GM enjoyed in the third quarter did not bring in any cash, Henderson said.

Next year, GM will get the full impact of Wagoner’s $9 billion cost-cutting plan. But $3 billion of that is also noncash.

Plus, GM still hasn’t paid for all of the severance packages and buyout deals that eliminated 35,000 jobs. The company paid $1.9 billion in cash in the third quarter for restructuring costs. Henderson says GM will be paying more separation costs into the first quarter of next year.

Burden of Delphi

Former GM parts unit Delphi will also drain GM’s cash in the future. GM still has contractual obligations to employees of the bankrupt parts maker. It may have to assume up to $7 billion in pension and health-care liabilities that would boost its cash expenses, albeit over many years.

Plus, to get the union to accept a lower wage-and-benefits package so that Delphi can drop costs and GM can possibly sell the company, the automaker may have to subsidize the wages of some of the employees. That could cost GM $400 million in pretax payments next year and $100 million a year after that. That, too, will eat some cash.

That doesn’t mean GM is headed toward bankruptcy, says Lombard. Its $20 billion cash pile is shrinking, but when the sale of 51% of GMAC goes through this quarter, GM should get $10 billion in cash.

Automotive profits still remain elusive, though. GM’s auto business lost $116 million, with the struggling North American business losing $367 million. What’s worse is that even as GM’s revenue per vehicle jumped almost $370 a car from the second quarter, the amount of profit its cars contribute actually fell.

Long Way to Go

Henderson blamed a number of factors, including rising shipping costs and a big jump in prices for raw materials, especially precious metals used in catalytic converters.

Another factor is GM’s model lineup. The new full-size SUVs launched in January pushed up per-vehicle margins because buyers tend to order loaded vehicles with lots of expensive options when new models hit dealerships. But as a new model rolls through its first year on the market, consumers buy less pricey models and their profit power slips.

Even though new models represent 30% of GM’s volume, the older models are under pressure from competition and have a tougher time making stronger profits, Henderson said.

It’s no wonder. GM’s U.S. market share is down from 26.6% to 24.5%, according to Autodata. To keep market share up, the company has pushed up incentives to more than $3,400 per vehicle—about $1,100 above what GM spent in the second quarter.

Those kinds of numbers are why Henderson says that GM is “a long way from where we want to get to.” Kerkorian would probably agree. Looking ahead, the question will be whether Wagoner and Henderson can get GM where it needs to be fast enough to keep Kerkorian at bay.

Welch is BusinessWeek’s Detroit bureau chief.

In the biggest foreign takeover by an Indian company, Tata Steel and Corus Group on Friday reached an agreement on the acquisition of the European steel giant by the Indian firm for £4.3 billion (Rs 36,500 crore).The Board of Directors of both the companies approved the acquisition of Corus at a price of 455 pence per share in cash, paving the way for creating the world’s fifth largest steel entity with a capacity of 23.5 million tonnes per year.

“Corus Directors consider the terms of the acquisition to be fair and reasonable, so far as shareholders are concerned. The Directors intend to unanimously recommend that Corus shareholders vote in favour of the scheme,” a joint statement released by Tata Steel and Corus said.

The acquisition will be made by Tata Steel UK, a wholly-owned indirect subsidiary of Tata Steel. The Indian firm has also been able to satisfactorily address the concerns of Corus’ two main pension funds.

“This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion,” Tata Group chief Ratan Tata said.

“We have compatible cultures of committment to stakeholders and complimentary strengths in technology, efficiency, product mix and geographical spread,” he said.

Corus Chairman Jim Leng said the combination with Tata represented “the right partner at the right time at the right price and on the right terms.

“This creates a well balanced company, strategically well placed to compete in an increasingly competitive global environment,” Leng said.

The Tata-Corus deal comes close on the heels of the acquisition of Luxembourg-based Arcelor by Rotterdam-based Mittal Steel, owned by India-born industrialist LN Mittal. Arcelor-Mittal is now the world’s largest steel company with a combined output of about 110 million tonnes per year.

“The combined entity would be better equipped to remain at the leading edge of the fast changing steel industry,” Ratan Tata said.

Leng said the deal with Tata followed talks with a number of Brazilian and Russian companies over the past one year.

The price of 455 pence per Corus shares is a premium of 26.2 per cent to the average closing price of 360.5 pence per Corus share for the twelve months period ended October 4, when the two sides first confirmed of the negotiations.

Tata Steel would fund the deal through its own cash resources and loans. The company is likely to raise about 1.8 billion pounds on its own and would get a loan of about 3.3 billion pounds from Deutche Bank, ABN Amro and Credit Suisse.

As per the deal, at least 75 per cent Corus shareholders must tender their shares for Tata Steel to complete the transaction. The Indian firm has also been able to address the concerns of Corus’ two pension schemes - the Corus Engineering Steels Pension Scheme and British Steel Pension Scheme - by increasing its contribution rate and paying additional funds.

Corus is Europe’s second largest steel producer, after Arcelor-Mittal, with revenues of 9.2 billion pounds in 2005 and steel output of 18.2 million tons in UK and Netherlands.

Tata Steel is India’s largest private sector steel firm with revenues of 5.0 billion dollars in 2005-06 and steel production of 5.3 million tonnes across India and South-East Asia. Tata Sons, Tata Steel and other Tata firms had combined revenues of about 22 billion dollars in 2005-06.

The directors of the Anglo-Dutch steel major Corus have decided to accept Tata Steel’s £4.1 billion ($7.7 billion) takeover offer, industry sources said on Friday.A formal announcement that the Corus board will recommend shareholders to accept Tata’s bid is expected to be made later on Friday. Corus did not officially confirm this as the final details were still being agreed.

Annanya Sarin, a spokeswoman for Corus, did not confirm or deny that the board had reached a decision on Tata’s takeover offer, but said that any decision would have been announced to regulators.

The Corus board’s reported agreement to Tata’s bid does not necessarily mean that the takeover will go through. It will need to be accepted by shareholders and industry sources were expecting counter-bids from the Russian Severstaal and the Brazilian steel maker Companhia Siderurgica Nacional (CSN).

A merger of Corus with Tata Steel will create the sixth largest steel producer in the world and would amount to the biggest takeover of a foreign firm by an Indian company.

Corus is currently ranked the ninth largest steel producer in the world while Tata is ranked 56th. Corus has 24,000 employees in Britain and 16,000 in Holland.

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Swindlers have stepped up their effort to fleece millions of dollars from online advertisers who use lucrative marketing networks run by Google and Yahoo, according to a quarterly report to be released on Monday.

The sales referrals generated by clicks on the brief advertising links popularised by the two internet powerhouses are a sham 14.1% of the time, based on information collected from 1,300 online marketers. That’s up from a click fraud rate of 13.7% three months ago, according to Click Forensics, a San Antonio-based consulting service that compiles the index. The statistics jibe with other data asserting advertisers are paying a significant sum to Google, Yahoo and their partner Web sites for phantom shoppers even as more resources are devoted to thwarting scammers.

A recently released survey of 407 online advertisers by market research firm Outsell estimated click fraud cost advertisers $800m last year. Click fraud is a highly sensitive subject for Mountain View, Google and Sunnyvale, Yahoo because it raises doubts about the trustworthiness of the advertising model that drives their profits and stock prices. Google, Yahoo and partner Web sites get paid each time someone clicks on advertising links usually displayed at the top and on the side of Web pages.

Advertisers pay the commission even when the click doesn’t produce a sale — a system that inspired bilking schemes. The motives for click fraud vary. Most often, Web site owners repeatedly click the ads on their own sites to generate money for themselves. In other cases, advertisers target the ads of their rivals to drain their marketing budgets.

As click fraud becomes more prevalent and attracts more media attention, advertisers are becoming more aggressive about demanding refunds and better protection, said Tom Cuthbert, Click Forensics’ president. “Advertisers aren’t satisfied with the status quo,” he said.

“They don’t want to keep losing sleep at night wondering how much money they are losing to click fraud.” Reflecting those concerns, about 900 advertisers have joined Click Forensics’ anti-fraud network during the past three months. Google and Yahoo are better at weeding out click fraud than smaller Web sites, but Click Forensics still concluded both companies are being hard hit.

About 12.8% of the clicks on ads served up by Google and Yahoo are deceptive, up from 12.1% three months ago. Mr Cuthbert said Google and Yahoo may be identifying some of those fraudulent clicks and removing fees from advertisers’ bills. Both companies are tightlipped about how they monitor for click fraud, another factor that has frustrated some advertisers that want more transparency.

Google chief executive Eric Schmidt acknowledged click fraud remains an ongoing headache, but disputed the notion that the problem is becoming more prevalent. “Smart people are trying to break the law, but we have even smarter people trying to prevent it,” Mr Schmidt said during an interview at a conference that concluded Sunday in Idaho. Yahoo CEO Terry Semel declined to discuss the latest data on click fraud, saying he intended to address the issue Tuesday when the company is scheduled to release its second-quarter earnings.

“We will be very proactive about it,” Mr Semel said during the same Idaho conference. Both Google and Yahoo have agreed to settle class-action lawsuits to limit their potential liability for past click fraud. If approved, the two settlements would address any click fraud that occurred amid more than $22bn of ad spending. A two-day court hearing on Google’s offer to pay up to $90m in refunds and attorney fees is scheduled to begin July 24 in an Arkansas court. Yahoo’s proposed settlement, which doesn’t limit how much the company might pay, isn’t scheduled to be reviewed in a Los Angeles federal court until late this year.

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Microsoft Corp. picked two well-respected technical minds to fill the void from founder Bill Gates’ pending departure in two years, but it also identified a next tier of leaders charged with reinventing the software giant to compete against younger, agile rivals.Grabbing headlines in Thursday’s announcements were Ray Ozzie, 50, who assumes the company’s top technical mantle as chief software architect, and Craig Mundie, 56, who takes over some of Gates’ role as long-term visionary.

But Microsoft also tapped a next tier of technical talent in J Allard, Steven Sinofsky and Bob Muglia — executives in their 30s and 40s — to play a larger role in shaping the company’s future business and technology strategy.

Analysts said all three have won the respect of Microsoft’s rank-and-file programmers with deep technical knowledge and an understanding that technology improvements cannot come at the expense of delays to new products, a problem that has plagued the company’s mainstay Windows division.

“They have really good technical minds and really good experiences about what kind of decisions you have to make in order to ship a product,” said Rob Horwitz, an analyst at independent research firm Directions on Microsoft.

“Those are the guys with their feet on the ground and not as much pie in the sky.”

An ability to ship new products in a timely manner seems all the more important in light of investor perceptions that Microsoft has been outmaneuvered by aggressive and more agile competitors like Google Inc. and Yahoo Inc.

“Microsoft is at a crucial inflection point,” said Jupiter Research analyst Joe Wilcox. “The technologists are important for the company’s future.

The decision by Gates to step back from Microsoft in two years follows longtime Windows guru Jim Allchin’s plan to retire after Windows Vista ships in 2007, representing a changing of the guard at the Redmond, Washington-based company.

“The world has had a tendency to focus a disproportionate amount of attention on me. In reality, Microsoft has always had an unbelievable strong depth and breadth of technical talent,” Gates said at a news conference on Thursday.

WHO’S NEXT

Sinofsky, 40, earned his stripes as the head of product development for the Microsoft Office business software team, gaining a reputation as a tough taskmaster with an ability to meet targeted release dates.

Earlier this year, he took on the role of leading the team of developers creating the next version of Windows after Vista. Sinofsky’s responsibilities include integrating the operating system with a set of Windows Live Web-based services.

Allard, 37, gained prominence with a note he sent to Microsoft leaders about the looming importance of the Internet, which became the basis for the company’s change of strategy to embrace the Internet in the mid 1990s.

An avid video game player, Allard now oversees the engineering and design of the Xbox game console. He pushed Microsoft into online gaming well before rivals Sony Corp. and Nintendo Co. Ltd.

Muglia, 46, has the longest track record of the three at Microsoft, having joined the company in 1988. As the senior vice president of Microsoft’s server and tools business, Muglia needs to keep outside developers happy with its tools and technology professionals using its servers.

All three executives were already considered stars in the company, but analysts said granting them more say over strategy and keeping them happy and motivated is a smart move.

Navigating government bureaucracy is not easy, but it may become faster with Google Inc.’s new search site for U.S. federal, state and local government.Google U.S. Government Search, http://usgov.google.com, was launched on Thursday by the search leader.

Google said the site should make finding U.S. government information easier for government employees and contractors. For example, a search of the word “highway” on the site returned links to the Federal Highway Administration and the California Highway Patrol.

Another for “Iraq” returned links to Library of Congress documents and The World Factbook, a collection of country profiles published annually by the Central Intelligence Agency.

The site can be personalized and also offers news from the White House, the armed forces and even provides a weather report for Washington, D.C.

It is the latest in a series of specialized content sites developed by Google, which launched a search engine devoted to Shakespeare on Wednesday.