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Microsoft plans to offer hardware vendors significant price cuts on Windows XP licenses for low-cost computing products, but the deal will only be available for computers with low hardware specs. This tactic is part of Microsoft’s strategy to stifle adoption of Linux by computer manufacturers that are targeting the budget market, where low cost and high flexibility give the open source operating system an edge.

The popularity of the game-changing Asus Eee PC, which ships with a heavily-modified version of the Xandros Linux distribution, spawned a whole new class of inexpensive computers. Other vendors have entered the market with their own competing products, many of which also use the open source operating system. Windows is a poor fit for such computers, which are designed and priced like budget appliances. Vista requires too much hardware overhead, while Windows XP licenses add extra expense to the budget hardware that can be avoided by using Linux. So as products like the Eee bring Linux into homes and schools, Microsoft has struggled to squeeze into the growing budget hardware niche.

According to IDG, which obtained details about the price cuts from hardware vendors, Microsoft will offer Windows XP licenses for $26 for developing countries and $32 for the rest of the world. In order to qualify for these deep discounts, products will have to be limited to a maximum of 1GB of RAM, 10.2 inch screens, and single-core processors clocked no higher than 1GHz (though there are apparently some exceptions). Products must also not have hard drives exceeding 80 GB in capacity and cannot have touch-screen technology.

The offer will likely attract some interest from hardware vendors, but it suffers from some serious strategic weaknesses. Microsoft is only making this deal available for Windows XP, a seven-year-old operating system that is on its way out. Microsoft originally planned to stop selling Windows XP on June 30, but it has made a special exception for budget computing products. Compared to Microsoft’s legacy operating system, modern Linux distributions offer a more future-proof option and more comprehensive software stack.

Microsoft has seen some modest success with Windows XP Starter Edition, a crippled version of the operating system that is designed for developing countries which has been sold for similar prices. Microsoft’s XP price cut strategy seems like a new angle on the Windows XP Starter Edition concept. Instead of crippling the operating system, Microsoft is providing the real thing, but with caps on the hardware it can run on. This might buy Microsoft some time, but the relative age of Windows XP and the hardware overhead of Windows Vista make this move unsustainable in the long term.

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If you thought spam on your computer was a bother, brace yourself: spammers want to find you on your cellphone.

Cellphones have become consumers’ most personal technological devices. Some industry executives, along with consumer groups and security experts, are concerned that unwanted text messages on phones will be an even greater headache than unwanted computer messages.

Cellphone spam is particularly annoying to its recipients because it is more invasive — announcing itself with a beep — and can be costly.

Taber Lightfoot, an assistant director for new media at the Yale School of Management, is among those who have paid for the privilege of receiving cellphone spam.

“I was at work and I got so annoyed,” she said of the first burst of three messages she received. She got another burst two days later.

“That is when I called Verizon and demanded they reimburse me $1.60 for eight text messages,” Ms. Lightfoot said. “It wasn’t a lot of money, but it was my money.”

American consumers are expected to receive an estimated 1.5 billion unsolicited text messages in 2008, according to Ferris Research, based in San Francisco, which tracks mobile messaging trends. That is nearly double what they received in 2006.

Of course that is a small percentage of the overall number of messages: an industry survey showed that consumers in the United States sent and received about 48 billion text messages in December alone. But for many people who are charged as much as 20 cents for an incoming message or are interrupted in the middle of dinner, even one is too many.

“The reason this really burns people up is because they have to pay for messages they don’t want, and they shouldn’t have to,” said Chris Murray, senior counsel for Consumers Union, a nonprofit group.

Now some consumers, like Ms. Lightfoot, are monitoring their cellphones more aggressively for unwanted messages and, in some cases, demanding refunds. Computer security companies have developed products to help fight mobile spam. And AT&T, Verizon and others are making it easier for customers to block unsolicited messages and keep spammers at bay.

The fees that customers pay to receive messages are a source of profit for the phone companies. It is hard to estimate how much they make. Many consumers pay for a monthly plan that allows them to send and receive large numbers of messages. But for those without a plan, getting as few as 10 unsolicited text messages a month at 20 cents each would cost an extra $24 a year.

Communications companies say they are not interested in spam as a profit center. They want to one day exploit the power of customized advertising on mobile phones, and tawdry spam pitches threaten to make their customers hostile toward all commercial messages. The companies are trying to head off the problem before consumers revolt.
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With all the commotion over the rise of social networking sites, parental groups and government bodies have been asking for someone to think of the children. In response to rising concerns that Facebook and MySpace have become beacons for sexual predators and bullies, these two leading sites have agreed to add over 40 new safeguards aimed at protecting young users.

Announced today by Connecticut Attorney General Richard Blumenthal, the agreement “marks another watershed step toward social networking safety, protecting kids from online predators and inappropriate content.” Officials from Washington, D.C. and 49 states have signed on to the agreement, which took months of negotiations.

Texas is the only state that passed on signing the agreement, stating that it wants even “quicker action” when verifying users’ ages and identities than the current agreement provides for.

The actual safeguards Facebook and MySpace have agreed to implement cover a wide range of protection, not just from sexual predators and bullies, but also from companies and their products. One change that will be made, for example, will require these sites to “keep tobacco and alcohol ads from users too young to purchase those products.” Other changes include: “Remove groups whose comments or images suggest they involve incest, pedophilia, bullying or other inappropriate content,” “Send warning messages when a child is in danger of giving personal information to an adult,” and “Review users’ profiles when they ask to change their age, ensuring the update is legitimate and not intended to let adults masquerade as children.”

Naturally, these rules and the new protection technology they are intended to inspire are by no means limited to Facebook and MySpace. The parties involved hope that all other social networking sites will follow suit. Facebook and MySpace were simply included in this initial round of negotiations due to the fact that they are the two most popular sites worldwide.

How well these agreements and new rules hold up once they run into the real world will likely determine whether further negotiations ensue. As they stand, they aren’t much more than a set of good-faith handshakes between the social networking sites and government bodies. There’s no word of a time table for implementing the new tools or repercussions if the sites decide they have better things to do. That said, it’s in the companies’ best interests to try, as living up to commitments like these will help keep lawmakers and regulators off of their backs.

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Google has been boosting its Google Apps product suite as fit for corporate use for months, with new security and deployment features arriving on a regular basis. The company’s latest endeavor, Google Web Security for Enterprise, is now available, and promises to provide a consistent level of system security whether an end-user is surfing from the office or working at home halfway across town.

The new service is branded under Google’s “Powered by Postini” product line and, according to the company, “provides real-time malware protection and URL filtering with policy enforcement and reporting. An additional feature extends the same protections to users working remotely on laptops in hotels, cafes, and even guest networks.” The service is presumably activated by signing in directly to a Google service, as Google explicitly states that workers do not need access to a corporate network.

Unlike other Google-purchased companies languished for a long time after being acquired, the Postini brand and related products have been the foundation of many of Google’s corporate-oriented initiatives this year. It’s a marked contrast to the company’s behavior in recent years, during which several companies were purchased and apparently left to rot with no clear sense of how their own products and services would be integrated into the Google product portfolio.

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hawn Fanning, best known for founding Napster, has a new job. He will be working at Electronic Arts, which is about to buy his social-network-gaming startup Rupture for $30 million, according to sources with knowledge of the deal. His co-founder Jon Baudanza will also join Electronic Arts. We first heard of a possible deal back in February, but did not know who was the buyer. Rupture’s first product was a social network for players of the online video game World of Warcraft, but it only came out with a beta version and kept delaying its public launch.

Electronic Arts is buying the company for its technology, since it doesn’t have a lot of users (it was only ever in beta) and never launched the second version of its service. Presumably, creating social networks around massively multiplayer video games is a key component of its online strategy. The company has not yet officially announced the acquisition, but it is expected to do so soon. [Update: The closing of the deal is imminent, but there are still some papers to sign].

Rupture had previously raised only $2.5 to $3 million in an angel round last summer from investors including Ron Conway, Joi Ito, Reid Hoffman, and Baseline Ventures. Although this is not Fanning’s first startup, it is his first real payday. Napster helped change the music industry, but it went bankrupt doing so. And although he just sold his second startup SnoCap to Imeem, that was more of a mercy acquisition. It is doubtful that he made more than a few pennies on that sale. You know what they say. Third time’s the charm.

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Will you do a search advertising deal with Yahoo? How will you do it in a way that avoids antitrust objections? Are you relieved that Microsoft withdrew its offer for Yahoo?

The questions were asked again and again by a group of reporters meeting with Google’s top three executives Thursday. Eric Schmidt, the chief executive, and Larry Page and Sergey Brin, the company’s co-founders, answered roughly: We’d like to; we can’t tell you; and yes.

Beyond that, the three men shed little light on their role in the Microsoft-Yahoo merger talks, which ended Saturday when Microsoft withdrew its $47.5 billion offer to buy Yahoo, or on the status of their own negotiations with Yahoo.

“We’re very excited to work with them,” Mr. Brin said of Yahoo.

If conversations were to lead to a deal, Mr. Schmidt said, “We would anticipate structuring a deal to address antitrust concerns.”

“We had a brilliant test,” he added, referring to a limited two-week trial that the two companies conducted and that ended about 10 days ago.

The questions kept coming in different forms; the answers stuck to the same line.

Mr. Schmidt, who had raised concerns that a Microsoft-Yahoo combination could reduce competition on the Internet, said he was relieved that Google would not have to face that prospect, at least for now.

“Obviously we are happy that that is not going to happen,” Mr. Schmidt said.

Mr. Brin also said Google’s offer of a search advertising partnership with Yahoo was not an effort to scuttle the Microsoft-Yahoo deal, but rather an attempt to give some options to Yahoo, which faced a hostile bid from Microsoft.

“We really believe in companies having choices about their destiny,” he said.

So is the Microsoft-Yahoo saga over?

“You never say never in this business,” Mr. Schmidt said, adding that he was not privy to any information suggesting that merger negotiations might resume.

The meeting, at Google’s Mountain View, Calif., headquarters, adjourned as Mr. Schmidt, Mr. Page and Mr. Brin headed to another building for Google’s annual meeting with shareholders.

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Craigslist’s CEO Jim Buckmaster believes that eBay’s lawsuit is an exercise in hypocrisy, in no small part because the online auction giant has taken many of the same measures Craigslist did in order to protect itself. Buckmaster made yet another post to the Craigslist Blog over the lawsuit, addressing some of the points that eBay raised in its recently-unsealed complaint. While Buckmaster’s points may be true, though, his post seems to dance around the overall point of the lawsuit—that Craigslist has diluted eBay’s stake in the popular classified site through its actions.

Buckmaster’s most recent blog post came not long after details about eBay’s lawsuit against Craigslist were made public. In the suit, eBay alleges that Buckmaster and Craigslist founder Craig Newmark breached their fiduciary duties by engaging in a series of transactions that would ultimately benefit themselves “to the detriment of eBay.” This included holding a series of meetings without eBay’s knowledge, despite eBay’s ownership of more than a quarter of the company. During these meetings, the two implemented measures that would prevent eBay from selling its shares to anyone but Craigslist, gave themselves more decision-making power, and appointed a new board designee.

Buckmaster immediately shot back by saying that every measure was taken in order to protect “the long term well-being of the Craigslist community,” accusing eBay of being “obsessed with dominating online classifieds.” Buckmaster promised at the time that Craigslist would file a formal response through the court system, but couldn’t keep himself from responding himself.

In his latest blog post, Buckmaster starts out by noting that eBay opposes Craigslist’s implementation of a “poison pill” policy that was meant to prevent eBay from using its shares to make decisions that could hurt the company. However, eBay itself has implemented similar policies that allow the company to shift around shares with the intent of protecting company interests.

Buckmaster also says that eBay is suing Craigslist because it offers its other shareholders the right to first refusal to purchase additional shares in the company. eBay no longer has that privilege because it engaged in competitive activity when it launched Kijiji in the US, and Buckmaster believes the auctioneer is unhappy about this unbalance. Additionally, Buckmaster claims that eBay is suing over Craigslist’s indemnification agreement that lets the company pay legal fees for Craigslist directors in the event that they are sued, and for Craigslist’s holding of staggered board elections. Both of these things are policies that eBay itself has implemented in the past.

Of course, these are all points that dance around the ultimate objection that eBay has. eBay isn’t suing over the fact that Craigslist now has a poison-pill policy or that eBay has lost its right of first refusal—it’s suing because Buckmaster and Newmark made all of these decisions themselves without the knowledge or consent of the only other significant shareholder in the company. One has to wonder, though, why Buckmaster is airing the companies’ dirty laundry in the public. Is he looking to gain public support? To intimidate eBay into dropping the case (and perhaps its shares in Craigslist)? Either way, Craigslist is probably best served by fighting the case through the legal system and laying off on the blog rants.

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