-Matthew Bath is technology editor at Which? The opinions expressed are his own.-

Microsoft’s Windows operating system has been frustrating and delighting computer users in almost equal measure since it was first debuted by the software giant first in 1985. Fast forward through nearly a quarter of a century of powering the majority of the world’s personal computers, and Windows is about to hit another milestone.

Windows 7 launches on October 22, worldwide, and it’s safe to say that, as a firm, Microsoft will be collectively crossing fingers and toes that shoppers flock to the new version.

The successor to its Windows Vista operating system, Windows 7 promises to be faster, more reliable and make computing simpler than ever – so much so that like a proud parent, Microsoft hosting worldwide coming-of-age parties to help launch Windows 7 onto PC desktops worldwide.

Yet the key question is whether consumers, already stung by what many found a problematic Windows Vista, are as willing to take a punt on this latest version.

Certainly, it’s chalking up record sales – and Windows 7 has overtaken Harry Potter and the Deathly Hallows to become the biggest grossing pre-order on Amazon.co.uk of all time, and the online store says demand for the new operating system remains strong.

So why are shoppers pre-ordering in droves? Partly, it’s because Microsoft fumbled the ball with Windows Vista, leaving some users frustrated and fed-up with an operating system that felt sluggish and crash prone. A chance to jump to a shinier ship is welcomed. Partly, last time lots of people stayed away from the Windows Vista party following negative reports, remaining with the perfectly functional Windows XP instead.

The surge in sales tells only part of the story, however. Which? has talked with shoppers who tell us they are confused by Microsoft’s different versions (with six different prices at the last count), and there are lots of questions around whether the upgrade really is worth the hassle.

Certainly, a lot of the features seem fairly cosmetic on the surface, and some will appeal to only a handful of users. If you’re one of the chosen few to own a touchscreen PC and monitor, then the new multi-touch features in Windows 7 will have you clapping (and pinching and swiping) your hands with glee as your monitor turns into the equivalent of an outsized Apple iPhone.

Other features – such as easier home networking and interface tweaks to make navigation simplier are all good, but seem slight. Rather, Microsoft has been significantly reworking the technology that happens under the hood of Windows, making it less crash prone, faster, and hopefully a better experience.

If you’re happily using Windows Vista, though, then there really isn’t a compelling reason to upgrade as the new features are hardly lengthy.

And if you’re using Windows XP, then Microsoft has a different message for you: your PC is unlikely to run Windows 7 well, and you’ll have to fork out for a new computer. That’s an expense in these economic times that many consumers might find a little tough to swallow.

And, finally, amidst all Windows shopping it’s easy to forget that most new operating system launches are hit with bugs, glitches and incompatible software. That’s normal, but not any less frustrating.

So, if you are looking longingly through the Microsoft-shaped window, our advice is clear. Resist the temptation to upgrade straight off the starting blocks and wait for Microsoft and other software makers to find and fix the niggles and bugs, then feel free to jump in to Windows 7.

-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --

The fate of Yahoo Inc has become intertwined in the public's imagination with the success or failure of its dealings with Microsoft Corp in recent years.

That's despite the fact that as much as 70 percent of the value investors put on Yahoo's depressed shares are tied up in its international assets or cash holdings -- factors that have nothing to do with Microsoft.

Yahoo's operations trade for just $5 to $6 per share out of its current $15 share price, once you exclude its Asian investments and the value of its cash. Its hidden assets in Japan and Chinese affiliates -- Yahoo Japan Corp and China's Alibaba Group -- alone are worth around $6 to $7 per share.

The trouble is that Yahoo needs to find a way to cash out of its increasingly rocky relationship with Alibaba Group, in which it holds a 39 percent stake after it pulled back from operating its own business in China in 2005.

Yahoo's best chance here may come next year if Alibaba succeeds with a second IPO of its Taobao.com consumer ecommerce site, building on the success of the 2007 IPO of Alibaba.com, now valued at more than US$13 billion on the Hong Kong exchange.

Truth be told, Yahoo's huge success in building the biggest U.S. Internet media destination never translated very well overseas, despite the early foray into Asia that left it with lucrative assets in Japan and China. These passive investments came to substitute for a global operating strategy.

But that's changing now, as Yahoo once again has begun investing in international operations it can fully control.

In its latest such push, Yahoo said on Tuesday that it would buy Maktoob.com, the largest Internet media site for the Arab world, with an estimated 16.5 million users. Terms were not disclosed.

Yahoo's international stronghold is Asia, where it had 172 million unique users in the month of June, according to industry estimates. It is the top player in Japan through its stake in Softbank-controlled Yahoo Japan, and is dominant in Taiwan and Hong Kong as well.

In India, Yahoo has the most visited home page and is the most popular provider of e-mail, instant messaging and online news to consumers. In a country mad on the sport, Yahoo operates the most popular site for cricket fans. Yahoo had 23 million unique monthly users in India in June, according to market researcher comScore.

But Yahoo stock gets little to no stock market credit for these international operations. Converting market share into meaningful financial results will take years. First, Yahoo must develop its patchwork of leading properties in places like the Philippines and Vietnam and Latin America into a global franchise. And it's hard to see how Yahoo can regain lost ground in Europe's more developed Internet markets.

Until now, the trap for Yahoo has been that much of its international value remains latent, locked up in investments in Japan and China rather than in operating businesses it controls. That is changing, slowly.

This leaves Yahoo at the mercy of an eventual rebound in U.S. advertising markets. For the foreseeable future, any significant rebound in Yahoo's share price depends on conjecture over the still unknown potential of getting into bed with Microsoft.

-- At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article, with the exception of a token Yahoo share. He may be an owner indirectly as an investor in a fund. --

LONDON, Aug 3 (Reuters) - The resignation of Google CEO Eric Schmidt from Apple's board should come as no surprise to anyone with an inkling of what corporate governance means.

But then Silicon Valley's idea of corporate boards has long consisted of cozy, interlocking directorships which would be considered collusion in most other industries.

Google's CEO is not leaving Apple's board voluntarily. He is only stepping down in response to the increased government scrutiny of obvious potential conflicts of interest between the two companies.

Yet regulators shouldn't be content with Schmidt's departure. The truth is that Apple and Google have been heading into the same markets for years. A veritable chain of overlapping business ties remain in place even if the most obvious formal link is now broken.

The chairman of Apple's board, former Genentech CEO Art Levinson, remains on Google's board. Another Google board member, Ann Mather, is the former chief financial officer of Steve Jobs' former animation company, Pixar Studios.

Paul Otellini, the CEO of Intel Corp, Apple's main chip supplier, also sits on Google's board. Al Gore remains on Apple's board, but in his new turn as venture capitalist he has many business ties to Google and its founders. Gore is a partner of Google board member John Doerr at legendary Silicon Valley VC firm Kleiner Perkins.

For months, the U.S. Federal Trade Commission has been examining Schmidt's participation on the boards of the tech world's two most dynamic companies. Last week, the Federal Communications Commission said it was looking into Apple's decision to reject a Google phone application to run on the iPhone.

Google's CEO says he has consistently recused himself from Apple board discussion of the iPhone. There's no reason not to take him at his word. But that's largely a distraction from the bigger issues at stake here,

Schmidt need not have participated actively in iPhone discussions. By taking part in discussions of the rest of Apple's strategy, Schmidt was in a position to steer Google's own strategies around the Apple juggernaut. Rivals need not cooperate directly to divvy up markets.

Anyone following the industry knows that Apple and Google have been moving in similar directions since well before Schmidt joined Apple's board three years ago. As computers become more like phones and the Internet becomes more mobile, the competition has become only more obvious.

By August 2006, both companies were hard at work on their plans to enter the mobile phone market. In September 2005, Apple made its first failed foray into the market with a joint development effort with Motorola that led to the introduction of the Motorola ROKR iTunes phone.

A month before -- and a year before Schmidt joined Apple's board -- Google had acquired mobile device start-up Android, forming the genesis of its own push into mobile phone markets.

Six months after Schmidt became a director, Apple unveiled its ground-breaking iPhone, in January 2007. Fevered speculation mounted throughout 2007 that Google was working on its own so-called GPhone.

In November of that year, Google introduced its Android software for mobile phone development. In September of 2008, the first Android-powered phone built by Taiwan phone maker HTC for T-Mobile was introduced.

So far, Apple has been content to attack the high-end of the smartphone market. Google is aiming at the mid-priced phone market and new mini-notebook computers with Android. But the conceit that the two companies aren't competitors is wearing thin.

Reforming corporate boards has never been easy in Silicon Valley. Recall the boardroom battles that cost former Hewlett-Packard CEO Carly Fiorina her job. They pitted H-P's old guard against corporate governance advocates who were Fiorina's allies. The decline of Yahoo is another obvious example of failed board governance.

Independent corporate governance is an afterthought in the go-go corporate culture of Silicon Valley, where entrepreneurs backed by venture capitalists launch start-ups. Even years after an IPO, the founders and their VC backers typically keep disproportionate control over "their company."

Investors bear no small part of the blame. Most care only in retrospect, once rocket-fueled growth subsides and the shares of former high-tech stars fall back to Earth.

For now, both Apple and Google shares are moving higher, as the tradition of weak corporate governance looks set to survive a while longer.

(Photo: Reuters/Kimberly White)

LONDON, July 29 (Reuters) - There's been a bonfire of shareholder value at Yahoo and the blaze is not out yet, even after the agreement to a long-delayed deal with Microsoft.

Eighteen months ago, Yahoo walked away from Microsoft's nearly $45 billion acquisition offer -- a 60 percent premium to Yahoo's then market value.

Fast forward to today and there is a zero premium being offered by Microsoft. And that's after Yahoo also spurned $9 billion from Microsoft to buy just Yahoo's search business. Still, investors had been hoping Microsoft might pay at least $1 billion in up-front cash to Yahoo.

No chance. Instead, Yahoo is receiving face-saving revenue guarantees for search advertising sold on Yahoo's own sites for the first 18 months after the Microsoft deal takes effect.

Think ahead to 2012, the Olympics. That's when Microsoft and Yahoo expect to finish fighting for regulatory approval, closing the deal, dividing up assets, putting their plans into effect and re-launching services.

The agreement is not an acquisition, but for Microsoft, it might as well be, as it gets control of the key levers.

For Yahoo shareholders, it's value destruction not seen since the misguided merger of America Online and Time Warner at the peak of the dot-com era. The parallel between what is happening to Yahoo and the decline of AOL is instructive.

When the AOL-Time Warner deal was announced in 2000, AOL was valued at $166 billion. Four years ago, AOL was considered to be worth $20 billion. Now it's less than $6 billion.

Yahoo's stock market valuation hovered at just over $20 billion on Wednesday following an 11 percent decline in its share price that reflected disappointment at the terms of Microsoft's pact.

And there's no certainty Microsoft and Yahoo can win regulatory approval without big sacrifices.

The world has moved on since Microsoft first approached Yahoo. Google looks stronger, which might help the Microsoft-Yahoo case. But there are lots of lawmakers in Washington, not to mention Brussels, looking to write tough new laws to capitalize on consumer privacy fears.

Colin Gillis, a financial analyst with Brigantine Advisors in New York, argues the deal could be the trigger for a broader U.S. privacy law that seeks to rein in online behavioral targeting.

Among the major Internet advertising companies, Yahoo has been the most aggressive proponent of efforts to link user activities across the Web with targeted advertising. Pushing the Microsoft deal could prove damaging to its underlying ad strategy.

Terms of the deal give Microsoft effective control over Yahoo's search technology, which will be incorporated into its own effort, Bing. In exchange, Yahoo will act as the sales force for the display advertising business of the two companies.

The danger for Yahoo shareholders is they will wake up in 2012 to find themselves owning a shriveled piece of the Internet pioneer's former glory. A far leaner AOL, meanwhile, will be competing directly with Yahoo's media and advertising businesses.

Web search is the most dynamic aspect of the online advertising market. It's the best way advertisers have of figuring out consumer intentions. Microsoft ends up capturing search, while Yahoo retains the lower margin, labor-intensive job of selling display ads like site banners to other publishers.

In the end, Microsoft gets half of what it wanted and Yahoo has nothing more to show for the fight but something like $500 million a year in operating income when all the pieces are in place.

The new deal has a logical operational structure where Microsoft manages technology and Yahoo sells. But the value that's being created will increasingly fall to Microsoft, when, years from now, the partnership comes into effect.

-- At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. To read some of Eric's previous columns, click here  --

(Editing by Martin Langfield)

By Eric Auchard

LONDON, July 24 (Reuters) - Investors have proved all too ready to interpret positive earnings trends from Intel, IBM and Apple as signs of economic recovery and to justify a continued rally in technology stocks.

Now they are taking the wrong lessons in reverse by reading disappointing results from Microsoft Corp as evidence that a nascent rebound in the economy has stalled.

By the same token, it's mistaken to read the best quarterly results in two-and-a-half years for Samsung Electronics, the world's biggest maker of memory chips, as any indicator of progress on the economic front.

Look past the headlines and you'll find factors specific to each of these companies that say little about any fresh demand for technology in this economy.

The truth is that technology companies have done a terrific job of cutting costs and preserving cash flow, even as revenue growth has continued to shrivel or turn negative. (See Reuters analysis).

But demand for new products and services remains scarce, except in isolated pockets. Apple and Blackberry-maker Research in Motion make must-have gadgets that resist economic penny-pinching.

Remember why investors put up with the volatility of technology stocks in the first place? Winners in the sector are famous for generating outsized growth for hot products or services independent of economic cycles.

Microsoft's fiscal year-end results reflect the dynamics of the company's own product cycles as much as the economy. The company reported its first-ever drop in annual sales of Windows software as overall revenue fell by 17 percent.

But the world's largest software maker is on the cusp of a major upturn in its business that is expected to follow the introduction of the next version of its operating system, Windows 7 in October. It's natural, then, that business and consumer buyers might pause until Windows 7 gives them new reason to buy PCs in 2010 and beyond.

Sure, the company blamed a poor macroeconomic climate. But Microsoft has been saying much the same thing for the past year, namely, that an "economic reset" to lower levels of growth is underway in the world.

Meanwhile, Samsung's quarterly results out Friday showed it benefiting from a recovery in memory chip pricing that is only indirectly related to underlying economic demand. Firming pricing in memories followed a two-year industry slump created by a glut of over production. Again, no signs of economic uptick here.

Samsung, which is also the world's second largest maker of mobile phones, is enjoying robust demand for these products thanks to clever designs. These are stealing market share from rival mid-priced phones. The gains are coming in spite of an expected 10 percent drop in global cell phone demand this year.

Furthermore, the positive results earlier this month from Intel and IBM said less about the economy than they did about the success of specific turnaround strategies the companies have been put in place over the years (See Intel column).

IBM has sharply raised its 2009 year earnings outlook as it has refocused on higher-margin software and services businesses instead of hardware. This success is a product of financial reengineering and cost-cutting, not improving demand. Note that IBM revenue is set to fall 9 percent in the course of 2009.

In general, second-quarter results have provided further evidence that technology demand is stabilizing, albeit at lower levels.

The danger for investors is reading too much into these reports. Half way through the year, there is little evidence of fresh corporate spending or new consumer demand for technology. Outside China, much of the activity has been restocking of depleted inventories. Economic recovery remains illusive.

-- At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. You can read some of Eric's recent columns here.--

(Editing by David Evans; Photo: Reuters/Rick Wilking)

Some tech links to start the week:

I am seriously considering changing my byline to Zing, what with all the media attention a certain search engine is getting.

The New York Times looks at the ups and downs of turning brands into verbs. The jumping off point is Bing, Microsoft's effort at verbal one-upsmanship over Google, Twitter and over generic daily activities. The software giant must alter deeply ingrained computer habits to succeed. In the meantime, my original questions about Bing remain.

The more substantial news this week would be if Microsoft finally inks a search and advertising partnership with Yahoo Inc. It's not easy to overcome deal speculation fatigue -- it's been a year-and-a-half since Microsoft sought to acquire Yahoo outright, and a year since it dropped back to Plan B and sought out a more limited partnership deal. Boomtown reported Friday that Microsoft is down to a few short strokes away from signing.  Henry Blodget makes the point that Microsoft may have to pay up far more than the $1 billion it was offering a year back for such a deal.  Closing a deal now suggests renewed desperation on Microsoft's part after the paltry gain it received from Bing in June market share statistics for U.S. web search.

Beyond the personalities and the history that have kept Yahoo and Microsoft apart, there is the little matter of an advertising recession  that will delay any short- or medium-term rebound in either company's online advertising fortunes. AOL Chief Executive puts any resurgence in online advertising out to 2011 in an interview published by Reuters on Sunday.

UBS has published its quarterly survey of corporate technology spending intentions. The study of 100 U.S. and European CIOs finds these buyers slightly more optimistic about their budgets during the second quarter than they were earlier this year.  Among the more interesting findings:

• U.S. spending appears to be improving while European discretionary IT spending is declining.
• IBM and HP/EDS will take the lion's share of any increased spending by CIOs on computer service, while Accenture, CSC and Indian software services companies all stand to see far less.
• Only a handful of software companies can expect to see increased net spending in the next 12 months: Microsoft, SAP, Citrix and Oracle , to a far lesser degree. Out of favour are technologies such as security, software as service and voice recognition.
• Dell saw a big gain among buyers more likely to spend with it.  The Q2 survey showed 21 percent of buyers more likely to buy, up from 12 percent in Q1. UBS pins this increase on Dell's willingness to slash pricing.

The biggest surprise is the gulf emerging between the U.S. and Europe over plans to upgrade to the next version of Windows 7, due out in October, UBS finds. More than half of Europeans have no plans to upgrade to Windows 7, while closer to a quarter of U.S. buyers have yet to make plans. (Click to enlarge graphic)

(Images: Microsoft, UBS Research)

-Tom Dunmore is Brand Director & Editor-in-Chief at Stuff magazine - Stuff has over 1 million readers worldwide. The opinions expressed are his own.-

Google announced on Wednesday that it was developing its own computer operating system. It will be secure, fast, lightweight and - most of all - free. And it presents the biggest challenge yet to the long-standing dominance of Windows.

The idea behind Google ChromeOS is nothing new - it’s built on a Linux foundation and will no doubt share many of the features of other open-source operating systems. But Google is the only computing brand with more might than Microsoft: it’s trusted, and has a proven track record of building brilliant, free services, from search to instant messaging.

Indeed, Google has been busily chipping away at Microsoft’s market for some time, with the Google Docs suite of in-browser applications providing a decent (and free) alternative to Microsoft Office, while the Android mobile phone software has pulled the rug from under Windows Mobile.

Microsoft’s attempts to strike back by stealing some of Google’s lucrative internet search advertising market have had little success - hence the rebranding of MSN as Live search, and the subsequent replacement of Live search with Bing.

But Microsoft’s core business is the Windows operating system that powers nine in ten of the world’s computers. By launching against Windows, Google is declaring out-and-out war - and doing so when Microsoft is at its weakest.

Windows market share has slumped from 91percent to 88 percent in just one year, according to Net Applications. The failure of the latest version of Windows, Vista, has been so catastrophic that, well over two years after its release, many Windows PCs are still sold the previous version, XP. Why? Because Vista is simply too demanding for the new generation of cheap, low-powered - and immensely popular - netbooks.

And while the Mac market share has risen from 8 percent to 10 percents in the last 12 months, Apple’s high prices ensure that it will never truly challenge Microsoft for the mainstream.

So it’s no surprise the Google is will be targetting its ChromeOS at netbook users when the operating system is released in 2010. And if ChromeOS works as Google promises – making the most of free web services, but totally secure and immune to viruses - it will quickly pick up support within cash-strapped businesses too.

Meanwhile Microsoft’s Windows 7, due in October, promises to be faster and less processor intensive - but it’s still built on foundations that predate the internet. And it still costs hundreds of pounds.

Windows isn’t about to be eradicated - inertia and conservatism will stop many corporate environments from switching to ChromeOS. But Microsoft’s near-monopoly on the operating system could be ending. But be warned: a bigger, Google-flavoured monopoly awaits.

-- Leslie Harris is the president and CEO of the Center for Democracy and Technology in Washington, DC. The views expressed are her own. --

In the wake of troubling reports as recently as last year that Western companies were assisting China with Internet censorship and the unmasking of cyber-dissidents, governments around the world seemed poised to regulate the conduct of Internet companies. Lawmakers appear to have stepped back from those efforts, but the challenges of advancing global Internet freedom remain.

The Global Online Freedom Act, drafted in the U.S. Congress, would have made it a crime for Internet companies to turn over personal information to governments in cases where that information could be used to punish dissent. The bill produced a firestorm of controversy. Human rights groups campaigned for swift passage, while the tech industry scrambled to stop the bill, which they viewed as a global eviction order from many difficult but emerging markets. At the same time, several members of the European Parliament proposed a European version of the measure, taking the accompanying controversy global.

Now policymakers seem far less certain that global Internet freedom will be served by imposing harsh mandates on Internet companies that provide crucial services to customers in repressive regimes. The bill has not been reintroduced in the U.S. Congress this year, and earlier this month, a top European regulator, European Union Telecommunications Commissioner Viviane Reding, dismissed the notion of Europe passing its own Global Internet Freedom Act, saying that she was not convinced that "hard law" was the best way to address the issue.

For Internet executives who feared that hard-line regulatory mandates might force them out of many countries, Reding's comments came as welcome relief. But celebration is premature. Threats to Internet freedom are growing and lawmakers’ concerns about industry's role remain rightly high.  Those who choose to misconstrue Reding’s remarks as a free pass on this important issue do so at their peril.

Now is the time that Internet and technology companies must step up and take on the very challenges that the Global Internet Freedom Act was intended to address in order to ensure that their services and technologies do not become tools for surveillance and oppression.

Lest companies argue that the problem is too big and complex for any one company to make a difference, there is a responsible way forward. Late last year, a diverse coalition of leading information and communications companies, major human rights organizations, academics, investors and technology leaders launched the Global Network Initiative, which seeks to provide a framework to help information and telecommunications companies chart an ethical and accountable path forward through the growing demands from countries to take actions that infringe on the freedom of expression and privacy rights of their users.

Equally important, the initiative promotes collective action to uphold the rule of law and the adoption of public policies that protect and respect freedom of expression and privacy on the global network. Three technology giants – Google, Microsoft and Yahoo! – have shown critical leadership by committing to the Global Network Initiative. Now, others in the industry need to step up and make that commitment as well.

Companies that join the initiative will find its requirements both rigorous and fair. Signatories will have two years to implement a range of commitments including conducting human rights risk assessments, training employees, increasing transparency with users and employing a high degree of push back when government restrictions or demands appear to be inconsistent with fundamental rights. Members also commit to encouraging their joint venture and business partners to abide by the same principles.

The collective goal is not to provide the definitive rulebook for companies doing business in hundreds of countries with countless different legal regimes. Rather, the initiative provides a framework that allows companies to stand up for their customers, wherever they are in the world, and to draw support from a powerful community of business leaders and human rights advocates.

Now is a critical moment for this initiative. As regulators shift their focus away from immediate legislative action, the test for the Internet industry will be the extent to which it commits itself to addressing the challenge on its own. The Global Network Initiative provides a path toward responsible action. But its value depends in part on expanding participation from the companies in the sector and building a global identity.

One thing is certain: the challenge of upholding global Internet freedom is not going away. The next time a foreign government uses American Internet technology to spy on citizens, censor democratic materials or otherwise oppress users, the world will ask what the Internet industry is doing to address the problem.

Ignoring the issue was never a viable alternative. The world is on notice about these practices, and the next attempt to legislate the issue is always just around the corner. Companies that participate in the Global Network Initiative will be prepared to do the right thing regardless of whether or not there is a legal mandate to do so. At the end of the day, this is about leadership on a fundamental issue of human rights that will not go away.