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Microsoft changes tune on Linux:
(ZDNet) Microsoft appears to be changing its tactics in its ongoing spat with the Linux and open-source world by taking a booth at this August's LinuxWorld Expo for the first time.

The Windows giant has never ignored the Linux show, often sending executives along to scope out the terrain and pitch Microsoft's point of view, but it has never taken the step of renting a booth. Senior executives, including chairman Bill Gates have long preferred a more caustic form of engagement with open source and its underlying philosophy, calling it a "cancer" and arguing that "Free Software" goes against everything that capitalism stands for.

Last week, however, Microsoft finalized its plans for establishing a small presence in the "Rookery" area of the conference, which showcases first-time exhibitors. On display will be Microsoft's embedded offerings, including Windows CE .Net and Windows XP Embedded; the former is aimed at handheld devices, and the latter is a modular form of Windows XP that can be customised for everything from cash registers to Internet fridges.

"Microsoft will be... discussing many offerings for the developer community with the goal of educating developers who may not be familiar with our products, and engaging in interesting dialogue about Windows Embedded and its comparisons to Linux offerings," the company said in a statement provided to journalists.

Microsoft will occupy booth R10, according to LinuxWorld Expo's Web site. Last August Doug Miller, director of competitive strategy for Microsoft's Windows division, attended the show and said that the company has learned and benefited from the rival operating system.

Linux's success in low-end servers led the company to revise its server product line, Miller said. And Microsoft learned that it needs better interactions with the programmers who use Microsoft products.

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Microsoft Unwraps New Initiative, Code Names: Microsoft Corp. over the past week has quietly unveiled details about a key new security initiative code-named Palladium, giving the first glimpse into its plan to deliver on its promise of "Trustworthy Computing."

Named after a protective statue of the Greek goddess of wisdom, "Palladium" is being used to describe a broad-based security system for the Windows operating system that will involve both hardware and software.

As Microsoft wraps up its antitrust case and settles into marketing its newest Windows operating system and seven-month-old Xbox video game console, the cash-rich software giant is directing attention toward its next generation of products, including Palladium and others carrying code-names such as "Longhorn" and, reportedly, "Freon."

John Manferdelli, product manager for the Palladium business unit, said in an interview published on Microsoft's Web site that the new initiative "will give individuals and groups of users greater data security, personal privacy and system integrity."

Microsoft co-founder Bill Gates had outlined a promise of "Trustworthy Computing" in a widely publicized, companywide memo in January.

The palladium was famed in ancient Greece for safeguarding Troy. Legend had it that as long as the statue was kept safe, the city could not be captured.

Instead of storing sensitive information such as passwords on software, Palladium will also aim to protect information at the hardware level -- for example, encrypting keystroke or video display signals carried over wires.

To achieve this, Manferdelli said that Microsoft is calling for industrywide collaboration with hardware makers and is already working closely with chip giants Intel Corp. and Advanced Micro Devices Inc. on the new security architecture.

With a cash war chest of more than $30 billion, the Redmond, Washington-based company is trying to move beyond software and into a new realm of services and hardware that will keep it growing.

NEXT WINDOWS, XBOX IN THE WORKS

Palladium will most likely be an integral part of the next version of Windows, which is code-named "Longhorn."

In a detailed interview with Fortune Magazine this week, Gates provides a broad view of what Longhorn will hope to accomplish once it succeeds the current Windows XP (once code-named Whistler) operating system sometime after 2005.

Gates explains that Longhorn will be much more intelligent in that it will recognize users and tasks seamlessly, and tailor itself to specific situations and needs.

"Why can't I tap into all my stuff at home or at work from any device that's mine, and have it just be available because it knows I'm me?" Gates asked in the Fortune article.

Another pet project mentioned in the article is "Broadbench" a huge video screen that is supposed to be as big as -- and eventually evolve into -- a desk.

Beyond software and office hardware however, Microsoft has already laid bare its ambition to penetrate the entertainment hub of the home, the living room, with its Ultimate TV digital television recording system and Xbox video game console.

"Freon" is the code name for a future version of Xbox that will combine the Xbox machine's gaming abilities with the ability to record and play back programs on a hard drive, according a report in the Wall Street Journal on Monday.

A Microsoft spokeswoman did not confirm the new Xbox code name or the project, which reportedly takes aim at Sony Corp lead in digital TV recording with the TiVo system and its unmatched success with the PlayStation series of video game machines.

Xbox had the code name "Midway," after the World War II naval battle in which the United States effectively ended the threat of a further Japanese invasion in the Pacific.

While Freon appears to be far off, another code name that is close to becoming a product is "Mira" the so-called "smart display" that allows users to detach flat screen monitors from their personal computers but still access their PC and the Internet from another room using a pen and wireless connection.

Mira-based products will debut this fall, alongside the portable Tablet PC, Microsoft has said.


Microsoft Discloses Security Flaws, again: Microsoft Corp. disclosed Wednesday that it has found three security flaws — one critical — in its popular Internet audio and video software. The flaws were found in Windows Media Player versions 6.4, 7.1 and in its newest Windows XP operating system. The most serious flaw can allow an attacker access to the user's system with the ability to add, change or delete data and perform other functions.

The company has posted on its Web site a software "patch" for users to download.

In addition, Microsoft said it has found four security flaws in its e-commerce Web-site building and management software. Two flaws were rated as critical.

The vulnerabilities affect Commerce Server 2000 and Commerce Server 2002, and could allow attackers to run commands of their choice. Microsoft has also posted a patch for those programs.

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New Windows lock could be leaky: (ZDNet) Microsoft's new plan to ensure PC security through extensive changes to its Windows operating system could help make private data and media files safer, but first it has to address privacy concerns, industry watchers said Monday.

This week, the software giant took the wraps off a wide-ranging push to strengthen the security of PCs by adding new features to its Windows operating system and teaming with hardware makers to create a trusted computing platform on which the new components can run.

"There are potential privacy issues and potential privacy benefits," said Alan Davidson, associate director for the Center for Democracy and Technology, a tech-policy think tank. But, Davidson said, one thing is certain: "The way that this is built will have a tremendous impact on privacy."

Whether the technology, code-named Palladium, becomes Microsoft's security savior or a privacy headache depends largely on decisions the company has yet to make. Done right, the fusion of protected software and hardware could provide a secure store for a person's private data that couldn't easily be broken into. Done wrong, the system could, among other things, empower Hollywood and music companies to keep track of who is playing their media files.

The Palladium technology still resides mainly on the white boards of Microsoft developers and won't be seen in a product until at least the second half of 2004, said Mario Juarez, group product manager for the project at the Redmond, Wash.-based software maker.

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High-Speed Internet Demand Growing: NEW YORK (AP) - The go-go days of the dot-com era may be gone, but consumers' appetite for high-speed Internet access and the online activities associated with it is getting bigger, recent surveys by the Pew Internet and American Life Project show.

Roughly 24 million Americans, or 21 percent of all Web users, now have high-speed connections at home, an increase of more than a quarter since the start of the year, and quadruple the number of broadband users just two years ago, according to a Pew survey last month.

"This places broadband adoption rates on par with the adoption of other popular technologies, such as the personal computer and the compact disc player, and faster than color TV and the VCR," Pew researchers said in reporting their findings.

A separate Pew survey revealed some mildly encouraging signs for those hoping that broadband will help resuscitate the industry by driving new data traffic onto all the dormant fiber-optic cables put into the ground during the boom.

Nearly six in ten broadband users have generated their own online content such as a personal Web page, posted information to a Web site or shared music and other types of files online, according to a survey of 507 adults with high-speed service conducted in January and February. About a quarter of them perform such activities on a typical day.

Similarly, about 63 percent have downloaded games, video or pictures at least once, and 50 percent have downloaded music files, Pew said. About 43 percent have displayed or developed photos online.

Pew also found that the average Internet user with high-speed home access does seven online tasks or activities per day compared with about three a day among dial-up users.

"Broadband users spend more time online, do more things, and do them more often than dial-up Internet users," the Pew report said.

Another key finding, Pew said, was that the extra time spent online due to broadband comes at the expense of other activities such as watching television and shopping. Thirty-seven percent said their Internet use has cut down on TV time; 31 percent said it has decreased time spent in stores; and 18 percent said it has reduced their newspaper reading.

The dominant mode of high-speed access was still through cable TV modems at 71 percent, followed by DSL telephone lines at 27 percent, while 2 percent were using satellite or wireless broadband services.

As might be expected, high-speed connections also appear to be enabling more work to be done at home, with about a third of the survey's respondents saying they "telecommute" at one time or another.

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Microsoft Won't Support Sun Product: WASHINGTON (AP) - Just before closing arguments in its antitrust case, Microsoft delivered a broadside to one of its bitter software rivals, declaring Tuesday it will stop supporting Sun Microsystems' flagship product by 2004.

Microsoft cited Sun's opposition in the case as the reason for the decision to remove support for Sun's Java programming language from future versions of Microsoft's Windows operating system.

"The decision to remove Microsoft's Java implementation was made because of Sun's strategy of using the legal system to compete with Microsoft," Microsoft spokesman Jim Cullinan said in a statement.

Sun had little praise for Microsoft's decision to carry Java, instead focusing on the 2004 deadline and Microsoft's decision to use its own incompatible version.

In a statement, Sun called the decision "a move calculated to coerce consumers and developers who prefer the Java platform to nonetheless abandon that platform simply because Microsoft has publicized its intentions to deny the Java platform's access to Microsoft's monopoly distribution channels."

Microsoft was found by a federal appeals court to have used illegal means to stamp out competition. The Justice Department reached a settlement with Microsoft last year, but nine states are still seeking stronger antitrust penalties.

Several witnesses appearing in the states' case against Microsoft, including executives of computer maker Gateway, accused the software giant of retaliating against companies that refused Microsoft edicts or helped the government build its antitrust case.

In an interview, Microsoft General Counsel William Neukom declined to comment on the Java announcement or allegations of retaliation.

Current versions of Windows XP do not include Java, though users can download it if they need to run programs written in the language. But Microsoft did say it would temporarily restore support for Java in the upcoming update to Windows XP, expected this fall.

Cullinan said the company will temporarily support Java "to minimize any potential disruption among our customers."

The battle over Microsoft's implementation of Java — promoted for its ability to run programs regardless of what operating system it is installed on — was a central part of the federal antitrust case as well as two civil suits brought by Sun against Microsoft. Microsoft was criticized for putting its own flavor of Java in Windows that was incompatible with Sun's version.

A federal court found that Microsoft created programming tools that fooled Java programmers into thinking they were writing software that would work on any version of Java, rather than just Microsoft's version. Microsoft still disputes that anyone was tricked into writing incompatible software.

Sun has taken an active role in the antitrust case. It gave information to lawyers for the nine states suing the company and Sun executives testified during two months of penalty hearings.

Microsoft cited terms of a settlement with Sun in its decision to drop Java.

"The settlement agreement between the companies prevents Microsoft from making any changes — including any security fixes — to our Java implementation after January 1, 2004," Cullinan said. "We will not put our customers or Windows at risk so you can anticipate that there will be no Java in Windows from that point forward."

Lawyers for Microsoft and nine states suing the company are scheduled to present their closing arguments Wednesday. Microsoft's announcement Tuesday took the states by surprise, said California Assistant Attorney General Tom Greene.

"We're certainly surprised at this event on the eve of the closing arguments in a major antitrust case," Greene said. "We'll look forward to hearing more about this tomorrow."

One of the antitrust penalties proposed by the states would force Microsoft to carry a Sun-approved version of Java.

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Wal-Mart Sells Lindows on Line: Wal-Mart's online store is offering eight different Microtel PCs with LindowsOS included. The computers sell for $300. to $600. USD and will ship in about seven days.

Wal-Mart's OS-less PCs, that's a dramatic move away from the standard Windows-based home computer. Now the retailer is advertising systems with the LindowsOS distribution pre-installed, no longer just moving away from Windows, but now directly competing with it.

"These computers do not ship with Microsoft Windows. They ship with an exciting new UNIX based Operating System (OS) named Lindows. This exciting new OS delivers the stability of UNIX with the ease of Windows and the ability to run most Microsoft programs. These computer systems are a perfect low cost alternative to computers preloaded with Microsoft Windows."

To say that Lindows runs most Microsoft programs is a bit of a stretch. Wal-Mart says the PCs come with "mail, word processor, web browser, address book, calculator, cd player, MP3 player, Microsoft PowerPoint viewer, Word viewer, and Excel viewer," and buyers get to select three "free" Click-N-Run applications from the Lindows.com warehouse.

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Microsoft Finds Dormant Virus in Korean Software: Microsoft Corp. said on Friday it had unwittingly released a Korean-language version of its development software for online services that was infected with the notorious Nimda virus.

The virus contained in the version of Microsoft's Visual Studio .NET is not expected to cause any damage since it remains essentially dormant in a part of the program that is in no danger of being activated, the company said.

A patch is available, as are clean replacement copies of the software, which is used by developers to write Web services programs, said Christopher Flores, lead product manager for Microsoft's Visual Studio .NET.

The virus was discovered by a Microsoft employee in May, contained in a compressed, unused file, Flores said.

The file came from a company that helped develop the Korean language version of the product, which has been on the market less than 90 days, he said.

"We've taken a serious look at our product-building processes across the board," Flores said. "Unfortunately, we placed a little bit too much trust in this vendor and ... did not examine the contents of the file."

"The number of copies out there is still relatively small compared to the United States," said David Lazar, Visual Studio .NET group product manager.

The news comes six months after Microsoft announced a drive to make security a top priority for all its products.

Earlier this week the Redmond, Washington-based company warned customers of a handful of new security flaws in its software, including several that were critical. So far this year, Microsoft has issued 30 security bulletins about vulnerabilities affecting its software.

Flores said the Nimda virus incident was a "fringe case" involving a situation that was not likely to result in any harm.

"We do take trustworthy computing very seriously," he said. "Building software is an extraordinarily complex process. Our processes are tighter now."

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Ruling lets Iowans seek Microsoft refunds: (The Des Moines Register) Thousands of Windows 98 users in Iowa could get $40 refunds from Microsoft Corp. after the Iowa Supreme Court reinstated a lawsuit Wednesday that alleges price fixing.

Des Moines lawyer Roxanne Conlin, who represented Iowa consumers in the lawsuit, said the 5-2 opinion was the first antitrust ruling in any state that favored "indirect purchasers," in this case, consumers who bought the Windows 98 operating system or bought computers with Windows 98 installed.

"What's most important here is that consumers have a direct remedy against violators of Iowa's antitrust law, when in most states they do not," Conlin said. "In capitalism, everybody has to follow the rules, and one of the rules is that you don't fix prices and you don't create a monopoly."

A Polk County trial court had thrown out the lawsuit. The Supreme Court's ruling orders a Polk County judge to review consumers' argument that Microsoft's practices violated the Iowa Competition Law. They contend they were harmed and entitled to refunds or credits Conlin estimated to be $40 apiece. She said tens of thousands of consumers might be eligible.

Microsoft spokesman Jim Desler at the company's headquarters in Redmond, Wash., said the Iowa court's ruling was a departure from recent rulings in other states, including New Hampshire and Rhode Island.

"We feel that consumers were not injured at all," Desler said. "Consumers have clearly benefited from Microsoft's efforts to improve our products."

Bob Brammer, spokesman for the Iowa attorney general's office, said the ruling was a "momentous decision that helps consumers."

He said the price-fixing lawsuit was separate from a lawsuit that Iowa and several other states are pursuing against the company. The price-fixing lawsuit was brought by Joe Comes, who owns a vending company in Des Moines, and other computer consumers in Polk County.

The consumers say Microsoft unlawfully and willfully maintained a monopoly that artificially drove up the price of Windows 98. The company violated the state's 1976 Competition Law, the plaintiffs allege. That law says monopolies are illegal because they exclude competition and fix prices.

Microsoft responded that the Iowa lawsuit went against federal law, which says only "direct purchasers," such as computer makers who buy Windows 98 from Microsoft, can recover damages for antitrust violations.

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Microsoft Discloses Software Flaw: Microsoft Corp. acknowledged a serious flaw Wednesday in its Internet server software that could allow sophisticated hackers to seize control of Web sites, steal information and use vulnerable computers to attack others online.

The software, which runs about one-third of the world's Web sites, is used by millions of businesses and organizations but less commonly by home users. Microsoft made available a free patch for customers using versions of its Internet Information Server software with its Windows NT or Windows 2000 operating systems.

The server software included within Microsoft's newer Windows XP operating system was not affected by the security flaw.

In a separate warning Wednesday, Microsoft said customers of its Windows NT, Windows 2000 and Windows XP operating systems were vulnerable to an unrelated problem affecting Microsoft's technology to connect to the Internet over phone lines. Hackers trying to attack these computers must already have permission to use them, limiting the risks.

A researcher with eEye Digital Security Inc., Riley Hassell, found the Web server flaw in mid-April during testing of eEye's own hacker-defense software, but the discovery was kept closely guarded under an agreement with Microsoft until Wednesday.

Microsoft described the risk to Web servers as "moderate." The company and other top experts, including U.S. officials at the National Security Agency, have for months recommended turning off the vulnerable feature unless customers need it.

However, it was impossible to know how many customers followed that advice and shut off the feature, which is turned on automatically the first time the software is installed.

One consolation for Microsoft's customers was that the software flaw wasn't easy to exploit by most hackers. "It does take a more sophisticated level of skill," said David Gardner, a security program manager at Microsoft.

The latest vulnerability affects a function in the server software that allows Web administrators to change passwords for an Internet site. Despite the anticipated difficulty for hackers, the flaw was considered unusually threatening because it is closely related to a similar Internet server glitch disclosed by Microsoft on April 10.

Experts believe hackers already have been distributing customized attack tools to exploit the April 10 flaw, and they fear these underground tools could be updated readily to attack computers susceptible to the latest glitch.

A little-known Chinese hacking group has been distributing such tools on a Web site for weeks, although these are limited to attacking computers running Chinese-language versions of Microsoft's server software. Others claim to have developed more reliable attack tools using the April 10 glitch.

The FBI had warned that the previous, similar flaw was "a signficant threat due to the magnitude and type of potential victim systems."

Marc Maiffret, the self-described "chief hacking officer" for eEye, said malicious hackers will devise automated tools to scan the Internet and attack vulnerable computers rather than targeting machines individually.

The same technique was used to spread the damaging "Code Red" and "Nimda" across the Internet last year, which infected nearly 1 million servers.

"It could readily be exploited with a worm," Maiffret said. "It's kind of a scary thing."

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Microsoft Defends .NET Passport: Microsoft insisted Tuesday that its .NET Passport service complied with European data protection laws, rejecting charges that it is "surreptitiously" collecting and passing on personal information about users.

At a news conference, the U.S. software giant's corporate privacy officer, Richard Purcell, compared the user authentication system to a doorman who checks IDs but has nothing further to do with what happens once a person enters a site.

"These practices do indeed meet criteria" laid down under strict EU data protection laws, he said.

EU spokesman Jonathan Todd said last month that concerns about the free service — which can store online passwords and credit card numbers for e-mail, games and e-commerce — had been passed on to national data protection authorities, who are responsible for enforcing EU privacy rules.

The review became public after a Dutch member of the European Parliament, Erik Meijer, accused Microsoft of collecting "a vast quantity of personal information" from Passport users and "surreptitiously" passing it on to "unknown parties ... without their noticing it."

EU Internal Market Commissioner Frits Bolkestein responded by saying he was looking into the concerns "as a matter of priority."

Purcell, who was meeting with Bolkestein Tuesday while in Europe this week, said a "dialogue" was underway with European regulators.

"We are clearing up misconceptions and clarifying" how Passport works, he said.

No formal investigation has been initiated by any of the 15 European Union ( news - web sites) member states, nor by the EU's head office in Brussels, said a senior Microsoft attorney, Peter Fleisher.

EU privacy rules, in force since 1995, govern what kind of personal information companies can gather on their customers and how it will be used.

Purcell declined to comment on the separate, EU antitrust investigation into Microsoft's product line, focusing primarily on Microsoft's Windows program.

The EU said last August that it believed Microsoft was abusing its dominant position in desktop software to horn in on the market for servers, which link personal computers in networks.

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Security Flaw Found in Explorer': - A security flaw in Microsoft's Internet Explorer browser could allow a hacker to take control of a remote computer if its user clicks a link to an outdated Internet protocol, a computer security firm says.

Oy Online Solutions Ltd. of Finland said it notified Microsoft Corp. of the security hole on May 20 but the software giant has yet to produce a software patch to fix the problem, the Toronto Star reported Tuesday.

A Microsoft spokesman who refused to be identified said Tuesday that the company is "moving forward on the investigation with all due speed" and will take the action that best serves its customers.

The problem concerns Gopher, an Internet protocol that predates the World Wide Web with pages like Web pages except that they are unable to store audio and video content.

Although Gopher is considered an outdated format for Internet content, it is still supported by Internet Explorer and most other browsers.

According to Oy Online, a hacker could take over a user's computer simply by having the user click on a link to a "hostile Gopher site." That one click would install and run any program the hacker chose on the victim's computer, and the victim might never know.

"The program could, for example, delete information from the computer or collect information and send it out from the computer," Oy Online said in a release. "(It) could also install a so-called backdoor (program) that would enable the hostile attacker to access the computer later."

All versions of Internet Explorer are believed to be vulnerable, the Star reported. - Refusing to confirm the security flaw, the Microsoft spokesman said the company "feel(s) strongly that speculating on the issue while the investigation is in progress would be irresponsible and counterproductive to our goal of protecting our customers' information."

And the spokesman added, "Responsible security researchers work with the vendor of a suspected vulnerability issue to ensure that countermeasures are developed before the issue is made public and customers are needlessly put at risk."

After being embarrassed on an almost regular basis by security flaws in its products — including a debilitating problem found in its latest Windows XP operating system just days after its release — Microsoft began a companywide training program on security issues earlier this year.

In January, Microsoft Chairman Bill Gates instructed employees to make software security a top priority.

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Windows 2000 SP3 Nears, Adds Antitrust Tweaks: Microsoft on 5/28/02 issued the Windows 2000 SP3 Release Candidate, marked build 3.140. The update files in at 17MB for the Professional and 30MB Server versions of the operating system.

This is the third service pack for Windows 2000 that Microsoft began beta testing last year, and it was going to be a maintenance release with no new features. But, SP3 has quite a significant update, also adding support for Automatic Updates and a new configuration pane that will comply with Microsoft's antitrust settlement with the Department of Justice and nine states.

The new Configure Programs feature appears as part of Add/Remove Programs accessible in the Control Panel. Now users have the option to override the Microsoft defaults and select a new custom Web browser, e-mail client, media player, instant messenger, and Java virtual machine. There is also an option to hide the integrated Windows components "Internet Explorer" or "Windows Media Player."

This feature will be included in Windows XP Service Pack 1, set to enter beta testing soon with the final release expected this summer.

Windows 2000 SP3 - can now automatically check for updates from the Internet, the Automatic Updates panel allow users to schedule updates for certain times of the day. This is an good addition for network administrators.

Credentialed beta testers can log into BetaPlace, that's Redmond's centralized test site, and download the SP3.

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Microsoft Changes Software Options: WASHINGTON (AP) - Microsoft Corp. is disclosing how it will let users of its latest Windows software effectively replace its own e-mail, Web browser and instant-messaging tools with rival programs. The action was required by Microsoft's landmark antitrust settlement with the government.

Microsoft demonstrated a new feature this week that its engineers will include within Windows XP to allow users to trick their computers into behaving as if some of Microsoft's own software tools had been removed from Windows.

Microsoft, which also disclosed that sales of Windows XP have exceeded 32 million copies, said it will offer the change, probably in August, in a 40-megabyte "service pack" update. Customers can download the update from Microsoft's Web site or order it for shipping costs expected to run less than $10.

The government demanded the redesign, aimed at helping rival software companies compete against Microsoft more fairly, as a cornerstone of its agreement to end the historic antitrust case against the software maker. Nine state attorneys general are pursuing additional penalties against Microsoft.

Lawyers for the Justice Department (news - web sites) and the nine states that also agreed to the settlement expect to review Microsoft's plans in the next few weeks. Microsoft does not plan to demonstrate its changes for U.S. District Judge Colleen Kollar-Kotelly, who will decide later this year whether to approve the settlement.

The government did not force Microsoft to make similar changes to earlier versions of Windows; the update will work on both home and professional editions of Windows XP.

Microsoft also will use the Windows update to crack down on software pirates: It identified a stolen unlocking combination widely distributed on the Internet to install Windows XP illegally.

In an unusually aggressive move, Microsoft designed its update not to load on these illegal copies and will block these users from downloading future repairing patches from its Web site. Microsoft refused to estimate how many users might be affected except to say it identified a sizable number of illegal copies of Windows XP that would account for millions in lost sales.

Microsoft's anti-piracy decision is not unprecedented and comes amid renewed debate in Washington about the adequacy of technology to protect copyrights. Microsoft previously used another software update to sabotage its Office business software electronically on computers it believed were running illegal copies.

The other changes to Windows initially could benefit leading technology companies, including AOL Time Warner Inc., RealNetworks Inc. and Apple Computer Inc., which offer rival Web browsers and software for sending e-mails or instant messages and listening to digital music. It also could provide new revenue sources for hard-hit computer makers in a dour economy by encouraging software rivals to pay to distribute their own tools over Microsoft's wares.

"These guys are going to pay OEMs (computer makers) to put it on there, and OEMs are going to take money or whatever it takes," Microsoft spokesman Jim Cullinan said.

Consumers will be able to hide Microsoft's own Windows programs using a new utility called "Set Program Access and Defaults." Users can choose whether to continue using Microsoft's Web browser or other programs for e-mail, music and video or instant-messages, plus Microsoft's support for the Java programming technology.

One option, marked "non-Microsoft," blocks Windows from using any of these programs from Microsoft; consumers can select any rival Web browser already installed, for example, such as those offered by America Online, the former Netscape Communications Corp. or the fledgling Opera Software ASA of Norway.

In a demonstration of its redesign for The Associated Press, Microsoft deleted all its Internet Explorer icons from one of the company's laptop computers, which preventing the Web browser from starting, then restored the icons later.

Microsoft acknowledged that some Web sites using its ActiveX technology for animations and other functions won't work if customers block its Internet Explorer browsing software, because rival browsers won't load these pages. But the company said it expects few such glitches even for consumers who choose to disable all its programs.

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Report: Hole found in Excel XP: A security hole in Microsoft's Excel XP spreadsheet application could allow hackers to take over a user's PC by using specially formed XML stylesheets.

According to security expert Georgi Guninski, the problem occurs when a user opens an Excel spreadsheet file and chooses to view it with an XML stylesheet. If the stylesheet contains specially formed code, said Guninski in a security note on his Web site, the PC will try to run that code.

"As script kiddies know, this may lead to taking full control over a user's computer," said Guninski. "Excel does not give any warning to the user--just asks whether to use the style sheet or not." However, Guninski added, by default Excel does not display spreadsheet files with the stylesheet.

XML, or Extensible Markup Language, is a system for defining specialized markup languages that are used to transmit formatted data.

On his site, Guninski has posted a sample piece of code that would fool Excel XP into thinking it contains a link to a stylesheet but which in fact runs a command that lists directory contents on the user's PC.

To be safe, said Guninski, users should not use XML stylesheets. Guninski said that Microsoft was notified of the flaw on 23 May. Microsoft did not immediately respond to requests for comment.

The flaw is the latest in a slew of security alerts to hit Microsoft products. Last week the company warned Windows NT and 2000 users of a new flaw in its debugger tools that could give attackers complete control of a system once they've gained basic access to that system.

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Windows XP Patch to Comply with Anti-Trust Deal: SAN FRANCISCO (Reuters) - The first product changes dictated by a proposed anti-trust settlement with Microsoft Corp. will appear next week in a software patch for Windows XP the company said on Friday.

Microsoft and the U.S. Department of Justice agreed to a settlement in October designed to address complaints that the software giant was using its market dominance to bully computer manufacturers and others to favor its products.

The settlement, which is being challenged as inadequate by nine states, would give computer makers more flexibility to feature rival software on their machines.

The settlement is not binding until signed by the judge, although Microsoft agreed to comply with certain conditions before then, Jim Cullinan, lead product manager, told Reuters.

The Windows XP Service Pack 1 will be released to more than 10,000 beta testers by the end of May and then made available to the public around the end of August, he said.

The software allows computer manufacturers and users a variety of options in making default settings for certain popular programs including Web browser, e-mail, instant messenger and media player for audio and video.

MORE USER OPTIONS - A new button on the Windows start menu, titled "set program access and defaults," allows users to choose between four default options: computer manufacturer choice; Microsoft only software; non-Microsoft software; and customized settings, which is the default choice.

Users can choose to set defaults to one program but also display alternative programs, or they can hide other programs so that the icons are not on the desktop or in other areas, eliminating easy access to the programs.

Previously, computer makers could set defaults to programs other than Microsoft's but could not hide Microsoft programs, except for the browser, like they can now.

Microsoft allowed computer makers to hide access to Microsoft's Internet Explorer browser after an appeals court in June agreed with a lower court that Microsoft had illegally maintained its monopoly in personal computer operating systems.

MICROSOFT TO SHARE PROTOCOLS - In the coming months, Microsoft plans to share code with competitors that will enable them to write programs that interact with XP in the same way Microsoft programs do, Cullinan said.

Microsoft will release application programming interfaces, code that reveals how a software program talks to the operating system, he said. The company also will license protocols used in communications between desktop Windows PCs and servers, he added.

The company did not decide to release the service pack because of the settlement, but rather because Windows NT code, formerly used in products aimed at the corporate market, is now in XP and being used by consumers, Cullinan said.

Service packs are meant to fix critical compatibility, reliability and security issues in a product until an updated version of it can be released.

"We've never issued a service pack for a general consumer" product, he said.

ANTI-TRUST, SECURITY TRAINING - The service pack will reflect specialized employee training in anti-trust law as well as in secure product design and development, Cullinan said. The company announced a push earlier this year to make security a priority in all its products.

"You will see some fixes based on that work," he said, of the security training. "It's one step. There's still a long way to go."

The service pack will roll up about a dozen or so critical security problems that have already been patched in XP and accompanying programs like Windows Messenger instant messaging (news - web sites), he said.

The software also changes the Passport settings so that they don't pop up soliciting registration until a user accesses a service that requires Passport, such as Hotmail, Microsoft Network or Windows Messenger.

Passport allows users to enter their personal information once and have it accessible by multiple Web sites and services, rather than the user having to enter that data for each new service they sign up for.

The settlement was reached after the appeals court decision ruled that Microsoft was a monopoly but rejected a proposal to split the company in two.

California, Massachusetts and seven other states are pressing for more severe sanctions against Microsoft, such as forcing the company to sell a cheaper, stripped-down version of Windows and giving rivals easy access to detailed Windows code.

About 32 million copies of Windows XP have been sold since its release in October, according to Cullinan.

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Microsoft threatened an audit for the 24 largest school districts in the Northwest. Now it appears they may be backing down, according to Steve Duin, the Oregonian columnist. Not only that, he writes that Portland Public Schools is opening 16 Linux computer labs across the districts, at half the cost of a Microsoft-equipped lab. More here!

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Microsoft dealt another blow on Lindows: Microsoft's claim to the word "Windows" suffered another blow this week when a federal judge again questioned the company's assertion that the term is not generic.

The judge also repeated his denial of Microsoft's request to shut down the Lindows.com site and block its owner from advertising its product.

Lindows, started by Michael Robertson, the founder and former CEO of MP3.com, aims to offer an alternative to Microsoft's dominant Windows operating system by selling a new program, LindowsOS, which would allow Windows programs to run on the Linux operating system. A legal battle has been ongoing in federal court in Seattle since December, when Microsoft sued the start-up to prevent use of the Lindows name, claiming it violated Microsoft's trademarks.

In a preliminary ruling in March, U.S. District Judge John Coughenour questioned whether the word "Windows" is entitled to trademark protection. He also denied the software giant's request to shutter Lindows' site.

Microsoft, fiercely protective of its Windows franchise, appealed the ruling, asking the judge to reconsider.

Coughenour on Tuesday reiterated his previous decision in a seven-page ruling, saying competitors and dictionary definitions demonstrated that the "consuming public used the terms 'windows,' 'window' and 'windowing' to indicate a general type of user interface." He said the term was generic in the same way that the words "light" in "light beer" and "matchbox" in "matchbox toys" are.

Coughenour also cited Microsoft's own use of the word "windowing" in its documentation as proof that the term is generic.

"Through its own use of the evidence, Microsoft essentially admits that these terms refer to the genus of computer software products that have windowing capability," he wrote.

The ruling is a setback for Microsoft's attempts to claim the Windows name as its own, and it could open the door for other companies to use the term in their products.

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Microsoft Helps Protect Your PC: Microsoft unveils a free tool that searches for security flaws in Windows-2000/XP based computers. In an effort to beef up the security of its software, Microsoft made available a free tool designed to search out security vulnerabilities hiding in Windows-based computers.

It's called the Microsoft Baseline Security Analyzer, the tool is intended to provide users with an easy way to check their systems for common problems that arise when computers are configured incorrectly or when users fail to install suggested security patches, Microsoft says.

After scanning a system with the tool, users receive a security report card that lists all the holes and vulnerabilities found during the scan. The MBSA does not actually download and install fixes but provides instructions how to do so.

MBSA is available online. The tool, which is 2.5MB in size, can be downloaded from Microsoft's developer Web site. It can be installed on Windows 2000 desktop and server operating systems as well as the Home and Professional editions of Windows XP, Microsoft says. Users must also have version 5.1 or higher of Internet Explorer.

Microsoft MBSA can also be used to scan for security holes in the following software: Windows NT 4.0, Windows 2000, Windows XP, Internet Information Server 4.0 and 5.0, SQL Server 7.0 and 2000, Internet Explorer 5.01 and later, and Office 2000 and XP.

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Bug Hunter Finds Flaws in Office XP: (AP) Holes in Outlook XP and Excel could allow attackers to take over a system, security researcher warns.

Two new security flaws in Microsoft's Office XP productivity suite could be combined to allow attackers to take over a system, according to independent security researcher Georgi Guninski. Guninski sent an advisory about the issues to security e-mail lists and posted it on his Web site Monday.

The first vulnerability, which affects Outlook XP, would allow an attacker to embed "active" content in an e-mail, he wrote. Active content contains both an object and a script. The content embedded in the e-mail would then execute when the e-mail is forwarded or replied to, wrote Guninski, who has uncovered a number of vulnerabilities in Microsoft products in the past.

The vulnerability could force a user to visit a Web page designated by the attacker, Guninski wrote.

Outlook Users Warned to Look Out:
Tthe most critical problem is that Outlook will automatically download potentially dangerous files sent in certain HTML e-mail messages. The warning applied to e-mails with IFRAME HTML tags embedded in the message. If a user reads such an e-mail, Outlook will begin downloading executable files from a Web specified in the message.

"Outlook will put up a dialog box asking a user if they want to open the file, save it, or cancel the download," Smith writes. "There is no security warning that the executable file might be dangerous. Unfortunately, the default action of the dialog is 'Open'." Smith recommends that IFRAME tags be used only in conjunction.

Hidden Code:
Another HTML-related flaw allows JavaScript code to run in e-mails even though scripting is turned off in the default settings of Outlook. A malicious hacker could bury the JavaScript code in a seemingly harmless link, causing hidden dangerous code to execute when the user clicks on a link, he says.

"In Outlook, URLs are limited to about 2,000 characters which is probably enough space to contain a simple worm which could exploit one of the know Internet Explorer security holes," Smith writes.

In addition, Smith claims that cookies can be set and read in HTML e-mails despite Outlook's default settings to turn cookies off.

The second security hole, which affects the spreadsheet component of Office XP, can be used in conjunction with the first vulnerability to place executable files in a user's start-up directory, which could lead to a takeover of the target machine, he wrote.

Guninski, who lives in Bulgaria, included sample code in his advisory to demonstrate how to exploit both vulnerabilities.

Guninski wrote that he notified Microsoft of the bugs on March 17, but that the company did not produce a patch in two weeks, triggering his advisory. In the past, Microsoft has criticized Guninski for releasing his vulnerability data too quickly, calling his actions "irresponsible."

Workarounds for the vulnerability include disabling all "active" content in Internet Explorer (which is used by parts of Outlook) and fully deleting the spreadsheet component of Office XP.

Microsoft Responds
In a statement e-mailed, Microsoft said it is investigating the matter, but also acknowledged the accuracy of the first vulnerability.

As a workaround for that flaw, Microsoft recommends disabling HTML e-mail and not selecting Microsoft Word as the e-mail editor.

As for the second vulnerability, Microsoft said it does not yet have a workaround, but notes that "even in the worst case it could only be used to create files--not to execute them or take any other action on the user's computer."

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Microsoft Program Tracks User Habits: (AP) WASHINGTON - Microsoft's new version of its popular Media Player software creates a list of the digital songs and movies each computer user has played — a potential treasure-trove for marketing companies, lawyers, even snooping spouses.

The company is notifying customers about the tactic after inquiries from The Associated Press. Microsoft says it has no plans to sell the data collected by Media Player, which comes free with the Windows XP operating system. The company said last month it had sold more than 17 million copies of Windows XP.

"If you're watching DVDs you don't want your wife to know about, you might not want to give her your password," said David Caulton, Microsoft's lead program manager for Windows Media.

Downloading CD information such as the disc name and track list, is a common practice used by almost every computer CD player. But downloading DVD information is new, and has the potential to be sensitive especially in the case of racy or violent movies.

Microsoft's original privacy statement informed customers that they were downloading the information about CDs but never stated that the information was being stored in a log file on each computer.

The new statement makes clear that information is being downloaded for both DVDs and CDs, but does not explain how users can eliminate or get into the log file.

"It definitely could have been clearer and more specific about DVDs," Caulton said.

Clearing the list of songs and movie titles would cripple Media Player. Stopping the program from collecting any more information would mean changing the software's settings, but that would disable Internet broadcasts.

As part of downloading the information about songs and movies from the Web site, the program also transmits an identifier number unique to each user on the computer. That creates the possibility that user habits could be tracked and sold.

Privacy experts said they feared the log file could be used by investigators, divorce lawyers, snooping family members, marketing companies or others interested in learning about a person's entertainment habits.

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