Microsoft to issue debt

Chaos in the money markets gave Microsoft Corp. an opening Monday to announce it would take on debt for the first time, launch a new $40 billion stock buyback plan and raise its dividend.

The moves indicate that for all the credit problems plaguing the financial sector, cash-laden technology companies with good credit ratings are still borrowing money on favorable terms and otherwise enjoying flexibility.

The largest information-technology company, Hewlett-Packard Co., approved an $8 billion buyback plan Monday. And Intel Corp. Chairman Craig Barrett told The Associated Press that the chip maker — which boasted $11.5 billion in cash and $2.1 billion in debt at the end of the last quarter — was feeling no squeeze from the credit crunch.

"I don't see any slowdown in our technology investment or R&D investment or manufacturing investment going forward," he said. "When you've got 10, 15 billion dollars in your bank account, short-term credit is not a significant issue."

Microsoft, which benefits from having $23.7 billion in cash and short-term investments on hand as of June 30, historically has avoided taking on debt to fund day-to-day operations, acquisitions and stock buybacks, even as many of its peers, including IBM Corp. and Oracle Corp., have done so.

Oracle, for one, has accumulated $11.2 billion in debt in recent years while buying up dozens of its smaller rivals, while sitting on $13 billion in cash as of Aug. 31. The business software maker indicated recently that much of that money would go toward acquisitions or buybacks.

Microsoft did plan to borrow money for its $47.5 billion run at Yahoo Inc. this year, but the proposal fell through before the company issued any debt.

Now, as investors are growing increasingly risk-averse, blue-chip companies like Microsoft are finding interest rates on commercial paper — short-term loans that range from overnight to nine months — hovering around 2 percent. Finally the world's largest software maker decided it was time to borrow.

The company said Monday its board approved a $2 billion commercial paper program, as part of a bigger $6 billion, open-ended allowance for debt financing. Moody's Investors Service and Standard & Poor's Rating Services both assigned Microsoft's debt their highest ratings.

"They've had pressure to do this for a long time, and I think it's a process of just getting everybody at the company comfortable with taking on debt," said Walter Pritchard, an analyst at Cowen and Co.

Heather Bellini, an analyst for UBS, said she was surprised by the move, given that the company was vague about what it might use the proceeds for.

"Listening to (CEO) Steve Ballmer in the past, his position has been he wouldn't issue debt for the sake of issuing debt," the analyst said. But given the interest rates available to companies like Microsoft right now, "I think they were just being opportunistic," she said.

In general, taking on debt makes sense for a company like Microsoft. The interest payments Microsoft would make are tax-deductible, which could help boost Microsoft's mighty profits even more.

Richard Lane, a senior vice president at Moody's, also noted that because much of Microsoft's revenue growth comes from overseas, it's cheaper to use debt to fund buybacks and other domestic activities than to do it with money that originates with overseas sales and is taxed when it is brought back into the U.S.

Microsoft also raised its quarterly dividend to 13 cents from 11 cents, payable Dec. 11 to shareholders of record on Nov. 20. Investors reacted to that, the buyback and the debt offering by sending Microsoft's shares up 24 cents, nearly 1 percent, to close at $25.40 even as the broader market fell.

Microsoft's fiercest competitor in the Web search business, Google Inc., has said it isn't planning to buy back stock or take on debt. Google has $12.7 billion in cash, which it prefers to use for acquisitions and investments in its business.

"The drama is in New York, not here," Chief Executive Eric Schmidt said in a meeting with reporters last week. "It's business as usual at Google."

Google co-founder Sergey Brin begins blogging

Google co-founder Sergey Brin has started a blog, candidly telling of being at risk for Parkinson's Disease and plugging his wife's genetic testing start-up firm.

While Brin is no stranger to news-making webcasts and online press announcements, he made a blogging debut Thursday by sharing personal musings in a post at the Blogger weblogging website Google bought in early 2003.

Brin wrote of his mother being diagnosed with Parkinson's Disease and how testing by 23andMe, a company started by his wife Anne Wojcicki, shows he has a gene mutation that "markedly" increases his chances of getting the illness.

"This leaves me in a rather unique position," Brin wrote.

"I now have the opportunity to adjust my life to reduce those odds. I also have the opportunity to perform and support research into this disease long before it may affect me."

Brin told of working with The Parkinson's Institute and the Michael J. Fox Foundation to combat the disease and provided links to the organizations' websites.

Brin wrote of comparing his genes with those of relatives and of checking whether his DNA links him to others with his family name.

Founded by Wojcicki and Linda Avey two years ago, California-based 23andMe offers genotyping for a price of 399 per person.

iPods make choice harder

The Zune has a long way to go to become a threat to the iPod. But it is getting closer.

With updated Zunes and new iPods hitting the market in the past week, I spent some time with each: a black-on-black version of Microsoft Corp.'s music and video player and a bright red model of Apple Inc.'s iPod Nano. And it became clear that there are a few things Apple can learn from the Zune — though not surprisingly, Microsoft might want to take some notes as well.

The Nano ($149-$199) remains the more attractive of the two. Its new look is sort of growth-spurt chic, combining the long, lean looks of earlier models with a reoriented 2-inch screen that debuted with the shorter, wider third-generation model. In addition, its sides are rounded, which gives it an oval-esque shape that felt awkward cradled in my hand but was easy to slip into a back pocket.

The new Nano comes in an array of bright colors, and this alone may appeal to buyers who want something that stands out from the crowd.

The latest flash memory-based Zune ($150-$200) comes with some new color options, but they're not nearly as loud, and overall the device is identical to the one Microsoft rolled out in October. At 3.6 inches tall and one-third of an inch thick, it is the same height as the new Nano but noticeably bulkier.

Looks aside, the biggest differences are in the players' new features, which include wireless music downloads and streaming on the Zune and an accelerometer that makes it easier to manipulate song-shuffling, gaming and image viewing on the Nano.

Unlike the iPod family, Zunes have always included a wireless feature, but it was limited to sharing songs with other Zune users (who can be hard to find) and to synchronizing music, videos and photos with personal computers. On the most recent Zune, this has been expanded so that when users are in Wi-Fi hotspots they can access the Zune Marketplace online music store straight from the device.

The ability to download songs over the air is not unique — the Nano's big brother, the iPod Touch, can snag songs from Apple's iTunes Store via built-in Wi-Fi — but it certainly gives the smaller Zunes an edge over the wireless-less Nano, and a free update makes it work on older Zunes, too.

I found the Zune's Marketplace feature easy and definitely satisfying, especially since I tend to think of music I want while I'm listening to tunes.

The feature lets you search by lists of top songs, or by sluggishly tapping in artist names; most users will probably find the former simpler, but I did appreciate the option of the latter.

Another neat Wi-Fi feature on the Zune is the ability to download songs you hear over the built-in FM radio. This was simple, and only required a few clicks from start to finish. If you don't have Wi-Fi access, you can still choose songs and they will queue up so you can download them the next time you connect to your computer.

Users who pay $15 per month for Microsoft's all-you-can-eat Zune Pass music subscription can also stream songs over Wi-Fi, and I found songs came in pretty clearly.

The new Nano, meanwhile, does have a few tricks up its chrome sleeves. Apple added an accelerometer, which it had previously included in the iPod Touch and iPhone. The accelerometer lets you do things like turn the Nano sideways while listening to music to scroll through album covers. That had its own menu tab on the previous Nano. Or now you can give the Nano a shake to shuffle it to another song.

I thought the shaking-shuffle feature was kind of annoying. With the slipperiness of the Nano's curved sides I worried I would throw the little guy onto some subway tracks or a busy street while commuting.

But the accelerometer can make games cooler. Apple included a simple game called "Maze" to give users an idea of how this works, and I was surprised at the responsiveness of a little, silver on-screen ball as I tilted and maneuvered the Nano. This was one trick I wished the Zune could learn.

You can also view photos either in portrait or landscape mode on the Nano; the Zune only shows photos in landscape mode, and both devices limit video playback to landscape mode, too.

Another highlight of the Nano's makeover is the new "Genius" feature, which is meant to help you put playlists together by taking one song as a starting point and suggesting other tracks with a similar sound or feel. Or if you try this from a computer, while using the iTunes software, a Genius sidebar shows related songs you can buy from the online iTunes Store.

This gave me some interesting suggestions, like Fujiya & Miyagi's light electro-groove tune "Cassettesingle" when I used The Bird and the Bee's dreamy-sounding pop song "Because" as a starting point. But it seemed a bit off-base by suggesting Jason Mraz's cheerful "I'm Yours" when I started with Rihanna's dark-sounding "Disturbia."

The Zune's latest software includes a similar feature called Mixview that uses thumbnails of album art and artist photos to illustrate users' listening patterns and give music suggestions. Visually, Mixview is miles above the Genius feature, as the images show up in a circular pattern around a rectangle containing a user's profile information.

I liked being able to click on each thumbnail to find related albums, artists who may have influenced the music I'm checking out, or profiles of other Zune users who listen to that music.

Beyond these features, there are plenty of similar specs on the two players. Both sound good, power up fully in about three hours and are rated for up to 24 hours of audio or four hours of video playback per charge.

Their screens appeared similarly bright, and a photo of my brother's bandana-clad dog looked equally crisp (and cute) on the Zune and Nano.

Videos looked very good on both, but the Nano is easier for watching because it has a larger viewing area — 2 inches on the diagonal, compared to 1.8 inches on the Zune.

Both are solid multimedia players, though. And while Apple may be at the front of the pack right now, clearly Microsoft is making strides — and maybe making consumers think twice before running out to buy a new iPod.

Wikipedia's Wales launches Wikia Green

Jimmy Wales is best known for evangelizing Wikipedia, the open-source, nonprofit encyclopedia he co-founded in 2001. On Tuesday his for-profit venture, Wikia, in its fourth year, unveiled a community for all things "green."

Anyone can edit Wikia, just like Wikipedia, which is built to attract people passionate about a given topic rather than to provide a general reference. For example, a Wikipedia article about ExxonMobil provides an overview of corporate history, while Wikia Green might zero in on the company's environmental record, with special emphasis on the Exxon Valdez oil spill of 1989.

To reduce costs and its load on the electrical grid, Wikia has halved its server need over the past six months, in part through using virtualization and efficient power supplies. Its offices recently moved from San Mateo, Calif., to San Francisco in part to reduce employees' commutes, and the company is applying to be certified by the city's green business program.

Microsoft's newest browser may block ads

The next version of Microsoft Corp.'s Web browser makes it easier for people to surf the Internet without leaving a trace.

Companies that sell advertisements online — including Microsoft — can electronically gather tidbits about Web surfers' habits, and then use that information to help decide what kinds of ads to show. However, in the newest "beta" test version of Microsoft's forthcoming Internet Explorer 8, which was made available Wednesday, a mode called InPrivateBrowsing lets users surf without having a list of sites they visit get stored on their computers.

The program also covers other footprints, including temporary Internet files and cookies, the small data files that Web sites put on visitors' computers to track their activities.

Both Internet Explorer 7, Microsoft's current browser, and Mozilla's recently released Firefox 3, already allow users to block cookies. The top two browsers also let users delete private information such as temporary files and browsing history after the fact. But they can't turn off that collection entirely.

The beta also introduces an additional InPrivateBlocking mode, which can block third-party content from appearing on Web sites. For example, a news site might carry stock quotes from one company and weather information from another. Companies that provide such content may also be collecting and sharing information about what people do online. But users who turn on InPrivateBlocking won't see that content or be exposed to such data collection without their consent.

InPrivateBlocking can also keep some types of ads from appearing — including those served up by Microsoft's own advertising platform, whose success is considered critical to the software maker's future.

JJ Richards, a general manager in Microsoft's advertising division, responded in a statement that consumers understand that they get free content and services in exchange for advertising, but want "transparency, trust and control with respect to the sites they visit."

"If IE8 helps heighten awareness of this value exchange, that's a step in the right direction," he said.

Users surfing with InPrivateBlocking turned on can review a list of which companies are trying to display or collect data. Users also can click a link to read more and decide case by case whether to permit certain ones to go ahead.

"Today as a user, we have no visibility or control over how that information is shared and recorded," said James Pratt, a product manager for IE8. "I wouldn't put Microsoft as being the arbiter of what should and shouldn't be tracked."

InPrivateBlocking isn't purely an ad-blocker by design, but publishers are still worried, said Mike Zaneis, vice president of public policy for the Internet Advertising Bureau, which represents Web publishers.

If InPrivateBlocking were widely adopted by IE8 users, small sites that rely almost exclusively on outside companies to serve ads couldn't survive, he said. The Internet ad economy didn't crash after ad-blocking plug-ins appeared for Firefox, but Zaneis said that may have more to do with Firefox's much smaller market share. (Firefox's challenge to IE has grown, however; the browser is used by more than 10 percent of Web surfers.)

If IE8 blocks programs that track how many times an ad is seen — a calculation that helps determine payments to advertisers and publishers — that could also bring down the Web ad marketplace, Zaneis noted.

"We'll wait and see what the marketplace looks like," he said. "I think (Microsoft) realizes, we all realize that it's a beta version, and it's sure to change before it's finalized."

An earlier IE8 beta showed off many bells and whistles that make Web browsing easier. Since then, Microsoft said it also improved the address bar's ability to figure out users' intended Web destination as they type.

An improved search box also provides more content alongside suggested results. For example, an Amazon.com search for an music album, entered in the browser toolbar, populates a drop-down menu with titles, prices and thumbnails of cover art.

Microsoft would not say when it plans to release a final version of the newest browser, but said this second beta is ready for average users to try.

Google resolves Gmail access problems

SEATTLE (Reuters) - Google Inc said on Monday it has resolved an issue with its contacts system that caused many users of its Gmail service to have trouble accessing their online e-mail.

The problems began at about 5 p.m. EDT and an announcement on the company's Gmail "Help Center" site said the issue is now resolved.

Google said an outage in the contacts system used by Gmail prevented the e-mail system from loading properly. The company also said that there may be minor delays in deliveries even though all mail is safe.

Users across the United States, Canada and India reported problems with Gmail and a Google employee also reported that the company's own corporate e-mail account was down.

Text of Chinese Foreign Ministry's statement

BEIJING - Text of a statement by Chinese Foreign Ministry spokesman Qin Gang in response to President Bush's speech, posted on the ministry's Web site Thursday and translated from Chinese by The Associated Press:

With the common efforts made both by China and the U.S., the Sino-U.S. relationship has developed steadily in the last few years. The two countries have conducted fruitful talks, communication and cooperation bilaterally and on a range of international issues. Facts prove again that although there are divergences between China and the U.S., there is a wide range of common interests, and a basis for cooperation. A good Sino-U.S. relationship is a benefit to the people of both countries, and helps peace and stability in the Asia-Pacific region and throughout the whole world.

We are willing to work together with the U.S. on strengthening dialogue and cooperation, appropriately dealing with divergences and sensitive issues and helping the relations to develop constructively and stably.

The Chinese government puts people first, and is dedicated to maintaining and promoting its citizens' basic rights and freedom. Chinese citizens have freedom of religion. These are indisputable facts.

As for the divergence on human rights and religions, we always advocate that both sides talk from a basis of mutual respect and equality, to enhance understanding and diminish divergence, and enlarge mutual consensus.

We firmly oppose any words or acts that interfere in other countries' internal affairs, using human rights and religion and other issues.

Sun 4Q profit falls 73 pct, guidance hurts stock

SAN FRANCISCO - Sun Microsystems Inc.'s profit plunged 73 percent in the most recent quarter as slumping sales to big U.S. companies and restructuring charges weighed on the server and software maker.

The Santa Clara, Calif.-based company also revealed plans Friday to expand its stock buyback program by $1 billion, a sign Sun believes its shares, which have fallen by 50 percent over the last nine months, are undervalued and poised to rebound.

Wall Street didn't share that optimism.

Sun's shares sank more than 12 percent on the company's worse-than-expected guidance, which indicated that the pressures that hurt Sun in the April-June period, its fiscal fourth quarter, are bleeding into the current quarter.

Sun, the world's fourth-largest server maker, said before the market opened that it expects a "slight" sales decline in the fiscal first quarter, which ends in September, and indicated it likely wouldn't turn a profit. Analysts surveyed by Thomson Financial were expecting flat sales and a profit of 11 cents per share in this quarter.

Goldman Sachs analysts David Bailey and Min Park said in a note to clients that Sun's results supply "another piece of evidence that the problems the company faces have no short-term fixes, and we would continue to avoid the shares."

The disappointing forecast represents the latest setback for a company that until recently was riding a sudden run of profitability: The latest quarter was Sun's sixth profitable quarter out of the last seven periods.

That marked a turnaround from the more than $5 billion in losses Sun racked up after the dot-com meltdown obliterated demand for many of its expensive servers. Sun turned the corner with intensive cost-cutting, such as by slashing 6,500 jobs over the past two years.

Investors still have had muted expectations. Analysts lowered their estimates in July when Sun announced early that its fourth-quarter sales and profit margins would be below the company's previous guidance.

Sun blamed weakness in the U.S. economy, which has caused some of its biggest customers to cut spending, and the sale of fewer higher-end servers, which carry better profit margins. Sun faces intense competition in that market from IBM Corp. and Hewlett-Packard Co.

Sun earned $88 million, or 11 cents per share, in the latest quarter. That compares with $329 million, or 36 cents per share, in the year-ago period.

Excluding one-time charges, Sun earned 35 cents per share. Analysts surveyed by Thomson Financial were expecting profit of 25 cents per share, but some include charges that Sun is excluding, so the numbers aren't directly comparable.

Sales were $3.78 billion, a 1 percent decline from $3.84 billion last year. That matched analyst estimates.

For the full 2008 fiscal year, Sun earned $403 million on $13.9 billion in sales.

Investors remain wary of Sun's prospects considering the U.S. market makes up about 40 percent of its sales. They're also concerned because much of Sun's gains have come from its cost-cutting, which might not be sustainable.

Those fears have been reflected in Sun's stock, which has fallen steadily since the company's 1-for-4 reverse stock split in November. The maneuver was supposed to improve Sun's image, but instead seemed like a sign of trouble.

Sun shares fell $1.31, or 12.3 percent, to close at $9.32 Friday.

Another worrisome figure for Sun was its gross profit margin, which declined 2.9 points to 44.3 percent in the latest quarter. For all of fiscal 2008, however, the figure improved by 1.3 percentage points to 46.5 percent.

Some view Sun's stock as attractive because of its sharp decline.

Wachovia analyst David Wong said it might take a while for the shares to get any kind of big boost, but in the meantime, "Sun continues to restructure and focus on cost cutting, which we think will result in improved profitability when demand improves."