Microsoft News Tracker

Microsoft’s online deck chairs have been in disarray since the departure in July of Kevin Johnson, but they got a new arrangement this week with veteran SVP Yusuf Mehdi picking up responsibility for MSN and Microsoft’s search properties. The best line award goes to Angela Gunn at BetaNews who opines:

Yusuf Mehdi is the new number-two for Microsoft’s Online Services division — but, as The Prisoner would be the first to ask, who is Number One?

A curious question, but par for the course of Microsoft’s online efforts.

Medhi, formerly Senior VP of Strategic Partnerships, has shifted his responsibilities from mergers and acquisitions to MSN and Microsoft’s search properties. He takes most of the job’s marketing and search tasks off the plate of Bill Veghte, the senior VP now focusing mainly on the Windows and Windows Live groups; Veghte picks up a new title, Senior Vice President for the Windows Business.

But Medhi isn’t stepping into the top spot for the online properties group, leaderless since Kevin Johnson jumped for Juniper Networks in the wake of the failed Yahoo acquisition. That leader will be…

…announced at some later date, says Microsoft. For now, Mehdi joins two senior VPs tasked with interim division leadership: Brian McAndrews, who manages the Advertiser and Publisher Solutions Group, and Satya Nadella, head of the Search, Portal, and Advertising Platform Group.

Until a new Online Audience Business head is hired, the three will report to CEO Steve Ballmer, who’s said to be still seeking a high-profile "get" — internal or external — for the top spot. A Microsoft spokesperson confirmed to BetaNews Tuesday afternoon that the search is still most definitely on for that person.

Mr. Ballmer is apparently asking volunteers to step forward and everyone is taking one step back. I’d suggest an immense signing bonus and a similar golden parachute.

Yesterday Microsoft held their annual Financial Analyst Meeting for 2008 and while you can view the full video and (nearly unreadable) transcripts of the presentations, it was mostly predictable fare. However, there were a few newsworthy nuggets::

Steve Ballmer (Chief Executive Officer) 

• Yahoo: "it didn’t work out. Fine, we’re done. We can move on. Does that mean that nobody will ever talk to anybody again? I suspect the answer to that question is also no. It’s a long time in a big world, but we’re comfortable proceeding as we are on our own with our people, with our strategy, independent innovation and I think what we really still have in search and advertising is a two-horse race [Google and Microsoft - ed.]."
• Facebook: Satya Nadella who helped Ballmer handle the online business (since Kevin Johnson was missing) revealed an extension of the Facebook advertising relationship:

  "One last thing I wanted to also talk about is an extension of our Facebook relationship where we are extending it to Search and Page Search. We will be providing an API to Facebook where they will create a rich search experience, including a Web search for the Facebook users. And that’s something that they will launch in the fall, working with us, and it’ll carry both our Web results as well as our Page Search advertising."

Bill Veghte (SVP, Online Services)

• Windows Live: Windows Live Wave 3 will ship this year
• Internet Explorer 8: IE8 will arrive in 2008 with a beta in "a month or so."

Chris Liddell (CFO)

• Yahoo again: "I think the chances of us buying Yahoo! on a full acquisition basis are so small that they are essentially negligible. I never say never. Who knows in years to come. But a full acquisition certainly in the timeframe and sort of economics that we had previously thought essentially makes no sense.

  We still have the possibility of doing a search transaction, which we think makes some economic sense. If I had a worry it’s the parallel paths continue, and about the time Yahoo decides that search deal makes sense for them is probably about the time that we have committed to our own plan so much that it may no longer make sense for us."

Up until today Kevin John was the president of Microsoft’s Platforms & Services Division (PSD) which develops Windows and Microsoft’s online properties including Windows Live and MSN. Now Kevin Johnson is out and PSD has been split into two pieces reporting directly to Microsoft CEO Steve Ballmer:

Microsoft Corp. today announced that the Platforms & Services Division (PSD) will be split into two groups: Windows/Windows Live and Online Services, with both groups reporting directly to CEO Steve Ballmer. Microsoft also announced that PSD President Kevin Johnson will be leaving the company. Johnson will work to ensure a smooth transition.
…
Effective immediately, senior vice presidents Steven Sinofsky, Jon DeVaan and Bill Veghte will report directly to Ballmer to lead Windows/Windows Live.
…
In the Online Services Business, Microsoft will create a new senior lead position and will conduct a search that will span internal and external candidates. In the meantime, Senior Vice President Satya Nadella will continue to lead Microsoft’s search, MSN and ad platform engineering efforts.
…
In addition, Senior Vice President Brian McAndrews will continue to lead the Advertiser & Publisher Solutions Group (APS).

So was Johnson pushed or did he jump? The rumor is that Johnson is now going to run Juniper Networks, which while nice enough, doesn’t seem like a sufficient opportunity to justify a voluntary departure so the smart money is on pushed.

One problem could have been Vista’s lackluster reputation, but Microsoft is still printing money with Windows so a more likely cause is the continuing disappointment from Microsoft’s online efforts. I’m sure it also didn’t help that Johnson was the point man on Microsoft’s attempt to buy Yahoo (or pieces thereof) which appears to have finally come to naught.

As for what it all means, I see no reason to expect significant changes in either products or financial performance - it was merely a rearrangement of the deck chairs which won’t be complete until new executives heading the two groups are named (assuming that Steve Ballmer doesn’t really want to run Windows/Windows Live himself). Any expectations of radical alterations are clearly premature.

As had been rumored last week, Microsoft has acquired Powerset, a semantic search and natural language processing startup based in San Francisco for an undisclosed sum said by sources to be in the neighborhood of US$100 million. Microsoft SVP Satya Nadella explains the rationale:

Powerset will join our core Search Relevance team, remaining intact in San Francisco. Powerset brings with it natural language technology that nicely complements other natural language processing technologies we have in Microsoft Research.

More importantly, Powerset brings to Live Search a set of talented engineers and computational linguists in downtown San Francisco. This is a great team with a wide range of experience from other search engines and research organizations like PARC (formerly Xerox PARC).

We’re buying Powerset first and foremost because we’re impressed with the people there. Powerset CTO and cofounder Barney Pell is a visionary and incredible evangelist. When he introduced our senior engineers to some of the most senior people at Powerset — Search engineers and computational linguists like Tim Converse, Chad Walters, Scott Prevost, Lorenzo Thione, and Ron Kaplan — we came away impressed by their smarts, their experience, their passion for search, and a shared vision.

That shared vision is to take Search to the next level by adding understanding of the intent and meaning behind the words in searches and webpages.

There’s more on the technology there and on Powerset’s web site (including this demo video), but the big picture is to offer a better search to users than Google’s in order to whittle away at their share. I would have to observe that Powerset certainly isn’t the first or only company to try to apply semantic concepts or natural language processing to Web search - just Ask Jeeves.

Live Search Books was announced in October 2005 as MSN Book Search with considerable hoopla, plans to digitize the British Library, and verbal fisticuffs with Google over copyright and Google Book Search, but it has all come to nought as Microsoft’s Satya Nadella announced today:

Today we informed our partners that we are ending the Live Search Books and Live Search Academic projects and that both sites will be taken down next week. Books and scholarly publications will continue to be integrated into our Search results, but not through separate indexes.

This also means that we are winding down our digitization initiatives, including our library scanning and our in-copyright book programs. We recognize that this decision comes as disappointing news to our partners, the publishing and academic communities, and Live Search users.
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With Live Search Books and Live Search Academic, we digitized 750,000 books and indexed 80 million journal articles. Based on our experience, we foresee that the best way for a search engine to make book content available will be by crawling content repositories created by book publishers and libraries.

The rest of Nadella’s comments can be summarized as "Microsoft couldn’t figure out how to make any money on this stuff." I remarked when MSN Book Search was announced that the business model was rather vague and apparently altruism was not a sufficient rationale.