WinInfo Daily UPDATE, July 26, 2002

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July 26, 2002—In this issue:


  • Rumors About XP SP1 Product Activation Changes Not True


  • Longhorn: It's All in the Timing
  • Tying Together Office and Longhorn
  • Microsoft to Up Hiring, R&D Spending
  • Exchange 2000 SP3
  • Exchange 2000 Rockets to Top Spot
  • Microsoft Has No Interest in Expensing Options
  • Visual Studio .NET "Everett" on Tap
  • AOL Faces Federal Accounting Probe
  • Palm Market Share Slips as Handheld Sales Falter
  • Freestyle for Your PC: Maybe Next Time


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(contributed by Paul Thurrott, [email protected])


  • A bizarre rumor about Microsoft making sweeping changes to its Windows Product Activation (WPA) technology in Windows XP Service Pack 1 (SP1) is completely false, the company told me Thursday. The rumor, which was started by a small Web site for technology enthusiasts, had Microsoft changing the product keys for all its customers who use volume licensing. This rumor has spread across the Internet and become embellished en route. One version that I came across Thursday morning claimed that Microsoft was making the change so that it could charge licensees yet again for SP1. Not so, says Microsoft.

    "There is no truth in this rumor," Allen Nieman, the lead technical product manager for licensing technologies at Microsoft told me Thursday. "We are not changing the way volume licensing customers install or deploy Windows XP. We are not issuing volume licensing customers new product keys. Volume licensing customers are not impacted by any of the changes we are making to activation in SP1. The only folks impacted by the changes we are making in SP1 are people with illegal copies of Windows."

    As I first reported in May 2002, the WPA feature in XP SP1 will get two minor modifications, neither of which will affect legitimate users. First, Microsoft discovered that most pirated XP copies are tied to one company's volume-license product key. So, Microsoft alerted the company about the problem, changed the company's key, and disabled it for use after SP1. Anyone who uses this pirated key will be unable to upgrade to SP1 or any future updates through Windows Update. Second, Microsoft is adding a 3-day grace period for people who use one product key to install XP on a second system. In the past, users who wanted to install a copy of XP on a second system had to immediately activate by phone. This new policy will give users some breathing room if disaster strikes and they need to install XP on a new system.

    (An irreverent look at some of the week's other stories, contributed by Paul Thurrott, [email protected])


  • The next major revision of Windows, code-named Longhorn, won't ship until 2005 at the earliest. Various Microsoft executives have said as much in the past, and this week, Chairman and Chief Software Architect Bill Gates specifically said so during the company's annual financial analysts meeting. Because the Longhorn release schedule is tied to the release of so many other products and technologies, a time frame of 2005 (or beyond) is virtually guaranteed. Here's why: Gates said this week that Microsoft would tie Longhorn to future releases of Microsoft Office, Microsoft Exchange Server, and, of course, the Microsoft SQL Server Yukon technologies, which Microsoft will use for the Longhorn file system. And my understanding is that Redmond will release Longhorn's server versions—the follow-ups to the Windows .NET Server (Win.NET Server) family releases that will happen in first quarter 2003—in lockstep with the Longhorn desktop versions. Given all this information, how quickly could Microsoft release updates to Office, Exchange Server, and Windows Server? I'm thinking 2 years would be the minimum; indeed, Office 11 will ship mid-2003, meaning that Office 12—the version that Microsoft will release along with Longhorn—won't happen until at least mid-2005. And consider Windows Server: Windows 2000 Server shipped to customers in February 2000, with its successor, a minor update called Win.NET Server, scheduled to hit around the same time in 2003. So how could the next update appear any sooner than mid-2005? It can't. So, Longhorn is definitely on track for mid-2005 or later. And that, people, means that we can expect at least one or two interim Windows XP releases in the meantime, as I've been saying for a while now. And although Microsoft won't talk about these releases because it's busy pushing XP Service Pack 1 (SP1), XP Tablet PC Edition, and XP Media Center Edition, I can assure you that mentions of future XP versions will start appearing later this year. It's unavoidable.


  • And speaking of Microsoft's plan to tie Longhorn with Office 12, here's a quote. During the Microsoft financial analysts meeting, Gates described the move to the Longhorn generation of products. "If we didn't have this approach—a version of Office that takes advantage of \[Longhorn\]—then the work wouldn't show through," he said. "The most important ISV \[Independent Software Vendor\] for us is Microsoft itself. We want one architecture for all our products." In the meantime, Office 11, due in mid-2003, will feature ClearType technology for clearer text; a persistent query window for live updating of query information; and a new UI, which we can hope will look a lot better than that awful blue-gray "Office NGO" look we've seen in early alpha releases of the product.


  • Recession? What recession? Microsoft said this week at its annual financial analysts meeting that the company would increase R&D spending for its next fiscal year by almost 20 percent, to $5.2 billion. Additionally, Microsoft will add 5000 jobs over the same period, bringing its total workforce to 55,000 people. And what will Microsoft be doing with all those people, you ask? Investors hope the company will be working to pump up its stock price, which hit a 52-week low the other day. In hindsight, my recommendation that friends and family consider buying Microsoft stock at $70 a share now seems like awkward miscalculation, as the stock was trading in the low 40s as I wrote this.

  • EXCHANGE 2000 SP3

  • Microsoft has issued a critical set of bug fixes for its popular Microsoft Exchange 2000 Server product, dubbed Exchange 2000 Service Pack 3 (SP3). As Microsoft notes, Exchange 2000 SP3 is a cumulative service pack that provides interoperability with Windows .NET Server (Win.NET Server) domain controllers (DCs)—but not with Win.NET Server machines directly (you can't run Exchange 2000 on Win.NET Server); fixes to customer-reported problems; and updates based on the Microsoft Trustworthy Computing Initiative. The company recommends that all Exchange Server customers download and install SP3 on all servers running Exchange 2000. For more information and the free download, visit the Microsoft Web site.


  • And speaking of Microsoft Exchange 2000 Server, Microsoft reported this week that its Exchange Server product line is now the most popular collaboration and messaging server in the world, surpassing solutions from IBM and, well, just IBM, I guess. Exchange Server usage rose 20 percent over the past year, giving it more than 39 percent of the market. Does anyone else find it odd to see Microsoft continually touting its domination over other products?


  • Despite repeated calls from investors and analysts that Microsoft change its policy of not expensing stock options, company executives say they have no plans to do so, unless, of course, new laws force them to. The weird thing is, even Microsoft CEO Steve Ballmer admits that "it makes economic sense to expense options." Scrutiny over corporate handling of stock options has intensified since the Enron and WorldCom fiascos, of course, but Microsoft says that it won't have similar problems because its executives don't bathe in extravagant perks of the kind that executives from those companies enjoyed. And Ballmer even noted that Gates and he won't accept new stock options in the future. Which is nice, except that Gates and Ballmer are already two of the richest men in the history of the planet Earth, making any future stock options rather pointless anyway.


  • It's been a good week for future-product news, thanks to the Microsoft financial analysts meeting, which the company generally uses to divulge product plans to which it hopes that the markets react favorably (this time, of course, they didn't). Another product that Microsoft discussed this week is Visual Studio .NET, which was released in February (I think the previous Visual Studio—VS—release came out a really long time ago—1977, maybe). Anyway, Visual Studio .NET will be updated often in the future, starting in late 2002 with a minor release code-named Everett. This release will improve security and performance and will include the final version of the Microsoft .NET Compact Framework, which adds support for mobile-phone and handheld-device applications development (and apparently includes a handy little mirror for checking your makeup during long code compiles). A major Visual Studio .NET release will ship in late 2003; this one will be tied to Microsoft SQL Server 2003 (code-named Yukon). In fact, Yukon will ship with a special version of Visual Studio .NET so that database developers will have only one set of tools to worry about. And, developers will be able to write Yukon stored procedures in any programming language, not just T-SQL, the native language of SQL Server (and, I believe, Slovenia). Finally, a circa-2005 VS version will coincide with the Longhorn release and offer up the new Longhorn-style UI.


  • Everybody's favorite online giant was slapped with a US Securities and Exchange Commission (SEC) accounting probe this week after "The Washington Post" expose about AOL revealed that the company's accounting practices were a little unconventional. For example, AOL apparently reported some of its online advertising transactions in 2000 and 2001 in a rather questionable manner, including what appears to be a bizarre legal settlement that involved stock rather than cash. AOL Time Warner stock responded to the news predictably, dropping 18 percent to about $9 on Thursday; the stock has dropped more than 70 percent this year. Does anyone alive still believe that the AOL-Time Warner merger was a good idea?


  • Quarterly shipments of handheld computers slipped 10 percent year-over-year—to 2.6 million units, despite the fact that I personally purchased two handheld computers (just doing my part for the economy, ahem). More interesting, perhaps, is news that Palm's share of the market fell dramatically, from 40.6 percent in first quarter 2002 to 32.4 percent in second quarter 2002, when the company sold 846,000 devices. Hewlett-Packard (HP) is now the number-two maker of handhelds, thanks to its merger with Compaq; HP sold 485,000 units in the second quarter, for 19 percent of the market. But the bigger winner, in some ways, was Sony, which jumped to the number-three spot with sales of 250,000 units, a dramatic 233 percent rise from the 75,000 units Sony sold a year before. Sony's performance gave the company 10 percent of the market. Handspring, once the number-two handheld vendor, slipped to fourth place with 171,000 units sold and 6.5 percent of the market.


  • Although I won't be able to divulge many details about Windows XP Media Center Edition (code-named Freestyle) until this fall, I want to respond to the number-one question I receive about this product: Why isn't Microsoft making it available to existing XP users as a free download or as a $100 Plus-style package with a remote control and TV tuner card? Microsoft told me this week that it's looking at providing Media Center in various ways in the future, but for the initial release, the company felt that consumers wouldn't get a good experience unless Microsoft could ensure that the underlying hardware was a known quantity. To this end, the video card, TV tuner, and remote control in the Media Center PCs that will ship this year (only from Hewlett-Packard—HP—in the United States) are indeed a known quantity. But I think the company is making a mistake by severely limiting the potential audience for this enthusiast-friendly software. A lot of people want it, but they aren't going to pay $1500 to get it.

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