Users of Microsoft's Windows Media Center began having trouble using the software to copy NBC shows for later viewing like any DVR would. The reason? The network had marked copying the show as verboten under the terms of the FCC's proposed, but never implemented, broadcast-flag rules. In other words, Microsoft is enforcing a law that does not exist. (An EFF video, "The Corruptibles," provides a good, if activist-biased, explanation of the broadcast-flag controversy.) [News.com]

A Facebook sale to Microsoft is practically taken for granted by whipped-up bloggers, wishful thinkers, and tech pundits. By everyone, in short, except for those who would actually decide such matters. Kara Swisher says a sale is unlikely. My sources are more definite: Microsoft has asked if Facebook would sell, and gotten an unequivocal "no." Founder Mark Zuckerberg controls three out of five potential Facebook board seats, and he doesn't want to sell.

What's so bad about Mozilla's Toronto workspace? Besides the fluorescent lighting, the colorless white walls and the folding tables, the worst thing about Mozilla's Toronto workspace is how we're sure management would improve it. With corporate graffiti, company logos and too many colors. That was management's trick at Facebook and look where readers ranked it in our poll on tech's ten worst workspaces — as tech's second-worst workspace, just after Mozilla. Check out the full list, below.

Corporate raider Carl Icahn, who has purchased 4.3 percent of Yahoo and proposed a new slate of directors for its board, hates Microsoft's latest plan to purchase Yahoo's search marketing business or otherwise partner with Yahoo to gain control of it. "Microsoft is trying to get the milk without buying the cow, and if you look at Icahn's history, he has never been used that way," one of Icahn's secret stooges told CNBC. "He does not want to see Yahoo pushed into some joint venture with Microsoft and is not going to be used to push Yahoo into it." Icahn and like-minded shareholders favoring a Microsoft-Yahoo merger control at least 29 percent of Yahoo. They do not, however, control Microsoft.

Microsoft platforms and services president Kevin Johnson addressed employees in an internal memo over the weekend to discuss Yahoo and Microsoft's online strategy. The 11-word version : "We are not where we want to be. Hear more Wednesday." For the superfluous details, see our 100-word version, or, for the gluttons for repetition and passive voice among you, Johnson's entire email, both below:

Speaking at the Hungarian University of Economy today, Microsoft CEO Steve Ballmer got egg on his face and not in the figurative sense. Hungary's government spends millions on licenses to use Microsoft software at its universities and this market lockdown is apparently so upsetting to some Hungarians — how will they ever learn to use Linux? — that during today's speech, one attendee stood-up, yelled at Ballmer: "Give back the money of the taxpayers!" and then started chucking eggs. We disapprove, but only because we know Ballmer prefers bananas. A nice banana-cream pie-ing would have made a European matched-pair with the earlier prank on Bill Gates. Watch the egging in the clip embedded above.

Over the weekend, Microsoft said it "raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo." Sources told Kara Swisher that the alternative deal is an acquisition or partnership to give Microsoft control over Yahoo's search marketing business. Yahoo would keep everything else — notably its display advertising business — and Microsoft would control 30 percent of the search market. Perhaps more importantly to Microsoft, it would prevent Google from controlling more than 80 percent of the market with its own Yahoo deal. In its statement, copied below, Microsoft said it reserves the right to change its mind about the deal. We are utterly unsurprised.

Rising ad star Alex Bogusky of Crispin Porter + Bogusky is the subject of the cover feature in the latest issue of Fast Company. The story focuses on Microsoft's $300 million deal with the agency to, in Fast Company's words, "crush Apple." Bogusky will be fighting an uphill battle on two fronts — one against Microsoft's perpetually clueless marketing drones, and the other against the fact that Apple's products are, you know, better. Microsoft has even had trouble convincing the public largely trapped in the Windows operating system monopoly to buy Vista, and the company's branding is a complete mess. But hey, check out Bogusky's wavy locks, chiseled features, stylish boots and designer jeans!

The legendary site in England where the Nazis' communication code was finally broken, Bletchley Park, has hit hard times. The land is being eyed by developers eager to build on the spot situated perfectly between Oxford and Cambridge. Among possible funders who turned the opportunity down was the Bill and Melinda Gates Foundation — reportedly because it wasn't "Internet related."

Yahoo CEO Jerry Yang is once again very eager to get a search-advertising deal with Google signed. Two sources tell the New York Post "executives are scrambling" to finalize the deal. Why such a rush? Because Microsoft CEO Steve Ballmer identified the deal as the big reason Microsoft walked away from merger talks with Yahoo. Now that pro-merger Yahoo shareholders own at least 29 percent of the company — and are trying to replace the company board with directors who share that position — returning to the Google deal is the easiest way Yahoo CEO Jerry Yang will scuttle any renewed interest from Microsoft.

$30 billion hedge fund Paulson & Co. has released filings to show it owns 3.4 percent of Yahoo shares and intends to support Carl Icahn's bid to replace the company's board. Combined with Icahn's 4.3 percent share, Legg Mason fund manager Bill Miller's 5 percent share and Capital Research fund manager Gordon Crawford's 6 percent share, at least 18 percent of Yahoo's ownership now favors displacing the company's board with directors more amenable to a Microsoft merger. Capital Research funds beyond Crawford's control own another 11 percent of the company, raising that total to at least 29 percent. Shareholder activist Eric Jackson says investors owning another 3.2 million Yahoo shares favor a Microsoft merger as well. CEO Jerry Yang and chairman Roy Bostock can write all the letters they want. There's only one holdup: Getting Microsoft back to the table. (Photo by Simon Grossi)

Yahoo CEO Jerry Yang has written two letters in response to Carl Icahn's attempt to take over Yahoo's board. One addresses Yahoo employees and the other its senior management. Neither feature capitalization. Both suggest Carl Icahn's move to take over Yahoo's board "reflects a significant misunderstanding of the facts," which as Yang see's them are that he and Yahoo's board responded to Microsoft CEO Steve Ballmer's merger proposal with "diligence" as well as "knowledge, experience and commitment." Funny how Yahoo's largest shareholders seem to disagree. Both of Yang's letters are copied below.

After reviewing our post "The 10 worst workspaces in tech," commenter AdmNaismith described Facebook's office, pictured above, as "foggy, dank, dim, and utterly depressing." Commenter mothra1 hated Yahoo's New York offices more: "They suck! Lifeless and impersonal. Kinda like the douchebags who still actually work there." Meanwhile, Adobe apologist BlairHapjo told us we "clearly didn't get past Adobe's lobby," and the rest of the office features "Aeron chairs, real offices (with doors!), big picture windows." For us, the worst offices we found on Office Snapshots and elsewhere were the the ones that try too hard to seem Internet-hip, like Jajah and Google. Now it's time to settle the disputes. Below, vote for your least favorite and help us rank tech's 10 most dismal places to work:

Roy Bostock, Yahoo's chairman of the board, has responded to corporate raider Carl Icahn. The one-word version: "Unfortunately." That word sums up so well the letter, Yahoo's hamhanded reply to Icahn, and the whole sorry mess. Bostock has a point: There has not been a written offer on the table since Yahoo rejected Microsoft in February, and so neither the current board nor Icahn's replacements have any proposed sale to consider.

Carl Icahn's slate of replacement directors for Yahoo's board is a list of head-scratchers, except for one name. That's Mark Cuban, the guy who sold Broadcast.com to Yahoo for $5.7 billion in 1998 and used the money to buy the Dallas Mavericks. "Talk about biting the hand that feeds," writes VC blogger Fred Wilson. "It's a downright hostile move for Cuban." Actually, hedging his Yahoo shares so he kept his fortune while founder Jerry Yang's cratered in the dotcom bust — that was hostile. Think Yang doesn't remember that? (Photo by eschipul)

Yahoo board chairman Roy Bostock has penned a response to billionaire investor Carl Icahn's verbose missive, who's trying to replace the Internet company's board with directors who favor a deal with Microsoft:

For Carl Icahn to earn a quick profit on Yahoo, snatching up 3.5 percent of the company at around $25 a share and then selling to Microsoft at $33, Microsoft executives have to play along. So far they aren't doing so. They've told Icahn they have "moved on" and do not plan to reconsider a Yahoo merger. Meanwhile, sources familiar with the matter — we're guessing Googlers eager to see Icahn's effort kiboshed — tell the Wall Street Journal that a Google-Yahoo search advertising deal, the one that drove Microsoft CEO Steve Ballmer from the negotiating table in the first place, is now "more likely than not."

"Every surface will be a computer." So spake Bill Gates at the annual CEO Summit, sounding much like himself a few decades ago when he promised a computer on every desk. Since then we've collectively turned our laps and our pockets into computing centers as well. So why not walls and tables, like the new TouchWall unveiled today? While Gates defined "every surface" as being in homes and offices, we here at Valleywag couldn't drag our minds out of the gutter long enough to think of the top 5 unexpected places where surface computing just might take hold.

After acquiring 3.5 percent of Yahoo in the week after merger negotiations fell through with Microsoft, corporate raider Carl Icahn will move forward with a plan to replace the company's board with directors expected to be friendly to resuming negotiations. Icahn could announce the alternative slate as early as tonight, Reuters reports, citing sources familiar with the matter. Which means the Wall Street Journal could run a widely expected hit piece on Yahoo CEO Jerry Yang as soon as tomorrow.

"We're considering bypassing Vista and going straight to Windows 7," GM technology chief Fred Killeen told BusinessWeek. He said that replacing Windows XP with Vista would require the company to buy too many machines. "By the time we'd replace them, Windows 7 might be ready anyway," he said. Fred, Fred, Fred — if you ask Microsoft, Intel, Dell, and the rest of the technology industry, buying too many machines is sort of the point. (Photo by ceonyc)