Microsoft, harried by regulators in the 1990s, once lobbied Congress to cut spending on antitrust enforcement. Now, it's profiting from their efforts. The software giant's lobbying budget nearly doubled from 2006 to 2008, helping it sink Yahoo's deal to have Google sell ads for its search pages. The failure of that deal helped speed Yahoo CEO Jerry Yang out the door, and could set Microsoft up to win Yahoo's search business. CNET News]

Microsoft's chair-hurling 800-pound gorilla slammed the door on talk of a renewed Yahoo acquisition deal at today's shareholder meeting in Bellevue, Washington. "We are done with all acquisition deals with Yahoo ... We did our best. We've moved on." In business, this often means: We'll be back. For now, though, Ballmer said he'd rather cut a deal to serve Live Search results to Yahoo users — as a vendor, not an owner. Why can he speak with such confidence? Because he's already snapped up Yahoo's key search engineers.

Among the many windmills Jerry Yang tilted at in his brief career as Yahoo's CEO was his devotion to Web search. It veered on an obsession for him. It played into his decision to resist Microsoft's offers to shower him with cash, first for his whole company, then for just its search business. Is it a coincidence, then, that Yahoo's top search engineer has left a day after Yang stepped down? A tipster tells us Sean Suchter resigned yesterday, and speculates that he may be joining Microsoft.If so, Microsoft may have gotten Yahoo's search business on the cheap. Our tipster writes:

Silicon Valley entrepreneurs like to talk about their hopes of "changing the world." Yes, of course: Changing the world from one in which they are poor to one in which they are fabulously wealthy. The question in the air is whether the founders of companies do a better job at creating wealth, for themselves and their investors, than professional managers. With Yahoo announcing Jerry Yang's plans to step down as CEO, it would seem like a losing time for founders. But Yang is an exceptional case; he took his hands off the steering wheel when Yahoo had a mere five employees, and never really ran anything until he stepped in as CEO last June. Most founders of successful startups eagerly seize power, and have to be forcibly dislodged from the driver's seat. The best never let go. Just take a long-term look at the stock market, and you'll see why.

It's been more than three years since the debut of Writely, the free, browser-based alternative to Microsoft Word quickly snapped up by Google. Nearly two years since the formal release of Google Docs & Spreadsheets, now known as just Google Docs. Let's admit it: Google Docs is no YouTube, Gmail or Google Maps. A survey of 2,400 American Internet users by Clickstream found that half of them use Microsoft Word, but only one in a hundred uses the free, instant-access Google Docs. Obama's going to change all this, right?

"The real issue is Intel does not have parts to support the April timeframe." Remember the class-action lawsuit over Vista Capable PCs that lack the graphics power to run Vista's Aero interface? TechFlash has published the 29-page court document with Microsoft's internal emails. Intel CEO Paul Otellini personally intervened to convince Microsoft to lower the standards so that an entire generation of underpowered, non-upgradable PCs would be deemed Vista Capable. I know — I bought one. Microsoft computer science guy Jim Allchin was "apoplectic" over the appallingly bad idea. But Digg users never explode in rage at Intel. Once again Redmond's brightest, hardest-working tech leaders have stabbed themselves in the face.

The rumor mill says Microsoft has offered to pay twice what Google offered to take over as Verizon's default search engine on phones. I'll let Henry Blodget do the business analysis here ("MSFT will really take a bath on this one"). As a Verizon loyalist, my reaction is slow-burning rage. They're going to pocket a billion bucks and make me reconfigure my phone. Amazing what you can do if you truly hate your customers. (Photo by AP/Virginia Mayo)

Redmond's biz-dev gorillas have strong-armed Sun Microsystems into bundling the MSN toolbar as an optional add-on to Sun's Java downloads in the US. What does the Silverlight-powered toolbar have to do with Java? Nothing! That's the genius of it.A dozen years ago, Microsoft broke Sun's run-anywhere Java technology, which was supposed to make operating systems irrelevant for most applications. The Windows version of Java changed one function call, in a way that seemed trivial. It made many apps written for Windows not work on other operating systems. Sun sued, cementing the company's has-been status. Microsoft eventually paid a token settlement for having cock-blocked Java in favor of its own buggy, security-violation-breeding ActiveX technology. I'm sure Bill Gates considers it the best $20 million he ever spent. Where was I? Oh yeah: Sun has been reduced to bundling a non-Java Microsoft toolbar with every Java download, to pick up a few extra bucks. I can only hope the Sun staffers involved are too new to be humiliated.

Microsofties who want to make money on the Web without the hassle of actually working at Microsoft have been jumping on board Yahoo's sinking ship. Today's best commenter, longtailwagsthevalley, talks about the game of musical chairs:

Yahoo CEO Jerry Yang publicly pines for another bid from Microsoft. On stage at the Web 2.0 Summit conference yesterday, he said, again, that he was open to talks. Microsoft has taken pains to say it's not interested. But really, besides corporate raider Carl Icahn, who cares? A new leadership team, all with lengthy Microsoft resumes, has taken over key parts of Yahoo.Joanne Bradford, a longtime sales chief at MSN who later headed up Microsoft's content operations, now runs U.S. sales. Jeff Dossett, after a protracted job dance with both Microsoft and Yahoo, just took over Yahoo's "audience" group, which oversees its media websites. And Eric Hadley, another longtime Microsoftie, has just gotten a job running marketing. The three all know each other well from MSN and form a tight-knit cabal. And one thing drove them from Microsoft to Yahoo: Microsoft's senseless obsession with Google. MSN has always been an oddball operation at Microsoft. Is it not, at its heart, a media company. That Google figured out a way to turn attracting an online audience and selling advertising into an algorithm infuriated Microsoft's leadership — but the thought that the Web might be a software business after all held a deep attraction to them. Google's strength is in search advertising. And search advertising is bought, while display advertising is sold. Keyword ads practically sell themselves, while banner ads require the careful cultivation of human links between Web publishers and advertisers. In their display-ads sales, Microsoft and Yahoo both took their eye off the ball, distracted by Google. Microsoft will remain distracted, possibly for all time. But Yahoo is beginning to rebuild an ad-sales operation badly wounded by Yahoo president Sue Decker's mishandling of sales chief Wenda Harris Millard. That's what Bradford, Dossett, and Hadley have figured out. If there's still a role for humans in the packaging of audiences for advertisers, it's going to be filled at Yahoo, not Microsoft. It is a chancy, contrarian bet; running up against both Google and Microsoft takes guts. But it's no coincidence that so many Microsoft executives are now at Yahoo.

Microsoft has discontinued licensing for Windows 3.x, the first version of the hated OS to come anywhere near rivaling a Mac. The 1990-era operating system was still in use as "embedded" software in cash registers and ticketing systems. Call me nostalgic, but I miss the limited functionality of those old systems. Now, when I go to buy my triple espresso at Whole Foods in the morning, I'm forced to navigate a colorful, cheery point-of-sale machine that says "Welcome to Whole Foods" and then sits there, because it didn't occur to some programmer to make it say, "Slide your card already, cowboy, you're holding up the line." (Screenshot by Willy Hoops)

What does $240 million get you these days? That's what Microsoft invested in Facebook, but the software giant hasn't gotten much love in return. On election night, whose online maps did Facebook use? Google's.

Programmer Richard Stallman's 25-year crusade to banish proprietary software from planet Earth hasn't had many victories. Most recently, One Laptop Per Child stabbed RMS in the face by replacing its Stallman-approved freeware with a Windows operating system. OLPC head Nicholas Negroponte, who originally backed a free-software configuration, believes it's a necessary compromise to sell the low-price laptops in a Windows-centric world. Stallman's response compares Negroponte to a drug dealer handing out free samples at the playground.

Mountaineer, philanthropist, and longtime Microsoftie Jeff Dossett has a new claim to fame: He's brave enough to join Yahoo — but it took a while to convince him. Two months ago, Dossett, who joined Microsoft in 1991, went through a curious back-and-forth: BoomTown's Kara Swisher reported he was leaving Microsoft to join Yahoo. A Microsoft rep promptly denied the report, claiming Dossett was leaving a job at the software giant's MSN Web business, but looking at other opportunities within Microsoft. We could speculate about how Microsoft and Yahoo were bidding for Dossett's services, but the real lesson here is: Never, ever believe a Microsoft flack. Dossett replaces Scott Moore, who's leaving Yahoo as reported.

Is Facebook making money? Losing money? One would think that investing $240 million in a company entitles one to answers to such questions. But one would be wrong. Microsoft executives are so in the dark about the social network's finances that they have taken to quizzing reporters for information, we hear. (Photoillustration by Richard Blakeley)

Pity the poor Microsoft employees in charge of protecting Windows from third-party apps with security holes. The only code they can fix is Microsoft's. But as John Markoff reports this morning, Microsoft's boldest move to protect Windows Vista users totally backfired:

Paul Allen, the gazillionaire cofounder of Microsoft who has spent his subsequent years frittering away his cash on tech startups, sports teams, and a cable company or two, is ailing, reports Seattle tech blog TechFlash. Allen missed a "First Citizen" awards ceremony thrown by local realtors in his honor because of "an undisclosed medical procedure." We're thinking it can't have been something minor, or at least not easily postponed. Bill Gates attended the event, as did Patty Murray, one of Washington's senators. Murray's praise for Allen's civic contributions — including the Experience Music Project museum and the purchase of the Seattle Seahawks — brought the crowd to its feet. In 1983, Allen was treated for Hodgkin's disease. (Photo by Mark Wilson/Getty Images)

At Microsoft's Professional Developers Conference in Los Angeles today, Rick Rashid, the head of Microsoft Research, reminded the audience that he helped write the Mach kernel 25 years ago. That piece of code is now at the core of Apple's OS X, the operating system which runs both the Mac and the IPhone. What he should be asking: Why didn't his employer think of that? (Photo by Ina Fried/CNET News)

Everyone is basically in agreement that the advertising market next year is going to suck—even your precious internet ads! So I guess it's appropriate that Microsoft's $300 million ad campaign, which started out with such an ineffective burst of star power, has now been reduced to using videos submitted by you, the idiot consumers. This is all part of a grand strategy by a brilliant ad agency and not at all a harbinger of Microsoft getting its ass handed to it on a national stage, okay?

God bless John Markoff's ethics-addled heart. The veteran New York Times reporter sucks up industry-spin bullshit, fake quotes and all, then repackages it as truth I can cut and paste. Why is Windows 7 suddenly in the news? Same reason Microsoft's cloud-based Office knockoff, whatever it's called, was also demoed to developers in Los Angeles this morning: