News Corp's Dow bid now faltering

The Bancroft family has controlled Dow Jones for more than 100 years

Rupert Murdoch's News Corporation has admitted it is now "highly unlikely" it will proceed with its $5bn (£2.5bn) offer for the Dow Jones media group.

It said this was because of the reported present level of opposition from the Bancroft family, which owns 64% of Dow Jones' voting shares.

With the Bancrofts expected to make a statement later on Tuesday, reports say less than a third are backing the deal.

The news came as Brad Greenspan said he had financial support for a rival bid.

Mr Greenspan, the founder of the MySpace social network, said he had now gained the backing of five investor groups interested in buying a stake in Dow Jones to thwart News Corp's bid.

Editorial assurances

The Bancroft family said last week that it had held "very productive" talks with News Corp, and the bid had also gained the backing of the Dow Jones' board.

News Corp first tabled its bid for Dow Jones on 1 May.

The Dow Jones' main newspaper title is the Wall Street Journal.

Rupert Murdoch has promised to maintain the Wall Street Journal's editorial independence if News Corp's bid is successful.

Garnett Appears Headed to Boston to Try for a Title

Kevork Djansezian/Associated Press

Kevin Garnett has been the centerpiece of the Minnesota Timberwolves for the past decade after being drafted out of high school.

By CLIFTON BROWN

After 12 seasons with the Minnesota Timberwolves, Kevin Garnett seemed close last night to joining the Boston Celtics in a multi-player trade.

The Timberwolves and the Celtics were trying to complete a deal that would send Garnett, a 31-year-old perennial All-Star forward, to Boston in exchange for multiple players from a list that included forward Al Jefferson, guard Sebastian Telfair, swingman Gerald Green and center Theo Ratliff. Minnesota was also expected to receive at least one draft choice.

Andy Miller, Garnett’s agent, did not return telephone messages, nor did Danny Ainge, the Celtics’ executive director of basketball operations. Both The Boston Globe and The Associated Press reported that Garnett would be traded to Boston.

Garnett, one of the league’s best and most versatile players, has averaged at least 20 points, 10 rebounds and 4 assists the past nine seasons. The addition of Garnett would give Boston three proven scorers — Garnett, guard Ray Allen and swingman Paul Pierce — making the Celtics instant contenders in the Eastern Conference.

The Celtics tried to acquire Garnett in June, but he blocked the trade because he did not want to play in Boston. Garnett has apparently had a change of heart, and his presence in Boston could help resurrect one of the league’s most storied franchises. Boston has won an N.B.A.-record 16 championships, but none since 1986, and the Celtics have only won three playoffs series in the past nine years.

Garnett has been the centerpiece of Minnesota’s franchise for a decade, but he has been frustrated in his attempts to win a championship. His best season was 2003-4, when he was named the league’s most valuable player and led Minnesota to the Western Conference finals. However, the Timberwolves have not made the playoffs since, and Garnett may realize that a change of scenery could be his only chance to win a title.

If the deal is completed, Garnett was expected to receive a one-year extension on a contract that has one guaranteed year, plus an option year remaining.

It has been an active off-season for the Celtics, who acquired Allen last month in a draft-day deal for guards Wally Szczerbiak and Delonte West, and forward Jeff Green of Georgetown, whom Boston drafted with the No. 5 pick. Allen will be 32 when the season begins, but he averaged a career-high 26.4 points last season.

Many Celtics fans seemed disappointed after the draft lottery in which Boston did not get the No. 1 or No. 2 pick and missed the chance to draft Greg Oden or Kevin Durant. But if the Garnett deal is completed, the Celtics will have a superstar in his prime.

Web child fight videos criticised

Many of the attacks are worse because the cameras are there

Police chiefs have urged websites to remove violent video footage of children fighting, following an investigation by the BBC.

Panorama found that films showing brutal fights between children are regularly uploaded to sharing websites.

Police say the companies should monitor what is posted on their sites and remove any violent or criminal content.

But YouTube, one of the sites found with footage, says it relies on users to "flag up" inappropriate films.

The investigation found films showing children as young as 11 and 12 punching and kicking other youngsters.

Brandishing handgun

One showed a youth brandishing a handgun and smashing it against a police car.

Another shows a laughing teenager jumping on a police car and shattering its windscreen.

Deputy Chief Constable Brian Moore, of the Association of Chief Police Officers, said it was the responsibility of internet companies to search their sites for videos of violence and crime.

Look all this is happening, this is real life, this is going on, we're going to show it Hayden Hewitt Liveleak

They should then pass the details to police.

He said: "They are responsible for what is on their products - they are making a profit from this.

"We would question who is in a financially better position to police the likes of YouTube - those in the private sector, who are earning huge amounts of money, or police forces which are currently having to stretch budgets."

But YouTube, said it did not employ anyone to police what is posted. The site, which is owned by Google, claims pre-screening content is a form of censorship which is not the role of a private company.

A spokesman said the website takes down videos but only if they are flagged by users and subsequently found to breach their guidelines.

Rule breakers

"Sadly as with any form of communication, there is a tiny minority of people who try to break the rules," the spokesman said.

"On YouTube these rules prohibit content like pornography or gratuitous violence. We don't want that sort of material on our site, and nor does our community."

HAVE YOUR SAY Videos should not be policed by the website itself, it is a collective issue and we should all be involved Mark, Basingstoke

The YouTube spokesman added the website would help police if they were approached for information.

Another website which features in the programme, Liveleak, said it checks all videos before hosting them.

Hayden Hewitt, co-founder of the website, defended the inclusion of such fights including one in which a girl had to go to hospital with a detached retina.

He said: "Of course it's horrible. It's not about me morally defending anything here.

"We have to take a stance of saying 'look all this is happening, this is real life, this is going on, we're going to show it."'

Panorama: Children's Fight Club will be shown on BBC One on Monday, 30 July at 2030 BST.

Iraq faces alarming humanitarian crisis

By David Loyn BBC developing world correspondent

Iraq's people were poor and lacked most of the normal signs of development, even before the fall of Saddam Hussein.

Fewer Iraqis have access to clean water than did under Saddam

Then it was possible to blame the problems of dictatorship and international sanctions, but since the US-led invasion continuing poverty in this oil-rich state has had other causes.

A new report by Oxfam says that the continuing failure to provide even the most basic services to many Iraqis will not only cause continuing suffering, but "serve to further destabilise the country".

Oxfam are unable to work on the ground in Iraq in the way that they would elsewhere, but working with the NGO Co-ordination Committee in Iraq (NCCI), their new survey finds "eight million people in need of emergency aid".

The survey recognises that armed violence is the greatest threat facing Iraqis, but finds a population "increasingly threatened by disease and malnutrition".

Savage divisions

Clear statistical analysis is difficult, but the Oxfam/NCCI report believes that more than two million people are now internally displaced within Iraq, as savage new lines are drawn between communities who were not at war before.

Delivering aid to them provides new challenges to a system that is coping even less well than it did in the year after the war.

Of the four million Iraqis who are registered to receive food assistance, 60% receive it. That is down from 96% in the year after the war.

Fewer people have access to clean water than did under Saddam Hussein, and 80% have no access to effective sanitation, a figure comparable to sub-Saharan Africa.

Most UN agencies have found it difficult to operate in Iraq since the devastating bomb that killed their special representative, Sergio Vieira de Mello, and many of his staff only six months after the invasion.

The invasion itself was not mandated by the UN, but the reconstruction effort has since won more international support and its backing.

Humanitarian needs neglected

The Oxfam/NCCI report finds that the immediate needs of Iraqis are being neglected by international funding, which is targeted at longer term development goals.

These goals will be hard to achieve given the major security challenges.

Oxfam says the world must increase humanitarian assistance to Iraq

The report finds that funding for these longer-term projects went up by almost 1000% in the first two years after the invasion, but, despite the need, immediate humanitarian aid fell by about a half.

The report says that the right of the people of Iraq to humanitarian support "is being neglected".

But, while reminding the international community and the UN of their moral responsibility, it recommends a number of basic steps that the government in Baghdad could take to improve the plight of the people.

Most urgently, the report demands that government assistance should be devolved to local control.

That way, locally accountable bodies could inspect the warehouses and delivery systems for aid.

This report must represent a major challenge both to the international authorities and the Iraqi government, who are both found to be failing their people.

Corruption 'mars Iraq rebuilding'

Reports of widespread fraud and waste of funds in Iraq

The US agency overseeing reconstruction in Iraq has told the BBC that economic mismanagement and corruption there are equivalent to "a second insurgency".

The chief auditor assigned by Congress, Stuart Bowen, said the Iraqi government was failing to take responsibility for projects worth billions of dollars.

Mr Bowen also said his agency was investigating more than 50 fraud cases.

Meanwhile, nearly a third of Iraq's population is in need of emergency aid, a report by Oxfam and Iraqi NGOs says.

The report said the Iraqi government was failing to provide basic essentials such as water, food, sanitation and shelter for up to eight million people.

It warned that the continuing violence was masking a humanitarian crisis that had escalated since the US-led invasion in 2003.

On Monday, six people were killed and at least 12 injured in a car bomb attack in Baghdad. The US military also announced the deaths of three of its soldiers in the western province of Anbar.

'Troubling'

US Special Inspector General for Iraq Reconstruction Stuart Bowen was appointed to audit $44bn (£22bn) allocated since 2003, after reports of widespread fraud and waste.

The agency publishes quarterly reports on the situation, most of which have complained about a serious lack of progress. Monday's report was no different.

Millions of Iraqis have been forced to flee the violence, either to another part of Iraq or abroad - many of those are living in dire poverty Jeremy Hobbs Director of Oxfam International

In an interview with the BBC, Mr Bowen said corruption was endemic and described it as "an enemy of democracy".

He added: "We have performed 95 audits that have found instances of programmatic weakness and waste, and we've got 57 ongoing cases right now, criminal cases, looking at fraud."

Mr Bowen said the transfer of projects to Iraqi government control was "troubling", and expressed concern about delays and cost overruns.

The report gave the example of the Doura power station, rebuilt with tens of millions of US dollars, which fell into disrepair once it was transferred to Iraqi control.

Mr Bowen also said Iraqi ministries were struggling to administer funds.

Last year, Prime Minister Nouri Maliki's government only spent 22% of its budget on vital rebuilding projects, while spending 99% of the allocation for salaries, he said.

He said "a pathway towards potential prosperity" could be found only if oil production was brought up to optimal levels, and security and corruption effectively managed.

'Ruined by war'

The Iraqi parliament has now adjourned until 4 September, despite US calls for it to remain in session and pass already-delayed legislation.

The recess means parliament will reconvene just days before America's top commander in Iraq, Army Gen David Petraeus, reports to Congress on the US troop "surge" strategy.

His assessment will likely provide the backdrop to the next round of war spending.

The BBC's Nicholas Witchell in Baghdad says the report by the UK-based charity and the NGO Co-ordination Committee in Iraq (NCCI) makes alarming reading.

The survey recognises that armed conflict is the greatest problem facing Iraqis, but finds a population "increasingly threatened by disease and malnutrition".

It suggests that 70% of Iraq's 26.5m population are without adequate water supplies, compared to 50% prior to the invasion. Only 20% have access to effective sanitation.

Nearly 30% of children are malnourished, a sharp increase on the situation four years ago. Some 15% of Iraqis regularly cannot afford to eat.

The report also said 92% of Iraq's children suffered from learning problems.

It found that more than two million people have been displaced inside the country, while a further two million have fled to neighbouring countries.

On Thursday, an international conference in Jordan pledged to help the refugees with their difficulties. Oxfam has not operated in Iraq since 2003 for security reasons.

Brown and Bush ponder post-Blair ties

By Paul Reynolds World Affairs correspondent, BBC News website

Gordon Brown: seeking a new US relationship

Gordon Brown's talks with President George W Bush will set a new tone for US-British relations after years of exceptionally warm ties between Mr Bush and the UK former Prime Minister Tony Blair.

The expectation generally is that the UK will continue to be close to the United States but perhaps not quite as close as it was.

The new British leader is an Atlanticist, who knows and likes the US well. He is expected to - and indeed he and Foreign Secretary David Miliband have said he will - continue to advance a foreign policy that is sympathetic towards the US.

But nobody thinks that Gordon Brown is going to find a soulmate in George Bush as Tony Blair did. That relationship was forged in the heat of 9/11 and Iraq.

Iraq...

On the most immediate foreign policy issue to hand, Britain will not undertake a precipitous withdrawal from Iraq. However Mr Brown has spoken of a "new stage" and the signs are that he wants out as soon as possible, as long as that is (or can be presented as being) compatible with the policy of handing over only when the Iraqis can do the job.

And Britain will stay in Afghanistan in a combat role. Indeed, it wants more Nato members to join the fray, as does the United States.

...and Iran

A key issue that might well test the relationship is Iran. A new round of UN sanctions is going to be debated, maybe decided, in September, but what if the Bush administration decides to attack Iran's nuclear facilities in the final 18 months or so of its term of office?

Mr Brown has not ruled out military action - doing so now could undermine the diplomatic and economic pressure currently being applied, it is felt - but most observers think he would not join in if the US went ahead.

Forged in fire: Bush and Blair at Camp David, February 2001

Mr Brown will go to Camp David on Sunday evening for dinner and will stay over into Monday, the White House spokesman Tony Snow has announced.

He will no doubt try to clear up some mixed signals that his government has sent out about how it wants to deal with Washington. For example, the appointment of Mark (now Lord) Malloch Brown as Foreign Office minister - a man who was a leading critic of the Bush administration when he was a senior UN figure - was seen as a deliberate distancing from the US neo-conservatives.

On the other hand, Britain does not really want to get much closer to the European Union, holding firm to its "red lines" in the EU treaty negotiations, one of which is to preserve a national foreign policy. This approach was reflected in the recent row with Russia in the Litvinenko affair, in which London did not reach out for an EU-wide response but trod its own path.

The possibility is that Britain will end up semi-attached to the United States and semi-detached from Europe.

Links to US

The former British ambassador to Washington, Sir Christopher Meyer, was present at Camp David when Tony Blair met George Bush there in February 2001. He dismisses any suggestion that Gordon Brown will want to use Camp David to distance himself significantly from President Bush.

"People have got quite excited about this," he said. "There are thousands of seminars about it but I don't think that it warrants that level of activity. They will not be as close personally, unless some magic strikes, but frankly that does not matter that much.

"There is such an awful lot of stuff in the relationship and while there are variables - personalities, events, and shifts of tone - and sometimes the relationship is not that special, historically since 1945 it goes on regardless.

Rendition differences

One recent example of how the relationship can at times be tense came when a House of Commons committee revealed that Britain had reservations about aspects of the US policy of flying terror suspects around the world but that these were ignored.

It was a reminder that, although the two countries are as close allies as they can realistically be, in the end they can diverge.

"Mr Brown's mixed signals are a classic case of an administration bedding in, with some of the bits not dropping into place," says Sir Christopher.

"As for Iran, I am not sure I see the UK going for military action. There are major military objections. I would be surprised if Britain got involved.

"And in Afghanistan, we need help. How long can we sustain that action?"

Bush and Brown vow co-operation

Mr Bush praised Mr Brown for the UK's battle against terrorism

US President George W Bush and UK PM Gordon Brown have held their first formal talks, renewing pledges to fight terrorism and seek progress in Iraq.

Mr Brown said both nations had duties and responsibilities in Iraq, and that he would seek military advice before announcing any changes in policy.

The pair met at Camp David, near Washington, amid widespread interest about whether they could work together.

The talks also focused on Afghanistan, Darfur, world trade and climate change.

Ahead of the summit there was speculation about whether the Texan president and the Scottish prime minister would find some common ground.

In the event, Mr Bush spoke warmly of the "special relationship" with the UK, describing it as "our most important bilateral relationship" - the same term used by Mr Brown ahead of his trip to the US.

Britain and America's policies on Iraq are in step - for now, at least BBC political editor Nick Robinson

The president said he found Mr Brown a warm, humorous man, far removed from the "dour Scotsman" image sometimes portrayed by the media.

He also paid tribute to Mr Brown's personal strength in overcoming the death of his first child in 2002.

And he joked when he learned that six of Mr Brown's newly-appointed cabinet were under 40 years old, telling the prime minister: "You must be feeling old."

But the BBC's political editor Nick Robinson, at Camp David, says Mr Brown did nothing to return those personal compliments - even referring to their meetings as full and frank, which is normal diplomatic code for an argument.

Iraq debate

On Iraq, Mr Brown said any recommendation on the future role of the UK's 5,500 troops in Iraq could be put to parliament after British MPs return to work in October after a summer break.

That would leave any decision on UK troop levels until after a final report on the US "surge" in Iraq by Mr Bush's commander in Iraq, General David Petraeus.

The consequences of failure would be disaster for Great Britain and the US, something this Prime Minister understands George W Bush US President

Current UK policy in Iraq is to hand over power in Basra province to local Iraqi authorities, following successful handovers in three other southern provinces.

"Our aim, like the United States is, step-by-step, to move control to the Iraqi authorities," Mr Brown said.

Mr Bush then linked the fortunes of both nations to the outcome of events in Iraq.

"The consequences of failure would be disaster for Great Britain and the US, something this prime minister understands," the president said.

'Common struggle'

Mr Brown, who faced a series of attempted bombings in the UK in the days after he assumed office in June, denounced terrorism as a crime, not a cause.

Correspondents say Mr Bush used familiar language, including soaring rhetoric on the subject of good and evil, while Gordon Brown was much more specific, detailing a long list of what the two men had talked about.

However, Mr Brown denied suggestions that his view of terrorism differed greatly from that of Mr Bush.

"We know we are in a common struggle, we know we have to work together, and we know we have to deal with it," he said.

"Today in 2007 we see the challenges are radically different to 10 years ago," Mr Brown added, citing climate change, Africa, and the search for a Middle East peace process as key issues.

He said both men had agreed on the need for tougher sanctions against Iran, and the importance of restarting the Doha round of world trade talks.

Vick’s Co-Defendant Agrees to Plea Deal

One of the men indicted with Michael Vick on federal dogfighting charges pleaded guilty Monday and has agreed to help prosecutors make their case.

Eva Russo/Richmond Times-Dispatch/Associated Press

Tony Taylor agreed to cooperate with federal prosecutors pursuing the dog-fighting case against Falcons' quarterback Michael Vick.

Tony Taylor, a 34-year-old from Hampton, Va., pleaded guilty here in United States District Court to charges of conspiring to travel in interstate commerce in aid of unlawful activities and to sponsoring “a dog in an animal fighting venture.”

Taylor, Vick and two other men, Purnell A. Peace, 35, of Virginia Beach; and Quanis L. Phillips, 28, of Atlanta, pleaded not guilty last week in the case. But as part of his deal, Taylor signed a 13-page statement that confirmed much of what the government asserted in its indictment of the men on July 17.

Taylor outlined his involvement with the others in a dogfighting enterprise known as Bad Newz Kennels, according to the statement. He attested to how he scouted a property for Vick to buy in Smithfield, Va., as the base for the venture and cited numerous examples in which the group bought, trained and sponsored dogs in connection with fighting. He also said they gambled on the fights.

Although the statement said several dogs were killed, it did not say that Vick killed any of them. The statement said Taylor had a falling out with Phillips in 2004 and had not been part of the enterprise since.

The 18-page indictment against the men accuses them in graphic detail of animal cruelty. During a search of Vick’s property in April, 54 pit bulls were recovered, along with a so-called rape stand used to hold dogs in place for mating, an electronic treadmill modified for dogs and bloody carpeting. As part of his agreement with prosecutors, Taylor is expected to give testimony that mirrors his statement.

Since being indicted on charges of sponsoring, gambling on and authorizing acts of cruelty against dogs, Vick has had his football career put in limbo — and in jeopardy. N.F.L. Commissioner Roger Goodell has suspended him indefinitely, Reebok has pulled his Atlanta Falcons jerseys from stores, and Nike has stopped sales of its Vick-branded products.

At a 9 a.m. hearing Monday, Taylor stood with his lawyer, Stephen Ashton Hudgins, before Judge Henry E. Hudson and answered questions about whether he understood the plea agreement.

Taylor responded that he did with brief answers in a deep monotone voice.

He faces up to five years in prison and a $250,000 fine, and is free on bond while awaiting a Dec. 14 sentencing. Because a trial in the case has been scheduled for Nov. 26, the judge and prosecutors will have time to evaluate the extent of Taylor’s cooperation before setting a punishment.

Vick and the others are also free on bond.

Daniel C. Richman, a professor at Columbia Law School and a former assistant United States attorney, described the plea agreement as an important step for the investigation.

“A witness like this is the only way to really get inside information without tracking the crime while it is happening,” Richman said. “This is the government’s way of signaling to the other defendants that it has significant evidence and that they should seriously consider pleading guilty themselves.”

A spokeswoman for the United States attorney’s office in Richmond declined to comment because the investigation was still underway.

Vick’s lawyer, Billy Martin, did not return a telephone call seeking comment.

While leaving the court Monday, Taylor was swarmed by a reporters who peppered him with questions about Vick.

Taylor said nothing as he entered a waiting car and left.

Carl Tobias, a professor at University of Richmond Law School, said the turn of events did not help Vick but that defense lawyers could attempt to discredit Taylor.

“Vick’s lawyer was saying on Thursday that they were going to fight this thing to the end, but just a few days later someone has already pled,” Tobias said. “There is a lot time between now and the trial, and the other defendants could turn as well. But the other three of them may be hanging together. They could go after Taylor’s credibility by citing the falling out as more motivation to turn against them.”

Gates Plans His Leave Amid Great Change

Kevin P. Casey for The New York Times

Microsoft’s founder, Bill Gates, flanked by his designated successors: Craig Mundie, left, head of research and strategy, and Ray Ozzie, top software architect.

y JOHN MARKOFF

Published: July 30, 2007

REDMOND, Wash., July 27 — Microsoft is beset with competition from all sides, unlike any it has seen in decades, and Bill Gates, who co-founded the company 32 years ago, still intends to step away next year as planned.

Multimedia

Kevin P. Casey for The New York Times

Ray Ozzie, right, and Craig Mundie, center, will take over two of Bill Gates’s roles at Microsoft.

But so far, Mr. Gates, Microsoft’s 51-year-old chairman, shows no sign of fading away.

One year into a planned two-year transition, there are few visible cues that Mr. Gates is ready to leave the world’s technology stage to devote his energies principally to the $33 billion foundation he established seven years ago with his wife.

Indeed at the company’s annual financial meeting last week Mr. Gates spoke first, outlining a decade-long agenda, not a mere 12-month outlook.

He described a world in which the widespread availability of broadband networks would reshape computing, giving rise to what he said would be “natural user interfaces” like pen, voice and touch, replacing many functions of keyboards and mice.

Mr. Gates has stayed deeply engaged in the company’s technology strategy. He still frequently participates in high-level strategy planning sessions with Microsoft’s closest partners, like Intel, according to executives who have attended the meetings.

During a wide-ranging interview last week exploring his diminished role at Microsoft, the company’s challenge and its competitors, Mr. Gates insisted that he really has begun stepping back.

“I am in a lucky situation of having way more things that seem interesting to do and very exciting and important, and working with smart people, and highly impactful, way more than a 24-hour day will fit,” Mr. Gates said. To be sure, there is widespread skepticism in the industry about the possibility of Mr. Gates genuinely disengaging. Microsoft’s dominance is being challenged as never before by Google in particular, and Wall Street refuses to believe the company will regain its edge. The company’s stock has largely remained flat since the end of the dot-com era.

“It’s very hard for someone at his age, who has built a company with that much success and with continuing challenges to really walk away,” said David B. Yoffie, a professor at Harvard’s business school. “He will never be a titular leader.”

As he spoke in his office, Mr. Gates was joined by the two Microsoft executives, both veteran technologists, who are succeeding him. Craig Mundie, the chief research and strategy officer, and Ray Ozzie, chief software architect, agreed with Mr. Gates that despite significant industry challenges from all directions, Microsoft is at a perfect historic juncture for Mr. Gates’s departure and the first stage of his withdrawal from Microsoft has been reasonably seamless.

“The weaning process inside the company is inevitable,” said Mr. Mundie, a computer scientist who began his career developing minicomputers and supercomputers before joining Microsoft in 1992.

The greatest danger, according to all three executives, would be if Mr. Gates continues to make decisions while not staying deeply involved. He will remain chairman.

“It can’t be a situation where he’s expected to suddenly, magically come up to speed,” said Mr. Ozzie, a software designer who developed a software collaboration tool called Notes for Lotus and then started Groove Networks, which was acquired by Microsoft in 2005. “You know, did you see the 20 announcements last week that Google did, Yahoo did, Cisco did?”

For his part, Mr. Gates said he planned to remain deeply involved in a few areas indefinitely.

“Other than board meetings, there’s not much in terms of regular meetings,” he said. “It’s much more sitting down a couple hours a month with Craig, sitting down a couple of hours a month with Ray.”

On Thursday, Steven A. Ballmer, who took over the chief executive role from Mr. Gates seven years ago, said the company’s overall performance had never been stronger. Microsoft, he noted, has doubled its revenue and almost doubled its profits in the half decade that he has been at the helm. Despite that growth, the stock price has remained vexingly flat in the period.

Although smooth leadership transitions are infrequent among high tech firms, it appears that Mr. Gates has had the freedom to begin stepping away gracefully because Mr. Ballmer has been largely successful in shouldering the burden of running Microsoft.

Mr. Gates no longer attends senior leadership team meetings, and earlier this month he made what company executives described as a farewell appearance at the annual Microsoft sales force meeting in Orlando, Fla. When Mr. Gates finished his speech to the thousands of sales people at the meeting, they gave him a five-minute standing ovation, underscoring the bond the company still retains with its co-founder, according to a person who attended the event.

But as he cedes Microsoft’s technology leadership to Mr. Mundie and Mr. Ozzie, the company is struggling with a radical transition in the computer industry. Six months ago, Microsoft shipped its long-delayed Windows Vista operating system, and there is widespread belief within the industry that the era of such unwieldy and vast software development projects is coming to an end.

Ubiquitous broadband networks and high speed wireless networks have for the first time given rise to meaningful alternatives to bulky and costly personal computers. In their place are a proliferating collection of smart connected devices that are tied together by a vast array of Internet-based information services based in centralized data centers.

Multimedia

The industry is rushing to “software as a service” models ranging from Salesforce.com, a San Francisco company that sells business contact software delivered via Web browsers, to Apple’s iPhone, which is designed as a classic “thin client,” a computer that requires the Internet for many of its capabilities.

It is a vision that Microsoft itself has at least partially embraced. Microsoft, in contrast, is calling its strategy “software plus services,” an approach that is intended to protect the company’s existing installed base.

During the interview, all three executives indicated that Microsoft is now moving quickly to offer new Internet services for personal computer users. Centralized data storage will make it possible for PC users to gain access to most or all of their information from all of the different types of computers they use, whether they are desktops, laptops or smartphones, and wherever they are located.

During the transition, Mr. Gates has also stayed closely involved in shaping Microsoft’s strategy in the search market where it has been assiduously attempting to catch Google and Yahoo.

“We made all the structural changes we were going to make, and we rode in tandem last year,” said Mr. Mundie. “In the last few months Bill has transitioned to what I start to think of as special project mode.”

If he is stepping away from Microsoft, Mr. Gates has shed none of his trademark combativeness. He rejected the Silicon Valley view that Microsoft has begun to exhibit the same sclerotic signs of middle age that I.B.M. did when it dominated the computer industry, but failed to respond effectively to the challenge of the personal computer.

I.B.M. is no longer at the center of the computer industry, he asserted, for two reasons. First, the industry is now centered on personal computing. “As much as I.B.M. created the I.B.M. PC, it was never their culture, their excellence,” he said. “Their skill sets were never about personal computing.”

Second, the center of gravity in the computer industry has dramatically shifted toward software, he said. “Why do you like your iPod, your iPhone, your Xbox 360, your Google Search?” he said. “The real magic sauce is not the parts that we buy for the Xbox, or the parts that Apple buys for iPhones, it’s the software that goes into it.”

During the interview Mr. Gates rejected the notion that Google could become a successful competitor in the smartphone software market, where Microsoft has about 10 percent market share. The Silicon valley search engine provider has been widely reported to be preparing to enter the cellphone market with its own software and a host of services springing from that software.

Microsoft’s chairman said it was unlikely that Google would be able to make inroads into the Microsoft’s share of market for mobile phone software.

“How many products, of all the Google products that have been introduced, how many of them are profit-making products?” he asked. “They’ve introduced about 30 different products; they have one profit-making product. So, you’re now making a prediction without ever seeing the software that they’re going to have the world’s best phone and it’s going to be free?”

Again, the ability to create compelling software will determine the winners. “The phone is becoming way more software intensive,” he said. “And to be able to say that there’s some challenge for us in the phone market when its becoming software intensive, I don’t see that.”

The new, less central role for Mr. Gates was first formulated more than a year ago at a June 2006 meeting in which the three men worked out how they would divide responsibilities for guiding the technology direction of the $51 billion company, according to Mr. Ozzie, who was a longtime rival of Mr. Gates at companies like Lotus and I.B.M. before joining Microsoft two years ago.

They decided at that meeting that Mr. Mundie and Mr. Ozzie would divide Mr. Gates’s role at the company along three axes. Along one of these lines, Mr. Mundie, who has been described as Microsoft’s “secretary of state” and who is deeply involved in federal government and international policy issues, would take a more public-facing role, while Mr. Ozzie would focus more closely on internal company matters.

In another, Mr. Mundie has tackled the company’s long-range strategic decisions, while Mr. Ozzie has taken over the near-term challenges of weaving together the product development issues. Finally, Mr. Mundie has taken responsibility for software that sits closer to the computer hardware, like the Windows operating system, while Mr. Ozzie has shaped Microsoft’s response to the growing challenge of network software.

“There’s been a very natural shift in the past year where I will engage with a particular software team and Bill will disengage,” said Mr. Ozzie. Mr. Gates insists that his new world of philanthropy will be just as compelling as software has been. “I’ll have also malaria vaccine or tuberculosis vaccine or curriculum in American high schools, which are also things that, at least the way my mind works, I sit there and say, ‘Oh, God! This is so important; this is so solvable,’ ” he said, “You’ve just got to get the guy who understands this, and this new technology will bring these things together.”

Paulson in China for talks on economy, environment

Henry Paulson
©AFP/File - Saul Loeb

BEIJING (AFP) - US Treasury Secretary Henry Paulson arrived in China on Sunday, kicking off a visit aimed at convincing the Asian giant to implement much-needed economic and environmental reforms more quickly.

US diplomats said Paulson was first headed to Xining, the capital of the vast northwestern province of Qinghai, where China has enacted a series of environmental protection initiatives near its largest salt-water lake.

Paulson, who heads to Beijing on Monday, will meet with government officials to discuss the US-China Strategic Economic Dialogue (SED) launched last year.

The forum covers a range of economic and environmental issues, but the issue at the forefront is China's yuan, which is seen by lawmakers in the United States as grossly undervalued.

Paulson's visit comes amid growing pressure to curb the burgeoning US trade deficit with China and moves in the US Congress to punish Beijing for what some say are unfair trade policies.

Last week the Senate Finance Committee overwhelmingly approved a bill requiring the Treasury to identify nations with "fundamentally misaligned" currencies, potentially opening the door to economic sanctions against Beijing.

US lawmakers say the undervalued yuan makes US-bound exports cheaper, thereby fuelling the trade deficit, which hit 232.5 billion dollars last year.

"There is no doubt that China and other nations have been undervaluing their currency to give themselves an advantage," said Republican Senator Lindsey Graham, a member of the committee.

"For too long the game has been rigged against American business."

But Paulson said Friday that lawmakers were sending the wrong message by threatening to punish Beijing.

"We would like to see the Chinese move and show more flexibility," he said.

"The right way to deal with a sovereign nation is not through protectionist actions, but by making the case to them very directly as to why it's in their best interests ... that they proceed with their reforms."

China manages the yuan against a basket of foreign currencies. But it maintains that, after ending the yuan's peg to the US dollar in 2005, its currency has appreciated at a steady pace.

Paulson was due to leave China on Wednesday.

SE Asia nations open charter talks

Workers set up a billboard on the eve of the start of the ASEAN Regional Forum
©AFP - Sam Yeh

MANILA (AFP) - Southeast Asian nations opened talks here Monday to thrash out the details of their first-ever charter, trying to smooth out deep differences that remain despite nearly two years of work so far.

With time running out before the 10-nation ASEAN bloc adopts the charter in November, as it looks to aim for full economic integration by 2015, foreign ministers began their annual meeting in Manila looking to finalise the document.

The 40-year-old Association of Southeast Asian Nations (ASEAN) is hoping to transform itself into a rules-based organisation roughly along the lines of the European Union, with norms that all countries adhere to.

The bloc formally committed to the charter at a summit in the Philippines earlier this year, and Philippine President Gloria Arroyo urged fellow members to strike a deal and make the charter a reality.

"Our collective desire to bring social justice, economic opportunity and integrated security to the region is our common ground," she told ASEAN foreign ministers to begin the meeting in the Philippine capital Monday.

"There are no short cuts or quick fixes," she said. "I commend to you the important task of following through on the commitments that we have made."

Graphic showing the ASEAN members.
©AFP/Graphic

But the group has been unable to agree on sanctions to punish member states who do not follow the rules, while opposition from Myanmar has scuppered a proposal for a regional human rights commission.

Member states have also battled over whether to abandon their policy of operating on consensus in favour of taking decisions by vote -- a move which would also amount to forcing individual countries to abide by group rules.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

A Social-Networking Service With a Velvet Rope

Jim Wilson/The New York Times

Alex Albrecht, left, and Kevin Rose are hosts of “Diggnation,” a Web show on which they discuss the news, lounge and drink beer.

JUST now, the hottest startup in Silicon Valley — minutely examined by bloggers, panted after by investors — is Pownce, but only a chosen few can try out its Web site.

This week: turmoil in the stock and bond markets, Ford and the environment of a New Jersey community, and how asset allocation can cushion a portfolio.

Kevin Rose, the co-founder and chief architect of Digg, a hugely popular news site, announced in late June the introduction of Pownce, a social-networking service that combines messaging with file-sharing. Mr. Rose immediately endowed his latest venture with some mystique by declaring that, for the time being, only those with invitations would be permitted to test his new site.

Within days, invitations were selling on eBay for as much as $10. Mr. Rose has declined all requests to be interviewed about the service, including my own. But as a consolation, he sent me a coveted invitation. I enjoyed the rare thrill of cyberhipness — and got to experiment with the site.

I learned you can send text messages to individual friends or groups of friends on Pownce as well as post microblogs, or short announcements, to the larger Pownce community. This function is very similar to messaging services like Twitter or Jaiku, and is found on social networks like Facebook and MySpace (although Pownce’s messages cannot, at least for now, be sent to mobile phones). You can also send your friends links, invitations to events, or files like photos, music or videos. Of course, you can already do that on a multitude of file-sharing Web sites. It is the combination of private messaging and file-sharing that makes Pownce so novel.

Om Malik, the author of the technology blog GigaOm, is an enthusiast. “I love it and use it constantly, ” he said in a message sent to me on Pownce. “I like it because it lets me share a lot of different things with the networks of people I really care about.”

Pownce was initially conceived by another founder, Leah Culver, a 24-year-old programmer who developed the site as an experiment. But its glamour derives from Mr. Rose’s reputation for creating digital-media companies that evoke passionate fandom among their youthful audiences. In addition to Digg, he co-founded Revision3, a video production and hosting company opened last September.

“He is super-smart, friendly, humble and a team-builder — a perfect combination for a great entrepreneur,” said Ron Conway, who has invested in Digg and Revision3 and was an early investor in Google. (A disclosure: Mr. Conway also invested in Red Herring Communications, a magazine and Web site I once edited.)

Mr. Rose, 30, dropped out of the University of Nevada at Las Vegas, where he was studying computer science, to pursue his fortune in San Francisco during the dot-com boom. Fortune eluded him then, but he achieved minor fame when, following the collapse of the technology market in 2002, he became a nerdy host on TechTV’s “The Screen Savers.”

The audience Mr. Rose attracted at TechTV was then drawn to Digg, which he began promoting on his show and in his blog when the site was introduced in December 2004. Digg combines social networking, blogging and online syndication to create a site where news stories are ranked by popularity. Today, 17 million people visit Digg every month, according to the company.

After Mr. Rose’s contract with G4, the successor to TechTV, expired, he started Revision3. Each week, 250,000 people go to the company’s Web site to view its most popular show, “Diggnation,” where Mr. Rose and his pal Alex Albrecht lounge on couches, drink beer and discuss the most popular stories on Digg.

Something of Mr. Rose’s concept of his latest venture can be discerned in how he described Digg to me in a recent interview. “For us, it’s really about creating the platform for people to share things with their friends,” he said.

Owen Thomas, the managing editor of the Silicon Valley gossip blog Valleywag, has chronicled the excitement Pownce aroused over the last month, but doesn’t like the service himself. At 35, “I’m kind of old; I’m habituated to e-mail,” Mr. Owen wrote in just such a message.

MY own experiences with Pownce were ambiguous. As with Twitter, I felt mildly repulsed by the banality and exhibitionism of microblogs. On the other hand, I enjoyed the privacy of the closed messaging system and the ease with which I could share things with nicely calibrated groups.

What struck me most was the site’s potential to be powerfully disruptive. Most file-sharing occurs on public sites, which can be monitored by media companies; if the users violate copyrights, the sites or the users themselves can be threatened into compliance or litigated out of existence (as happened with the original Napster). File-sharing on Pownce would be difficult to police.

If I were a media executive concerned about protecting my intellectual property, I would pounce on Pownce. It’s possibly no coincidence that the name Mr. Rose chose for his new venture suggests the Internet gamer’s jargon “pwn,” which means to take control of a system by exploiting some vulnerability.

In the Kitchen and on the Airwaves, Red Lobster Gets a Makeover

David Richard for The New York Times

In North Olmsted, Ohio, Red Lobster has rolled out new décor, part of an effort to broaden the chain’s appeal.

THE dripping lobster claws and bouncing morsels of fried shrimp are gone, replaced by plates of steaming fish, rice and vegetables.

David Richard for The New York Times

The restaurant’s new menus put greater emphasis on freshness.

The kitschy fish-shaped tables will gradually be replaced by more natural-looking décor featuring stone and wood. Hamburgers will disappear from the menu, and oldies music will be replaced with a more contemporary mix.

The changes are part of the biggest makeover that the Red Lobster restaurant chain has undertaken in its almost 40 years. Acknowledging that its restaurants are perceived by some people as frumpy and downscale, Red Lobster has embarked on broad changes that are intended to woo wealthier diners — the kind who are less likely to cut back on eating out as gasoline prices rise and home equity falls.

So far the most visible part of the effort is a national television campaign that features healthier-looking fare and a message that emphasizes freshness rather than low prices. Two new spots have dominated prime time this month, carrying the new tagline, “Come see what’s fresh today,” which replaces the longtime slogan, “For the seafood lover in you.”

Kim Lopdrup, president of Red Lobster, says that the marketing initiative is part of a three-stage effort to revamp the brand. The first phase involved improving operations so that customers got what they ordered and did not have to wait too long. The second phase is aimed at changing the public image and perception. The third part will be dedicated to increasing sales at existing restaurants and perhaps adding locations.

“Our vision is to be where America goes for seafood,” Mr. Lopdrup said in a telephone interview. “We are working to become the Toyota of casual dining. They have high quality and among the lowest cost structures, and have been able to offer superior value.”

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Executives at Red Lobster, part of the Darden Restaurants chain (which also includes Olive Garden and other brands), say they are not turning their back on their traditional patrons, whom they refer to as “heartland” customers who are typified by “soccer moms.” Those customers, the executives say, will welcome the culinary and design makeover. The executives said there would be little or no price increase.

A new team of executive chefs will not only reformulate the recipes but also maintain blogs on the company’s Web site about the proper preparation of fresh fish. The restaurants’ new interior design — which has already had its debut in North Olmsted, Ohio, and Inglewood, Calif., and will open in Dallas on Monday — is meant to look sleeker and less cluttered.

The more sophisticated ambience, which is meant to evoke the Maine coast, is reflected in the television commercials. The “Fresh Fish” spot — with the steaming plate of fish — closes with the image of a lighthouse and the squawk of a sea gull. It is appearing on all the main broadcast and cable networks, including TBS, TNT, USA, Lifetime, Food Network, HGTV, Spike and ESPN.

A second commercial promotes what Red Lobster calls the “American Seafood Adventure,” a menu with regional dishes like New England lobster and crab bake and a maple-glazed salmon dish inspired by the Pacific Northwest.

Salli Setta, executive vice president for marketing, said that Red Lobster’s studies have found that seafood is considered the most “crave-able” food among people who dine out.

“Freshness is the single biggest criteria consumers use to judge a seafood restaurant,” she said. And when Red Lobster asked people about their views of the brand, they said they didn’t think the fish was as fresh as it could be.

“That’s a dated perception, given the amount of innovations we’ve made,” Ms. Setta said. “So we stepped back and said, ‘We need to communicate so many points about freshness, culinary ability and quality.’ ”

Asked to define what Red Lobster means by fresh, Ms. Setta responded, “It’s as fresh as anything you’d find in a top-tier seafood restaurant.” The chain delivers fish to its restaurants six days a week.

The new spots are by Red Lobster’s creative agency, the Richards Group of Dallas, which also handles planning for the brand. Zenith Media of New York handles the company’s media buying.

“Freshness is a very difficult concept to convey through electronic media,” said Chuck Schiller, group creative director at the Richards Group. In making the commercials, he said, “every take gets a fresh plate.”

Although the rising steam seen on screen is real, Mr. Schiller revealed one of the secrets of the trade: It is not all coming from the food. Food cinematographers sometimes use a steam iron to improve the effect. “These ads are more invitational, about the culinary expertise that’s the cue to freshness,” he said. “Great seafood merely needs to invite you, not sell you.”

Red Lobster’s annual ad spending is $95 million. The company would not say how much it was spending on its overhaul.

Given its desire to drive customers to its restaurants every night of the week, Red Lobster allocates almost its entire ad budget to television. That is unusual, given the vogue for marketers to shift their budgets away from traditional media toward online outlets.

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Despite some softness in the $70 billion casual dining industry during the first half of the year, Red Lobster’s same-restaurant sales for June were up nearly 7 percent compared with June 2006. Mr. Lopdrup said that summer grilling promotions were a factor.

Malcolm M. Knapp, a food industry consultant who has advised Red Lobster, said promotions like “Shrimpfest,” which has traditionally run in April and May, have helped Red Lobster during certain months but have also led to unevenness in quarterly sales figures. He said that the company’s effort to attract wealthier diners is a good move, given that households with an annual income of more than $70,000 account for half of all food eaten away from home.

“There is no question in my mind that it’s an overdue strategy,” Mr. Knapp said. “They felt they had to get certain things aligned before the big push. It’s absolutely the right strategy.”

Joe Buckley, a restaurant analyst with Bear Stearns, said that Red Lobster has a patchwork of restaurants with “a broad spectrum of looks and feels,” reflecting previous brand-image campaigns. “It’s a brand that’s been around a long time, and the consumer has an established view on what Red Lobster is. To broaden it will take some time,” he said.

Zagat, the restaurant guide publisher, released its first casual dining guide in April, and Red Lobster received “good to very good” scores. But customers said it was “dowdy” and had long lines.

One of Red Lobster’s satisfied customers also illustrates the chain’s biggest challenge. “My wife swears by their fish,” Mr. Knapp said. “She just can’t get her friends to try it.”