Sony is not making it any secret that it is going into video downloading business just like its competitors Microsoft and Apple. According to Howard Stringer, Chairman and CEO of Sony, Sony will venture into this business with chosen partners. Sony will not go into it alone.

Sony is testing the service that will sell videos, music and other digital content via its Internet-connected PlayStation 3 machines. Hence, the network is dubbed PlayStation Network.

Stringers suggests that he will let any studios, music labels and gadget makers to piggyback on Sony PlayStation system as long as they support Sony’s digital rights management (DRM) technology. This would open the possibilities of having as many choices of games, videos and songs for the consumers.

By allowing other companies to collaborate in selling their products via Sony’s PlayStation Network, Sony is squaring off its competitors like Apple and Microsoft who are into this business much earlier than Sony.

In the industry, mixed experiences are encountered by Sony’s competitors. According to market research Gartner, Microsoft with its Zune is running on software not available on other gadgets. Very much like Apple’s iPod. But, iPod is having much success due to its tight integration between hardware and software over the network.

Microsoft is beginning field test of Windows XP on a low cost laptop, so-called $100 laptop, or XO, in early 2008.

XO is a project pioneered by a non-profit group led by Nicholas Negroponte, the founder of Massachusetts Institute of Technology’s Media Lab. XO is the work of One Laptop Per Child project to boost access of technology to developing world by building low cost laptop for educational use only.

The first order came from Uruguay for 10,000 units and second order came from Peru for 40,000 units.

The XO laptop does not have hard drive and it uses a lightweight flash drive instead.

Microsoft has undertaken the project to run Windows on flash-based machine. Making Windows run on XO laptop is seen as a prerequisite for success for this projects. Many countries are holding back because the machine cannot run on Windows.

Porting Windows XP to run on XO is a challenge to re-write many drivers for the operating system that control functions like the laptop’s webcam and wireless connections. Besides these challenges, the engineers will have to make sure Windows run on a smaller amount of storage.

After launching OpenSocial to compete against Facebook in the social networking industry, Google launched another alliance to provide free software to run mobile phones like open-source, Linux-based operating system, a Web browser, and a host of applications, including maps, e-mail, and video sharing and viewing applications. This alliance is known as Open Handset Alliance.

The Open Handset Alliance has some of the biggest names in the industry like Intel, Qualcomm, Motorola, T-Mobile, Sprint Nextel and eBay as its members. The Open Handset Alliance will develop a new platform known as Android and not GPhone, which was widely expected.

As the name suggested, Open Handset Alliance will allow programmers to provide a toolkit for programmers to develop mobile phone applications for Android phones. These applications will be sold to users through online stores.

This effort to set up such consortium for mobile phones is not the first time for the industry. Microsoft has done it for its Windows OS for mobile phones. Nokia setup a consortium for its Symbian operating system. There are about 22 flavors of Linux operating systems for mobile phones in the market.

Microsoft has won the battle with Google to purchase a 1.6% stake in Facebook, a popular social networking site, for US$240 million. This deal underscores the rising importance of online advertising. This transaction also reflects the rising valuations for social networking sites like Facebook. MySpace was sold to News Corp for US$580 million in 2005.

This arrangement gave Microsoft the control over the placement of banner ads on Facebook outside of US. Presently, Mocrosoft had an agreement with Facebook to sell US banners ads till 2011.

Facebook has 49 million users and 60% of them are outside US. The number of registered users grows by 200,000 everyday.

Microsoft has unveiled a new software that can converge phone calls, e-mails and video conference together. Bill Gates sees this opportunity as a similar event when PC supplanted mainframe computers in the 1980s.

In the traditional phone industry, phones are sold by CISCO, Avaya Communications, Nortel Networks and NEC. Gates sees this as a similarity with the computer industry, “This has been its own world, untouched by the power of software.”

Microsoft is exploiting the dominant position of its Office suite to provide extensions to business productivity tools to perform most of the tasks of a traditional phone. Microsoft is getting its partners like SAP, Dell and Ericsson to develop their own compatible software and sell installation services for the new Microsoft products named Microsoft Office Communications Server and Office Communicator.

Microsoft will embed features such as directing calls, directory, connecting conference calls into the new software that will interact with its e-mail, word processing and mobile-phone applications.

Steve Ballmer, Chief Executive Officer of Microsoft, has announced in Paris that Microsoft will raise up to 25% of their revenue from advertising over the next 4 to 10 years.

With the slow growth of Microsoft core operating systems and desktop applications businesses and the threat from freewares and applications offered over the Internet by the likes of Google, Microsoft is exploring into new sources of revenue and growth.

Steve Ballmer predicts that “All marketing will be digital sometime in the next 10 years.”

Microsoft is going into this business venture seriously. In May, Microsoft has acquired an online marketing company aQuantive for US$6 billion. aQuantive will give Microsoft a online marketing base for selling ads, placing them and giving advertisers tools to measure performances. In the same month, Microsoft has also acquired two French companies - ScreenTonic, a mobile-phone advertising company and MotionBridge, a company specializes in mobile searches.

Microsoft has listened to the voice of consumers. Microsoft is going to extend the last selling date for Windows XP from 30 January 2008 to 30 June 2008. Microsoft operating system Windows XP has been in the market for the past 6 years and now, it has another 6 more months of life.

Microsoft is also extending the cut down version of Windows XP, the Windows XP Starter Edition until 30 June 2010.

The latest Windows operating system, Windows Vista, was launched in November 2006 and the demand has been slow. However, Microsoft announced that the sales of Windows Vista has reached 60 million licences in summer 2007. This is by far the fastest selling operating system in Microsoft history.

Microsoft is reportedly in talks to buy a stake in the social networking website, Facebook, in the range of US$10bn. This talk leads to a showdown between Microsoft and another giant, Google, who is reportedly keen to invest in Facebook.

Facebook has existing business relationship with Microsoft who is the exclusive provider of banners and sponsored links.

Facebook is expected to make a profit of US$30m this year. So, the valuation amount of US$10bn seems expensive.

 Facebook has 40 million users and its the 6th most used website in US.

Microsoft has issued four security to patch their security flaws. One of the fix is rated ‘critical’ but it applies to only Windows 2000 operating system. This patch was to prevent downloaded program from running malicious code on the computer.

The other which has a rating of ‘important’ was meant to address flaws in MSN Messenger and Windows Live Messenger. This patch was to fix a flaw in IM which allowed users to click on a link and make their computer vulnerable.

The other two patches were regular monthly security updates affect programs used by developers and administrators.

Yahoo Inc in a move to strengthen its service to web advertisers has acquired BlueLithium for US$300m. BlueLithium provides technology that matches adverts to users’ interests.

This purchase is one fo the strategic moves spearheaded by Yahoo new CEO, Jerry Yang, to match its rivals Microsoft and Google. Prior to this, Yahoo has acquired online advertising exchange Right Media for US$700m.

The top three web search providers has been strengthening their advertising funtions  by a series of acquisitions. Microsoft has acquired aQuantive for US$6bn and Google has acquired DoubleClick for US$3.1bn.

Let’s see how the online advertising is going to play out in 2008 with these acquistions.