Microsoft and Intel have been in such a lockstep for so long in their promotion of the Windows operating system powered by x86 microprocessors that they have earned the moniker Wintel.

But when does such co-operation reach inappropriate levels?

One among a series of internal Microsoft emails, unsealed by a federal judge in a case alleging PCs labelled “Vista Capable” could not fully run its latest operating system, suggests a line may have been crossed.

In the email, dated February 26 last year, John Kalkman, a general manager handling relations with PC makers, answered why PCs using Intel’s 915 graphics chipset were allowed in 2006 to have “Vista capable” logos, when they could not run advanced features such as Vista’s 3D “Aero” interface:

“In the end, we lowered the requirement [for Vista capability] to help Intel make their quarterly earnings so they could continue to sell motherboards with the 915 graphics embedded,” he wrote.

Another Microsoft employee, Mike Ybarra, says in a 2006 email that the decision to lower the graphics requirements for the “Vista capable” logo was a mistake:

“We are caving to Intel…we are really burning HP…we are allowing Intel to drive our consumer experience,” he wrote.

Intel did have a tough year in 2006, prior to Vista going on sale at the beginning of 2007, but a company spokesman has strongly denied that Mr Kalkman could have had any knowledge of its internal financial forecasts related to chipsets and motherboards.

In another email, first reported by the Seattle Post-Intelligencer, Steven Sinofsky, the head of Windows, writes:

“Intel has the biggest challenge. Their “945″ chipset which is the baseline Vista set “barely” works right now and is very broadly used. The “915″ chipset which is not Aero capable is in a huge number of laptops and was tagged as “Vista Capable” but not Vista Premium. I don’t know if this was a good call.”

Microsoft’s response to the content of the emails is that they “reflect part of an active discussion about how best to implement the Windows Vista Capable program.” The programme was introduced in April 2006 to maintain the sales momentum of Windows XP PCs while escalating the “buzz” for the forthcoming Vista.

The class-action lawsuit alleges consumers were misled by the programme into thinking they were buying PCs that could be upgraded to the new operating system and run all of Vista’s key features. The emails reveal that retailers themselves had qualms about Microsoft lowering the technical requirements for its logo.

Microsoft could perhaps have avoided any legal action if it had taken Wal-Mart’s advice, contained in this internal memo from a Microsoft employee:

“[Wal-Mart is] extremely disappointed in the fact that the standards were lowered and feel like customer confusion will ensue. They would like to see Microsoft reconsider the program and allow for the use of 2 different logos; one that is strictly a Windows Vista Home Basic Capable [the barebones version of Vista], and the other Windows Vista Capable.”

The dusty world of technical standards setting is full of excitement and intrigue again as 120 delegates from 37 countries convene in Geneva to discuss whether to accept Microsoft’s new Open Office XML software as an international open standard under the International Standards Organisation.

Standard-setting does not normally arouse much interest. It’s usually a group of five or six engineers in a small room voting on an incremental modification to a piece of code few people are even aware exists. But this time the stakes are high – especially for Microsoft, which could stand to lose out on a great deal of business if it does not get the ISO seal of approval.

Many governments, particularly in Europe, are starting to mandate their departments use open standard. Without ISO certification, Microsoft may find it harder to get its software on the procurement list.

Its hard to say exactly how much they might stand to lose. Some governments may not mind lack of ISO approval. Denmark, for example, said this week that its public sector purchasing would not be affected by the result. However, the Danish government may face a legal challenge over this. Certainly, it is fair to say lack of the ISO rubber stamp will make life harder.

Discussions in Geneva, have therefore been tense. Microsoft failed to get enough votes in the previous ballot September.

It has now had a week in Geneva to try to resolve 1100 issues raised about the OOXML standard. It needs to get around 5 countries that are part of the ISO voting process to change their minds to get the standard through. The final vote is at the end of March.

Its impossible to call the result. Ironically enough, this discussion on open standards is happening entirely behind closed doors. The delegates have been instructed not to reveal anything about the proceedings. If they take photographs of anyone in the meetings, they could be sued. This appears an attempt to prevent a reprise of the frantic scenes around the September vote, when both Microsoft and the ODF-camp, representing a rival open standard, hurled accusations of vote-rigging at each other.

Bits and pieces are trickling out on blogs, however, such as one from one of the Malaysian delegates. By the sounds of things, things are as tense as in September, with Microsoft representatives posted in Geneva hotel lobbies to schmooze delegates. Microsoft officially says they are there to provide technical assistance.

The other side has also brought its luminaries, with Vint Cerf, early internt pioneer and now Google employee, and Bob Sutor, IBM’s champion for the ODF format, in town to expound the virtues of open source software. Google has been unable to resist taking a swipe at Microsoft on its official blog.

Clearly a huge amount of energy is being expended on all of this. The battle may be taking place under the auspices of a rather bureaucratic standard setting body, but make no mistake – this is war.

Are wikis going out of fashion or just being subsumed as an accepted feature of collaborative websites?

Google makes no mention of wikis in its announcement about Google Sites – the fruits of its acquisition of JotSpot, the enterprise-wiki Web 2.0 start-up, in October 2006.

Instead, it describes Google Sites as a “team web site” where users can quickly gather a variety of information and projects in one place, including videos, calendars, presentations, attachments and text.

I tried the new service and found it fairly easy to put together a web site where others could be given rights to comment and add their own elements.

It was intuitive for someone like me who was already using Google Docs or had a personalised iGoogle page – the toolbars are simple and similar and there is the same ability to select widgets and drag them around the page being created.

There were a few rough edges and limitations – I’m still searching for how to delete a page I’d created, for example. Others have been very disappointed with its flaws.

Sites can be integrated with email, calendars, documents and spreadsheets, and in this sense, it is less of a wiki like Wikipedia and more of an online collaboration service that will compete with Microsoft Office and its SharePoint service.

That is why the strategy here is to talk about the range of Google applications, rather than focus on the wiki aspects. Microsoft makes a slicker Office software suite, but Google is challenging it with its cheaper or free browser-based alternatives.

At least Microsoft and Yahoo can agree on one thing. Noone wants the best brains to bolt (last week Bradley Horowitz, head of the company’s Advanced Development Division, left for Google, joining a brain drain that has been underway for some time - and yes, the A.D.D. acronym seems to have been a deliberate joke, to judge from Horowitz’s blog.)

This is what Jerry Yang had to say at the end of last week to Yahoo employees in an email that we’ve just got our hands on [note: the punctuation is all Jerry’s]:

i know the current environment can be unsettling. to ease your concerns, we’re putting in place a “change in control employee severance benefit plan” to ensure that all of you have financial protections in the event of a job loss if a change in control does take place. let me stress that this shouldn’t be construed as any indication that a change in control might or might not take place. it’s a way of protecting you and putting your minds at ease so you can all focus on creating value for yahoo!.

If you happen to be Microsoft this looks like a double-edged sword. If it stops top talent leaving, so well and good. But it also means that anyone you actually want to get rid of (and let’s face it, with more than $1bn in annual cost savings to be found there are bound to be a few) is going to cost. Will it keep employees focused on creating more value for Yahoo shareholders? Probably not - the best that investors can hope for now is a sweeter offer from Microsoft.

It’s hardly surprising that Legg Mason is the only major Yahoo shareholder to speak out on Microsoft’s takeover bid thus far – strongly hinting it would be happy to sell if Microsoft raised the price.

It is the only one of the top institutional shareholders in Yahoo without a major stake in Microsoft as well. It can therefore see a clear profit from the deal, while the rest have been buried in silence as they carry out frantic calculations on how much their Microsoft holdings may be hit by buying Yahoo.

Financial risk-management analysis group RiskMetrics has also been doing the maths. It says the 13 per cent drop in Microsoft shares since it made the bid public on February 1 “does not bode well for the long-term value creation potential of the proposed transaction.”

It cites a 2004 study showing that in three-quarters of the deals that get an immediate thumbs-down in the stock market, the company concerned is still underperforming the market index two years later.

RiskMetrics lists the cross-shareholdings, starting with Capital Research & Management’s 11.36 per cent stake in Yahoo worth $4.076bn and 5.98 per cent share of Microsoft worth $16.4bn.

Legg Mason is next with a 6.59 per cent stake in Yahoo, worth $2.364bn, but only a 0.02 per cent stake in Microsoft, worth $66m.

Vanguard, Barclays Capital and State Street all have substantial holdings in both.

“We can expect shareholders who own both companies to pressure Yahoo directors to extract a material sweetener from Microsoft…that isn’t seen to destroy the perceived benefits of the merger,” RiskMetrics predicts.

Yahoo paid $350m for Zimbra, the web email and collaboration software company, last September, but one wonders how much of that perceived value could be destroyed by Microsoft’s bid for the Sunnyvale company.

Zimbra today released version 5 of its collaboration suite. It adds synchronisation with Microsoft’s Outlook 2007, Blackberry email support, a version for mobile web browsers, instant messaging and an offline capability, among hundreds of enhancements.

Zimbra already resembled a browser-based version of Outlook with added bells and whistles. Hovering over Inbox names reveals contact information, mousing over an address in an email triggers a Yahoo map.

Yahoo plans to incorporate many of Zimbra’s features in an update of its Yahoo Mail service later this year, but Zimbra’s main focus has been on business, making it a direct competitor of Microsoft in the enterprise.

Its software is open source and it says it received passionate feedback from 13,500 open-source community members and customers on it latest version.

But one wonders what those passionate customers would do if Microsoft took over. Many will have chosen Zimbra precisely because they have rejected Microsoft solutions such as Outlook, Exchange and its “Live” services.

Microsoft could seek to replace Zimbra’s open-source software stack with its .Net framework, a move that would definitely turn off the faithful.

And while the latest version has plenty of appeal, the threat of a Microsoft acquisition must be giving many potential new Zimbra customers pause for thought.

The Yahoo subsidiary is just one of many services competing with Microsoft that face some kind of rationalisation in the event of its bid succeeding.

Palm Desert, California: Exactly one year ago at the DEMO 2007 technology conference, Adobe showcased Adobe AIR (then code-named ‘Apollo.’)

While many software developers have been focused in recent years on ways to move desktop applications onto the Web, Adobe Air makes it possible to move internet applications to the desktop.

Technically speaking, Adobe Air is a cross-operating system application runtime that enables web developers to use their existing web development skills in HTML, AJAX, Flash and Flex to build and deploy rich Internet applications for the desktop.

At Demo 2008 now underway in Desert Springs, California the first batch of applications based on Adobe Air are being unveiled.

They include:

Acesis which is using Adobe AIR and Adobe Flex to create point-of-care applications for its target market of small medical practices with up to 10 doctors. The company’s physician information system provides two interfaces – an AIR-based interface for physicians designed to replace pen and paper, and a browser-based interface for patients.

Fabrik’s next generation online service, Joggle, uses Adobe AIR to provide a single, aggregated view of a user’s personal content, no matter where it resides. Joggle finds and catalogues digital content whether it is stored locally or remotely on a web-based server and makes it easy for people to find, mange, access and share their photos, music, videos, and files.

2Win Solutions’ KonoLive is instant collaboration software that aims to make it easier to collaborate with colleagues and share knowledge. The service uses Adobe AIR and Flex to facilitate instant and uninterrupted collaboration across a wide range of systems.

Among the advantages, Fabrik’s CEO Mike Cordano claimed using Adobe Air had enabled the company to build a desktop application without forcing the company to hire a new team of desktop developers.

Bill Gates faced a fairly benign crowd at the Institute of Directors in  London on Wednesday morning where he made  his last UK speech  before his retirement.

But it was not without a few moments of controversy.

When the 1000-strong  audience was given a chance to question Mr Gates, one IT manager of a law firm accused Microsoft of being overly dominant in corporate software and complained of the arrogance of the company’s sales force. With other suppliers, he said, he could fire and re-engage them if their terms and conditions changed, but not so with Microsoft’s Office package.

Mr Gates was immediately on the defensive, saying there was plenty of competition in corporate software.

“I’d like to see the terms and conditions you have with IBM and we can immediately match them,” he said, sounding more like a keen-as-mustard sales rep than an executive less than six months away from slipping the corporate leash.

Oracle and many other companies also provided competition, he said. The problem was competition in corporate software just wasn’t covered as much in the media.

Mr Gates went on to stress how innovative the software sector was.

“People should wish that other commercial sectors were as competitive and innovative as the software space. Just think what food would cost and the advantages you would have experienced.”

The competition issue was clearly still a very sore point with him. Earlier, when questioned about his most stressful moments at Microsoft he had sighed “Trying not to be sued by your own government. Especially when it is unjust.”

Perhaps it is not surprising given the recent US decision to extend its close anti-trust scrutiny of Microsoft by another two years, and the new competition case opened in the EU earlier this month.

Mr Gates was visibly happier when talking about his future plans at his charitable foundation, tackling the world’s health problems and giving away most of his fortune. Then, the shoe will be on the other foot, as he gets to chivvy governments for not being generous enough and demand large sums of money from them.

For evidence of how seriously Microsoft is starting to take the market for virtualisation software, take a look at its acquisition today of Calista Technologies. This is a company that was launched as recently as 2006. It has raised only one round of venture capital (around $7m) and it has yet to ship any products.

Yet Calista got prominent billing today as Microsoft put some of the pieces in place for its attack on a market that represents both huge potential and a sizeable threat for its server and desktop businesses. No price for Calista was disclosed but when we spoke to Barry Eggers of Lightspeed Ventures, one of the company’s backers, he left no doubt that Microsoft is paying up in its efforts to catch up with VMWare (latest profile here):

We’re not in the business of selling good technologies early. Obviously it has to be a good deal for everybody all around.

Calista’s software is meant to make rich media work better on virtualised desktops - for instance, the graphics in Windows Vista could be made to work smoothly on a PC which does not run an instance of the software, but which is drawing it from a remote server.

Yet while Microsoft is racing to buy component technologies, it has yet to put the most important building block in pace. It still seems that a hypervisor for Windows - the key piece of software that lets multiple operating systems run on a single machine - will not be available in its server software until the second half of this year.

As happened with search technology, Microsoft has fallen well behind a competitor (in this case VMWare) that is moving fast to tighten its grip on a new market. Unlike search, though, Microsoft may be able to apply some of its most effective competitive weapons - "bundling" the software with its server products, using its control of desktop and server licensing - to make a dent.

You could forgive Kevin Harvey of Benchmark Capital if he sounded a little smug when I spoke to him earlier today about the eye-catching $1bn sale of MySQL. A longtime venture investor in open source companies, Harvey has had to put up with a few knocks along the way. As he put it:

When we first invested in Red Hat it was thought to be totally insane. When we funded MySQL it was only partly insane.

Benchmark’s purchase of a 26 per cent stake certainly looks pretty smart now. Harvey (whose earlier successes have included eBay) wouldn’t say how much he had invested, but MySQL took in around $39m in all.

It’s hard to shake off the lingering feeling, though, that open source as a pure-play strategy will never add up to much, and Sun’s purchase of MySQL seems to confirm this. Sure, it’s hugely disruptive to the software establishment, but it’s beginning to look like open source has more value when used as part of a traditional technology company’s armoury, rather than as a stand-alone business.

Sun hopes that owning MySQL will give it a chance to sell other (proprietary) software to users of the open source database. That is the same idea that prompted earlier open source acquisitions by Novell (of Linux distributor SuSe) and IBM (middleware company Gluecode.) Oracle didn’t even bother making an acquisition but simply declared that it would support Red Hat’s version of Linux, dealing a big blow to that company.

It seems only Red Hat really believes in trying to build a pure open source software "stack". At around $500m a year and growing at 30 per cent, Red Hat’s revenues are not to be sneezed at. But, tellingly, it is Sun, not Red Hat, that has bagged MySQL. Equally tellingly, MySQL’s investors discovered that the company was worth more as takeover-bait for Sun than as a stand alone business. "It was on the IPO track until Sun convinced us to take this track," says Harvey.

Maybe Sun has overpaid. But if Schwartz is right and MySQL is worth more dead than alive (as it were), then it suggests that the dominant software models will be hyrbid ones, not pure open source.