Updated on Oct. 13 with details of acquisition closing.

Microsoft completed its $68.7 billion acquisition of Activision Blizzard on Friday morning, nearly 21 months after the deal was announced, finalizing its biggest acquisition ever and the largest in the history of video games.

The deal adds blockbuster franchises including Call of Duty, World of Warcraft, and Candy Crush Saga to Microsoft’s portfolio. Activision Blizzard, headquartered in Santa Monica, Calif., employed 13,000 people as of the end of 2022.

“We are eager to learn from their creativity, exchange insights and best practices, and empower our new colleagues to bring their visions to the widest possible audience,” said Phil Spencer, the CEO of Microsoft Gaming, in a memo to employees, published by the company online.

Spencer said Activision Blizzard CEO Bobby Kotick will remain in the role until the end of the year to ensure a smooth transition between the companies.

The deal, originally announced in January 2022, cleared its final regulatory hurdle when the UK’s Competition and Markets Authority (CMA) approved the acquisition late Thursday. UK antitrust regulators previously sought to block the deal. Microsoft responded by agreeing to sell Activision Blizzard’s cloud gaming rights to Ubisoft.

The companies originally set a deadline for July 18 to get a deal done, but extended it to Oct. 18 to help address regulatory concerns in the UK.

“We’re grateful for the CMA’s thorough review and decision today,” Microsoft President Brad Smith said in a statement. “We have now crossed the final regulatory hurdle to close this acquisition, which we believe will benefit players and the gaming industry worldwide.”

Microsoft faced opposition to the deal, led by PlayStation maker Sony, but a federal judge in July sided with the Redmond company following a challenge from the Federal Trade Commission to block the merger. An appeals court then denied a FTC motion to temporarily stop the deal. The FTC is still appealing the decision.

An IRS audit examining nearly a decade of Microsoft financial reporting has found that the company owes $28.9 billion in tax for 2004 to 2013, plus penalties and interest, Microsoft said Tuesday afternoon.

The determination is not final, and the company says it plans to appeal. The appeals process is expected to take several years, and the IRS finding is not expected to reflect Microsoft’s upcoming quarterly report.

“We believe we have always followed the IRS’ rules and paid the taxes we owe in the U.S. and around the world,” wrote Daniel Goff, Microsoft’s corporate vice president for worldwide tax and customs, in a post disclosing the preliminary IRS finding. “Microsoft historically has been one of the top U.S. corporate income taxpayers. Since 2004, we have paid over $67 billion in taxes to the U.S.”

Goff noted in the post that taxes paid by Microsoft under the Tax Cuts and Jobs Act could reduced the additional tax owed by the company by up to $10 billion. 

To put the figures in context, Microsoft’s total net income from fiscal year 2004 to fiscal year 2013 was $198.7 billion, according to its historical financial results.

As described in the post, the disagreement involves the mechanism known as transfer pricing, related to the way Microsoft allocated profits among different companies and jurisdictions.

Seattle-based e-commerce giant Amazon faced a similar tax dispute but defeated the IRS in court in 2017.

You may have read the juicy sound bites from Satya Nadella in Google’s antitrust trial this week, as the Microsoft CEO made the case that the search giant unfairly leverages its market power to stifle competition (a charge that Google vehemently disputes). But there was a lot more to digest from his comments.

On this episode of the GeekWire Podcast, we reenact portions of his testimony, explain the positions staked out by Microsoft and Google in the case, and discuss the irony of Microsoft siding with the DOJ two decades after its own antitrust battle.

Here are some additional highlights from his testimony:

Search defaults: “This entire notion that users have choice and they go from one website to one website or one search into one search … it’s [completely] bogus. There’s defaults. The only thing that [matters] in terms of changing search behavior. And at this point, in fact, it’s even more true. … You get up in the morning, you brush your teeth and you search on Google. And so therefore, with that such level of habit forming, the only way to change is by changing defaults.”

Google’s influence over distribution: “The one advantage Google has in defending their defaults … I think of as a game of carrots and sticks. We all try to defend by carrots, which is pay for OEM default distribution. Google has carrots and it has massive sticks. … ‘We’ll remove Google Play if you don’t have us as the primary browser.’ And without Google Play, an Android phone is a brick. And so that is the type of stuff that is impossible to overcome. No OEM is going to do that.”

Windows and Microsoft’s antitrust case: “Google exists because of two things. One is because of our consent decree, where we had to put a lot of limits on what we could distribute and not distribute by default. And, second, because [of] the fact that you could distribute anything you wanted on Windows, and it’s still the case, right, it’s not just Google. … The largest marketplace on Windows happens to be not from Microsoft, it’s Steam. And so it’s an open platform on which anybody can distribute anything.”

The future of AI: “I worry a lot, even in spite of my enthusiasm, that there is a new angle with AI. I worry a lot that, in fact, this vicious cycle that I’m trapped in can even become even more vicious because the defaults get reinforced. The publisher content can get locked in. And so if there are exclusive content deals which are happening right as we speak … all that content today, at least that’s crawlable by everyone and usable by large model training, could become exclusive.”

Google’s response: In court this week, lawyers for Google countered Microsoft’s argument by pointing to Google’s own success in getting users to switch defaults on Windows to Chrome and Google search as defaults. Microsoft’s problem isn’t Google, they argue, it’s the comparatively poor quality of its Bing search results.

Nadella said in response that Microsoft needs more data to be able to produce better results, which would come from more market share, which Microsoft contends Google is unfairly keeping it from achieving.

Apple and Bing: Microsoft’s negotiations with Apple to make Bing the default on iOS were the subject of much back-and-forth during Nadella’s testimony, including this entertaining exchange with John Schmidtlein, a lawyer for Google.

Nadella: So the point I was making to Apple — which, by the way, that is the only reason why they kept engaging, is with the Apple brand, it was not going to be called Bing. We had all kinds of strategic flexibility. It was going to be just like Apple Maps, that was the idea. This was not about trying to put Bing … front and center.

Schmidtlein: Oh, I see, you were going to hide the Bing brand?

Nadella: Yeah, of course. We were going to take whatever Apple felt was their chance as a success with the technology.

Schmidtlein: So you were going to try to hide the Bing brand behind the Apple brand and fool all the Google users into staying with Bing instead of switching back to Google, which is what they did on Windows in droves, right?

Nadella: That is not what I said.

Related links and coverage:

• Testifying in Google trial, Microsoft CEO Satya Nadella warns AI could extend search giant’s lead
• The Verge: Satya Nadella tells a court that Bing is worse than Google — and Apple could fix it
• New York Times: Microsoft C.E.O. Testifies That Google’s Power in Search Is Ubiquitous

In the final segment of the show: Generative AI and the “Ghost of Lesser Seattle.” We revisit our attempt to channel the late, great Seattle newspaper columnist Emmett Watson with the help of ChatGPT, and assess the reaction.

• Emmett Watson meets ChatGPT: What if the champion of ‘Lesser Seattle’ could see us now?
• Marketplace: There’s a corner of the internet where YouTubers read strangers’ obituaries. Why?

Listen above, or subscribe to GeekWire in Apple Podcasts, Google Podcasts, Spotify or wherever you listen.

With GeekWire co-founders Todd Bishop and John Cook.

“All partnerships are tactical. There is no such thing as a strategic partnership.”

That’s one of the lessons that business and technology leader Bob Muglia tells the companies he works with these days. It’s one of the insights that has stuck with me since my recent interview with Muglia during an event for his book, The Datapreneurs, hosted by Island Books on Mercer Island in the Seattle area.

Muglia, the former Snowflake CEO and past Microsoft executive, said this in response to my question about the recently expanded partnership between Microsoft and Oracle. I asked if he would have imagined, when running Microsoft’s server and database businesses, that the rivals would someday be partners.

He started by recalling a conversation with Marc Benioff in the pre-Salesforce days.

“I still have this fairly vivid memory in my head. … I think it was probably a COMDEX party, way back in Vegas in the late 1980s. I was talking to Marc Benioff, who was at Oracle at the time. He said to me, ‘Oracle and Microsoft could be the best partners. There’s only one product standing in the way.’ And that product definitely stood in the way, and continues to be there … SQL Server.”

But more recently, Muglia said, the decision by Oracle and Microsoft to work together reflects this larger principle that the most effective partnerships are tactical, not strategic.

“The best example of this is Microsoft and Dell,” he said. “They’ve had a 35-year tactical relationship. Every meeting with Dell is always a tactical conversation.”

As in, “What can you do for me, and what can I do for you?” I clarified.

“Exactly,” he said. “This quarter! ‘I need to move this many server units this quarter,’ and next quarter, it won’t be about volume. It’ll be about margin next quarter. Literally, they would change constantly in what they wanted.”

He continued, “But in a way, it was by far the best. Because you would sit down with HP, as an example, and you would just talk about the strategic things you could do together, but nothing ever really happened. … And sometimes things didn’t happen with Dell, too, but at least you were focusing on what you were trying to accomplish.”

For the same reason, he said, a pragmatic, tactical partnership between Microsoft and Oracle makes sense now, despite their ongoing competition in the database market. In the end, customers want clouds to connect.

The latest move by Microsoft and Oracle expands on previous work by the companies to connect their cloud infrastructures for better ease of use by their joint customers. The newly announced Oracle Database@Azure service will let customers run Oracle’s database services on Oracle Cloud Infrastructure in Microsoft’s Azure data centers.

Among other benefits, the companies say the service will give Oracle customers the ability to access Microsoft’s Azure OpenAI service, which leverages the tech giant’s partnership with the ChatGPT maker.

At the same time, Microsoft and Oracle are effectively teaming up against their common rivals, the biggest of them being Amazon Web Services and Google Cloud. 

Back to the conversation with Muglia, I mentioned my surprise that Oracle’s Larry Ellison only recently visited Redmond for the first time, to announce the expanded partnership publicly alongside Microsoft CEO Satya Nadella.

“I thought he was there when he looked through our trash,” Muglia joked, laughing along with other Microsoft veterans at the event about an incident long ago in which Oracle funded a group that tried to buy trash (initially unbeknownst to Ellison, he said at the time) from a pro-Microsoft group to dig up dirt on its rival. (Clearly, the companies have put this behind them at this point.)

Although the larger topic of Oracle and Microsoft was especially timely, given the recent news and Muglia’s history, it was a small part of my conversation with him. We talked extensively about insights from his book, including the past and future of databases, and the technical foundations for the new age of artificial intelligence.

Read more on those topics in The Datapreneurs, written by Muglia with Steve Hamm, available now, and also listen to my prior GeekWire Podcast discussion with Muglia for key takeaways from the book.

Thanks to Laurie Raisys and Victor Raisys of Island Books for hosting the event.

Microsoft’s partnership with OpenAI has looked at times like a glimmer of hope for its Bing search engine in its longstanding battle with Google, but Microsoft CEO Satya Nadella painted a different picture during the search giant’s antitrust trial.

Nadella testified Monday that he worries Google will use its profits from search to strike exclusive deals with publishers for training its AI models, further boosting its market share to the detriment of Microsoft and other rivals, according to The Verge and Bloomberg News, reporting from inside the courtroom in Washington, D.C.

• “I worry that this vicious cycle I’m trapped in … is only going to get more vicious,” Nadella testified, according to The Verge.
• “You get up in the morning, you brush your teeth and you search on Google,” he said at another point, Bloomberg reports.

The introduction of Bing AI Chat has had little to no impact on Bing’s market share, with Google above 90% and Bing at 3% as of September, according to StatCounter. Microsoft has disputed these numbers in the past, but not to the extent that it would make a material difference in Google’s market dominance.

Testifying on Monday, Nadella dismissed as “bogus” Google’s argument that it’s easy for users to change their search defaults, according to a Reuters report.

According to earlier testimony in the case, Microsoft was prepared to lose money in a deal with Apple to make Bing the default on iPhone and other devices. Nadella testified that he believes Apple was using its negotiations with Microsoft to “bid up the price” for the deal that it signed with Google, Bloomberg reports.

REDMOND, Wash. — Mike Sievert knew exactly how to break the ice with this crowd.

“It’s really great for me to be able to finally come and collect your thanks and adulation for Windows Vista,” the T-Mobile CEO and former Windows marketing executive said with a grin, getting a big laugh about one of the company’s legendary duds from hundreds of former Microsoft employees and executives Thursday.

The scene inside the Microsoft conference center felt like a reunion, as more than 600 people from 17 countries gathered for the Microsoft Alumni Network‘s Connect 2023 global conference, which wraps up Friday morning. Microsoft will turn 50 in less than two years, and attendees spanned many of the company’s decades.

Attendees picked up complimentary shirts bearing the company’s original logo, made strategic business connections in the “Deal Room,” and caught up cheerfully with former colleagues in the hallways of Building 33.

While the mood was light, the subjects were serious, with sessions designed to help alumni navigate the worlds of entrepreneurship, philanthropy, and the coming wave of artificial intelligence in their work and personal lives.

An important piece of business at the event was the introduction of a new executive director for the 48,000-person Microsoft Alumni Network, Manuela Papadopol, who succeeds Ali Spain after her seven years in the role.

Microsoft President Brad Smith, in a recorded video address at the outset of the conference, described the rise of AI as a moment equal or greater to the platforms and technologies that many people in the room pioneered — including the personal computer, the graphical user interface, the internet, and mobile computing.

“Here we are, again, at an extraordinarily important inflection point for Microsoft, for the world, for the tech sector, and most importantly for everybody who uses our products,” Smith said, adding that he believes the company is in “an extraordinarily good position to not just ride but lead so much of this next wave of innovation.”

The serious nature of the crowd was underscored during a Q&A session with Charlie Bell, the Microsoft executive vice president in charge of security technologies, who joined the company after a long tenure with Amazon Web Services. Some of the Microsoft alumni in the crowd pressed Bell to explain and defend his optimism about general artificial intelligence and what one described as “asymmetric warfare” with online attackers.

Speaking from the stage, Bell disagreed with the premise of that question, saying he believes the security principle of defense in depth will ultimately prevail.

“I don’t buy the idea that [attackers] just have to be right once,” he said. “I think we’re making it so they have to be right a lot.”

He predicted it will get “to the point where they have to be right so many times in series, they’re just never going to get there. Probabilistically, it’s too hard.”

“Datapreneurs” author Bob Muglia, the former Snowflake CEO who ran the Server & Tools division and other businesses during a long Microsoft tenure, put the current state of AI in the context of Gartner’s famed “hype cycle” for emerging technologies. He said AI is about to enter the dreaded “trough of disillusionment,” and may be in it now.

“The hype has been the fastest I can remember,” he said. “But I think the trough will be one of the shortest I’ve ever seen.” A key barometer to watch, he said, will be the adoption of Microsoft 365 Copilot starting in early November.

Another session focused on the metaverse, with Magic Leap CTO Julie Larson-Green, a former Microsoft Windows and Office engineering executive.

Asked about the near-term possibilities for monetizing augmented reality in business and enterprise markets, Larson-Green cited training and 3D collaboration, with healthcare further out.

Artificial intelligence will play a major role in the evolution of augmented reality, Larson-Green said. “It’s an AI device,” she said. “Augmented reality is the medium, but it is really an AI processing device.”

Four Microsoft alumni who are part of different sports ownership groups shared insights on the similarities and differences between professional sports and the technology business: Terry Myerson (Seattle Sounders FC), Dawn Trudeau (Seattle Storm), Rahul Sood (Jaffna Stallions), and Jeff Raikes (Seattle Mariners).

Some of the panelists said they appreciated the “local” nature of the sports teams, and the ability to impact the immediate community around them, compared to the global nature of their work at Microsoft.

“When I think about the Windows 10 launch, and the media statistics we talked about …. this is not that,” said Myerson, the former Windows chief, who now leads health data company Truveta. More important for the Sounders, he said, is how many kids are wearing jerseys to school on game days, for example.

Toward the end of Sievert’s session, which was moderated by Trudeau, an attendee gave him kudos for referencing the poorly received Windows Vista operating system, and asked him what lessons he drew from the experience that he has carried forward into his post-Microsoft leadership roles.

“I’m not overly critical of the company and our processes back then, but I think Windows Vista just wasn’t ready, and it wasn’t deeply connected with what customers wanted,” Sievert said, referring to the importance of maintaining a tight connection between marketing, product management, and engineering.

Eventually, he said, Microsoft got there. “I wanted to name Windows 7, Windows Vista Good Edition,” Sievert joked. “I thought that was a better name.”

• The talks took place around 2020 between Microsoft executives and Eddy Cue, head of Apple services. Citing people with knowledge of the matter, Bloomberg said the exploratory talks never reached an advanced stage.
• Apple and Google first reached a deal on search in 2002. The deal expanded over time to new devices, including the iPhone, and Google now pays Apple an estimated $15 billion a year to be the default search engine on the more than 1 billion iPhones and other Apple devices in use globally, Insider reported this year.
• Microsoft launched Bing in 2009 as a rival to Google, but today it accounts for less than 10% of searches.
• In an antitrust trial against Google that opened this week, the Justice Department argues that the Apple deal is evidence that Google unfairly dominates the search market. Cue defended the deal in testimony, saying there is no other search engine worthy of replacing Google.
• Previously: Microsoft Bing will become ChatGPT’s default search engine in latest OpenAI collaboration

Kate Johnson is based in Denver in her role as Lumen Technologies CEO and president, but she has been spending a lot of time in the Seattle area recently, and not just because one of the local stadiums bears the company’s name.

Johnson sees the Seattle region as an ideal test bed and proving ground for Lumen’s offerings, including consumer and business broadband, voice, and data services.

Yes, it helps that she has a home here, as a holdover from her prior role as Microsoft’s U.S. president. But beyond that, she cites the region’s importance as a major U.S. tech hub, home to the biggest cloud platforms, with a strong tech community, and tech-savvy customers interested in fiber internet service.

“The market is growing, and we are well-positioned to serve it,” she said. “I’ve been spending time making sure we’re making the appropriate investments, that I’m understanding our opportunities, and that we’re capitalizing on them.”

It’s part of a broader effort by Johnson and her team to reinvent the publicly traded telecom company, which was formed by the combination of Level 3 Communications and CenturyLink in 2017 and rebranded as Lumen in 2020. Johnson was named Lumen CEO a year ago and took over in November 2022.

Educated as an engineer, with experience at companies including Oracle, Red Hat, and Deloitte, Johnson is one of 53 female CEOs of Fortune 500 companies. She is charged with sparking new growth at a company that reported a net loss of $1.5 billion last year, after special charges, on revenue of $17.5 billion, down 11%.

In a recent interview at Seattle’s Lumen Field, she discussed topics including:

The evolution of the telecommunications industry and the need to reinvent the classic telecom business model amid the rapid increase in data and the rise of generative artificial intelligence.

“Companies are looking at, how the heck do I move these huge swaths of data from place to place, in a dynamic fashion in between networks. And here we are in telecom being uniquely positioned to serve in that way. But our business models haven’t really evolved to support it,” Johnson said.

“Right now, it’s our network, and you have to meet us somewhere in the middle in order to consume it. Our view of the future is really about cloudifying telco. And I sense that we’re going to see the same change patterns that happened as AWS, Microsoft, Google, and other companies really built up the cloud business in the world today.”

Her ongoing efforts to change Lumen’s culture, including an unusual series of internal meetings that have been ultimately constructive but initially unsettling for some longtime employees and executives.

“We have a pact at the door: we don’t record the meetings, and I won’t use names, because there’s still places where people fear bringing problems to the table. Less so since I started, but it’s still there. But then when they see me listen, and then we actually fix a problem, it gets kind of exciting. And that’s happened a bunch.”

Lessons from Microsoft’s transformation, and her recent experiences using Microsoft 365 Copilot as part of her work. Lumen is one of the companies piloting Microsoft’s corporate AI tools prior to their broader release.

Johnson and her team are using the technology to record and summarize meetings, send follow-up reminders, create initial drafts of content, and assess how inclusive meetings are, among other functions.

“It does not remove the need for our people to be intimately involved with detail, to understand what the key takeaways are,” she said. “Part of that’s training the models, and the other part is, our people are just learning now how to move up the value chain, what work they do and they don’t do.”

Listen above, or subscribe to GeekWire in Apple Podcasts, Google Podcasts, Spotify or wherever you listen.

Audio editing by Curt Milton.

It was a big week for Microsoft, with the unveiling of the company’s latest Windows and AI features and new Surface devices at a special event in New York City.

This was preceded, by only a few days, by the surprise resignation of Panos Panay, the chief product officer in charge of the company’s Windows and Devices division. Shortly after that announcement, Bloomberg News reported that Panay was set to join Amazon as the new leader of its Devices & Services division, a surprise twist that has yet to be confirmed as of publication time.

To help sort it all out, we’re excited to be joined on this episode of the GeekWire Podcast by someone who has covered the company for many years, journalist Mary Jo Foley, editor in chief at DirectionsOnMicrosoft.com.

One of the big stories on her radar: Microsoft 365 Copilot, the all-in-one business AI toolset that’s now set for release on Nov. 1, a little over a month from now.

Is that too early? Yes, Mary Jo says, theorizing that Microsoft is hustling the service to general availability in part to keep up with Google, which this week released new integrations between its Bard chatbot and the search giant’s apps and services.

For Microsoft business customers, one key question is whether the extra $30/user per month will be worth it, on top of the cost of their existing licensing plans.

Listen above, or subscribe to GeekWire in Apple Podcasts, Google Podcasts, Spotify or wherever you listen.

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• Directions on Microsoft Blog: Microsoft to start selling Microsoft 365 Copilot on November 1
• GeekWire: ‘It’s kind of like the ’90s are back’: Microsoft previews unified AI ‘Copilot’ initiative
• Longtime Microsoft hardware leader Panos Panay is leaving the company after 19 years
• Report: Departing Microsoft exec Panos Panay set to lead Amazon’s Alexa and Echo business
• Should Amazon be ‘pumped’ to land Panos Panay? A closer look at longtime Microsoft devices leader

Chancellor Jeremy Hunt, the United Kingdom’s chief financial minister, visited Seattle on Friday as part of a West Coast tour to promote the expansion of the UK’s tech sector, and lay the groundwork for an upcoming global artificial intelligence safety summit organized by the British government.

He spoke with GeekWire following meetings in Seattle with tech and business leaders including Microsoft CEO Satya Nadella, Amazon CEO Andy Jassy, Starbucks CEO Laxman Narasimhan, and Alphabet/Google CFO Ruth Porat.

Continue reading for an edited transcript of the interview.

GeekWire: How would you describe the substance of your meetings with Microsoft, Google, and Amazon today, and what was accomplished?

Chancellor Hunt: Well, they were very productive meetings, on a number of levels. The reason I’m here is because, in the last decade, the UK has become Europe’s Silicon Valley. We’ve become only the third economy in the world to have a trillion-dollar tech sector. And so there’s lots we want to talk about.

But the main areas of discussion are really around where we go next with AI, and whether it’s possible to get a global consensus as to the guardrails we put in place to really allow AI to take off, as we all want it to do.

There was a lot of common ground. The UK has got a reputation for having very nimble regulators who are good at nurturing innovation, and not stifling it. And it’s easier for us to change the regulatory environment than it is either in the EU or the US. It was really a discussion on all those levels as to what we need to do next.

Can you go into more detail about what, for example, Satya Nadella and Andy Jassy wanted to talk about?

At least half the time was spent talking about AI. We’ve got an AI safety summit coming up later this year (Nov. 1). We’re setting up an AI Safety Institute. We’re very hopeful that they will be members of that institute to help shape the regulatory structures that are going to work best for the development of global AI. And we want that to be the start of a global consensus as to the best way we harness this new technology to be a force for good.

Did you receive any indication from Microsoft, Amazon, or Google about their preferences for the involvement of China in the upcoming summit on AI?

There was broad agreement that, on something that is going to change humanity as dramatically as AI, you need to engage with China. That doesn’t mean you’re going to agree with them. It doesn’t mean that we’re going to necessarily have the same values and necessarily talk as openly as you would with fellow democracies.

But it is plainly sensible to see if there are areas of agreement, because China has a huge tech sector and, love it or loathe it, is going to have a huge impact on the development of the Internet going forward. My own view is, any engagement with China needs to be done with your eyes open. You need to understand that the system in China is not one whose values we share. And so that needs to be part of your thinking, but that doesn’t mean that you don’t talk to them.

When you consider the potential negative implications of AI for jobs, but also the potential positive impact on productivity and efficiency, do you see it as a net positive or a negative for the economy in the UK and globally?

I see it as off-the-scale positive. I really do. If you look at the lack of self-confidence and the social unrest, and sometimes the despair that you’ve seen in Western democracies in the last couple of decades, really since the financial crisis, a lot of it is because many have fallen into a low-growth trap. The average growth in the G7 at the moment is 1%. Whereas 15 years ago was 2% to 3%. And in the end, if the political classes are going to deliver what ordinary families want, we’ve got to find a way to get growth up, and MIT says that AI could triple our productivity.

One of the things that Satya Nadella said to me was that AI could bring back the joy into critical jobs, like being a police officer, or a teacher, or a doctor, by removing a lot of the drudgery and the difficult, annoying admin tasks that make those roles extremely frustrating. So I think from that point of view, I’m very optimistic.

But we have to harness this change with our eyes open. We welcomed social media as a fantastic way of making it easier for people to make connections, keep in touch with their friends and family. We now understand that the picture is more mixed than that. And there are mental health implications when these new tools are used in the wrong way.

So I think with AI, we need to be full of positivity and optimism about the potential but also be sensible about the risks and make sure they’re carefully managed.

It struck me that the UK Competition and Markets Authority’s announcement this morning giving preliminary approval to the Microsoft and Activision deal was great timing for you. Did that come up at all in your conversations with Activision Blizzard and Microsoft today?

Only to say that, we’ve always been very clear with Microsoft and Activision that the system we have in the UK — which is, by the way, what they want — is that regulators are wholly independent. And that decision by the CMA today had nothing to do with me, nor did the timing have anything to do with me, either. So that’s the system we have.

And that’s important, because what international investors love about the UK is that there’s a level playing field with domestic companies, and that regulators aren’t being [influenced] by politicians. They operate at arm’s length from us. But that doesn’t mean to say that politicians don’t have very important influence on what those rules are. And really that was why I had very useful discussions with Alphabet, Amazon, and Microsoft about how we create regulations that are nimble, and don’t stifle this new emerging technology, but foster its growth.

What would be your elevator pitch, to use a startup phrase, to tech companies about expanding in the UK?

I’d say this: we’ve just become the third trillion-dollar tech economy in the world because we have two very unique things:

• Outside the United States, we have the biggest financial services sector, so startups can get the funding they need to start up and scale up.
• And outside the United States, we have the most respected higher education sector with four of the world’s top 20 universities.

And what that means is that in the UK, you have an unrivaled amount of talent. So if you’re looking to hire people for your AI startup, your life sciences startup, your fintech startup, you can find them in the UK. We have a visa that means that anyone from the global top 50 universities can come to the UK without a job. And that’s deliberate because we’re trying to attract people from all over the world, the brightest and best, to the UK. …

Demis Hassabis is in Seattle today, where I am. When he sold DeepMind to Google, it was on the condition that he could keep DeepMind in London. And his argument was, I can get engineers of the same quality in the UK as I can get in the US, but they’re a lot cheaper, and it’s easier to find them.

We’ve got double the AI startups in the UK of any other European country. We’re currently attracting double the investment into technology of any other European countries. So it’s a great thing. And we’re very proud.

Are you using AI in your own work and life? And if so, how?

Well, it’s really interesting question, and well-done for putting me on the spot on that. The truth is we’re not using it nearly as much as I would like to be. I set up a project in which I’ve asked every UK government department to tell me, how much unnecessary admin is been done by public servants in your department, because this is the opportunity when it comes to productivity. So by Christmas, I’ll know how much unnecessary admin is been done by police officers in the UK, by teachers, by doctors, by nurses. We are then going to use that as the foundation for AI-driven projects that dramatically transform the delivery of public services. And that’s something we’re very excited about.

Any impressions of Seattle that you’d want to share? Or the tech companies here? What are your overall thoughts on what you’ve seen, heard and observed in your visit?

I’d just simply say this: Seattle is very similar to Britain. Everyone says it’s always raining, but when I’m coming in, it’s bright sunshine.

Microsoft’s plan to sell Activision Blizzard’s cloud gaming rights to Ubisoft appears to have appeased UK antitrust regulators who previously sought to block its $68.7 billion acquisition of the Call of Duty maker.

The preliminary decision Friday from the UK Competition and Markets Authority (CMA) comes less than a month before the Oct. 18 extended deadline for Microsoft to complete the acquisition.

The U.S. Federal Trade Commission, which lost its initial attempt to block the deal, is continuing to contest the acquisition before the Ninth Circuit Court of Appeals. Microsoft this week cited an “almost unprecedented range” of business and labor groups supporting the company’s position in favor of the acquisition.

The CMA’s decision isn’t final, and the agency says it’s reviewing additional remedies that Microsoft has proposed to address its “limited residual concerns” about enforcing the sale of cloud gaming rights to Ubisoft.

But the agency made it clear that Microsoft has overcome most of its objections.

“In contrast to the original deal, Microsoft will no longer control cloud gaming rights for Activision’s content, so would not be in a position to limit access to Activision’s key content to its own cloud gaming service or to withhold those games from rivals,” the CMA wrote, adding that the new plan “makes important changes that substantially address the concerns it set out in relation to the original transaction earlier this year.”

Brad Smith, Microsoft president and vice chair, said in a statement that the company is “encouraged by this positive development in the CMA’s review process” and “will continue to work toward earning approval to close prior to the October 18 deadline.”

Microsoft executives appeared in New York City this morning to unveil a torrent of new AI features for Windows and other products, in addition to new Surface PCs.

“It’s kind of like the ’90s are back. It’s exciting to be in a place where we are bringing some software innovation and really having fun, enjoying this entire journey,” Microsoft CEO Satya Nadella said during the event, reflecting on the surge of new AI capabilities from Microsoft and others in the span of less than a year.

Highlights from the news:

A unified Microsoft Copilot: Microsoft plans to bring its AI capabilities together into a combined experience that it’s calling Microsoft Copilot, starting with a free Windows 11 update Sept. 26.

• Windows apps including Paint, Photos, and Clipchamp will get new AI features.
• Microsoft’s updated Notepad app will automatically save a user’s content.
• An updated Snipping Tool in Windows will extract text from images.
• A new Outlook app promises to be a better hub for third-party email services.
• This Microsoft infographic gives an overview of the new Windows 11 features.

A date for Microsoft 365 Copilot: The company set a Nov. 1 release date for Microsoft 365 Copilot, its new set of AI productivity tools for enterprise users. A newly announced Microsoft 365 Chat feature processes internal business data and serves as a personal assistant for writing documents, catching up on emails, and other tasks, the company says.

Microsoft’s stock previously soared to a record high after the company said it would charge corporate customers an additional $30/user per month for Microsoft 365 Copilot. Its shares are up modestly today.

Bing DALL.E updates: The company showed plans to add support for the newly announced DALL.E 3 image generator to its Bing search engine, the latest sign of its tight partnership with OpenAI.

In addition, Microsoft said Bing Chat will now use chat history to inform its results, remembering a user’s favorite soccer team, for example, and proactively letting someone know if they’re playing in a city where they’re planning to travel. This capability can be turned off in Bing settings.

New Surface devices: Microsoft unveiled its latest PC hardware upgrades: a Surface Laptop Studio 2, Surface Laptop Go 3, Surface Go 4 for Business, and Surface Hub 3.

The news follows the departure this week of Surface and Windows leader Panos Panay, reportedly to take the helm of Amazon’s Devices & Services business.

A recording of the event is now available from Microsoft here.

Microsoft developed its first Surface tablet more than a decade ago under strict secrecy to give then-CEO Steve Ballmer the option to pull the plug shortly before it launched if the company’s PC partners objected.

Yet the company needed top hardware engineers to devote themselves to the project. Mike Angiulo, the former Microsoft executive who was secretly in charge of the project under then-Windows chief Steven Sinofsky at the time, solved this dilemma with a strategic recruit from another part of the company.

“How do you convince people to pour their hearts and souls into something that could ultimately be thankless?” Angiulo said this week. “You hire Panos Panay.”

Panay, who left his role as Microsoft’s chief product officer on Monday, is known for obsessing publicly over the details of the company’s Surface devices and other hardware products during launch events, which he has a habit of starting by declaring how “pumped” he is to be showing the team’s latest creations.

That attention to detail has also defined Panay’s management style off-stage, in his day-to-day role at Microsoft, according to several people who worked with him at the company over the years.

Such an approach, especially when combined with a certain intensity, can raise the risk of making people feel micromanaged, and it may not be for everyone.

But former colleagues said Panay has a knack for making people working on even the smallest parts of a project feel valued. He sees and appreciates the nuances of what they’re doing, and how it contributes to the larger whole.

“If I could meet with every single person in my organization, just to check on how they’re doing, I would absolutely do it,” Panay said during a virtual appearance at the 2020 Geekwire Summit, in the depths of the COVID-19 pandemic, explaining his strategy for helping members of his team adjust to the realities of remote work at the time.

In the office, former colleagues said, Panay was often the first to arrive and the last to leave.

In a LinkedIn post this week, a current Microsoft product management and marketing director, Ryan Day, recounted with appreciation a time when Panay spent 90 minutes giving him a one-on-one career counseling session: “Just me and him, during his workday,” he wrote, describing it as “a lot of time” to give someone at his level of the company.

Panay’s potential new role

But how would his style translate to Amazon?

That’s a key question after Bloomberg News reported that the e-commerce giant is poised to hire Panay to lead the division that makes its Alexa voice assistant and Echo devices. Panay would replace Dave Limp, Amazon’s devices and services chief, who said in August that he would step down this year after more than 13 years at the company.

The company has not yet commented on the Bloomberg report. Panay has yet to comment publicly beyond confirming on Twitter that he would be leaving Microsoft.

The timing is notable, with Amazon set to hold its annual Echo and Alexa product unveiling Wednesday morning in Arlington, Va. It’s not clear if Panay will make a cameo.

Microsoft, which named veteran executive Yusuf Mehdi to lead the Windows and Surface business, has confirmed that Panay won’t be appearing at its separate Windows and devices event, scheduled for Thursday in New York.

Apart from possible non-compete and trade secrets issues with Microsoft, one potential complication for Panay in accepting a new Amazon role could be his role as a board member of Sonos, which he has held since August 2020. The smart speaker maker offers Alexa functionality as part of its devices but also lists Amazon among its competitors in its annual 10K filing with the SEC.

Panay, who was 50 years old as of the filing of Sonos’ proxy statement in January, has a bachelor of science degree from California State University, Northridge, and an MBA from Pepperdine University.

He joined Microsoft in 2004, working on hardware projects in the company’s Entertainment & Devices Division before he was recruited to the nascent Surface team. After working as general manager of the Surface business, his role ultimately expanded to chief product officer overseeing the Windows and Devices division, including the integration of AI into the operating system through a feature called Windows Copilot.

Microsoft has long described its Surface hardware business, including tablets, laptops and desktop PCs, as a way of creating reference designs and setting examples for other Windows PC makers to follow. At the same time, under the leadership of Panay and his team, it has became a multi-billion dollar business in its own right.

The company’s Windows and Devices businesses surged during the pandemic but declined in the company’s most recent fiscal year, which ended in June. Windows revenue fell 13% to $24.7 billion, and Devices revenue, including the Microsoft Surface hardware lineup, was down 24% to $5.5 billion.

A shot in the arm for Alexa?

From the start, Panay won high marks for his passionate and conversational approach to Microsoft Surface launch events — which in recent years sometimes included him meandering through the audience as he told the tale of the company’s newest devices.

At first glance, that would seem to contrast with Amazon’s tightly scripted events.

But Amazon’s Devices & Services team might benefit from a shot in the arm in the form of Panay’s signature enthusiasm. Along with the rest of the company, the Echo and Alexa group went through difficult layoffs last year, amid reports that the division was losing as much as $10 billion a year.

At the same time, the rise of generative artificial intelligence tools, including OpenAI’s ChatGPT, have illustrated the need for Alexa to significantly improve its conversational abilities.

Although Microsoft has discontinued its Cortana voice assistant, removing one area of direct competition between Microsoft and Amazon, a common interest in the future of AI could be a point of friction in the context of Panay’s potential new role.

Executives at both companies traditionally sign non-competition and confidentiality agreements that can limit their ability to work elsewhere for specified periods after their employment ends. Microsoft would naturally want to ensure that Panay doesn’t leverage any trade secrets in a new role.

Microsoft and Amazon went through a process of negotiation over confidentiality and trade secrets after senior Amazon Web Services exec Charlie Bell left Amazon and joined Microsoft in 2021 to lead its security division. The companies ultimately reached a truce in that situation, allowing Bell to continue in his new role.

There’s a long tradition of cross-pollination of executives, managers, and employees, between the Seattle-area tech giants, due in part to the fact that those who jump from one to another often don’t need to relocate.

Key executives who have moved from Microsoft to similar roles at Amazon in recent years include Ian Wilson, vice president of human resources for AWS; and David Treadwell, now senior vice president of Amazon’s Commerce Platform. Earlier examples included Brian Valentine, the longtime Windows executive who went on to lead engineering for Amazon starting in 2006, before retiring from that role in 2014.

We’ll have to wait to see if Panos Panay joins the list. But he’ll no doubt be pumped if it happens.

In a major leak, Microsoft has accidentally disclosed many of its past, present, and future plans for its gaming division, such as details about its next-generation Xbox, planned acquisitions, and a potential new model of the Xbox Series X in late 2024.

The leak appears to have been caused by a clerical error. Microsoft uploaded a number of files to a federal court website last week as exhibits in the Federal Trade Commission’s ongoing attempts to prevent Microsoft’s acquisition of California-based game developer Activision Blizzard.

The upload accidentally included a number of confidential documents, as per Bloomberg, which included schedules, internal communications, design files, and more. This was initially noticed by users at the video game message board ResetEra on Tuesday.

Microsoft’s ongoing fight with the FTC has been huge for giving fans and press a look behind the scenes at the video game industry. Sony accidentally revealed some key budget numbers during June’s hearing in San Francisco. But this weekend’s leak was effectively an all-access pass for Microsoft’s Xbox plans.

The reveal that’s gotten all the press comes from an August 2020 email between Xbox head Phil Spencer and Takeshi Numoto, Microsoft’s commercial chief marketing officer, which discussed the possibility of Microsoft purchasing Nintendo.

Spencer noted here that Microsoft was “playing the long game,” as Nintendo was in good enough financial shape in the summer of 2020 that it wasn’t likely to agree to a voluntary merger. However, he also described a theoretical merger between the companies as a “career moment” for himself, and argued that Nintendo’s future “exists off of their own hardware.”

Side note: Both fans and analysts have argued for years that Nintendo would be best-served by adopting a new position as a third-party software developer and abandoning its hardware entirely, as its competitor Sega did in the early 2000s. This was a more sensible argument in earlier software generations, such as with the GameCube, but still resurfaces from time to time, chiefly among PC gamers who would really like to play new Zelda games.

The documents also confirm several reports that Microsoft intends to continue making physical Xbox units. The next-generation Xbox, Microsoft’s entry into the tenth generation of gaming consoles, is reportedly planned for release in 2028 as a hybrid unit, which will combine both current client-side loading with the cloud.

This approach, as noted by the Verge, is similar to how the current version of Microsoft Flight Simulator works. That game runs off its local installation, but also uses Microsoft’s cloud servers to stream photorealistic scenery to your system as you play.

The leak included Microsoft’s planned roadmap for the new Xbox. As per its internal timeline, Microsoft is presently doing the research and paperwork on the project, with plans to move into the concept/pre-production stage later this year. In theory, though, the 2028 Xbox would use both machine learning and cloud technology in conjunction with its own hardware. Relatively little about a 2028 game would run or be rendered locally, or have to be designed ahead of time.

It’s worth mentioning that all of the documents in the leak dated back to last year. Many of Microsoft’s plans could have, and now likely will, change.

Other reveals from this latest Xbox leak include:

• The next generation of the Xbox might not simply be a single console, but would consist of multiple devices that share the same OS. This would further Microsoft’s current “Play Anywhere” philosophy, but would extend it to the production of a handheld system, alongside web browsers, phone apps, PCs, and a “cloud console.”
• There are plans on the table for a new model of the Xbox Series X. Code-named Brooklin, this mid-generation “refresh” of the Series X features a new cylindrical design, 2 TB of internal storage, a single USB-C port in front, no disc drive, updated wireless technologies, and improved sustainability via lower power draw. It’s planned to hit the market at the same MSRP as the original model ($499) in or around holiday 2024.
• Along the same lines, a new model of the Series S, code-named Ellewood, is also in production. Like Brooklin, it would ship at the same price point as the current Series S, but would include 1 TB of internal storage, better wi-fi, and several innovations that are intended to improve the unit’s overall sustainability.
• Brooklin and Ellewood would come with a new generation of the Xbox gamepad. This new controller, code-named Sebile, sticks with many of the design elements of the current Series X|S “Merlin” game pad, but adds haptic feedback, quieter buttons, an internal rechargeable battery, an accelerometer, and improved durability and longevity. It’s planned to be compatible with Xbox, Bluetooth, and “Direct-to-Cloud.”
• Notably, the Sebile would also shed the current “share” button on Merlin pads in favor of the smaller layout that’s currently found on the Elite v2 controller.
• Both consoles and the Sebile are noted to be made with recycled material, and would ship in 100% recyclable packaging.
• At one point, Microsoft had also considered making an offer to acquire Bellevue, Wash.-based Valve Software, which operates the Steam digital storefront. The board of directors at Microsoft were fully supportive of doing so, as per Spencer’s leaked email, but the leak doesn’t contain details about whether that bid was successful, if it’s ever happened at all.
• Several unannounced games from Xbox subsidiary Bethesda Softworks were mentioned in the leaks. These include remastered editions of Fallout 3 and The Elder Scrolls IV: Oblivion; a sequel to the 2022 urban horror game Ghostwire: Tokyo; something called Doom Year Zero; and Dishonored 3, a surprise follow-up to Arkane Studios’ dark fantasy immersive sim.
• The leak contained a number of 2022 emails from Xbox VP Sarah Bond, which included estimates for how much several third-party publishers might ask for in exchange for their games being added to the Xbox Game Pass service at launch. This included Star Wars: Jedi Survivor ($300 million) and Assassin’s Creed Mirage ($100 million).
• Microsoft has been notoriously secretive about the internal figures that surround the Game Pass service, so Bond’s leaked emails provide a rare look at some of the potential math.
• Xbox initially estimated that Baldur’s Gate III would only cost $5 million to launch day-and-date on Xbox. BG3 had originally been announced as a Google Stadia exclusive, which led Xbox to describe it as a “second-run Stadia RPG.” It’s since turned out to be one of the biggest hits of 2023.

Update: Xbox head Phil Spencer took to Twitter on Tuesday afternoon to address the leak, which reportedly follows up on an internal email that was sent out to Microsoft employees.

“We’ve seen the conversation around old emails and documents,” Spencer wrote. “It is hard to see our team’s work shared in this way because so much has changed and there’s so much to be excited about right now, and in the future. We will share the real plans when we are ready.”

Amazon is expected to name Panos Panay, the longtime Microsoft Windows and Devices leader, as the new executive in charge of the division that includes its Alexa voice assistant and Echo smart devices, Bloomberg News reports, citing unnamed people familiar with the situation.

Microsoft announced Panay’s surprise departure earlier Monday morning.

Panay would replace Dave Limp, Amazon’s devices and services chief, who said in August that he would step down this year after more than 13 years at the company.

The news comes during a pivotal week for both companies. Amazon is scheduled to hold its annual Echo and Alexa product unveiling Wednesday morning at its second headquarters in Arlington, Va. Microsoft hosts its own event in New York City on Thursday where Surface and Windows-related announcements are expected. 

We’ve contacted Amazon for comment on the report. Microsoft isn’t commenting beyond its earlier statement on Panay’s exit.

Non-compete agreements have been a recurring issue when executives have moved between the companies. Issues of confidentiality and trade secrets came up when senior Amazon Web Services exec Charlie Bell left Amazon and joined Microsoft in 2021 to lead its security division. The companies ultimately reached a truce.

Microsoft has discontinued its Cortana voice assistant, which was previously a counterpart to Alexa, but the rise of generative AI could create new areas of competition between the companies.

Amazon’s Alexa group is under pressure to catch up to the conversational abilities of new forms of AI, most notably ChatGPT, made by Microsoft’s strategic partner OpenAI. Amazon CEO Andy Jassy told analysts in April that Amazon was working on a new large language model for Alexa “that’s much larger, and much more generalized, and capable.”

Amazon conducted layoffs in its Devices & Services team in 2022 as part of company-wide cuts, amid reports that the division was losing as much as $10 billion a year.

Microsoft’s Windows and Devices businesses surged during the pandemic but declined in the company’s most recent fiscal year, which ended in June. Windows revenue fell 13% to $24.7 billion, and Devices revenue, including the Microsoft Surface hardware lineup, was down 24% to $5.5 billion.

Yusuf Mehdi, Microsoft corporate vice president and consumer chief marketing officer, will lead the Windows and Surface business, according to an internal email this morning from Rajesh Jha, Microsoft executive vice president.

UPDATE: Report: Departing Microsoft exec Panos Panay set to lead Amazon’s Alexa and Echo business

Panos Panay, the Microsoft chief product officer who oversees the Windows and Devices division, is leaving the company in a surprise departure.

The Redmond tech giant announced the news in an internal email Monday morning.

“After 19 incredible years at Microsoft, I’ve decided to turn the page and write the next chapter,” Panay wrote on X. “I’m forever grateful for my time at Microsoft and the amazing people I had the honor to make products with.”

The longtime Microsoft hardware chief and executive vice president led the company’s unified Windows software and hardware teams.

News of Panay’s departure comes just days before Microsoft hosts an event in New York City on Thursday where Surface and Windows-related announcements are expected. Panay planned to attend the event.

Yusuf Mehdi, Microsoft corporate vice president and consumer chief marketing officer, will now lead the Windows and Surface business, according to the email sent by Microsoft executive vice president Rajesh Jha.

Panay joined the company in 2004 as a program manager and rose to prominence in the tech industry as the leader of Microsoft’s Surface hardware business, overseeing the development and launch of various products such as the dual-screen Surface Duo. He also led development of Windows 11.

“Thank you, Panos, for your impact on our products, culture, company, and industry over the past two decades,” Microsoft CEO Satya Nadella said in a statement. “I’m grateful for your leadership, support, and all you’ve done for Microsoft and our customers and partners.”

Last month, Amazon’s devices chief Dave Limp also announced his departure.

Read the full email from Jha below.

Team, 

After nearly 20 years at the company, Panos Panay has decided to leave Microsoft. Panos has had an incredible impact on our products and culture as well as the broader devices ecosystem. Under Panos’ leadership, the team created the iconic Surface brand with loved products. More recently, as the leader of Windows, the team has brought amazing services and experiences to hundreds of millions with Windows 11 on innovative devices including those from our OEM partners. He will be missed, and I am personally very grateful for his many contributions over the years. Please join me in wishing him well. 

Moving forward, we will double down on our strategy. These changes will be effective immediately with Panos’ help in the transition.  

• Build silicon, systems and devices that span Windows, client and cloud for an AI world. This team will be led by Pavan Davuluri, who will report directly to me. Brett Ostrum, Nino Storniolo, Linda Averett, Ken Pan, Ralf Groene, Aidan Marcuss, Carlos Picoto, Stevie Bathiche, Robin Seiler, Ruben Caballero and Anuj Gosalia will move to report to Pavan with their teams intact. Windows planning and release management will continue to be in this team. Our commitment to Surface and MR remains unchanged. 
• Build experiences that blend web, services and Windows for an AI world. To this end, Shilpa Ranganathan, Jeff Johnson and Ali Akgun will directly report to Mikhail Parakhin and form a new Windows and Web Experiences Team, moving with their teams intact.  
• Yusuf Mehdi will take on the responsibility of leading the Windows and Surface businesses with our OEM and Retail partners. 

In addition, Charles Simonyi, Terri Chudzik and Erin Kolb will join the E+D management teams and Ralf Groene and Mike Davidson will work together on the best alignment on design teams.  

We will set up time for an AMA in the coming days to answer questions. Let’s continue to stay focused on executing on our existing plans. Thank you for all that you do, and the impact that you have for our customers and partners.  

Best, 

Rajesh 

Microsoft CEO Satya Nadella and Oracle Chairman and CTO Larry Ellison made a rare joint appearance this afternoon to announce the next stage in their partnership, a new service that will let customers run Oracle’s database services on its cloud infrastructure in Microsoft’s Azure data centers.

Ellison said at the outset of the live stream that it was the first time he had ever been to Redmond, Wash., where Microsoft is based, which speaks in part to the fierce nature of the longtime rivalry between the companies.

Microsoft’s SQL Server and Oracle Database have traditionally competed head-to-head in the database market, and the companies have also become competitors in the cloud in recent years. The rivalry dates back to the 1980s, manifesting in what was sometimes described as a public feud between Ellison and Bill Gates.

“It’s hard to believe,” Ellison acknowledged Thursday. “I waited until very late in my career to make the trip.”

“It took us 45 years!” Nadella said as the two tech leaders laughed along with Alysa Taylor, the Microsoft corporate vice president of Azure and industry marketing, who hosted the live stream.

Among other benefits, Microsoft and Oracle say their new service will give Oracle customers the ability to access Microsoft’s Azure OpenAI service, which leverages the tech giant’s partnership with the ChatGPT maker.

The new offering, Oracle Database@Azure, expands on previous work by the companies to connect their cloud infrastructures for better ease of use by their joint customers, reflecting the desire of many large companies to use multiple clouds.

The companies are effectively teaming up against their common competitors, the biggest of them being Amazon Web Services and Google Cloud. Google recently announced a new initiative called the Cross-Cloud Network to simplify the process of networking and running distributed applications across multiple clouds.

The move reflects Microsoft’s desire to bend to the wishes of enterprise customers, and Oracle’s need to shore up its traditional database business, said Charles Fitzgerald, a Seattle-based angel investor and former Microsoft and VMware executive who follows the cloud industry closely on his Platformonomics site.

“Oracle is desperate to defend its database business which has lost considerable share to the cloud,” Fitzgerald said via email. “Unable to woo many customers to Oracle Cloud, Oracle is now relenting and encouraging customers to run Oracle Database on Azure. Microsoft wins as they have the broader customer relationship and pick up workloads around the database like AI and analytics.”

Oracle, which is officially headquartered in Austin, Texas, was based until 2020 in Redwood Shores, Calif., where the company still has a large presence.

Much like safety brakes in elevators make people comfortable using them in tall buildings, high-risk artificial intelligence systems need specialized precautions to ensure they don’t bring society crashing down.

Brad Smith, the Microsoft president and vice chair, drew that comparison Tuesday in his testimony before the U.S. Senate Judiciary Committee Subcommittee on Privacy, Technology, and the Law, agreeing in principle with a new bipartisan framework for AI legislation from U.S. Sens. Richard Blumenthal (D-CT) and Josh Hawley (R-MO), leaders of the subcommittee.

Among other things, the Blumenthal-Hawley framework would establish an independent oversight body and require companies developing AI systems for “high risk” applications to go through a registration and licensing process.

A key principle is that highly capable AI systems controlling critical infrastructure should “remain under human control at all times,” Smith agreed in his written testimony, submitted in advance of the hearing.

“Although the type of ‘safety brake’ would likely vary depending on the system and how it was used, all of them should have the ability to detect and avoid unintended consequences, and to disengage or deactivate the AI system in the event of unintended behavior,” he wrote, describing a potential regulatory approach.

Speaking via phone with GeekWire after the subcommittee hearing, Smith addressed the need to avoid unintended consequences in such an AI licensing system; offered his outlook on where the legislative process could go from here; and discussed Hawley’s criticism during the hearing of Microsoft’s policy allowing kids as young as 13 years old to use the company’s Bing AI chatbot.

Continue reading for edited excerpts from the interview.

Can you summarize where you stand on the Blumenthal-Hawley framework?

Smith: As a company, Microsoft is very supportive of the framework that Senators Blumenthal and Hawley have put together. We think it takes things in the right direction. We think it identifies the right problems. We think it has good solutions in terms of a licensing system for high-risk systems. Not everything, but those things that involve more risk.

Then having an independent oversight body makes sense to us. Focusing on the rights and needs of consumers and citizens, and doing it in a way that thinks about both companies that develop AI and deploy it, it all makes good sense. And we’re very enthusiastic they’re pursuing it in a bipartisan way. I think that’s critical.

One thing that struck me is that there will only be a certain number of companies that will have the legal horsepower and financial resources to go through these licensing regimes.

Smith: I think you’re putting your finger on something that’s critical. A lot of thought needs to be given to who should have to get a license, and for what use. We would not make it for everything. But it should be for those kinds of applications that are most powerful and most impactful on people’s rights, that could create higher risk.

I think there’s also a lot that has to be considered in terms of how onerous this should be. I don’t think one should want a licensing regime that is open, in effect, to only a small number of companies. That would be a huge step backwards. I don’t think one should want a licensing regime that would slow the pace of innovation.

There was a long sidebar on the issue of age verification and the use of AI by teenagers. Is there anything you’d want to clarify from the exchange with Senator Hawley?

Smith: Look, the purpose of the hearing was not to talk about age verification or even the age limits for some AI apps. But I appreciate the question that he had. … I think that Bing Chat is a useful tool to help people do research to solve their math problems, learn how to speak another language, learn how to code. It’s extraordinarily useful. And I think we have, and can continue to create, a safety architecture that puts guardrails so that it prevents people from using it for things that would harm themselves or others. I think that is a fundamental goal.

Frankly, the more I think about it, the more I’m struck by the fact that, for a 9th grader or a 10th grader, a sophomore in high school in the United States, there’s way more benefit than the risk of abuse in letting somebody use Bing Chat, because I think they’re likely to learn and be more successful as students in school.

What’s the logical path forward in terms of timeframe and general outlook for some kind of legislation?

Smith: I think we’ll start to see bills introduced. I think we’ll see more hearings. I think Senator [Chuck] Schumer may have more forums, and then my guess is, in 2024, there’ll be some legislation that may start to move forward.

I think at the same time, we’ll see more action from the executive branch. And that will come faster than the legislative branch. That’s typically the way things work. We may well see an executive order this fall that builds on the voluntary commitments. So I think we’re seeing, as one typically does, two speeds: faster in the executive side of the government, a little bit slower in the Congress.

Are there specific issues that are most significant in your mind that still need to be resolved among these different tracks?

Smith: I just think there are a lot of details that need to be worked through. I thought that came through well at the hearing. I’d really applaud the effort to create a framework, that’s a good place to start. Because then you can go from deciding whether your framework is right to really building up the blueprint in more detail, and then you can construct the house on top of the blueprint.

So it’s a good formula. And I think that’s fundamentally what they’re doing. And they’re doing it in a bipartisan way. They’re listening, people are learning. We should applaud when the government works that way.

See this page to watch the full Senate subcommittee hearing and read the written testimony from Smith, Boston University law professor Woodrow Hartzog, and Nvidia Chief Scientist William Dally.

We probably should have known something was up when they didn’t give WordPad a dark mode.

Just before the long holiday weekend, Microsoft added WordPad to its list of “Deprecated Features” for Windows, signaling the upcoming demise of an application that has been built into the operating system since Windows 95.

“WordPad is no longer being updated and will be removed in a future release of Windows,” the company’s explanation reads, without specifying a timeline for removal. It continues, “We recommend Microsoft Word for rich text documents like .doc and .rtf and Windows Notepad for plain text documents like .txt.”

The explanation illustrates how WordPad has become the third wheel of document editing on Windows, stuck in the middle without the full functionality of Microsoft Word or the sweet simplicity of Notepad.

However, Microsoft has been steadily updating the Notepad app in recent years, with features including the aforementioned dark mode. An upcoming Notepad update will add autosave functionality.

At least one famous former WordPad user is lamenting the loss.

Going way back into the archives, Windows on Windows has this look at a predecessor, Write.

Will you feel the loss of WordPad? Email me: todd@geekwire.com.

Microsoft will no longer include Microsoft Teams in Microsoft 365 and Office 365 for its primary business customers in the European Economic Area and Switzerland as of Oct. 1, and will drop the price of the productivity suites to reflect the change.

The move is one of three changes announced by the company Thursday morning, following the European Commission’s announcement in July that it was opening a formal investigation into Microsoft’s bundling of the communication and collaboration software into its business software suites.

Microsoft also outlined new steps to help rivals integrate their software and services into Microsoft 365 and Office 365; and promised to offer a new mechanism for competing apps and services to host Office web applications, ultimately making it easier for their users to access Microsoft Office files.

The EU investigation, sparked by a Slack complaint three years earlier, is based on concerns that “Microsoft may grant Teams a distribution advantage by not giving customers the choice on whether or not to include access to that product when they subscribe to their productivity suites,” the European Commission said at the time.

Microsoft is making the changes on its own, based on “extensive and constructive discussions with the European Commission,” wrote Nanna-Louise Linde, the company’s vice president of European Government Affairs, in a post Thursday.

“We do this not with the sense that this will necessarily resolve all concerns, whether from the Commission or our competitors, but we believe this is a constructive step that can start to lead to immediate and meaningful changes in the market,” Linde wrote.

Among other considerations, European regulators want to ensure that Microsoft customers can choose a version of the company’s business software suites without Teams at a lower price than they pay for the full bundle, Linde wrote.

More details on the changes:

• The unbundled versions will be €2 less per month or €24 less per year, and Teams will be available separately for €5 per month or €60 per year.
• Microsoft said the changes will apply to its “core enterprise customers, which represent most of our commercial business in the EEA and Switzerland.”
• Existing enterprise customers will be able to keep their current suites with Teams, or switch to the unbundled version.
• Microsoft will offer versions of its suites for small businesses and individual workers both with and without Teams.

Previously: Three years after Slack complaint, European Commission opens formal Microsoft Teams probe

In order to address regulatory concerns in the UK, Microsoft has restructured the terms of its acquisition of $68.7 billion Activision Blizzard to transfer its cloud streaming rights to a third party.

The new deal would see French game developer Ubisoft take charge of all cloud streaming rights to current and future Activision Blizzard games on PC and console. Ubisoft is one of the larger video game companies that’s still independent, and is known for franchises such as Rainbow Six, Assassin’s Creed, and Far Cry.

The announcement came via an entry on the official Microsoft blog by vice chair and president Brad Smith.

“To address the concerns about the impact of the proposed acquisition on cloud game streaming raised by the UK Competition and Markets Authority, we are restructuring the transaction to acquire a narrower set of rights,” said Microsoft President Brad Smith.

Under the terms of the new deal, Microsoft yields the right to publish Activision Blizzard games such as Call of Duty or Overwatch as exclusives on Xbox Cloud Gaming. Ubisoft will have the full rights to commercialize Activision Blizzard games, with compensation going back to Microsoft via “a one-off payment and through a market-based wholesale pricing mechanism,” according to Smith.

Ubisoft’s cloud gaming initiatives include a self-named subscription service that lets users stream Ubisoft games like Assassin’s Creed: Valhalla from its own servers. It also maintains a premium channel by the same name as part of Amazon’s Luna storefront.

The UK’s Competition and Markets Authority (CMA) had previously blocked Microsoft’s bid to acquire Activision Blizzard in April. One of its stated reasons for doing so was the fear that the acquisition would allow Microsoft to instantly dominate the cloud gaming service, citing an estimate that without Activision Blizzard, Microsoft already controls a 60-to-70% share of that market.

The ball is now in the CMA’s court, with Smith stating he and Microsoft are confident that the review process will be complete before the original acquisition’s extended deadline of Oct. 18.

“This is not a green light,” Sarah Cardell, chief executive of the CMA, said in a statement. “We will carefully and objectively assess the details of the restructured deal and its impact on competition, including in light of third-party comments. Our goal has not changed – any future decision on this new deal will ensure that the growing cloud gaming market continues to benefit from open and effective competition driving innovation and choice.”

Microsoft cleared a major hurdle in the acquisition last month when a federal judge sided with the Redmond company following a challenge from the U.S. Federal Trade Commission to block the merger. An appeals court then denied a FTC motion to temporarily stop the deal.

It’s the end of an era.

Seven years after it discontinued production for the Xbox 360 video game console, Microsoft announced Thursday that it will shut down the system’s digital storefront on July 29, 2024.

This will put one more nail in the coffin for the Xbox 360, just shy of the fan-favorite platform’s 19th birthday. After the shutdown, users will still be able to play supported games on a 360 and download any digital games or content that they already own, but will no longer be able to buy anything else.

Multiplayer games on 360 will reportedly continue to function after the shutdown for as long as a particular game’s publisher continues to support that game’s servers. This includes several of the older games in the Call of Duty franchise, which quietly surged back to best-seller status in July after Microsoft quietly fixed their matchmaking.

The end of life for the Xbox 360 Marketplace marks another recent blow for efforts in video game preservation. In March, Nintendo shut down the eShops for its Wii U and 3DS consoles. Sony had previously shut down the digital storefronts for the PlayStation 3 and Vita consoles in March 2021.

In both cases, this effectively took several generations of digital games off the market, some of which are now no longer legally available. The closure of the 360’s Marketplace is likely to have a similar effect.

“The Xbox 360 was an innovative console that gave rise to great digital distribution models. We understand the logistical challenges of maintaining aging infrastructure, but it’s a shame to see that legacy discontinued with the Marketplace shutdown,” said Jonas Rosland, the Boston-based executive director of Hit Save, a nonprofit that’s dedicated to the preservation of video games and their history.

“Many outstanding indie games, arcade classics, and innovative experiences got their start as Xbox 360 digital titles,” Rosland said. “Game preservation is about more than just saving commercially successful titles — it’s about retaining the full creative breadth of the medium.”

This is an endemic issue in the video game industry. A July study by the Video Game History Foundation with the support of the University of Washington found that roughly 87% of the video games that have ever been physically available in the U.S. are out of print and “critically endangered,” in much the same way as the lost films of the ‘30s and 40s.

The closure of the Xbox 360 Marketplace is a setback for preservation efforts. Starting in 2004, the Xbox Live Arcade distribution service made it attractive for both established and independent producers to make new, smaller games and publish them on Xbox. This includes early projects from now-established creators such as Seattle’s Ska Studios (Salt and Sacrifice), which released its first game The Dishwasher on XBLA in 2009.

Analysts currently estimate that there are around 220 games that are still digital exclusives to the 360 storefront, many of which have never been ported forward to later versions of the Xbox. As such, they’ll effectively go out of print when the Marketplace shuts down.

As of the evening of Aug. 17, fans have composed the following rough list of games and unique SKUs that are still exclusive to the Xbox 360 Marketplace, which will no longer be legally available after the shutdown.

This includes individual titles, as well as several unique compilations; special editions or collections that were never released on any other platform; and the original versions of a couple of games that were later ported to other consoles.

A game labeled as “(Xbox 360)” refers to that particular digital SKU, which typically isn’t playable on later Xboxes even if you own that SKU on the same account. For example, I own a copy of Bastion for 360 that only works on my 360. If I want to play it on my Series X, I’d have to buy the game again there.

• 0D Beat Drop
• Abyss Odyssey
• Alien Rage
• Alien Spidy
• AMY
• Ancients of Ooga
• Anna – Extended Edition
• Arkadian Warriors
• Assault Heroes
• Awesomenauts (Xbox 360)
• Backbreaker Vengeance
• Bastion (Xbox 360)
• Batman: Arkham Origins Blackgate Deluxe Edition
• Battle Academy
• Battlezone
• Bionic Commando: Rearmed
• Black Knight Sword
• Blade Kitten
• Blazing Birds
• Bloody Good Time
• Boogie Bunnies
• Brothers – A Tale of Two Sons (Xbox 360)
• Bubble Bobble Neo!
• Burnout CRASH!
• Call of Duty Classic
• Capsized
• CellFactor: Psychokinetic Wars
• Charlie Murder
• Child of Light (Xbox 360)
• Choplifter HD
• CloudBerry Kingdom
• Cobalt (Xbox 360)
• Constant C
• Crazy Machines Elements
• CrazyMouse
• Crimson Alliance
• Deadliest Warrior: Battlegrounds
• Deadlight
• Death Tank
• Deathsmiles II x (Games on Demand)
• DeathSpank
• Deep Black: Episode 1
• Defenders of Ardania
• Defense Technica
• Diabolical Pitch (Kinect)
• Dogfight 1942
• Dollar Dash
• Double Dragon II: Wander of the Dragons
• Duke Nukem 3D
• Dungeon Defenders
• Dust: An Elysian Tail
• Dustforce
• Ecco the Dolphin
• Exit
• Exit 2
• Fatal Fury Special
• Fez
• Final Exam
• Fire Pro Wrestling
• Fireburst
• Freefall Racers (Kinect)
• Frogger: Hyper Arcade Edition
• Frozen Free Fall: Snowball Fight (Xbox 360)
• Fruit Ninja Kinect
• Full House Poker
• Fusion: Genesis
• Gel: Set & Match
• Geon: Emotions
• Goosebumps: The Game (Xbox 360)
• Gotham City Impostors
• Guilty Gear XX Accent Core Plus
• Guncraft: Blocked and Loaded
• Happy Tree Friends: False Alarm
• Haunt
• Hell Yeah! Wrath of the Dead Rabbit
• Hexodius
• Home Run Stars
• How to Survive
• Hunter’s Trophy 2 America
• Hunter’s Trophy 2 Australia
• Hybrid
• Ion Assault
• JAM Live Music Arcade
• Kinect Fun Labs: Air Band
• Kinect Fun Labs: Avatar Kinect
• Kinect Fun Labs: Battle Stuff
• Kinect Fun Labs: Bobble Head
• Kinect Fun Labs: Build A Buddy
• Kinect Fun Labs: Googly Eyes
• Kinect Fun Labs: I Am Super!
• Kinect Fun Labs: Junk Fu
• Kinect Fun Labs: Kinect Me
• Kinect Fun Labs: Kinect Rush: Snapshot
• Kinect Fun Labs: Kinect Sparkler
• Kinect Fun Labs: Mars Rover Landing
• Kinect Fun Labs: Musical Feet
• Kinect Fun Labs: Mutation Station
• Kinect Sports Gems: 10 Frame Bowling
• Kinect Sports Gems: 3 Point Contest
• Kinect Sports Gems: Boxing Fight
• Kinect Sports Gems: Darts vs. Zombies
• Kinect Sports Gems: Field Goal Contest
• Kinect Sports Gems: Penalty Saver
• Kinect Sports Gems: Ping Pong
• Kinect Sports Gems: Prize Driver
• Kinect Sports Gems: Reaction Rally
• Kinect Sports Gems: Ski Race
• King’s Quest (Xbox 360)
• Leedmees (Kinect)
• Legend of Kay – Anniversary (Games on Demand)
• Life is Strange (Xbox 360)
• LocoCycle (Xbox 360)
• Lucidity
• Mark of the Ninja
• Marvel Puzzle Quest: Dark Reign (Xbox 360)
• Masquerade: The Baubles of Doom (Xbox 360)
• Max: The Curse of Brotherhood (Xbox 360)
• Mensa Academy
• Meteos Wars
• MicroBot
• Mighty No. 9 (Xbox 360)
• Minesweeper Flags
• Mini Ninjas Adventures (Kinect)
• Mortal Kombat Arcade Kollection
• Naughty Bear: Panic in Paradise
• NCAA Basketball 09 March Madness Edition
• NFL Blitz
• Painkiller (Games on Demand)
• Panzer General: Allied Assault
• Penny Arcade Adventures: Episode 1
• Penny Arcade Adventures: Episode 2
• Pinball FX2 (Xbox 360)
• Prison Architect
• Puzzle Arcade
• PUZZLE BOBBLE Live!
• Puzzle Chronicles
• R.B.I. Baseball 14 (Xbox 360)
• Rainbow Islands: Towering Adventure!
• RayStorm HD
• Red Johnson’s Chronicles: One Against All
• Rekoil: Liberator
• Renegade Ops
• Resident Evil (Xbox 360)
• Resident Evil 0 (Xbox 360)
• Resident Evil 4 (Games on Demand)
• RIDE (American digital version)
• Risk (Xbox 360)
• Risk: Urban Assault (Xbox 360)
• Rocket Riot
• RocketBowl
• Rotastic
• Rush’N Attack: Ex-Patriot
• Sanctum 2
• Scene It? Movie Night: Mega Movies
• Schizoid
• Sealife Safari
• Section 8: Prejudice
• Shooting Love 200x (Games on Demand)
• Skulls of the Shogun
• South Park Let’s Go Tower Defense Play!
• South Park: Tenorman’s Revenge
• Space Invaders Extreme
• Spare Parts
• Spyglass Board Games
• Star Raiders
• State of Decay
• Storm
• Street Fighter II Hyper Fighting
• Street Fighter III: 3rd Strike Online Edition
• Streets of Rage 2
• Strider (Xbox 360)
• Super Time Force (Xbox 360)
• Syberia 2
• Takedown: Red Sabre
• Tempest
• The Bluecoats – North vs South
• The Book of Unwritten Tales 2 (Xbox 360)
• The Bridge (Xbox 360)
• The Dishwasher: Dead Samurai
• The Dishwasher: Vampire Smile
• The Escapists (Xbox 360)
• The Fancy Pants Adventures
• The Path of Go
• Things on Wheels
• Thunder Wolves
• TiQal
• TNT Racers
• Totemball
• Trials Fusion (Xbox 360)
• Trivial Pursuit Live! (Xbox 360)
• Tron
• Valiant Hearts: The Great War (Xbox 360)
• Vigilante 8 Arcade
• Virtua Striker
• Voodoo Dice
• War World
• Warlords
• Warp
• Who Wants to Be a Millionaire? Special Editions
• Wing Commander Arena
• Wits & Wagers
• Wreckateer (Kinect)
• Wrecked: Revenge Revisited
• Yar’s Revenge
• Yie Ar Kung-Fu
• Yo-Ho Kablammo
• Yu-Gi-Oh! 5D’s Decade Duels Plus
• Yu-Gi-Oh! Millennium Duels
• Zeit²
• Zeno Clash II
• Zeno Clash: Ultimate Edition
• Zombie Driver HD
• Zombie Wranglers

In Maui’s historic town of Lahaina, more than half of the community’s 2,810 buildings have been damaged by a wildfire that this week obliterated the landscape. More than 1,200 of the impacted structures were essentially destroyed.

That’s according to research by Microsoft, which is providing the American Red Cross and other emergency organizations with maps analyzed by AI in order to help guide their response. The satellite images were provided by Planet.

“This is critical because they need to understand where to send people, which areas need to [be] prioritized, which part are they not considering,” said Juan Lavista Ferres, chief scientist and lab director at the Microsoft AI for Good Lab.

Microsoft and other tech companies and their employees are responding to the devastating wildfires in Hawaii, providing tech support and donations of goods and cash. Amazon has donated items such as tarps and coolers and says it will help deliver additional resources as needed. Amazon founder Jeff Bezos and his fiancée Lauren Sanchez announced Friday they are creating a $100 million recovery fund for the island.

The Microsoft analysis came from a longer-term, larger effort to build tools for detecting damaged buildings and structures. The project uses AI to compare before-and-after satellite images to identify damage and the percent of damage. It can be applied to wide-ranging natural disasters such as wildfires, floods, hurricanes and volcanic eruptions.

Analysis of the human-caused destruction in Russia’s war in Ukraine helped improve the tool, Lavista Ferres said. Microsoft was working in partnership with United Nations’ efforts.

Unfortunately, the need for the resource is widespread.

“When we started working on this two years ago, every single organization that we talked to, they needed this exact same tool,” Lavista Ferres said.

A four-person team at the Redmond-based software giant worked to generate the images for Maui’s emergency responders.

Members of the AI for Good team are working on other wildfire-related projects as well. One initiative is tackling wildfire predictions based on information such as where past fires have occurred. The goal of that effort is to direct wildfire prevention efforts, which could include actions such as prescribed burns, and to prioritize where firefighting resources are allocated.

The engineers are also working on AI tools for quickly detecting wildfires using images from satellites and cameras installed in wildfire-prone areas. AI can monitor vast quantities of images around the clock, searching for smoke or flames.

Wildfires are typically extinguished by creating nonflammable boundaries that contain them, and the blazes burn themselves out. Detecting fires and creating those borders quickly are key to limiting damage.

Other companies and organizations are also harnessing the computational power of AI to address the growing problem of wildfires, which are complex and fast-moving events.

The state of Washington recently began piloting services provided by Pano AI, a San Francisco company that uses AI-assisted cameras to spot fires. The Pacific Northwest National Laboratory (PNNL) developed RADRFIRE, a tool using infrared satellite imagery and AI to create detailed wildfire maps to track and forecast fires. Seattle-area startup Data Blanket is developing AI-based drone system for surveying fires to map their perimeters and direct resources.

Microsoft currently shares its wildfire tools with interested organizations. The plan is to eventually release them as open source for anyone to use. The work is funded internally by Microsoft.

“It is really rewarding to try to use this data to help, to see how these organizations are using that data and making them more efficient,” Lavista Ferres said. “It’s actually a great experience for us.”

Related coverage:

Wildfire startup puts AI-powered eyes in the forest to watch for new blazes and provide rapid alerts

Bill Gates-backed startup aims to fight wildfires, drawing on expertise of ex-Amazon drone leader and aviation execs

Microsoft ended its fiscal 2023 in June with 221,000 employees globally, according to the company’s annual 10K filing Thursday with the Securities and Exchange Commission.

That’s a decline of 11,000 people, or nearly 5%, from the company’s peak of 232,000 employees six months earlier, in December 2022, according to GeekWire’s calculations from Microsoft’s disclosures in regulatory filings, earnings calls, and the company’s website.

It’s the most rapid employment decline in Microsoft’s history, surpassing the pace (although not the ultimate size) of the company’s 18,000 job cuts in 2014 and 2015 after then-newly minted CEO Satya Nadella decided to largely reverse the company’s acquisition of Nokia’s Devices and Services business.

The new numbers show the impact of Microsoft’s job cuts announced in January, part of a wave of cutbacks across the technology industry at the time.

We calculated the figures below by comparing numbers in the latest 10K to those disclosed by the company in the same report in previous years. Microsoft declined our request to provide detailed numbers for the point in time six months ago, in December 2022, when the company reached its employment peak. As a result, these year-over-year numbers provide a before-and-after snapshot of the past year.

• After growing rapidly at the beginning of the fiscal year, Microsoft’s retrenchment meant that the company ended its fiscal 2023 with the same number of employees as one year earlier, 221,000, according to the new 10K filing.

• Even with the layoffs, the company’s international employment actually grew year-over-year, by 2,000 people, surpassing 100,000 for the first time.
• U.S. employment declined by 2,000 people year-over-year, to 120,000.

• Microsoft employees in sales and marketing roles saw the biggest year-over-year decline among the company’s four reported categories of employment, dropping by about 2,000 people, or 4%, from 47,000 in June 2022 to 45,000 in June 2023.
• Product research and development took a smaller hit, declining by about 1,000 people or a little more than 1% to 72,000 people year-over-year.
• Employees in operations roles increased by 4,000 people year-over-year, or nearly 5%, to 89,000 people, according to the 10K filing. Operations roles became the company’s largest category of employment in 2020.

Microsoft in the past disclosed its Seattle-area (aka Puget Sound region) employment figures on its Facts about Microsoft webpage, but the company has ended the practice in recent years. We’ve asked for the latest regional numbers and will update this post if Microsoft releases them.

— James Phillips, a former corporate vice president and president at Microsoft, joined Google Cloud as a vice president.

Phillips left Microsoft last year after spending a decade at the Redmond, Wash., tech giant where his organization grew from 300 people to more than 15,000. He led teams working on various cloud-related services and platforms, including Dynamics 365, Power Platform, and the Azure AI Platform.

In a post on LinkedIn, Phillips said the depth of talent at Google Cloud is “staggering” and said the “energy and momentum is palpable and contagious.”

“I can’t imagine a more powerful foundation for enterprise digital transformation,” he wrote. “For the foreseeable future, transformation will be all about information and AI … and at its very core that’s what Google is all about.”

Google Cloud revenue rose 28% to more than $8 billion in the second quarter. The cloud arm of Google, which competes with Microsoft Azure and Amazon Web Services, boosted its operating profits to $395 million, a improvement of close to $1 billion from its loss of $590 million in the same quarter a year ago.

Last year, Phillips joined Stripe after leaving Microsoft but departed one month later.

Phillips previously co-founded Akimbi Systems, which was acquired by VMWare, and helped launch Couchbase. He is also a strategic director at Madrona Venture Group, which recently hosted Phillips on its podcast.

Phillips was a board member at Seattle-based F5 but the company announced this week that he was stepping down.

— TV advertising measurement company iSpot.tv appointed Leslie Wood as chief research officer. She will oversee the Seattle startup’s data science department for TV and video measurement products.

Wood previously worked as chief research officer at NCSolutions, a Nielsen-owned agency that helps consumer packaged goods companies target and measure advertising. She held the position for more than a decade.

Prior to NCSolutions, Wood owned and operated LWR, an industry research consulting firm. She won the 2023 American Marketing Association’s Charles Coolidge Parlin Marketing Award on Thursday.

“Leslie Wood has been recognized as one of the most respected names in the media industry,” iSpot CEO and founder Sean Muller said in a statement.

iSpot ranks No. 11 on the GeekWire 200, our list of the top privately held companies in the Pacific Northwest. The company raised $325 million last year from Goldman Sachs.

— Kalungi, a Seattle-area marketing agency for business-to-business software companies, appointed Brian Graf as its new CEO. A University of Washington graduate, Graf has led marketing efforts for more than 20 software companies and most recently worked as Kalungi’s chief marketing officer team lead. He replaces co-founder Fadi George, who will transition to CTO and remain as president of the board.

—Brian Bosché, who recently stepped down from his role as director of marketing at Smartsheet, joined London startup Move.ai as vice president of marketing and revenue. Bosché previously co-founded Slope, a startup that helped companies manage their creative project production processes and was acquired by Smartsheet in 2019.

Microsoft is officially back on the European Commission’s investigative agenda.

European antitrust authorities opened a formal investigation Thursday into Microsoft’s bundling of Teams into Office 365 and Microsoft 365.

The move comes three years after Slack filed the complaint that formed the basis for the inquiry. That was in July 2020, at the height of the COVID-19 pandemic, when Teams and other communication and collaboration technologies, most notably Zoom, were soaring due to the sudden rise of remote work.

It has been nearly 14 years since Microsoft settled its last major European antitrust case, over the bundling of Internet Explorer with Windows 7.

In recent weeks, Microsoft and the European Commission were unable to agree on the specifics of a deal to unbundle Teams from Office 365 and Microsoft 365, according to a previous Financial Times report.

“In particular, the Commission is concerned that Microsoft may grant Teams a distribution advantage by not giving customers the choice on whether or not to include access to that product when they subscribe to their productivity suites and may have limited the interoperability between its productivity suites and competing offerings,” the commission said in a statement announcing the investigation.

A Microsoft spokesperson said in a statement, “We respect the European Commission’s work on this case and take our own responsibilities very seriously. We will continue to cooperate with the Commission and remain committed to finding solutions that will address its concerns.”

This is part of a major business for Microsoft. Office Commercial revenue grew 12% to $11.2 billion in Microsoft’s fiscal fourth quarter, representing nearly 20% of the company’s overall $56.2 billion in revenue for the period, according to GeekWire’s calculations from the company’s earnings report this week.

Several months after Slack filed its complaint, Salesforce reached a deal to acquire the San Francisco-based company for $27.7 billion in a transaction that was completed in July 2021. The former Slack CEO Stuart Butterfield, a key figure behind the EU complaint at the time, left Salesforce at the beginning of this year.

Updated at 6:40 a.m. with Microsoft statement.

Investors will be looking for early signs of traction from Microsoft’s artificial intelligence investments Tuesday afternoon when the company reports results for its fiscal fourth quarter.

They’ll likely need to wait longer to see a significant financial payoff from the company’s biggest AI bets, such as Microsoft 365 Copilot, still available only as a preview for now. Microsoft’s pricing news for the product sent its shares soaring to a new record last week.

But with the company already incorporating AI into other products, including Bing, GitHub, and its Azure cloud platform, Wall Street will be watching Microsoft’s results to get a sense for the actual business demand for emerging forms of artificial intelligence.

Microsoft’s partnership with ChatGPT maker OpenAI, sealed with a multi-billion dollar investment in the San Francisco company, has helped to give the Redmond company an early edge in the emerging era of generative artificial intelligence.

Wall Street analysts expect Microsoft to report revenue of $55.47 billion, as reported by Yahoo Finance, up 7% from the same quarter a year ago. That’s in the middle of Microsoft’s prior guidance of $54.85 billion to $55.85 billion.

Analysts expect the company to report earnings of $2.55 per share, up 14% from a year ago.

Google parent Alphabet, another cloud and AI bellwether, will report its earnings Tuesday afternoon, as well. Amazon reports earnings next week, on Thursday, Aug. 3.

Apart from AI, another angle to watch in Microsoft’s earnings will be any comments from CEO Satya Nadella about the company’s revenue from security products. A high-profile U.S. government breach by a Chinese hacking group is raising new questions about the security of Microsoft products, and its revenue from security tools.

Nadella said in January that security revenue surpassed $20 billion annually (up from $15 billion a year earlier), which was about 10% of Microsoft’s $204 billion in revenue in the 2022 calendar year.

On another front, analysts are likely to press for details on the outlook for Microsoft’s $69 billion Activision-Blizzard acquisition. The company recently won a key court ruling and gave itself an extra three months of breathing room to complete the deal.

Check back with GeekWire for details on Tuesday afternoon.

Recognizing that nothing goes better together than pizza and video games, Xbox has designed a pizza-scented wireless video game controller to promote the upcoming “Teenage Mutant Ninja Turtles: Mutant Mayhem” movie.

The limited edition, ooze green controllers come with a slice of (fake) pepperoni pizza stuck in the center that acts as built-in scent diffuser to deliver the aroma of a New York-style slice, according to Microsoft.

Four controller styles represent the signature colors, weapons, and personality of a Turtle brother: Leonardo, Raphael, Donatello, and Michelangelo. Fans can enter to win them by following Xbox Game Pass on Twitter and retweeting the official Xbox Game Pass sweepstakes tweet. The giveaway will run from today through Aug. 13.

Microsoft says the controllers are a great way to play the “timeless arcade game” “Teenage Mutant Ninja Turtles: Shredder’s Revenge,” which is available with Xbox Game Pass.

Paramount Pictures’ new “Teenage Mutant Ninja Turtles: Mutant Mayhem” film hits theaters next month. It will be available for pre-order on the Microsoft Store starting Aug. 2, and digital premium release is Sept. 5.

This week on the GeekWire Podcast: Microsoft staked its financial claim in the AI gold rush this week, announcing pricing for its upcoming Microsoft 365 Copilot technology: a whopping $30/user per month on top of its existing license fees.

Wall Street loved it. One analyst called it “eye popping.” Investors sent the company’s shares to a new record on the day the news was announced.

The upcoming product, fueled by Microsoft and OpenAI technologies, is designed to integrate with Microsoft productivity apps and work with internal business data, going beyond the capabilities of web-based generative AI technologies.

But will companies see that much value in what Microsoft has to offer? Microsoft 365 Copilot is still in private preview, for now, but the pricing suggests that the company likes what it’s seeing and hearing from early users.

It’s part of a big week that also saw the company clear a major hurdle in its $69 billion Activision-Blizzard acquisition, winning a key court ruling and giving itself an extra three months of breathing room to complete the blockbuster gaming deal. 

But behind the scenes, Microsoft is grappling with shaky morale amid ongoing cutbacks, and growing questions about the gap between employee and executive compensation.

Meanwhile, a high-profile U.S. government breach by a Chinese hacking group is raising new questions about the security of Microsoft products, and threatening to undermine a growing source of revenue for the company.

It’s shaping up as one of the biggest years in Microsoft history, and this was perhaps the biggest week of the year so far for the company.

Next up: Microsoft will report its quarterly earnings Tuesday. 

Stories discussed on this week’s show: 

• Microsoft sees ‘massive’ economic opportunity in AI; stock nears record on business pricing news
• Microsoft, Amazon, other tech companies make commitment with White House for responsible AI
• Leaked Microsoft messages show employees blasting pay cuts and low morale to executives (Insider)
• Microsoft’s stock has risen almost 1,000% since Satya Nadella became CEO in 2014, netting him a reported $1 billion in compensation (Fortune)
• Google Tests A.I. Tool That Is Able to Write News Articles (New York Times)

Listen above, or subscribe to GeekWire in Apple Podcasts, Google Podcasts, Spotify or wherever you listen.

Paul Allen would be right at home scrolling the Seattle Seahawks internet experience today — so long as the late Microsoft co-founder and team owner’s dial-up connection was working.

In a throwback to the 1990s, when Allen saved Seattle’s NFL team and Microsoft was growing into a tech giant, the Seahawks unveiled a web experience Wednesday to coincide with the release of a throwback uniform and gear for fans.

Complete with a vintage Microsoft start button and image of an old PC on seahawks.com, the throwback site launches with the sound of a classic internet dial-up. Dialing … connecting … connected!

The site is presented by Microsoft and features an ad for Internet Explorer that resolves to the Edge browser home page. An ad for Windows 95 goes to the Windows 11 site. And another vintage-looking ad for the Seahawks mobile app shows an HP iPAQ Pocket PC and goes to the modern site for downloading the app. There’s even a picture of a pager encouraging fans to text for team promotions and ticket availability.

A story on the site recalls the era in which Allen purchased the team, as a “pop culture revolution” took off in Seattle with the hysteria around grunge music, Starbucks coffee and the emergence of the tech scene.

The uniforms feature the Seahawks original retro logo on silver helmets. The royal blue and apple green jerseys are meant to honor “the Salish seas and forests of the Emerald City and Pacific Northwest,” a story on the site reads. A patch on the inside of the neckline features the Kingdome, the Seahawks home stadium until 1999.

Players including Bobby Wagner, DK Metcalf, Geno Smith, Tyler Lockett, Quandre Diggs and others are pictured modeling the uniforms.

Matt Haberkamp, Seahawks digital platform manager, oversaw the project and said it was fun to dig through the Internet Archive’s Wayback Machine to look back at popular websites of the ’90s and focus on creating a nod to the old Seahawks.com.

“We wanted to include as many small nuggets as we could think of,” Haberkamp said. “Connecting to the internet with a dial-up sound, popups, animated GIFs, images that won’t load, and an overload of ads all while using fonts, graphics and web design of the time.”

Haberkamp said the side rails were one of the highlights, using images of retro devices and Seahawks legends in calls for fans to share their memories and so on

“We were able to add Microsoft as a presenting partner to include their ’90s advertisements which pulled everything together,” he added.

In a throwback video on Twitter, Seahawks first-round draft pick Jaxson Smith-Njigba stars as a player waking up — in the throwback uniform — to the ’90s, in a home filled with touchstones from that decade. An old alarm clock, video game console, posters, a PC and more are shown in his room as he puts on headphones for a Sony Walkman.

Microsoft and Activision Blizzard agreed to extend their merger agreement deadline by three months to help address regulatory concerns in the UK. The new deadline is Oct. 18.

The companies originally set a deadline for July 18 to get a deal done.

The extension will “provide ample time to work through the final regulatory issues,” Microsoft President Brad Smith said in a statement. He added: “We are confident about our prospects for getting this deal across the finish line.”

Microsoft cleared a major hurdle in its $68.7 billion acquisition last week when a federal judge sided with the Redmond company following a challenge from the U.S. Federal Trade Commission to block the merger. An appeals court then denied a FTC motion to temporarily stop the deal.

Microsoft now needs to gain approval from UK regulators, which already extended their own deadline by six weeks to Aug. 29 to review the deal. The UK’s Competition and Markets Authority originally rejected the deal in April.

Microsoft previously agreed to a termination fee of $3 billion. If the deal does not close by Aug. 29, the company said today it will pay a $3.5 billion fee; if it does not close by Sept. 15, the fee goes up to $4.5 billion.

Also as part of the agreement extension, Activision is entitled to pay $0.99 per share to its shareholders. It said today that it also may seek to pursue an agreement with UK regulators “to hold separate the Company or certain assets of the Company or to implement other lawful alternatives to consummate the Merger,” according to a SEC filing.

Microsoft said Sunday that it signed a binding agreement with Sony to keep Call of Duty on PlayStation after the pending Activision Blizzard acquisition. Microsoft previously inked similar deals with Nintendo and cloud gaming providers to help ease regulatory concerns over the acquisition, which would be the largest in the company’s history.

Here’s an email from Xbox chief Phil Spencer to employees sent Wednesday, and a statement from Activision corporate affairs chief Lulu Cheng Meservey:

Team,

Microsoft and Activision Blizzard remain optimistic that we will get our acquisition over the finish line, so we have jointly agreed to extend the merger agreement to October 18, 2023. While we can technically close in the United States due to recent legal developments, this extension gives us additional time to resolve the remaining regulatory concerns in the UK.

I want to thank everyone for your time and energy in support of the regulatory process and on all the great work coming to fruition for Xbox this year. Players around the world will be delighted with the incredible lineup of games launching in the next few months, including Starfield and Forza Motorsport. It is also great to see the fantastic work the ABK teams are delivering for their players with the successful launch of Diablo IV and the ongoing performance of Call of Duty: Modern Warfare II, and we congratulate them on their accomplishments.

As we move even closer to the finish line, we are more excited than ever before about furthering our mission to bring more games to more players everywhere.

Phil

Microsoft will seek to capitalize on the intense interest in artificial intelligence at work with a significant price hike for businesses that decide to use its Microsoft 365 Copilot capabilities when they’re broadly released.

The company will charge an additional $30/user per month for Microsoft 365 Copilot as part of monthly subscription plans that currently range from $12.50/user to $57/user per month. The company announced the pricing Tuesday at its Inspire partner conference, citing a positive response to the Microsoft 365 Copilot preview.

The move amounts to a major bet on the value of AI to Microsoft corporate customers. It’s not clear how many of those customers will be able to stomach the premium, but Wall Street seems to like the direction. Microsoft shares climbed 6% after the announcement, with the potential to reach a record closing price.

• Microsoft stock climbed above $364/share, a market value of $2.71 trillion.
• The company’s market value is second among publicly traded companies to Apple, which is valued at more than $3 trillion.
• A Wedbush analyst, Dan Ives, predicted earlier this month that AI would lift Microsoft to a $3 trillion valuation by early 2024. In a note Tuesday, Ives called the pricing an “eye popping announcement.”

Announced earlier this year, Microsoft 365 Copilot is designed to integrate with Microsoft productivity apps and work with internal business data, going beyond the capabilities of web-based generative AI technologies.

Microsoft is racing against Google and many others to incorporate AI features into its productivity tools.

The company hasn’t yet announced when Microsoft 365 Copilot will be broadly available. Bloomberg Businessweek reports that Microsoft cloud and AI leader Scott Guthrie’s inbox “has been inundated with CEOs asking for access.”

Speaking to the company’s partners at the event, Microsoft CEO Satya Nadella cited the business opportunity that AI represents, given the potential to expand the market for enterprise technology and the economy overall.

“If you have an economy that’s around $100 trillion, we may have $7- to $10-trillion more of GDP growth driven by this next generation of AI technology,” Nadella said, describing it as “a massive partner opportunity.”

Microsoft is leveraging a combination of its own technologies and those from its partner OpenAI to incorporate new capabilities into a wide range of its products. The company has invested billions in OpenAI, seeking to position itself to capitalize on ChatGPT and other AI innovations from the San Francisco-based company.

Microsoft on Tuesday also announced:

• An enterprise version of its AI-powered Bing Chat, designed to protect commercial data and address business privacy concerns.
• An image-based Visual Search feature in Bing Chat, using OpenAI’s GPT-4.

Microsoft’s Inspire partner conference continues through Wednesday.

• Specific details of the deal weren’t available, but it ends a long battle between the two companies.
• In court filings following the acquisition announcement in January 2022, Sony expressed concern that Microsoft would make Call of Duty exclusive to its Xbox platform, though recent revelations from the FTC v. Microsoft case show that may have not been true.
• Microsoft previously inked similar deals with Nintendo and cloud gaming providers to help ease regulatory concerns over the acquisition.
• A federal judge sided with Microsoft last week in a setback for the FTC’s attempt to block the acquisition, and an appeals court on Friday denied a FTC motion to temporarily stop the deal. Microsoft now needs to gain approval from UK regulators.

Microsoft is providing new details about the techniques used by a Chinese hacking group to infiltrate the email accounts of an estimated 25 organizations and government agencies, reportedly including the account of U.S. Commerce Secretary Gina Raimondo.

The new analysis, published Friday, includes new information about two flaws in Microsoft’s own systems and code that, unbeknownst to the company at the time, helped to open the door to the hackers.

Microsoft says it has fixed both of the problems, effectively blocked the group’s efforts to maintain ongoing access to the accounts, and taken steps to prevent such situations in the future.

However, the company is facing growing scrutiny from the Biden administration over the incident. Meanwhile, Microsoft rival Google is seizing on the hack to make the case that the U.S. government should further diversify its pool of productivity software vendors.

Microsoft says it’s still investigating how the group, which Microsoft has dubbed Storm-0558, acquired an inactive Microsoft Account (MSA) consumer signing key — the initial step that allowed the hackers to forge authentication tokens to access the email accounts.

But in the meantime, the company provided new details on two Microsoft flaws that it believes were exploited by the group to make malicious use of the MSA consumer signing key once it was acquired.

• The company says a “validation error” in Microsoft code made it possible for the group to forge Azure Active Directory tokens, normally used to access government and enterprise accounts, despite acquiring a key that was intended for Microsoft consumer accounts.
• Once the group used a forged token to gain access, it was able to obtain additional access tokens from an Outlook Web Access application programming interface (API) by presenting a token previously issued from the API “due to a design flaw,” the company says.

Microsoft says it has fixed these problems and blocked the group from further leveraging the acquired consumer signing keys. The company says it has also “substantially hardened” its MSA key issuance systems, including moving those systems to a higher-security key store used for enterprise accounts.

In addition to shedding light on these security vulnerabilities, the incident is raising questions about the company’s practice of reserving some advanced security monitoring features for the highest-priced Microsoft 365 tiers.

An agency in the Federal Civilian Executive Branch discovered the hack after detecting unusual activity in a type of audit log available only in the top Microsoft 365 tier. A senior official with the U.S. Cybersecurity and Infrastructure Security Agency (CISA) told reporters this week that all organizations should have access to these features.

Microsoft signaled a willingness to change its approach.

“We’ve historically provided security logs to customers with options to maintain logs through Microsoft’s storage services or with other security and storage vendors based on their preferences,” a Microsoft spokesperson said in an emailed statement this week. “We are evaluating feedback and are open to other models. We are actively engaged with CISA and other agencies on this.”

Larry Hryb, better known to the Xbox player community by his gamer tag “Major Nelson,” announced Friday that he’s “taking a step back” from his job at Microsoft.

Hryb, a director of programming at Xbox Live, has worked at Microsoft since 2001 and on the Xbox project since 2003. He’s been one of the de-facto faces of the Xbox project for almost as long, as a blogger and co-host of the weekly Official Xbox Podcast, formerly known as Major Nelson Radio.

Hryb named his gamertag, Major Nelson, after Larry Hagman’s character of the same name on the sitcom “I Dream of Jeannie.” Under that name, Hryb used to maintain his own blog at majornelson.com that followed news and announcements out of Xbox, including new episodes of his podcast. He also routinely gave away free Xbox games on Friday afternoons via his official Twitter.

Whether it was presentations at trade shows or live chats with fans, Hryb was usually one of the first people you’d see onstage at Xbox events, particularly in the 2000s. During the Xbox 360’s heyday, when Hryb contributed to the New Xbox Experience redesign in 2008, it wasn’t uncommon to flip through tabs on the dashboard to see a recorded presentation by Hryb on new announcements from Xbox.

According to Hryb via his verified Twitter account, he plans to “take a step back and work on the next chapter of [his] career.” The Official Xbox Podcast will go on hiatus for the summer and come back “in a new format.”

A Microsoft representative confirmed the news to GeekWire via email.