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A federal judge in California awarded Microsoft $4 million in a case against a spammer. The spammer was found to have illegally sent a massive number of junk emails to Microsoft's MSN and MSN Hotmail customers, deceiving email users into downloading a malicious IE toolbar. Judge Manuel Real of the US Central District Court of California ruled that the spammer violated several federal laws and, in addition to paying the fine, would have to refrain from ever email people at various Microsoft-owned domains. Presumably, Microsoft will be passing along the $4 million payment to the Hotmail users who suffered at the hands of this spammer. Ahem.

Moving to strengthen its position against Google and Yahoo!, Microsoft said yesterday that it bought a company that makes software for searching through e-mails and other computer files.

The acquisition of Palo Alto, Calif.-based Lookout Software LLC will bring new technology into Microsoft's MSN Search initiative, the company said. In addition, one of Lookout Software's founders will join Microsoft as an employee working on the MSN Search team. Microsoft declined to disclose the price it paid.

Microsoft announced on Thursday that it now has more than a million subscribers for Xbox Live, the online gaming service for the company's video game console. Microsoft launched Xbox Live in late 2002 as a high-stakes bid to reshape the game industry and to distinguish its console.

While the service is primarily designed for game-playing, it also includes voice and video capabilities and is considered a major part of Microsoft's plans to take over the digital living room. Microsoft cleared a significant hurdle to Xbox Live adoption earlier this year when it recruited leading game publisher Electronic Arts, which had objected to Microsoft's business model for the service.

Microsoft CEO Steve Ballmer spoke to thousands of ISVs, solution providers and other partners Tuesday at the company's Worldwide Partner Conference in Toronto. He then sat down with CRN Editor Heather Clancy and Industry Editor Barbara Darrow to talk about the company's challenges and opportunities going forward.

Q: We'd like to start with some market segmentation you talked about and ask you to relate it to licensing policies, how you might have to change licensing to better serve different segments if you will. Why are you smiling?
Ballmer: [Laughs] I'm a reformed man. I don't change licensing policies. I avoid licensing policy changes like the plague at this stage.

In a move that advances instant messaging (IM) interoperability, Microsoft will open up communication between its enterprise IM server and the public consumer-oriented IM networks run by its MSN division and by rivals Yahoo and America Online.

Microsoft is announcing Thursday that Live Communications Server (LCS) 2005, due to ship during this year's fourth quarter, will allow users to exchange instant messages with users on AOL's AIM, Yahoo Messenger and MSN Messenger. "This has been the top request from our corporate customers. They have clearly told us that anything we could possibly do to make this happen would make them the happiest," said Taylor Collyer, Microsoft's senior director for LCS.

A car on every road and in every garage running Microsoft software?

Not yet, but the Redmond company will take a step in that direction today, announcing a partnership that will make a system running its Windows Automotive software available for every vehicle model from one of Europe's biggest automakers.

The deal with Italy's Fiat Auto -- the company behind the Fiat, Lancia and Alfa Romeo brands -- is the biggest in the eight-year history of Microsoft's automotive business unit.

Microsoft has provided a sneak peek of new features in the next version of Microsoft Operations Manager (MOM) 2005. The message: The brand new look with MOM comes with an ability to monitor your systems' health like never before. MOM is an application that provides event and performance management, application monitoring and reporting features for the enterprise.

According to Copeland, MOM is used and proven by Microsoft's own IT services that use it across the Microsoft corporate environment. "You're getting Microsoft best practices out of the box," he said.

Speaking at the company's annual partner conference in Toronto on Tuesday, Microsoft chief executive Steve Ballmer argued that promising a delivery date for Longhorn that the company couldn't actually hit would be unfair for customers and partners and would make the whole Windows upgrade cycle even more painful. "We are going to be as transparent as we can be, but we are not promising a final ship date today," he said.

Although much has been made of the challenges Microsoft faces in readying the next version of Windows, CEO Steve Ballmer said that "big bets" like Longhorn are not a reason for concern.

Rather, Ballmer said the time the alarm bells should go off is when Microsoft starts saying such technological leaps are not worth the risk.

"I think the day we say that to you, you ought to worry," Ballmer told thousands of partners gathered for the Worldwide Partner Conference here.

Microsoft released a tool yesterday for removing a particularly pesky computer virus -- but was not yet able to offer a software patch to prevent the infection from spreading. Stephen Toulouse, a security program manager with Microsoft, could not say when the patch to thwart the virus, called "download.ject," might be completed. The virus was discovered in late June and exploits a vulnerability in Microsoft's Internet Explorer browser.