The national flag of China flies in front of the former headquarters of Google in Beijing, July 1, 2010.

Credit: Reuters/Jason Lee

SAN FRANCISCO (Reuters) - Google Inc said its earlier report that Internet search services in China were being fully blocked could have been the result of a technical glitch that overstated the problem.

Google shares pared losses to 1 percent from a 1.6 percent decline earlier on Thursday after the company said on its website that its Internet search, mobile and advertising services could not be accessed in China.

The sell-off underscored investors’ ongoing concerns about the fragility of Google’s position in the country, after the company had a very public dispute with Beijing over Internet censorship earlier in the year.

However, some Internet users in the country reported no problems accessing the Chinese-language search page Google.cn.

Google later said in an emailed statement, "Because of the way we measure accessibility in China, it’s possible that our machines can overestimate the level of blockage."

"That appears to be what happened last night when there was a relatively small blockage. It appears now that users in China are accessing our properties normally," the company added.

The world’s No. 1 Internet search engine has been reporting sporadic disruptions to its mainland China services since it threatened in January to pull out of the country because of its Internet censorship practices and after a cyber-attack.

Google provides public updates about the availability of its services in China through a special website, here

Google generates a tiny portion of its nearly $24 billion in annual revenue in China, where the company lags home-grown search powerhouse Baidu Inc.

But China, the world’s largest Internet market by users, represents an important growth opportunity for Google, which has seen its growth slow in mature markets like the United States and Western Europe.

Access to Google’s various online services have long been spotty in China. In recent months, Google has reported partial blocking of access to its search, mobile and news services on many occasions.

"The last two or three months what we are seeing is nothing but posturing. It’s posturing by Google and it’s posturing by the local regulators there," said Caris & Co analyst Sandeep Aggarwal.

"Google is a truly global company and if you’re a global company you cannot not operate in the world’s largest Internet population," he said.

(Additional reporting by Paul Thomasch, Yinka Adegoke, Alex Dobuzinskis, Leah Schnurr and Melanie Lee; Editing by Tim Dobbyn, Tiffany Wu and Richard Chang)

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Wed, Jul 21 2010

Packages of the new Windows operating system, Windows 7 sit on a desk before being installed in Golden, Colorado in this October 22, 2009 file photo.

Credit: Reuters/Rick Wilking

NEW YORK (Reuters) - Signs point to strong results for Microsoft Corp as companies get around to buying computers after a two-year drought, but its stock may find it tough to gain altitude amid worries about where growth will come from in coming years.

Intel Corp smashed Wall Street’s expectations last week, pointing to resurgent demand from corporations for computers and servers. But IBM disappointed on Tuesday with weak technology services signings, in a surprise hint of weakness in IT spending.

Investors appear to have anticipated good news from Microsoft — whose stock has outperformed in July — but are now demanding to see more from a company struggling to make its mark in the pivotal and fast-growth areas of smartphones, tablet computers and search advertising.

Microsoft will announce fiscal fourth-quarter results on Thursday.

The company is gearing up to launch new phone software to catch Apple Inc and strives to raise consumers’ pulses with a range of Windows-powered tablet devices and its untested Kinect motion gaming platform.

Meanwhile, its Bing Internet search engine is posting solid market share growth but remains miles behind Google Inc.

"Everyone knows that Microsoft is going to have a pretty big quarter, but there’s really not a lot to get excited about beyond that," said Toan Tran, an analyst at Morningstar. "We know PCs are doing well so Windows is going to do well. Beyond Windows 7, what does Microsoft have going?"

Microsoft’s shares are up 10.4 percent this month, surpassing a 7.5 percent rise in the Standard & Poor’s 500 and an 8.3 percent rise in the Nasdaq. But they are sitting around the $25 mark — where they were a year ago — and well below the heights achieved during the tech-stock boom a decade ago.

Apple, which has seen its stock soar over the past several years with a string of highly popular consumer electronics products, made waves in May when it passed Microsoft as the world’s most valuable technology company. Analysts say it may now surpass Microsoft in revenue as well.

StarMine data shows the stock has tepid upside momentum, assigning it a long-term momentum score of 40 out of 100.

TECH SPENDING RETURNS

Data from Thomson Reuters StarMine show that analysts’ estimates for Microsoft’s earnings have been creeping up as more optimistic signals emerge over the past three months.

Analysts expect earnings of 46 cents per share, excluding items, on sales of $15.3 billion in the fiscal fourth quarter, according to Thomson Reuters I/B/E/S. That is well above 36 cents per share on revenue of $13.1 billion a year ago.

SmartEstimates — which puts more weight on the timeliest estimates from the most accurate analysts — suggest Microsoft will deliver profit about 1.6 percent above average estimates.

When companies buy PCs, they often install new — and more expensive — versions of Microsoft software, which has a direct effect on its margins. Global PC sales surged 22.4 percent in the second quarter, industry tracker IDC said this week, helped by strong demand from businesses.

Microsoft said this week it has already sold more than 150 million copies of its Windows 7 operating system since launching it October. Chief Executive Officer Steve Ballmer said he expected sales of 350 million PCs running Windows this year, confirming its status as the fastest-selling operating system ever.

"Corporate PCs are starting to pick up. Intel validated that," said Kim Caughey, senior analyst at Fort Pitt Capital Group. "A lot of companies are thinking, these old PCs are sucking the life out of my IT department, lets get a new generation of these things in here’."

Another potential growth driver is Microsoft’s Xbox 360 gaming console, which competes with Nintendo’s leading Wii and Sony’s PlayStation. Analysts are cautiously upbeat on "Kinect", which is selling in time for the holiday season. Though at $150 deemed costly by some, others say it could take the gesture-gaming concept popularized by the Wii to a new, controller-free level.

(Editing by Edwin Chan, Bernard Orr)

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DENVER (Billboard) - Internet search engines pride themselves as being neutral providers of information.

But as competition mounts to own the connection between fans and online content, tech behemoths like Microsoft and Google increasingly are turning to their search engines to help drive their entertainment content strategies.

In June, Microsoft launched a new entertainment vertical to its Bing search engine, which among other things aggregates full-track streaming from Zune, details on upcoming tours and buy links within the results for any artist, album or song search.

Google put together a similar package last year and is now building a music download service of its own that would be tied to its search engine and Android mobile operating system.

Given the high volume of entertainment-related queries that the search engines handle, it was only a matter of time before they took bold steps into the space. According to Microsoft, 10 percent of all Internet search queries are entertainment-related, with music lyrics alone accounting for 70 percent of those searches.

With the Bing upgrades, Microsoft is trying to position itself as a better entertainment discovery tool than Google. While both Google and Bing have links to stream full songs found in search results, Bing has the more complete package with additional details on tour dates, lyrics and buy links.

However, all that may change once Google gets its music act together. Sources confirm that later this year Google will launch a music download service that’s tied to its search engine. Currently, music searches on Google link to full-song streams provided by MySpace Music, as well as Twitter feeds and other information, which it launched late last year.

Exactly what Google has planned is unclear, but a hint was given during a developers conference for the company’s Android mobile platform in May. At the event, Google announced the acquisition of Simplify Media, a content-synching technology that the company demonstrated can be used to automatically synch and stream music purchased online to any Android phone containing the technology.

Whether this is an interim step toward an eventual streaming subscription service is unclear, and Billboard hasn’t confirmed any additional details on this point.

Potentially interfering with both plans is an increasingly aggressive effort by the recording industry to have search engines remove links to infringing material. BPI, the trade group representing U.K. record labels, raised the stakes in June by issuing a takedown notice to Google, demanding it remove links to 17 songs from third-party websites it deems infringing, such as RapidShare and MegaUpload. Google hasn’t yet responded, but its next steps will be telling.

Should Google comply, it would set a precedent that will almost certainly result in a flood of additional takedown notices from every music label and publisher eager to eliminate pirate links on the world’s most popular search engine. If it refuses, there could be another court fight coming as big if not bigger than the $1 billion lawsuit Viacom brought against YouTube — which itself is heading to appeal after Google recently won a summary judgment to dismiss the case.

As for Bing, Microsoft senior VP of online services Yusuf Mehdi assures the music industry that it will comply with any takedown requests, but has no plans to alter the search algorithm that determines search results.

"We’re pretty true to the algorithmic ranking in the Web results," Mehdi says. "We’re obviously not going to surface that kind of stuff in the Bing box, but the algorithm that determines relevancy of search results we’ll stick with."

While Bing’s moves are interesting, it’s Google that has the market-moving leverage. According to the most recent data from information services firm Experian Hitwise, Google’s search engine in May led the pack with 72 percent U.S. market share, with Yahoo second (14.4 percent) and Bing third (9.2 percent).

But when it comes to music, all of them stand in the shadow of Apple, which still commands 70 percent of digital music download sales in the United States, according to NPD Group. While Apple has no presence in online search (yet), both Microsoft and Google are competing with Apple on the rapidly growing mobile platform — Google with Android and Microsoft with the new Windows Series 7.

Successfully tying together a cloud-based music service with an online search and discovery system and a path to mobile phones — not to mention advertising around it all — is the digital content battlefield of the immediate future.

(please visit our entertainment blog via www.reuters.com or on blogs.reuters.com/fanfare/)

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(AFP/File) - Mario Queiroz, Vice President of Product Management for Google, holds up the Nexus One smartphone. The battle for leadership in Asia’s search engine market will shift from computers to mobile phones as more and more Asians use their handsets to go online, a Google executive said.(AFP/File/Robert Galbraith)