That’s not to say it’s a particularly good or bad idea to hire a former Dreamworks and Wal-Mart (WMT) exec named David Porter (pictured here) as vice president of retail stores to create Microsoft-branded stores–or as the company announced yesterday, “to create a better PC and Microsoft retail purchase experience.”

While Microsoft (MSFT) sells most of its consumer products via big-box retail stores like Best Buy (BBY), and the retail market for just about everything is weak, Apple (AAPL) has definitively proven that a well-designed retail store can be a powerful marketing tool.

The visually stunning and infectiously fun Apple stores, in fact, have been an important part of its recent surge in mainstream consumer appeal, becoming hubs of activity and even social life in its mostly big-city locations.

In fact, that was just the idea behind microsoftSF, which was located in San Francisco’s Metreon Sony Entertainment Center.

The huge 8,500-square-foot store, with 160 Microsoft products and related software and hardware from 30 partners, was billed in a June 1999 press release as “an interactive, hands-on retail environment in which people of all ages, from all walks of life and at all levels of technological expertise can explore the benefits technology can bring them. Far more than just another computer store, microsoftSF is a showcase for the latest technology from Microsoft and the hardware and software companies with which it collaborates.”

The microsoftSF store, which I visited several times (but bought nothing, although I was mostly a PC user at the time), was very attractive and the only such store in the world, with a “Road Warrior” arena, a lounge, a gaming area and more.

Said the press release: “To make all this possible, microsoftSF deploys Microsoft Windows and more than 100,000 feet of copper cable, 60 Sony PCs, 18 laptop docking stations, four dual-processor servers powered by Hewlett-Packard Net Servers, a Cisco Systems network, and an array of hidden audio speakers that create 16 individually controlled sound zones.”

And Microsoft CEO (then President) Steve Ballmer weighed in enthusiastically:

“We are delighted to be able to showcase in this one-of-a-kind retail environment the entire range of Microsoft software and hardware, as well as the technology of other companies who share the vision of how the PC and the Internet can empower people any time, anywhere. San Francisco and the Silicon Valley are home to the world’s largest and one of the most sophisticated high-tech audiences, so this was the natural place to create this site–dedicated to showing, in an interactive environment, the way technology can enhance our working, learning, living and playing.”

Not so much, as it turned out. The store closed in 2001.

But that does not necessarily mean that the new and much expanded efforts will have the same experience. The Metreon, which was sold off by Sony, was an odd mall then and still is, although its movie theater is successful.

And, in this effort, Microsoft will have control of the whole enchilada.

Plus, if well done, it is not such a bad idea to have a place–perhaps only in highly-trafficked locations in big cities–to show off its consumer wares, especially its popular Xbox 360 and other products (please, not the Zune!).

More importantly, given the disaster that has been the Windows Vista experience, it is probably a good idea to have a place to get people interested in Windows 7, especially its touch capabilities, when it rolls out this year.

Also, I still like the Surface interactive table, even if it is mocked in a popular video as a “big-ass table.”

Of course, only Apple stores have done well so far in this genre, as everyone, from Gateway (GTW), Sony (SNE), Nokia (NOK), Helio and Palm (PALM), has had rough retail experiences.

So, Porter certainly has his work cut out for him, at least judging from the press release from Microsoft yesterday:

“Defining the time frame, locations and specifics for planned Microsoft-branded retail stores will be Porter’s first order of business. The purpose of opening these stores is to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy.”

Said Porter: “There are tremendous opportunities ahead for Microsoft to create a world-class shopping experience for our customers. I am excited about helping consumers make more informed decisions about their PC and software purchases, and we’ll share learnings from our stores with our existing retail and OEM partners that are critical to our success.”

He’ll have to wait to see if the second time is a charm.

For all the noise, it’s worth paying attention, because Monday’s outlook will be cloudy, as in cloud computing.

The day will include a speech from Microsoft’s Chief Software Architect, Ray Ozzie (pictured here), and others on, among other topics, its cloud infrastructure service initiatives–designed to match aggressive efforts from Amazon (AMZN) in the space.

There will also be a demo of Windows 7, which will hopefully put an end to the long Vista nightmare when it is eventually released. (To be ahead of the curve, see a video below of Microsoft’s CEO Steve Ballmer and founder Bill Gates showing Windows 7 off at our sixth D: All Things Digital conference in May.)

In all, a Windows geekfest!

Microsoft (MSFT) execs will probably be in a good mood given the decent earnings results the company announced earlier this week for the third quarter. Revenue was up nine percent to $15 billion, even though net profits only increased 1.9 percent to $4.37 billion.

Still, that was a pretty good performance in a down economy, due to strength in Microsoft’s powerful Windows and Office franchises. And despite–as usual–the weakness of its online division.

While the revenue for its MSN, search and advertising network grew to $770 million, or up 15 percent in the quarter, operating losses doubled to $480 million from $267 in the same period a year ago. Search grew more than display advertising, a forward outlook Microsoft that maintained.

And still no digital chief, long promised by Ballmer, in sight either. Sources said that head, who will lead the unit, has still not been selected. (BoomTown is officially beginning to feel sorry for longtime leading internal candidate Brian McAndrews.)

While PDC has never been an online-focused event–this is for the big-dog businesses of Microsoft–it will still be interesting that the event will focus on continued movement toward the cloud.

It’s an inevitable–though decidedly dicey–journey for the software-dependent behemoth. So, the continued transformation should be interesting to watch.

Here is the Windows 7 demo from D6:

G.ho.st, which stands for “Global Hosted Operating System,” is claiming it has a pending trademark registration for the tagline “no walls.”

G.ho.st has used the phrase for almost 18 months and is alleging that it pertains specifically to operating systems (as shown in the screenshot here).

In a letter sent earlier this week to Microsoft CEO Steve Ballmer and many others, which BoomTown has obtained, G.ho.st CEO Zvi Schreiber claims that the software giant has violated G.ho.st’s pending trademark for the ad phrase “no walls” and asks Microsoft (MSFT) to remove it from the company’s marketing materials.

Microsoft’s advertising campaign, which launched this month and had a rocky start with poorly received commercials featuring comedian Jerry Seinfeld and Microsoft Founder Bill Gates, uses the taglines “Imagine No Walls” and “Life Without Walls” to tout its Vista operating system. (See a screenshot of one example below; click on it to make it larger.)

G.ho.st, which is hosted by Amazon (AMZN), is yet another of many attempts to make cloud computing real and is competing to grab customers from the software-based Windows powerhouse.

A Microsoft spokesman, in an email to me, dismissed G.ho.st’s claims.

He said:

“We are aware of their concerns and believe their claims have no merit. We are not aware that Ghost has any trademark registrations or other rights that would be infringed by our ‘Life Without Walls’ campaign. To our knowledge, the right they have asserted, namely, a U.S. ‘registered trademark application,’ in the phrase ‘No Walls,’ does not exist.

“To our knowledge, Ghost has no trademark registrations or other rights in the phrase ‘No Walls.’ Even if they did, they cannot prevent others from using the words ‘no walls’ together in a sentence or in a descriptive manner in ad copy. Nor can they claim ownership in word ‘wall’ or the idea of a wall. The tagline for Microsoft’s new ad campaign is ‘Life Without Walls’–a slogan that, taken in its entirety, is not confusingly similar to Ghost’s purported ‘motto.’”

G.ho.st launched at our D: All Things Digital conference this past May (where Ballmer and Gates also appeared).

Here are two videos showing the start-up’s whole demo:

And here’s G.ho.st CEO Zvi Schreiber’s full email letter to Ballmer (with email addresses and other personal information redacted):

From: “Zvi Schreiber (G.ho.st)”
To: [Steve Ballmer]
Cc: [redacted]
Sent: Wednesday, September 24, 2008 12:15:41 AM (GMT+0200) Auto-Detected
Subject: G.ho.st Virtual Computer NO WALLS trademark

[4] E.g. http://www.microsoft.com/windows/
http://www.microsoft.com/windows/possibilities/products/default.aspx?vindex=2
http://www.microsoft.com/windows/possibilities/default.aspx?ocid=ftp

Here are videos of three of the new “I’m a PC” ads from Microsoft’s next phase of its Vista-doesn’t-bite advertising campaign.

You can decide if you like them or not. But BoomTown is declaring them a vast improvement on the quirky initial commercials that featured Microsoft Founder Bill Gates and comedian Jerry Seinfeld.

Microsoft has insisted that those three ads, which attracted a chorus of critics, were just a “teaser” to this second phase of a $300 million ad campaign, in which the software giant seems to be returning from its short visit in hipville to a more normal marketing message.

And these new Microsoft (MSFT) ads are definitely normal and more clear, having an it’s-a-small-world-after-all panoply of people declare that they are all PCs.

The message is aimed at attacking the more elitist message of Apple (AAPL) ads, which have effectively mocked PC guy relentlessly over the years as an oaf.

In Microsoft’s ads, its own PC guy complains at the start of each that “I’ve been made into a stereotype.”

The ads proceed to show regular folk with some celebrities mixed in (including Gates, TV hottie Eva Longoria and feel-good author Deepak Chopra), all proudly declaring their PC affiliation.

While the ads feel like they are tapping a little too much into that uneasy red-state-blue-state vibe–as if we need more of that–they’re also nicely done, thankfully, although not particularly new or innovative.

Which, after the Gates/Seinfeld oddity, is a good thing.

Here are three of the new ads (click them all at once for an even better experience!):

While the very quirky ads recently rolled out by Microsoft to tout itself–starring Microsoft Founder Bill Gates and comedian Jerry Seinfeld–got a ton of hype, it turns out there will be no more than than the three already released for now.

It seems the churros have gone cold.

According to a Microsoft (MSFT) spokesman, the Seinfeld advertisements were apparently just a warmup for more to come tomorrow, though the new ones will not use Seinfeld in any significant way.

But they might still feature Gates and Seinfeld could return.

But the main Seinfeld/Gates pairing was, said Microsoft, just a “teaser” for the next phase of the $300 million campaign to tout its beleaguered Windows Vista operating system.

[UPDATE] Said Microsoft in an official statement: “We will be executing the second phase of our advertising campaign tomorrow, as planned from the start.”

The company said upcoming personalities in the new ads will include feel-good author Deepak Chopra, television star Eva Longoria and musician Pharrell Williams, and they will also use Microsoft’s own version of the dumpy PC guy character to attack Apple’s hugely successful Mac/PC ads.

BoomTown is dubious, to say the least, that Microsoft can be more clever than Apple (AAPL) in the marketing arena. And by dubious, I mean its chances are as good as Lehman Bros. rising from its financial grave.

News of the development was first reported by Valleywag, which said in its post title that the ads were canceled, which is untrue.

But Microsoft’s rep stresses that this was the plan all along, to jump-start the marketing conversation, even though the ads have, in fact, not gotten a lot of praise.

You be the judge. Here are the three ads. The first with the churros joke and the second and third visit with a family, combined:

Here is the full memo Microsoft CEO Steve Ballmer sent out to the troops about the big changes in its organization, including the departure of Platforms and Services Division President Kevin Johnson, in which he addresses Apple, Yahoo, Google and more:

From: Steve Ballmer
Sent: Wednesday, July 23, 2008 4:30 PM
To: Microsoft–All Employees
Subject: FY09 Strategic Update

I also have news about an organizational change and a transition in our Senior Leadership Team.

First, I want to thank you for your hard work and the dedication you showed during the past 12 months. FY08 was a milestone year. Our revenue jumped $9.3 billion to more than $60 billion. Operating profit grew 21 percent to $22.5 billion.

These outstanding numbers are the direct result of your commitment to the priorities I outlined last July. A lot has happened since then, but our fundamental strengths, challenges, and strategic goals remain largely the same. Therefore, my priorities are consistent with last year. In FY09 we must continue to:

1. Invest in the right opportunities;

2. Expand our presence with Windows, Office, and developers;

3. Drive end user excitement for our products;

4. Embrace software plus services; and

5. Focus on employee excellence.

By focusing on these five areas, we can continue to grow revenue, increase profit, and expand our market share. These priorities are also critical as we work to address key issues surrounding our business in the coming year:

· Windows: The success of Windows is our number one job. With SP1 and the work we’ve done with PC manufacturers and our software ecosystem, we’ve addressed device and application compatibility issues in Windows Vista. Now it’s time to tell our story. In the weeks ahead, we’ll launch a campaign to address any lingering doubts our customers may have about Windows Vista. And later this year, you’ll see a more comprehensive effort to redefine the meaning and value of Windows for our customers.

We also have to drive developers to create rich applications for Windows. With Internet Explorer and Silverlight, we have great tools for creating applications that run everywhere. But we also need to make sure developers have the .NET skills to write unique Windows applications using Windows Presentation Foundation. To keep today’s Windows applications alive, vibrant, and exciting, we need both—applications that run everywhere and rich client applications.

· Apple: In the competition between PCs and Macs, we outsell Apple 30-to-1. But there is no doubt that Apple is thriving. Why? Because they are good at providing an experience that is narrow but complete, while our commitment to choice often comes with some compromises to the end-to-end experience. Today, we’re changing the way we work with hardware vendors to ensure that we can provide complete experiences with absolutely no compromises. We’ll do the same with phones—providing choice as we work to create great end-to-end experiences.

· Business and enterprise: Our enterprise and server business has never been stronger—today we are on the verge of becoming the number one enterprise software company. We need to continue to push on all fronts—mail with Exchange, business intelligence with PerformancePoint, virtualization with Hyper-V, and databases with SQL Server. We have to drive our enterprise search capabilities, our unified communications solutions, and our collaboration technologies. And we must continue to compete against Linux in key workloads such as Web servers and high performance computing.

· Software plus services: Some people think software plus services is all about search. But it’s really about changing the way software is written and deployed. The future is about having a platform in the cloud and delivering applications across PCs, phones, TVs, and other devices, at work and in the home. It’s also about driving change in business models through advertising, subscriptions, and online transactions. Software plus services is a huge opportunity for us to deliver new value on the desktop and the server to all of our customers. This year at PDC, you’ll hear more about our cloud platform initiatives and the next versions of our Live and Online technologies.

· Google: We continue to compete with Google on two fronts—in the enterprise, where we lead; and in search, where we trail. In search, our technology has come a long way in a very short time and it’s an area where we’ll continue to invest to be a market leader. Why? Because search is the key to unlocking the enormous market opportunities in advertising, and it is an area that is ripe for innovation. In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas—we’re already seeing this in our maps and news search. Third, we are going to reinvent the search category through user experience and business model innovation. We’ll introduce new approaches that move beyond a white page with 10 blue links to provide customers with a customized view of their world. This is a long-term battle for our company—and it’s one we’ll continue to fight with persistence and tenacity.

· Yahoo: Related to Google and our search strategy are the discussions we had with Yahoo. I want to emphasize the point I’ve been making all along—Yahoo was a tactic, not a strategy. We want to accelerate our share of search queries and create a bigger pool of advertisers, and Yahoo would have helped us get there faster. But we will get there with or without Yahoo. We have the right people, we’ve made incredible progress in our technology, and we’ll continue to make smart investments that will enable us to build an industry-leading business.

As I mentioned earlier, I have important organizational news. Today we are announcing that the Platforms and Services Division will be split into two businesses: Windows/Windows Live and Online Services. We are also announcing that Kevin Johnson will leave the company. He will work to ensure a smooth transition.

Since 1992, Kevin has been a key contributor to many of this company’s most important achievements. As president of the Platforms and Services Division, Kevin has built an incredibly talented organization and laid the foundation for the future success of Windows and our Online Services Business. Over the last 16 years, through everything from his work as head of the company’s worldwide sales, marketing, and services efforts, to his leadership in transforming our field operations and repositioning the company to focus on opportunities in emerging markets, Kevin has played a vital role in this company’s success. There is no doubt that his passion and dedication will be missed.

Effective immediately, Steven Sinofsky, Jon DeVaan, and Bill Veghte will report directly to me to lead Windows/Windows Live. In the Online Services Business, we will create a new senior leadership position and conduct a search that will span internal and external candidates. In the meantime, Satya Nadella will continue to lead Microsoft’s search, ad platform, and MSN engineering efforts, and Brian McAndrews will continue to lead the Advertiser and Publisher Solutions Group. Both Windows/Windows Live and the Online Services Business are led by a strong group of executives on the technical and business side who have the talent and experience to address the challenges we face and drive the next generation of growth and success.

Looking ahead, I see an incredibly bright future for our company. As I said at the June 27th Town Hall for Bill, we are the best in the world at doing software and nobody should be confused about this. It doesn’t mean that we can’t improve, but nobody is better than we are. Nobody works harder than we do. Nobody is more tenacious than we are. We’re investing more broadly and more seriously than anybody else. Our opportunities to change the world have never been greater.

I look forward to working with all of you as we focus on our five priorities in FY09.

Steve

Kevin Johnson (pictured here), the point person for Microsoft’s failed bid to buy Yahoo, is leaving the company to run Juniper Networks.

As the president of its Platforms and Services Division, the smooth Johnson has been trying, without much success, to beef up the software giant’s efforts in the Web space, especially in the online advertising arena.

He and Microsoft have had a little problem with that, largely due to an immovable object called Google.

In an attempt to make an end run around the search behemoth, Johnson led Microsoft’s attempt to take over Yahoo, the #2 player in the search and search advertising space.

The six-month effort, according to many sources at Microsoft, has led to a great deal of unrest at the company, including ire aimed directly at Johnson because of his perceived influence on CEO Steve Ballmer.

That got worse as Microsoft’s various tactics to grab Yahoo and later just its search business have failed again and again.

In truth, Johnson’s strategy of using Yahoo as an “accelerant” has been a sound one, playing to Microsoft’s strengths.

It includes a focus on servers (muscle), software (technology) and scale (bigger is better) that is tailor-made for giant like Microsoft, which must both jumpstart is long-suffering online services business and also keep its powerful Windows brand from weakening.

Microsoft’s recent Vista version of Windows has not been well-received, despite Microsoft’s claims that it is a success.

The company is now currently working on its roll-out of the next operating system, Windows 7. It will include touch technology and also be more integrated to its Live offerings.

In a memo to Microsoft troops today, Ballmer wrote: “The success of Windows is our number one job.”

At the same time, Microsoft has been trying to improve its online business, especially in search and display advertising. But its market share in the search market, for example, has persistently stayed under 10 percent.

Over the last year, Microsoft has tried to move forward via acquisition, such as its $6 billion purchase of online ad marketing firm aQuantive last August. It has also introduced new search innovations like a cash-back program.

But, most of all, it has zeroed in on Yahoo, which has a share in the mid-20s, in order to give it a better chance to compete with Google, the dominant market leader.

After first trying to buy Yahoo in a bit of a ham-handed manner, it turned to a plan to buy its search business.

That proposal has been rejected by Yahoo twice as not good enough for a variety of reasons, some better than others.

The hubbub sent Yahoo into the arms of Google, with which it struck an outsourcing ad search deal, which has attracted a lot of controversy, but will likely go forward.

Welcome to Microsoft’s nightmare!

With archrival Google allied with Yahoo, Microsoft has succeeded in burnishing its image as a Web also-ran and still has an uncertain path to change that.

What Microsoft will do next is unclear, as it now probably has to focus on getting its own house in order, before facing outward again.

To begin, the company said, Johnson’s large unit–which includes the powerful Windows division, as well as the online services business–will be reorganized into two parts.

The Windows and Windows Live online service will be one part and other will be made up of online advertising, search and MSN.

Perhaps in a sign to its troops and Wall Street–Microsoft’s stock has been swooning of late, due to its recent disappointing results–CEO Steve Baller will take over the Windows unit.

Reporting to him will be SVPs Steve Sinofsky (engineering), Jon DeVaan (development) and Bill Veghte (business).

Microsoft will search for a new head of its online business, who will also report directly to Ballmer. Until then, SVP Satya Nadella will run search, MSN and ad platform engineering efforts and SVP Brian McAndrews will continue to lead the Advertiser and Publisher Solutions Group.

Hey, Jerry Yang is looking pretty stable in comparison right now, doesn’t he?

Please see this disclosure related to me and Google.