Microsoft and Google reached an agreement to settle the dispute on Google's employment of Mircrosoft's former employee Lee Kai-Fu.

Microsoft sued Google, claiming it had violated non-competition agreements after it poached Lee, who was the head of its research operation in China.

Google counter-sued saying that it had done nothing wrong and that Microsoft was using the legal system to act unfairly.

Microsoft has started limited testing of Windows Live Messenger, an update that expands the consumer instant messaging software into areas such as Internet phone calling.

Various enthusiast sites, including Mess.be and BetaNews, reported that a private beta of Live Messenger is imminent, while another fan site, Messenger Blog, offered purported screenshots of the new software. Microsoft initially declined to comment, but the company had promised a beta version would come shortly.

Search engine users could get a cut of the online action, Gates suggests.
In an effort to draw business away from Google, Microsoft announced plans to share some of its online advertising revenue with consumers who use its Internet search engine.

Gates said that search engines like Google get their revenues from advertising because people use these search engines.

Microsoft Corp.'s MSN and MCI Inc. said they are teaming up to extend the reach of MSN's instant-messaging service into the crowded global computer-to-phone call market.

The companies are the latest to enter the market for calling using personal computers. Those in the market include Skype, recently purchased by eBay, along with Google and Yahoo.

But the service will permit only outbound calls at first, even as rivals Yahoo Inc. and America Online Inc. allow instant messaging users to receive calls from conventional phones as well as to call out.