The iPhone 3G isn't the only thing being released this week. Microsoft on Thursday will release its automatic update for Windows XP service pack 3 (SP3).

The updates are expected to hit PCs by 10 a.m. Pacific time, July 10.

"Windows XP SP3 could be released to Automatic Updates as early as Thursday," according to a Microsoft spokesman. "As with all service pack releases, Microsoft will carefully monitor the release to ensure that all customers have a good experience."

The update will not have to be reinstalled, Microsoft said.

Microsoft released XP SP3 on May 7 after a compatibility issue delayed its original April 29 release date.

Service Pack 3 adds several networking and security improvements, and compatibility with Windows Vista and Windows Server 2008 security credential providers. It also incorporates features previously available individually as separate updates, such as Microsoft Windows Imaging Component (WIC), Microsoft Management Console (MMC) 3.0, and Wi-Fi Protected Access 2.

In May, several XP users who installed XP SP3 experienced continuous re-boots.

Microsoft later said that the problem was affecting AMD-based machines with Windows XP images that were originally captured by an OE on an Intel-based machine.

"The problem is a registry value, present on images created w/ Intel processors, that causes a driver (intelppm.sys) to load at boot," according to a Microsoft Update blog entry. "When intelppm.sys attempts to load on an AMD-based system upon the install of SP3, it causes a blue screen and the continuous reboot."

Microsoft said it would add a filter to prevent the reboots.

How much information should Internet companies be able to collect about your Web activity in order to serve you more relevant and targeted advertising? An IP address? Search queries? Your system settings and browser of choice?

For most companies like Google and Microsoft, the collection of that type of data is de rigeuer. Though it is typically deleted 18 months after its collection, and executives swear that personally identifiable information will not be found in their databases, many have their doubts.

My IP address may not reveal my name or location, but if I happen to be Googling my own name, address, or place of employment, and Google retains those search terms, am I inadvertently telling the search engine exactly who I am?

"If my ISP said, 'Is it ok if we give everything you do to another company?' I'd say of course it's not ok," Sen. Byron Dorgan, a North Dakota Democrat, said during a Wednesday hearing before the Senate Commerce Committee. "Online advertising is important; I understand that [but] there are so many unanswered questions about [online] information and how people navigate the Web."

Dorgan grilled Bob Dykes, CEO of NebuAd, an online advertising company that aggregates information to serve up targeted ads. "Maybe an ISP comes in and [says], 'Whenever anyone does something on our system, we're going to shovel all that information to you as its being done. What's the difference between that and wiretapping?"

"We're compliant with the law," Dykes responded. "The information we're looking at as people surf the Web doesn't include any personally identifiable information. [We are taking] an IP address and transforming that into an anonymous number with a one-way hash. All we're keeping is the qualifications from the market segments" NebuAd is targeting.

Leslie Harris, president and CEO at the Center for Democracy and Technology (CDT), was skeptical about the anonymity of the collected data. At best, the data collected by companies like NebuAd is "pseudo-nonymous," she said.

Harris pointed to AOL, which in 2006 mistakenly released 20 million search queries that included indentifiable data. Dykes argued that that was basically because people were doing searches on houses in their neighborhoods using particular names and addresses. That is exactly the point, according to Harris.

Sen. David Vitter, a Louisiana Republican, asked the two panelists if they believed that anyone data collection process on the Internet could ensure true anonymity. Dykes said yes, but Harris did not believe so.

"If pure privacy is what you want, the Internet is probably the wrong thing for you," countered Clyde Wayne Crews Jr., vice president for policy at the Competitive Enterprise Institute, a conservative think tank.

TOKYO - Sony Corp and other Japanese companies said they will team up to jointly develop key technologies to make large-sized organic light-emitting diode (OLED) panels for use in TVs.

OLED panels, seen as promising next-generation flat displays, use organic, or carbon-containing, compounds that emit light when electricity is applied.

Unlike liquid crystal displays, OLED panels do not need backlighting, making them slimmer and more energy efficient. But makers need to clear hurdles such as cutting production costs and maximizing screen size in order to begin mass-producing OLEDs.

Sony and other firms, including a joint venture between Toshiba Corp and Matsushita Electric Industrial Co, will participate in a joint development project initiated by the Japanese government.

Details of the project, which aims to establish basic technologies for making energy-saving, high-definition OLED displays with screen sizes of 40-inch and larger, will be announced soon, participating companies said.

Other participants in the project include Idemitsu Kosan Co Ltd and Sumitomo Chemical Co Ltd.

Shares in Sony were up 1.8 percent at 4,430 yen in early afternoon trade, outperforming the Tokyo stock market's electrical machinery index, which fell 0.3 percent.

SAN FRANCISCO/NEW YORK (Reuters) - Microsoft Corp and Yahoo Inc have been holding separate talks with other potential media partners after their negotiations with each other broke down, sources familiar with the companies' thinking said on Wednesday.

Microsoft—rebuffed this year in efforts to buy all of Yahoo and then just its search business—is talking about alternative deals with Time Warner Inc, which owns AOL, and News Corp, parent of MySpace, a source close to Microsoft said, but any negotiations remain in preliminary stages.

Meanwhile, talks have continued for months between Yahoo and Time Warner over a potential merger of AOL with Yahoo to create a more formidable advertising and media player, but they are no closer to a deal, a source close to the matter said.

Shares of Yahoo jumped as much as 9 percent on Wednesday after the Wall Street Journal reported that Microsoft, positioning for a new run for Yahoo's search business, had in recent days approached media companies to join together on a deal that would effectively lead to Yahoo's breakup.

However, a Reuters source and a CNBC report, citing unnamed sources, later said there were no new talks or negotiations.

The Journal also said Microsoft met with activist investor Carl Icahn in recent days to encourage him to press his proxy battle for control of Yahoo's board, the first sign Microsoft welcomed his month-old campaign. This development also was attributed to unnamed sources familiar with the talks.

Icahn was not available to comment on the report.

Microsoft, Yahoo, Time Warner and News Corp all declined comment.

REVIVING HOPE

Wall Street analysts said the latest news revived flagging hopes among some investors that Microsoft was still interested in doing a deal with Yahoo. "The hopes that Microsoft would come back were getting crushed over the last 10 trading days," Collins Stewart analyst Sandeep Aggarwal said.

Yahoo stock ended the day up 3.4 percent at $20.88. The stock had traded as low as $19.58 on Tuesday, near its level in late January before Microsoft made its unsolicited takeover bid for Yahoo, sending the stock above $30 by mid-February.

Microsoft shares fell 3.7 percent to $25.88 on Wednesday. In the prior day's trading, Microsoft fell to two-year lows of $23.19, intraday, before recovering.

Analyst Youssef Squali of Jefferies & Co said the sharp Yahoo stock reaction was most likely a defensive move by short-sellers seeking to cover bets a Microsoft deal was off.

"Even the rumor that Microsoft is getting interested again is enough to have people to want to cover their bets against Yahoo stock," Squali said, adding that many investors have shorted Yahoo from the high $20s all the way down below $20.

Adding to the volatility were options investors who placed fresh bets Yahoo would be trading up to $27.50 by October, said analyst Rebecca Engmann Darst of Interactive Brokers Group.

THE WAITING GAME

Several financial analysts said a key detail in the Journal report was that Microsoft and Yahoo executives had sought to revisit the merger on May 17—two weeks after Microsoft walked away—and that two Yahoo board members in the meeting had said they would settle for a merger worth $33-$34 a share.

On May 3, Yahoo rejected a $33-a-share Microsoft offer worth $47.5 billion, and earlier this week questioned whether the software maker was ever serious about a full-scale merger.

The source familiar with Microsoft's thinking confirmed that Yahoo had belatedly sought a deal in mid-May worth $33 to $34, but that Microsoft was no longer interested at that point.

The source said Microsoft executives considered the early May deadline as vital to winning regulatory approval before the end of the year—when a new presidential administration arrives and months more delays would likely occur.

Microsoft also become convinced that Yahoo executives were passively resisting the deal and unwilling to seriously negotiate. Meanwhile, the economy has taken a toll on the online ad market, and with it, the value of buying Yahoo.

"Microsoft is going to let Icahn do the dirty work and hand Yahoo over to them," Jefferies & Co's Squali said, adding that it was in Microsoft's interest to hang back and let Yahoo shares settle lower as investors quit betting on a takeover premium.

In the long run, however, Microsoft needs Yahoo more than Yahoo needs Microsoft, he argued.

"Microsoft has a gaping hole in its strategy and it's called the Internet and it's only getting worse because Google is encroaching on Microsoft's business," Squali said.

Separately, the U.S. Justice Department is pursuing a formal antitrust investigation into a deal reached last month between Yahoo and Microsoft-archrival Google Inc to team up on Web search advertising.

Google, with more than 60 percent of the Web search market, and Yahoo, with 16.6 percent, agreed to a deal for Google to run search ads on Yahoo's site in a partnership that could mean $250 million to $450 million in new cash flow for Yahoo.

Google said it was confident the deal would enhance overall industry competition, but declined to discuss the probe.

(Additional reporting by Ajay Kamalakaran in Bangalore, Franklin Paul in New York, Diane Bartz in Washington, D.C., Doris Frankel in Chicago; Editing by Derek Caney, Leslie Gevirtz, Gary Hill)

TAIPEI, July 7 (Reuters) - Quanta Computer and Compal Electronics, the world's top two contract laptop PC makers, forecast a 20 percent or more jump in their third-quarter shipments from the second quarter, powered by demand from emerging markets and for low-cost PCs.

Quanta, which makes PCs for customers including Hewlett Packard and Dell, has yet to see a negative impact on its sales from the global economic slowdown, Vice President Elton Yang said on Monday.

"The main driver behind the rise is from low-cost PCs," he said at an investor event sponsored by the Taiwan stock exchange.

Compal attributed its strong outlook to growing laptop demand in China, India and eastern Europe, which would outweigh slowing U.S. demand, said Gary Lu, the company's chief financial officer.

Quanta and local rival Asustek Computer are expected to benefit from growing demand for low-cost PCs as a U.S.-led economic slowdown forces consumers to cut back on spending.

"The company (Quanta) is not being affected by the economic situation and rising manufacturing costs," Quanta's Yang said, adding Quanta's full-year target to ship 40 million laptops remained unchanged.

Last month, Quanta predicted global notebook PC shipments would grow 25 percent this year on healthy consumer demand, even though corporate demand was slipping.

It added it expected its own low-cost notebook shipments—one of its fastest growing segments—to hit around 10 million this year as top brands try to tap demand from emerging markets for 8-10 inch, cheaper PCs, known in the industry as Netbooks.

Shares of Quanta ended up 1.3 percent on Monday, roughly in line with 1.6 percent jump in the broader market . Compal's stock fell 0.6 percent.

BRUSSELS (Reuters) - Microsoft has told a European Union court that an antitrust fine of 899 million euros ($1.4 billion) against it is both excessive and disproportionate, the Court of First Instance said on Monday.

On February 27 the European Commission found that Microsoft used high prices to discourage competition, failing to carry out sanctions imposed against it as part of a long-running case. Microsoft is appealing against the fine imposed in February.

"The Commission failed to take due account of the fact that the contested decision only concludes that the royalties allegedly established by Microsoft under one particular license ... were unreasonable," the court said in summarizing Microsoft's arguments, published in the EU's Official Journal.

A Commission spokesman disagreed.

"The Commission is confident that its decision to impose the fine was legally sound," Jonathan Todd said.

The company argued that the Commission made a "manifest error" by labeling its rates as unreasonable without considering that they were "intended to facilitate negotiations between Microsoft and the prospective licensees."

As well, Microsoft and the Commission had agreed to have a trustee review the rates if need be, in a mechanism that had been used in another case, Microsoft argued.

The Commission also erred by the yardstick that it used in requiring Microsoft to establish its trade secrets were innovative, ignoring many arguments prepared by patent experts, the company said.

"The Commission also denied Microsoft's right to be heard", because it failed to give the company a chance to give its views at the end of the period for which it was fined, Microsoft said.

The Commission has said it imposed the fine because the U.S. software group had defied a 2004 order from Brussels to provide information to competitors on reasonable terms.

Microsoft has been fined a total of 1.68 billion euros by the EU for abusing its 95 percent dominance of PC operating systems through its Windows operating system.

The 899 million euro fine was the biggest ever imposed on a company by the EU executive.

The Commission initially fined Microsoft 497 million euros in March 2004 for withholding interoperability information for "work group server" software and for deliberately damaging rivals by tying its Windows Media Player to its Windows system.

Microsoft unsuccessfully appealed against that penalty and was also later fined 280.5 million euros by the Commission for non-compliance.

The latest fine picked up from where the 280.5 million euro penalty left off, covering the period from June 21, 2006 until October 21, 2007.

The company announced its appeal of the latest fine in May.

(Reporting by David Lawsky)