Founders Niklas Zennstrom and Janus Friis agreed to drop litigation against eBay over patents used within Skype following weeks of tense negotiations.

As a result Joltid and Joost, their two companies, will hold a 14pc stake in the business once it is spun off, with private equity investors led by Silver Lake Partners and the Canada Pension Plan Investment Board (CPPIB) owning 56pc.

The consortium also includes Andreessen Horowitz, the venture capital fund co-run by Netscape creator Marc Andreessen. However, it will not now include Index Ventures, against whom the two Skype founders had filed a separate lawsuit, alleging it used confidential information to assist in the consortium’s original bid for Skype.

eBay will retain a 30pc stake in the business, which it is spinning off in order to focus on its core retail auction site and its payments business, PayPal.

The deal values Skype at $2.75bn, slightly above the $2.6bn eBay paid for it in 2005. The online auctioneer will receive $1.9bn in cash, plus a $125m note.

Shares in eBay rose 17 cents to $23.41 in morning trading.

Julie Larson-Green is relieved. As corporate vice president of “Windows Experience” at Microsoft, she has just overseen the successful launch of Microsoft’s new operating system, Windows 7.

The software, which went on sale last month, has been a hit with both computer users and technology experts; early sales of the new operating system are 234 per cent higher than sales of Windows Vista, its much-maligned predecessor.

Microsoft acknowledges that it made mistakes with Windows Vista, and there was huge pressure on the computing giant to produce a winner with Windows 7. Larson-Green, who arrived just as Vista was being sent to retailers, saw it as a clear opportunity to go rethink the way the development teams worked.

Instead of organising engineers into separate groups focused on things such as search, security and networking, Larson-Green realised a more “end-to-end” approach was needed.

“We grouped people based on what pieces of software needed to work together, rather than around specific feature deliverables,” she says. “In the past, there might have been a media team that was responsible for all the things around media. But this time, part of what the media team worked on was in the graphics team area, and some was in the devices area.

“Each team had its technology mission for the area of the code that they were responsible for, and we planned Windows as an end-to-end experience rather than each individual team planning what they were going to do and pulling it all together.”

The idea was hardly revolutionary, but for a company like Microsoft, entrenched in established ways of doing things, Larson-Green’s arrival was a breath of fresh air. “I’d been working on Office and had never worked on an operating system before. I spent a lot of time learning about the market, the challenges, the people on the team,” she admits.

Vista, she says, had a “rough patch” at launch. It had been in development for a long time, and “a lot of things had changed in the world during that time”. That forced the Windows development team to go back to the drawing board with Windows 7, says Larson-Green. “We had to ask ourselves, everything we know to be true, is it still true?”

The team crunched huge amounts of data about user behaviour to see which areas needed to be improved and tweaked. Cutting down the amount of time it took for the computer to get online was a major focus.

“The number one thing people do is connect to the internet,” she says. “We looked at the start-up process, thinking through what things needed to be loaded in what order. We wanted to make sure your internet connection was done very early in the start-up cycle.”

They also tried to create an operating system with manners. Larson-Green said she didn’t want any interruptions in the flow of what people do, so that meant fewer annoying pop-ups, which users loathed.

It would be wrong to dismiss Larson-Green’s empathetic approach to system design as typical female “soft skills”; in truth, her career path has given her a more rounded view of the software industry than many of her peers.

At school, she says, she was always the girl who was good at maths. Larson-Green grew up in Washington state, the home of Microsoft. After deciding to study computer science at Western Washington University, she had to switch courses. “I waited tables to pay my way through college, but the computer labs were only open to undergraduates in the evening, when I was working. So I changed my degree to business management, with an emphasis on management and information systems and micro computers.”

She applied for a job with Microsoft, and another position at software solutions provider Aldus. “I got the ‘thanks but no thanks’ letter from Microsoft on the same day I got an interview with the other company.”

Larson-Green started off in customer support, answering calls for 10 months. “That’s a big, huge learning experience,” she says. “I learned a lot about empathy.”

She eventually reapplied for a role at Microsoft, working on the Visual C++ team and Internet Explorer before joining the Office team, where she took the bold step of replacing the menu-driven interface with context-specific “ribbons”. Consumers loved it, so it was little surprise when Microsoft asked her to lead the Windows 7 project.

“User interface is customer service for the computer,” she says. “A lot of what I’ve learned has come from empathy, an ability to forget what I know and think instead like a customer, seeing a product for the first time.”

Larson-Green already has one eye on the future of the Windows operating system. Does she envisage it becoming a browser-based platform, like Google’s forthcoming Chrome operating system?

“The browser is a huge part of what you do on the computer,” she concedes. “But you’re also able to be connected [to the internet] and do things without having to go through the browser.

“I think as long as you want to be connected to devices or take advantage of new hardware and things like touch-screens, which you can’t do without an operating system, it will be a while before you can see a world where you can just see a browser. And the browser has to run on something.”

Emerging trends, such as gesture-controlled interfaces, like that found on Microsoft’s prototype Project Natal gaming system, are also of particular interest. “There are things we’re learning about that weren’t there at the start of Windows 7.”

It’s reasonable to assume that Microsoft is already planning for the next version of Windows, though Larson-Green is coy about specifics.

“There are lots of fun, interesting things technology can do for you when it knows a little bit about where you are, what you need and what you care about.”

Having largely resolved concerns about privacy, cost, and security, the City of Los Angeles has “Gone Google.”

The Los Angeles City Council on Tuesday voted unanimously to approve a $7.2 million deal with IT contractor Computer Sciences Corp. to replace the city’s existing Novell GroupWise e-mail system with Google Apps, Google’s suite of online communication and productivity programs. Microsoft Office licenses will be reduced but not eliminated, as select city workers will continue to use Microsoft’s software.

The hotly contested deal calls for shifting about 30,000 city workers over to Google Apps in the next year.

Part of the reason Google won the deal appears to be cost: The City Administrative Officer (CAO) expects “Going Google,” to borrow Google’s marketing catch-phrase, will cost the City an estimated $17.6 million over five years. Remaining with Novell, the CAO estimated, would cost $23 million.

The City plans to get $1.5 million of the estimated $1.9 million funding needed in 2009-2010 from its 2006 antitrust settlement with Microsoft.

Novell disputes the City’s cost estimate for the contact. Perhaps anticipating the unfavorable vote this week, the company issued a statement on Friday claiming that “the budget figures for GroupWise have not been presented accurately.”

Novell said that it “is prepared to help Los Angeles reorganize and centralize its system to make it more efficient, find real costs savings, and reduce the direct cost of the overall service.”

Novell’s defeat has to be particularly bitter, given that Google CEO Eric Schmidt used to be the CEO of Novell and that Schmidt was just in Utah, where Novell is based, talking about how the state could help more high tech businesses develop in the region.

The other reason that Google’s bid appears to have triumphed is that the company is working on a parallel Google Apps instance for government organizations. Google said in September that it is developing a private cloud to accommodate the security and policy issues faced by government entities.

The CAO report states that “Google agreed to store all City data in its ‘Gov Cloud’ facilities.”

The Los Angeles Police Department, according to the CAO report, believes Google’s private cloud will address its security concerns, but the California Department of Justice still has to sign-off on this plan.

Vatsal Sonecha, VP at TriCipher, a security company that provides authentication for online applications like Google Apps, characterized Google’s contract win as an endorsement of the cloud computing model.

“I really believe that we have accepted cloud computing as the norm going forward,” he said. “It’s just is a very compelling business case, especially in the area of collaboration.”

Such acceptance, however, isn’t unqualified however. The City of Washington, D.C., an early adopter of Google Apps and of the cloud model, still runs on-premises systems in parallel with its cloud apps, the CAO report notes. “[M]ost City employees continue to use the existing system, and have not shifted to exclusively use Google’s system,” the report states.

If cloud computing is the future, most organizations still have at least one foot firmly planted in the past.

Like it or not, Motorola’s new Google-powered Droid smartphone will be compared to the iPhone.

The good news is that this feature-rich handset, running version 2.0 of Google’s Android OS, compares very favorably to the Goliath of the smartphone world as a utility mobile-computing device — and, oh yeah, a phone.

The bad news is that there may be too many good things going on to make using this device the quick, intuitive, out-of-the-box experience it should be. That’s a problem, given that the iPhone has set the usability bar so high.

An embarrassment of riches shouldn’t be a negative, and it really isn’t overall on the Droid, which goes on sale Nov. 6 to Verizon customers only. The tight integration of all things Google — maps overlaid on GPS, voice input all over the place, search that does not ask you to decide whether you are looking for something locally or on the net — are now more fully realized in this major upgrade to the mobile operating system that the search giant first released on a single handset, the T-1.

This is very good thing for those who have become Google citizens and are already used to entrusting their contacts, documents and discovery needs to that cloud.

On the down side, you will need a Gmail, Facebook or Microsoft exchange account to use the e-mail app. And, there is no provision for syncing to an address book (or calendar) on your desktop. Everything is in the Google cloud, which — given the recent Sidekick data-loss debacle — may not be the greatest selling point just now.

Like the iPhone and many other handsets this is a primarily a touchscreen device whose face is almost 100 percent screen — and a bright, crisp screen it is. Rather than take sides in the virtual-vs.-hardware keyboard debate, the Droid provides both. The hardware keyboard slides out in a familiar landscape mechanism, and it includes a 5-way directional pad, the better to allow you to keep your hands on the keyboard once you have them there.

The virtual keyboard appears when appropriate, landscape or portrait. And while the software keys appear to be narrower than those on the iPhone, they seem at least as easy to use. Another familiar feature is the “reality check” of a small pop-up displaying the key being pressed. And there is a type-ahead function which displays possible words, potentially saving you keystrokes.

On-board music purchase is from Amazon (at least), but when the Droid is connected to a computer, it’s read as an SD card, and dragging any tracks onto it makes them playable within the music app. The Droid also sports a 5-MP camera with autofocus, on-demand flash and video.

The Droid goes beyond the iPhone in two key areas: Like the Palm Pre, applications can run in the background, and switching among them is a smooth process. And as a robust GPS device it accepts and gives turn-by-turn verbal instructions, making it the closest approximation yet to a total GPS solution that obviates the need for a dedicated vehicle device. One caveat: It’s necessary to be connected to the 3G data service for course correction and other dynamic route features to work (and to even plot a course), so this is not a replacement for a GPS device in locales where Verizon 3G coverage is nonexistent or spotty.

Available apps? Android only offers about a tenth of the nearly 100,000 Apple has available, but that should change as Android handsets become more common. The first app I downloaded was Google Voice which, strangely, is not preinstalled — but then again, it isn’t available at all on the iPhone. On the Droid, you can set your Google Voice number to be the one that everyone sees when you call or text them, so you can switch to Verizon without worrying about giving everyone a new number or waiting for your old number to port over. That’s assuming you’re already using the phone-number-for-life that Google provides.

Navigation is not a touch-screen experience: Unlike the left-right/swipe metaphor there’s a hard “undo” button that takes you back step by step. In fact there are four hardware buttons to the iPhone’s one: Back, Menu (which does not activate from any given screen), Home and Search (which does).

The customizable screens can contain dozens of shortcuts — to contacts, bookmarks, anything — but there are only three of these screens: the “home” screen plus one to the left and one to the right, accessible by swiping. Think of these as a speed dial, with your entire collection of app icons in a sliding drawer. But these icons can be moved anywhere using touch/hold, and there is the gentlest of vibrating feedback to confirm your gesture. (This “haptic feedback” is the default and activates in too many contexts, including for every number you hit when manually entering a phone number. Fortunately, it can be turned off in the settings).

There’s one “feature” that is is sure to draw fire. On certain events (including when you connect to a power source), a computerized voice announces: “Droid.”

A SHARP increase in cyber attacks including internet probes by “hostile foreign intelligence services” marked the busiest year since 2005 for the country’s peak security service, the Australian Security Intelligence Organisation.

ASIO’s annual report to federal parliament released yesterday, cited “new layers of complexity” to the standard fare of terrorism threats, espionage and foreign interference.

The most serious national security challenge in 2008-09 was the thwarting by ASIO of an alleged plan by Melbourne-based Islamic extremists for an armed suicide assault on an Australian Defence Force facility, the report said.

“Small numbers of Australians continue to look to conflict theatres overseas for inspiration and some aspire to participate in the violence or seek to learn from the tactics and techniques employed by extremists there,” it warned.

“The number of known Islamic extremists – those willing to use violence in pursuit of political objectives – in Australia is very small but significant, and did not change substantially in 2008-09,” the report added.

ASIO found further evidence of unamed hostile foreign intelligence services using the internet in a bid to access confidential Australian government information systems including business information systems.

The year saw traditional espionage methods supplemented by new high-technology techniques.

“The extent of internet-enabled espionage as a rapidly growing threat to the national interest became more apparent,” it noted.

Adverse security assessments were issued against two unamed individuals seeking entry to Australia in 2008-09.

The visa applicants were assessed to pose a security threat due to links to a terrorist group or a foreign government, said the report.

A total of 59,884 visa security assessments including 1466 assessments for protection visa applicants were completed by ASIO over the same period.