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A leaked memo from Microsoft founder and chairman Bill Gates warned senior staff that the company is at risk of being outstripped by web-based technologies being developed by rival companies.

"The next sea change is upon us," Gates said in an email. "We must recognise this change as an opportunity and take our offerings to the next level." CTO Ray Ozzie also cajoled Microsoft to respond quickly in the race to pioneer search and communications technology and services.

The leaks came as Microsoft revealed new web-based products for consumers and small businesses, Windows Live and Office Live. Gates also emphasised the possibility of making more software revenue through online advertising.

In other Microsoft news, the company announced that it will open up the document formats for its Office applications. The standard will be reviewed by Ecma International, the European standards body.

The US prevailed in the battle for control over the Internet, after an eleventh-hour deal was struck at a UN summit which left US-based non-profit organisation Icann in control of tasks like administering domain names and IP addresses. Some governments had argued Icann was incapable of representing the global Internet community, but the US maintained other regimes might restrict free speech if they had more influence. In addition, an "Internet Governance Forum" has been established to discuss Internet issues, but will have no power over Icann.

Cisco boosted its position in the video networking space by acquiring digital video equipment maker Scientific-Atlanta for $6.9 billion.

Its target sells TV set-top boxes and equipment for telecoms service providers, where it competes primarily with Motorola. The deal, Cisco's largest since 2000, will boost its credibility in the emerging digital broadcasting market.

Spain's largest telecoms company, Telefónica, agreed to buy UK mobile operator O2 for £17.7 billion, in a strategic move to strengthen its European presence. The long-rumoured acquisition will open up two of Europe's largest markets - Germany and the UK - for the telco, and will create the world's fifth-largest telecommunications company by market share. O2 has 24.6 million mobile phone customers in the UK, Ireland and Germany, augmenting Telefónica's mobile phone division, Telefónica Móviles SA, which has over 90 million customers in 15 countries.

Oracle lost its third chief financial officer in less than two years when Gregory Maffei resigned after just four months in the job.

Maffei will be replaced by Oracle co-president Safra Catz. Although CEO Larry Ellison said Maffei's departure was due to another company making him an attractive offer, industry insiders speculated that a power struggle with Catz had forced him out.

Autonomy, a Cambridge-based provider of search and infrastructure software, bought its American rival Verity for $500 million in cash. Although Verity is the bigger company by revenues, its profits are on the wane, while Autonomy's are growing.