Watch out for the free version of Microsoft's Works package next month. Yep, that's right, the protective software giant is going after its main competition - the free programs that mimic its costly Office suite.

Microsoft will allow advertising to be included in the free versions of the software as a means of ensuring it continues to earn revenues on the Works package.

The company will include Word processing and spreadsheet software as part of the package. Works sells for about $40 but many already have free versions of the software. Works is a very scaled down and basic text processor, a poor cousin to the company's Office suite.

Of course Works will never beat competition such as the excellent OpenOffice.com package of programs produced by the internet community. I'm a big fan of OpenOffice.org, which pretty much does everything that can be done with Microsoft's Office pricer suite.

That's a free and a big competitor.

My guess is Microsoft will sooner or later going to have to learn how to deal with the bright new products being created by the open source community, and not just those that try to undercut Office.

Perhaps in a decade Microsoft will make it all free, and advertising will be the mainstay of its revenues?

The company is on top of its market, but it knows it has to adapt or lose growth momentum. At least this week the company received some good news on the many legal fronts it is fighting. A federal judge in San Diego has nullified a $1.5 billion award against Microsoft in a case brought by Alcatel-Lucent against the company alleging the infringement of certain MP3 patents.

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Meanwhile Apple continues to go after the younger set with three new iMac computers. These thinner versions of the iMac desktop come as two 20-inch models and a 24-inch version. All are made of aluminum and glass.

The Mac still accounts for half of Apple's sales, despite the phenomenal growth in the iPod market, and the growing mass of iPhone users.

For the techies: the new iMac comes with Intel Core 2 Duo processors running up to 2.8 GHz with 4MB of shared L2 cache and up to 4GB of 667 MHz DDR2 SDRAM memory. It can come with up to 1TB of internal storage.

Every iMac also includes iLife '08, an update to the regular set of applications, including what the company is calling "major" new versions of iPhoto and iMovie. Both are designed to integrate with Apple's new service, .Mac Web Gallery, where paid-up members can create and host online websites for their photos and videos.

The gallery is part of the company's .Mac online service, which provides 10GB of storage and support for personal domains, compared to the previous 1GB. E-mail attachments can be up to a maximum size of 20MB. Mac costs $100 per year.

The software also includes GarageBand for creating music. The new 24-inch 2.4 GHz iMac has a suggested retail price of $1,799. In addition Apple has introduced an upgrade to iWork, a software suite with new versions of Pages and Keynote word processing and presentation applications.

A new spreadsheet application, Numbers, is part of the package.

iWork '08 can import Microsoft Word, PowerPoint, Excel and AppleWorks documents and can export to Microsoft Office file formats or PDFs. Keynote '08 is Apple's application for creating cinema-quality presentations. The company includes a new function called Smart Builds, which allows users to drop graphics onto a slide when creating animations.

Apple's computer market is on the upswing. The company currently holds a 3 per cent share of the personal computer market, gaining from 2.5 per cent a year earlier. The new MacBook notebooks pushed a 73 percent surge in profit last quarter.

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Of course, the man behind this resurgence is Apple chief executive Steve Jobs. This week the "fake" Steve Jobs was outed when a journalist revealed that another member of the profession was behind a much followed spoof blog on the internet.

In a story published this week, Brad Stone of the Times revealed that the persona was in fact Dan Lyons, a technology editor at Forbes.

"The Secret Diary of Steve Jobs" was a wicked satire dressed up as a daily account of events and personalities in the tech industry. The blog is at http://fakesteve.blogspot.com. A book is already in the works.

Contact Ahmed at elamin.ahmed@gmail.com.