Microsoft and Facebook have ended their advertising deal for Microsoft to sell display ads on the social network.

The company made the announcement in a blog post by Bing general manager Jon Tinter today, slipped in below news that they were expanding their search relationship. Here is the blog post.

The two companies are expanding their search relationship internationally, which had been limited to the U.S. Facebook users will also get access to more Bing search engine features than they previously had.

The two companies began their ad partnership in 2006, when Microsoft also invested $240 million in Facebook. Here is the announcement back in 2006 on the advertising partnership.

Microsoft will continue to sell search advertising for Facebook.

Microsoft is providing free cloud computing access on Azure to National Science Foundation researchers.

The National Science Foundation is seeking project proposals and plans to award $5 million in grants to fund research that will use Azure to analyze research data.

Microsoft began selling Azure on Monday. The platform allows developers to build and store software and data in Microsoft-run servers rather than on a PC or a server located at a company or university.

The proliferation of data has become a burden for scientists and research institutions to store and manage, whether it's climate data or DNA sequencing.

"We have to shift discussion from infrastructure to insight," said Dan Reed, corporate vice president for Microsoft, in a Thursday Webcast. Reed did not say how much data storage Microsoft would provide to the project, describing it only as a "substantial amount of storage."

Jeannette Wing, assistant director for the NSF Computer and Information Science directorate, said the NSF will probably fund tens of projects with the $5 million in grant money. Here is more information on how to apply for a grant.

"The cloud as a commodity service is familiar to all of us. Posting pictures, email, shopping and of course, the killer app, search," Wing said during the Webcast. "However the cloud as a research platform is still underexplored."

On Tuesday, Google announced its own Focused Research Grants, $1.35 million of which is going to the University of Washington for research on using cloud computing and cellphones to collect data. Here is our earlier story on that.

A former Microsoft vice president called out Microsoft for a lack of innovation in a New York Times editorial Thursday.

Dick Brass, who was a Microsoft executive from 1997 to 2004, dissected how Microsoft's culture stunts innovation and compares the company to General Motors. Ouch. (As in Windows and Office are like General Motors' SUVs and trucks.)

Here is a link to the editorial.

With the recent announcement about Apple's iPad, Brass asks the question "... why Microsoft, America's most famous and prosperous technology company, no longer brings us the future ..." He goes on to call Microsoft a "clumsy, uncompetitive innovator."

In the editorial, Brass — who said he worked on tablet PCs and e-books at Microsoft — said the internal culture of competition allows more established groups to kill smaller groups working on emerging technology.

Update 12:30 p.m.:

Microsoft responded to Dick Brass' editorial in a blog post by Frank Shaw, corporate vice president of corporate communications.

"Obviously, we disagree," Shaw wrote. Then, a smiley face " :) ."

Shaw goes on to explain that, "For Microsoft, it is not sufficient to simply have a good idea, or a great idea, or even a cool idea. We measure our work by its broad impact."

He responds to some points that Brass made about a display technology called ClearType and video-game console Xbox.

Here is the Microsoft blog post.

Mike Nash, another longtime Windows executive, is leaving Microsoft.

Nash was corporate vice president for Windows product management and has worked at Microsoft for 19 years. He is leaving to join the Kindle group at Amazon.com.

Nash has left an imprint in many places at Microsoft. He was the first product manager on the Windows NT marketing team, oversaw Microsoft.com and worked on computing security.

The company released a statement about Nash's departure saying:

"In his 19 years, Mike has made an impact in a number of key roles at the company. We appreciate his service and wish him well."

Nash's departure follows news that Bill Veghte, senior vice president of marketing for Windows, will also leave the company.

Microsoft Office 2010 has reached the release candidate milestone.

A new version of the software -- which includes Microsoft's office productivity software Word, Powerpoint and Excel -- was given to customers in the company's technology adoption program.

The stages in sausage making for Microsoft are: beta, release candidate, release to manufacturing, launch. The launch is scheduled for June, and Microsoft says it does not expect sales of Office to materially impact third-quarter earnings, which probably means the realease will be close to June 30.

Microsoft put out a statement, "This is one of Microsoft’s planned milestones in the engineering process; however they do not have plans to make this new code set available broadly." The statement does not elaborate on who "they" are.

The Microsoft cloud, Azure, opened for business on Monday. (This story is a day because I took Monday off after pulling a breaking-news shift in the newsroom on Sunday.)

Microsoft had been testing its cloud-computing platform, Windows Azure and SQL Azure, throughout January, and began charging on Feb. 1.

The cloud represents a huge investment for Microsoft, which built large data centers in Chicago, San Antonio and Dublin last year. Chief Executive Officer Steve Ballmer said in a speech last week, "There’s no question that the big thing that’s going on today is the shift to the cloud." The company estimates at least half of its sales could be coming from the cloud in the next 10 years.

Cloud computing is the migration of software and data from PCs and corporate servers to servers in remote data centers that would be run by companies such as Microsoft and Google. The software would be accessed from PCs through Internet browsers such as Internet Explorer and Mozilla Firefox. Consumers are already using cloud applications such as Hotmail, Flickr and iTunes.

Microsoft hopes to make money when businesses start building applications to run in the cloud -- for example, a pizza company moving its ordering system from its own servers to a cloud run by Microsoft.

Here is the company's announcement about Azure.

Here is an earlier Q&A I did with Microsoft's Server and Tools President Bob Muglia about the cloud.

Here is a story I wrote about a company that is using the cloud to get laptops to teachers in Ethiopia.

Google has awarded $1.35 million to the University of Washington for research on mobile phones.

Researcher Gaetano Borriello won the three-year grant, which includes $900,000 up front and $450,000 per year. An engineer from the company will work directly with Borriello. His project is called "Open Data: Data Collection from Mobile Devices."

The grant is part of $5.7 million that Google is putting in to its Focused Research Awards, which target research into energy efficiency, machine learning, privacy and mobile phones. Machine learning -- that sounds a lot like the plot of "Terminator" to me. The company said in a statement it will continue to give up to 100 research grants annually.

Here is a link to the company's announcement on its research blog and a list of the other grant winners.

Update 11:51 a.m.:

The grant extends a project Borriello began last year with some students, working at Google's offices in Seattle's Fremont neighborhood to build an open-source Open Data Kit for Android, Google's mobile operating system. The kit can be used by people in developing countries to enter data on public health, micro finance or the fair-trade coffee market, for example.

"Google has traditionally given out a significant number of smaller research grants in a wide variety of areas," said Ed Lazowska, a professor at the UW Computer Science and Engineering Department. "They’re augmenting that with a more focused program."

Microsoft has been a long-term supporter of the University of Washington as well, giving more than $5 million over the past three years to support research with most of it going to the computer science department, Lazowska said. The company also gave $7.2 million to the capital campaign for the Paul G. Allen Center for Computer Science and Engineering.

Update Feb. 2, 10:32 a.m.:

The Senate Ways and Means committee meets Tuesday at 3:30 p.m. to discuss this proposed tax break. An earlier version of this story said the committee was meeting Wednesday.

Earlier:

The state Legislature is considering a tax break for tech companies that want to build data centers in rural Washington after Microsoft moved its cloud-computing platform, Azure, out of Washington state last year.

The state Senate Ways and Means committee will take public comment on the proposed bill, Senate Bill 6789, on Tuesday at 3:30 p.m. in Olympia. A similar bill, House Bill 3147, has been proposed in the House, but no public comment has been scheduled.

The proposed bill would provide a 15-month exemption on sales tax on servers and related electrical equipment for companies that would build data centers in the state. The centers would have to be at least 20,000 square feet and be constructed between March 31, 2010, and July 1, 2011.

A business and city coalition called Washington Needs Jobs supports the legislation. Members include the city of Quincy; technology companies including Microsoft, Yahoo and VMWare; and developer Sabey.

Six companies built major data centers in Washington state between 2004 and 2007, including Yahoo and Microsoft. The city of Quincy in Grant County was an attractive place to build because of its cheap hydropower electricity rates.

Here is our earlier story on Microsoft's announcement that it was moving Azure, its cloud computing platform, out of Washington state. In 2009, Microsoft built large data centers in Chicago, San Antonio and Ireland. The company says it plans to spend $2 billion in capital expenditures in 2010.

Bob Muglia, president of the Server and Tools division at Microsoft, said in December that the Grant County data center was already at capacity when Microsoft decided to move Azure out of state. He did not address whether the lack of a tax break was a factor. In cloud computing platforms such as Azure, large amounts of software and data are stored on remote servers in data centers and accessed by users via the Internet. Examples of popular cloud services include Hotmail, iTunes and Flickr.

Microsoft has been running trials of Azure and is starting to sell it this month.