Hackers may have made off with the source code for Whistler, Microsoft Office and - for all we know - Bob.NET. A major breach of the company's networks reported in today's Wall Street Journal (nice shooting, Ted) seems to have effectively compromised the integrity of a whole range of Microsoft products, including Windows Me, the gold code (or maybe not) of which shipped just last month.

The hack is being described by Microsoft as industrial espionage, so no doubt the FBI will shortly be in touch with Larry Ego-san of Oracle, who earlier this year confessed to funding trawls through MS-related trash. But it looks to have been too sophisticated for Larry and his spook squads. According to the WSJ the hackers probably (very detailed for "probably," this) planted the QAX Trojan disguised as Notepad in a Microsoft employee's email. QAZ then alerted a computer in Asia, and may also have installed tools from a site in the South Pacific.

Other computers were infected, employee passwords collected, and then sent to an email address in St Petersburg. Sensitive areas could then be entered, and files downloaded.

So the Russians have got Whistler? There does appear to have been some serious intent behind the exercise, rather than it being one of those merry prankster 'look at me' things. On the contrary - the hackers could have had access to the files for up to three months, and they didn't say look at me once.

But why did they do it? There are advantages to some company associated with getting access to Microsoft source code, but these would be entirely negated if it wasn't legal access. There might be all sorts of cool things you could do, but the Feds would start wondering what special advantages you'd had to be able to do them. Even Larry, surely, wouldn't risk it.

But you might speculate that one of the less controlled and responsible secret services might. Given that Microsoft software is now ubiquitous, there are security issues. The French certainly think so, but surely not even the French secret service would...

The code having been taken hostage is a slightly more likely scenario, although it's still not entirely plausible. If Microsoft just refused to deal, said publish and be damned, where would that get the kidnappers? On the other hand, publish and be damned all over the Web to such an extent that it could never be returned to captivity, that might be a big problem. If Redmond does hear from the kidnappers, it would perhaps be wise not to turn them down straight off.

But the most immediate problem for Microsoft is that the company seems not to know whether or not the code it's been producing in the last three months is safe. It's going through the files now, examining all changes made during that period, and until it's through it can't be sure that anything produced in the past three months, including Windows Me and Whistler beta code, is clean. So more delays and worries, surely. ®