MICROSOFT TARGETS HIGH-END COMPUTERS

September 29, 2000

COMMERCIAL NEWS

San Francisco, CALIF. — Wylie Wong and Stephen Shankland report that Microsoft is aiming for the top. The software maker unveiled a new, high-end version of Windows 2000 and related business software aimed at eroding the dominance of companies such as Sun Microsystems and Oracle in running the largest business computers that power the Internet.

At a press conference, Microsoft announced the release of Windows 2000 Datacenter, the latest flavor of the Windows 2000 family of operating systems for businesses. Microsoft chief executive Steve Ballmer headlined the event with a 90-minute keynote speech.

All the top Intel server makers – including IBM, Dell Computer, Compaq Computer, Fujitsu, Hewlett-Packard and Unisys – announced they are shipping servers that run on Datacenter.

As previously reported, Datacenter runs on the highest-end computers, including those that manage e-commerce sites and large-scale science and engineering applications. The desktop and lower-end versions of Windows 2000, released to much fanfare in February, are designed for corporate desktop PCs and servers as well as for computers that power Web sites.

Microsoft also unveiled its family of new software aimed at helping businesses create e-commerce sites. As previously reported, the products include SQL Server 2000 database for storing and collecting corporate information, Exchange 2000 messaging software, and Host Integration Server 2000, software that allows businesses to link corporate information from mainframe computers to the Web.

The company also announced new wireless software that will allow Web sites and large corporations to transmit their Web content and services – originally intended for display on PCs – to mobile devices such as cell phones and handheld computers.

The products, which will be marketed under the Microsoft.Net Enterprise Server label, serve as the foundation of Microsoft’s new Internet strategy to drive the Windows operating system more fully onto the Net.

Microsoft’s push rests on three components, chief executive Steve Ballmer said in an interview today. First are the software products – the operating system and the higher-level business software. Second is the close work with its partners, the computer companies. And third are the services to install and support the products, Ballmer said.

Microsoft said that about 1,000 Compaq consultants will be trained on installing and configuring BizTalk Server, the company’s forthcoming Extensible Markup Language-based (XML) software for linking different computing systems across the Net. The software giant and Dell announced a partnership to jointly sell servers and Microsoft.Net Enterprise Server software to help companies conduct business e-commerce. Internet consulting firm Lante will provide services for businesses who take part in the Microsoft-Dell program.

Microsoft also said it has hired a new executive to run sales and marketing for its mobility group. Juha Christensen, previously executive vice president at Symbian, will head Microsoft’s wireless sales and marketing efforts.

Microsoft’s entry into the wireless market will compete against the likes of Oracle, IBM, Sun-Netscape Alliance and Sybase, which previously have released wireless software that translates existing Web information into a format readable by handheld devices.

While Microsoft’s rivals shipped their wireless software first, it’s not too late for the company to capture a large piece of the wireless market, analysts say. Microsoft plans to ship the wireless software, called Microsoft Mobile Information 2001 Server, in the first half of next year. At today’s conference, the company announced Microsoft Outlook Mobile Access, which will allow users of Microsoft’s new wireless software to access their email and calendar from a cell phone.

“It is a very early stage of the market. There’s more talk about deploying wireless applications than action at this point,” said analyst Dwight Davis of Summit Strategies.

Datacenter, which is several months late, is Microsoft’s most ambitious move yet to tackle the high-end server market, where profit margins are plump, and customers don’t tolerate crashes. Microsoft has had a notoriously hard time entering this market, currently dominated by Unix servers from Sun Microsystems and others.

Microsoft doesn’t sell Datacenter as a stand-alone product. Only computer manufacturers can sell Datacenter on systems that have been certified to work with it. This method of tightly controlling the hardware has long been used with high-end computers such as mainframes but is new to the Windows and Intel world, with its myriad of different network cards, memory modules, disk drives and other hardware.

The tight control and heavy involvement of Microsoft in customer operations is a different style for the company, which grew to its dominant position by selling boxed software customers would buy and manage themselves.

But Datacenter won’t sweep the business landscape. There’s not much software able to take advantage of 32-processor Windows servers right now, and what does exist is very new and not yet certified to work with Datacenter.

Microsoft acknowledges this modest adoption rate. Michael Risse, general manager of the .Net solutions group, said Microsoft’s initial goal is to be able to bid on every computing contract, even though it won’t always win. “We will compete with anybody,” he said in an interview.

Microsoft is also working on another high-end version of Windows, one that will run on Intel’s upcoming 64-bit Itanium processors, which can handle larger databases than today’s 32-bit Intel CPUs.

This new version, however, is likely to be adopted at an even more leisurely pace than Datacenter, since it uses a completely new chip and therefore requires much more extensive revisions.

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