2000 wasn't the best year for Microsoft Corp.
The Redmond software company received a federal court order to
break up, saw its stock price cut in half, ran into a softening
personal computer market and had to reduce its revenue expectations
So as it prepares for oral arguments Monday to appeal the
court's break-up order, Microsoft is trying to expand beyond its
desktop-bound past and provide consumers and businesses with what
executives call the "end-to-end experience."
Microsoft wants its products to do all things for all people:
create Intranet sites and manage networks for corporations, enable
families to buy products online, e-mail pictures to relatives and
play video games.
A strategy of linking and bundling products trying to be a
one-stop source for virtually all software helped get Microsoft
into trouble with the Department of Justice, prompting the lawsuit
that ended with its being found guilty of monopolistic behavior.
Microsoft is moving beyond software to cozy up to consumers. It
is working on a host of new products, including the Xbox game
console, the company's first major hardware release that is planned
for release later this year.
The house that Bill Gates built is also betting its future on a
broad Internet-based operating system now in early development.
Microsoft also must continue to prove itself on the desktop and
corporate networking market, with products including the
business-oriented Windows 2000 operating system and the
soon-to-be-released consumer-friendly "XP" versions of Windows
Can the company pull it all off?
"I don't think they have any choice," said Scott McAdams,
president of McAdams Wright Ragen in Seattle.
As computing evolves and the Internet becomes ubiquitous,
everyone is battling for products from video game consoles to
handheld devices to digital television. Each market poses a threat
"If they stay out of one of the new platforms, and then that
starts evolving, then boom, you've let the fox into the henhouse,"
McAdams said. "All of the new platforms are opportunities to
leverage the Windows franchise."
Many at Microsoft are comparing the company's current position
to where it was when it released Windows 95, which turned out to be
a runaway hit.
Only now, the Internet has emerged as a playing-field leveler
people don't need Microsoft software to work on the Web. Microsoft
clearly would like to see that change.
"About two years ago, we changed our vision from 'a computer on
every desktop' to 'anytime, anywhere,"' said Steven Guggenheimer,
the company's senior director of consumer strategy.
The computing giant is to make .NET an industry standard.
Essentially an operating system for the Internet, the product will
aim to let people keep track of everything they do, from shopping
to business planning, through a system not necessarily tied to a
specific personal computer.
Though still in its initial phase, the company is hoping .NET
will help bridge a gap between home and work, giving people access
to the data they need to work and play no matter where they are.
"I don't think of myself as a business person or a consumer. I
just want to get my stuff done," explained Microsoft executive
But the company faces stiff competition in that realm from
companies including Oracle Corp., IBM Corp. and Sun Microsystems
Inc., along with smaller upstarts and in the Web server market
from the Linux operating system.
While McAdams says Microsoft doesn't always produce the best
product, he does think the company has an edge because it owns some
90 percent of the desktop operating system market. And, McAdams
says, Microsoft has formidable cash reserves in the order of
around $27 billion.
"If they want to be in a space, they will sit there and throw
money at it for five years," McAdams said.
While chief executive Steve Ballmer insists the company's recent
executive changes don't signal a move away from its traditional
business focus, Ballmer stressed in a recent memo to employees the
need for "overcoming the perception that we primarily produce
software for the desktop."
Microsoft also must battle to bring back investors, a daunting
task at a time of bearishness on technology stocks. In a research
note Thursday, Merrill Lynch analyst Henry Blodget downgraded
Microsoft's stock, citing weak technology demand.
Blodget says the company will face considerable challenges as
computing moves beyond the desktop.
"Microsoft has done an absolutely excellent job on riding a
major technology wave, the personal computer, and that wave is now
maturing," Blodget said.
Jean W. Orr, senior vice president of research for BlueStone
Capital Securities, has given the stock, which has already
rebounded somewhat from its end-of-2000 low, a "strong buy"
"I think this is a difficult line that Microsoft is trying to
navigate right now," she said. "I personally think they're doing
a good job."