Microsoft unveils .NET strategy

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Microsoft Corp. on June 22 unveiled details of its long-awaited Web-distributed software and services strategy to more than 300 reporters and analysts at Forum 2000 in Redmond, Wash. Executives outlined the strategy, called .NET, which uses Extensible Markup Language, or XML, as the primary vehicle for distributing software and services to businesses, consumers and software developers. The new strategy eventually will shift Microsoft's applications business, powerful products such as Office and MSN, to a subscription-based model whereby customers pay for applications delivery and ever-more customized versions. However, Microsoft will continue to license and collect one-time royalties on some products such as Windows.

The moniker .NET replaces Microsoft's use of Next Generation Windows Services, or NGWS, which was the label it's used for several months to describe the forthcoming platform.

Steve Ballmer, Microsoft's president-CEO said .NET represents a long-term strategy and "an environment and programming infrastructure that supports the next generation of the Internet." He emphasized repeatedly that the new software platform, which will enable software developers to create increasingly integrated and streamlined applications that run across a host of devices ranging from cell phones and tablet PCs to set-top boxes and TVs, is a long-term gambit that will require a lot of "patience" on Microsoft's part along with partners, customers and developers. "We are embarking on a long-term transformation of the Internet, embarking on a transition."

Mr. Ballmer stressed that unlike the Windows Operating System, which Microsoft inaugurated 15 years ago, "you can't point to `that is .NET' . . . .NET is a user and a set of developer experiences."

Microsoft's task now will be to roll out the strategy at a software developers conference next month and evangelize its plan. During Forum 2000, the company ran video testimonials from the likes of Michael Dell, chairman of Dell Computer Corp.; Michael D. Capellas, president-CEO of Compaq Computer Corp.; Joe Nacchio, chairman of Qwest; and other high-profile partners to tout its next-generation vision.

Mr. Ballmer and Bill Gates, Microsoft chairman and chief software architect, both emphasized the company's commitment to open standards and the desire to work with many third-party developers. This party line has a new turn, born out of the company's protracted antitrust woes. Eager to showcase its desire to work with partners and to make its code available, Mr. Ballmer said Microsoft will talk to partners and competitors about taking .NET software and running it on non-Windows systems and devices. "We are very open to talking with them," he said of competitors.

Microsoft will spend $4 billion on research and development in fiscal 2001, starting July 1. That's 50% more than a typical R&D spend for Microsoft, according to Mr. Ballmer. The .NET initiative is likely to receive the lion's share of marketing funds. It remains to be seen how .NET will segue with the business Internet campaign launched late last year to tout Windows 2000.

Mr. Ballmer dismissed any notion that the PC is dead. "The focus is on the PC still, it's still an exciting tool that has a long way to go to be simpler." He pointed to Windows ME, the consumer upgrade to Windows 98 second edition that will be released in September. The product has far more multimedia capabilities and will enable consumers to create and edit home movies, among other activities. In fact, Microsoft believes the PC will become an "activity center." Mr. Ballmer said 130 million PCs will be sold worldwide this year.

Besides maintaining and growing the PC business, Microsoft is committed to the e-server business and extending the Windows 2000 platform that runs servers, growing the MSN portal and migrating its applications to the .NET paradigm.

Microsoft received good news this week when it was issued a stay on the behavioral remedies that were issued as part of the antitrust case. That means the company won't have to change its business practices for at least a year and can proceed with the .NET strategy even during the appeals process. If it hadn't received the stay, it would have had to alter its practices starting Sept. 3 and submit a breakup plan.

Copyright June 2000, Crain Communications Inc.

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