Filter looks at the day's top technology news through snapshots and analysis of what the world's media outlets are covering. Washingtonpost.com's new Mon.-Fri. feature is penned by technology reporter Cynthia L. Webb. If a technology story breaks, a company falters or triumphs, or there's a new trend in technology, Filter wants you to know about it.
By Cynthia L. Webb washingtonpost.com Staff Writer
Friday, June 4, 2004; 9:52 AM
Steve Ballmer takes his job very seriously (remember the famous "scream" speech?). And to make sure Microsoft Corp. remains the world's dominant software company, he's not afraid to leave his CEO perch and get down in the trenches.
The latest Microsoft unit to get the full-court-press Ballmer treatment is its Business Solutions group, which sells software to small- and mid-sized businesses. At any other company, the unit's modest increase in quarterly revenue would be something to celebrate. But in Redmond, those numbers are a sign of crisis, and Ballmer's decision to intervene surely indicates that Microsoft is not willing to settle for anything short of dominance in the small business market.
In typical fashion, however, Microsoft executives "said Ballmer's involvement does not signal the unit is struggling or needs extra help," The Seattle Times reported. "Ballmer's latest move shows that Microsoft is more committed to making software for smaller businesses," the paper said. "'In no way does this mean retrenchment,' said Orlando Ayala, a senior vice president overseeing the sales force for small and midsize businesses" and the unit's new chief operating officer. Microsoft provided more details on the reshuffle on its Web site.
Crisis or not, Microsoft is making big changes. The unit will cut "100 research and support positions in North Dakota, Ohio and Denmark, executives said. Microsoft will then add the same number of jobs, mostly in sales and marketing, to the unit, which has about 2,000 employees," The Seattle Times reported. The newspaper noted that the unit "is not a moneymaker, and sales of its accounting, e-commerce and other software are minuscule compared with those of Windows or Office products. For the first three months of this year, the unit reported $153 million in revenue -- just a 4 percent increase from a year earlier. It had a net loss of $65 million, compared with a $92 million net loss in the year-ago period. In April, Microsoft lowered its revenue forecast for the division for the quarter ending June 30. Sales should be about $180 million, $25 million less than previously forecast, because of lowered sales expectations in the United States, Chief Financial Officer John Connors said at the time."
• The Seattle Times: Microsoft CEO Moves To Oversee Lagging Division
Ballmer has a long history of getting personally involved in rescuing struggling Microsoft units. "At one point, he even moved his office to Microsoft's RedWest campus to delve into the company's Internet efforts," The Seattle Times reminded readers. From the Post-Intelligencer: "It's also not unusual for Ballmer to become more involved in a group that might not be living up to expectations, said analyst Matt Rosoff of Directions on Microsoft, a Kirkland-based research firm. Past examples include the mobility group, which makes software for small devices." Rosoff also talked to InternetNews.com: "When a business division isn't living up to Microsoft's expectations, that's usually what triggers a re-org and draws Steve Ballmer's attention," Rosoff told the news outlet. "I think he wants to keep a closer watch and push them up a level."
• The Seattle Post-Intelligencer: Microsoft Increasing Its Bet On Unprofitable Division • InternetNews.com: Microsoft Business Solutions In Re-Org
The world's largest software company has a plan of attack for the unit: When in doubt, throw more money into the mix. The Business Solutions budget is getting a $50 million infusion, The Seattle Post-Intelligencer reported. "Executives yesterday acknowledged difficulties during the past year but said the changes reflect the big role Microsoft sees such business applications playing in its future. The larger budget will, among other things, put more technical specialists in the field to promote Microsoft Business Solutions software, bolster advertising, and help train the business partners that sell and support Microsoft software. 'We're increasing our bet,' said Doug Burgum, the senior vice president who heads the Microsoft Business Solutions division," The Seattle P-I reported.
CNET's News.com provided some more details on how the business applications unit got its start. "The company entered that market in 2001 with the $1.1 billion purchase of Great Plains Software, putting it into direct competition with Lawson Software, Britain's Sage Group and numerous other software companies that cater to midsize businesses. That's when Burgum, who was chief executive of Great Plains, joined the company. He's still based in Fargo, N.D., at Great Plains' former headquarters."
Microsoft "expanded the unit internationally with the acquisition of Danish software maker Navision. It has also added new product lines, introducing a set of applications for coordinating sales, marketing and customer service. The company says it will invest $2 billion annually for the next five years in sales, marketing and development efforts targeted at small and midsize business, or companies with less than $1 billion in annual revenue. Microsoft doesn't report the unit's finances, but AMR Research says it brought in about $659 million in revenue for the company last year, a sliver of its more than $32 billion in annual revenue."
• IDG News Service: Microsoft Bumps Business Apps Group Up Hierarchy • CNET's News.com: Microsoft Elevates Great Plains Division
Reuters outlined the nitty-gritty of the management shuffle. Burgum "will now report to Ballmer instead of Jeff Raikes, head of the information worker division that makes the Office family of applications," and Ayala will report to Burgum. "The change is directly unlikely to affect customers and partners, but it signifies the importance Microsoft places on its growing enterprise applications business," IDG News Service said. "Microsoft's desktop applications are ubiquitous in the business world, but the company did not traditionally compete in the market for the expensive, complex ERP (enterprise resource planning) and CRM (customer relationship management) systems used for back-office functions." Burgum "said his division had already operated with a 'lot of independence' from the Office-focused division, but said the changes would make it easier for Microsoft to compete in the business applications industry," InternetNews.com reported. "It's a great benefit for our business to engage with Steve (Ballmer) at this level," Burgum said.
• Reuters: Microsoft Shuffles Small Business Software Execs
A Patent A Day, Keeps The Competition Away?
The Wall Street Journal today reported that Microsoft may start wielding its patents as a way to knock down competition from open-source software systems. "In December," the newspaper reported, " Microsoft announced a new policy to begin licensing its patents, citing requests from customers, regulators and others, though it is unclear how many of the patents cover techniques already in use by other companies." And that move has Linux fans worried. According to the Journal, "some proponents of open-source software see an implicit threat in such moves. They believe Microsoft may press for royalties from the distributors or even users of open-source programs including Linux, and they fear that Microsoft could resort to patent-infringement suits if they don't agree to licensing deals. Such a move could disrupt the open-source world, where many products are free or sold at low prices."
• The Wall Street Journal: Microsoft's New Plan to License Patents Has Linux Fans Worried (Subscription required)
