Microsoft News Tracker

Press release:

Microsoft Corp. today announced it has agreed to acquire ProClarity Corp., a software company based in Boise, Idaho, that develops advanced analysis and visualization technologies that work in association with Microsoft’s business intelligence (BI) platform, which includes Microsoft® SQL Server™ 2005, Microsoft Office Business Scorecard Manager 2005, Microsoft Office Excel® and Microsoft Office SharePoint® Portal Server. The upcoming release of the 2007 Microsoft Office system significantly increases and broadens Microsoft’s investment in BI, and this acquisition deepens that investment, providing functionality that includes additional advanced analysis and visualization technologies as well as business-logic-driven “guided” analysis.

Some analysis from Elizabeth Montalbano at InfoWorld:

Keith Gile, a principal analyst with Forrester Research Inc., said the acquisition “fills a gaping hole” for Microsoft and positions it more competitively as a BI vendor.

Gile said Microsoft’s investment in BI is fairly new, and there has not been a link between the back-end data mining and reporting services in the SQL Server database and the front-end interfaces business customers use. The acquisition of ProClarity changes that, he said.

“Office is a great consumer tool for BI, but it’s not a great producer tool — it’s not a mechanism for building, but surfacing the results,” he said. “ProClarity is a good tool to [produce BI results]. It’s strong at building queries, dashboards and analysis on top of the Microsoft platform.”
…
Over the past few years, Microsoft has increased its emphasis on having a comprehensive BI portfolio. In particular, Microsoft is promoting the next release of its Office suite, Office 2007, as not only a package for productivity but also BI in an effort to encourage customers to upgrade. Office is the front-end interface to Microsoft’s BI strategy, allowing users to see the results of business information extracted from SQL Server.

ProClarity, a long time Microsoft partner, is privately held and no financial terms were disclosed.

As rumored last week, Microsoft announced today that Virtual Server 2005 R2 is now available as a free download. Press Q&A with Zane Adam, director of product marketing in the Windows Server Division:

PressPass: What did Microsoft announce today at LinuxWorld with regard to virtualization?

Adam: We announced three key things today that help drive our goal of making virtualization a more mainstream technology. First, we told customers that our Virtual Server 2005 R2 product is now available as a no-charge download. Combined with the flexible virtualization licensing now available with Windows Server 2003 R2 Enterprise Edition, this means there is little barrier to adoption for customers who want to realize the benefits of server virtualization.

Second, we announced the availability of no-charge virtual machine add-ins to run select Linux distributions, along with a technical support model to assist customers as they consolidate their Linux-based applications on Virtual Server 2005 R2.

Our third announcement is about the momentum we’re seeing around our Virtual Hard Disk (VHD) format licensing program, which will drive industry development of solutions to help customers better manage virtual machines. We now have more than 45 vendors signed up in this royalty-free license program, which is more than double the number we had six months ago.

PressPass: Why is Microsoft making Virtual Server available at no charge?

Adam: We see virtualization technology as a key stepping stone toward the vision of self-managing dynamic systems. Self-managing dynamic systems are abstracted IT infrastructures that will ultimately give customers greater flexibility, automation and control. These systems will be completely independent of physical resources, so IT groups will have more time to devote to solutions that increase business value. Toward that end, we want to make virtualization more broadly accessible and affordable so our customers can realize benefits in areas like server consolidation, disaster recovery, application re-hosting, and software test and development.

We believe that Virtual Server is already the best server virtualization technology for the Windows Server System and more than 5,000 customers are using the product today. Going forward, our strategy is to continue addressing customer need for virtualization solutions that are secure, interoperable, manageable and fully supported. We’ll also continue exploring how to provide the right licensing policies for all of the servers and applications running on top in the virtual machine environment. As an example, today we allow customers to run up to four virtual operating systems on one physical system running Windows Server 2003 R2 Enterprise Edition at no additional cost.

In the Windows Server “Longhorn” wave, virtualization will become part of the Windows platform via Windows hypervisor technology, and our customers will be able to run an unlimited number of virtual operating systems on one physical server running Windows Server “Longhorn” Datacenter Edition. In light of this and other market trends, I believe customers will think twice before spending thousands of dollars for other virtualization products that very well could be at no charge in a couple of years.

Or in other words, Microsoft just bundled a product in its server OS that provides functionality that other companies are charging for. Before anyone drops a dime to call Neelie Kroes at the European Commission, this looks more like the ongoing commoditization of the virtualization software market ([1],[2]) than monopolistic activity.

Update: More details on the announcement are here. Also see XenSource Licenses Microsoft’s VHD As Format War Begins.

Dow Jones’ weekly financial magazine Barron’s has a reputation for taking a skeptical view of various Wall Street darlings so the cover article in this week’s issue (available April 1) had me wondering whether it was an April Fool’s prank:

Microsoft’s New Vistas by Eric J. Savitz

Dramatically improved versions of its Windows and Office programs should boost Microsoft’s growth and jolt its stock back to life.

You have to be a subscriber or sign up for a trial subscription to read the full article, but based on the wire service reports, I’m not rushing to find my credit card since it seems to be the same old bromides. Angela Moore at MarketWatch:

Rick Sherlund, software analyst at Goldman Sachs, sees the stock as much as 25% undervalued, Barron’s said, and he thinks the shares will start to rise as people learn more about the new Office and Vista programs.

Sherlund thinks Vista will drive an extra $1.5 billion in revenue for Microsoft over the product’s first 18 months, Barron’s reported.

Michael Sievert, Microsoft’s vice president for Windows product management and marketing, told Barron’s the company expects 400 million Vista-equipped PCs to ship in the first two years and he expects it “to be the most rapidly adopted operating system in history.”

I’ve been through this before, but at the risk of flogging a dead horse, here it is again:

• PC shipments are expected to hit more than 230 million in 2006 and are growing
• Almost all PCs already ship with a Microsoft operating system
• Unless an asteroid hits the Earth, a Microsoft PC operating system will be on 400 million PCs in the first two years after any date you pick in 2007 or whenever Vista ships
• The only way Microsoft makes more money with Vista is if they charge more per PC, significantly cut down on piracy, or the excellence of Vista inspires folks to trade in their old equipment sooner or rush out to upgrade the OS on their old hardware

We can argue about the latter point, but if there’s any evidence that any of the money making scenarios are going to occur, I’d love to see it. The most fruitful is likely Microsoft trying to upsell premium Vista versions, but until the pricing (particularly OEM and volume pricing) is revealed it’s hard to gauge customer reaction and the resulting payoff. Finally, Microsoft’s client OS’s are currently providing about $14 billion a year in revenue, so $1.5 billion in 18 months is about 7% growth which is less than the PC growth rate. They’re kidding, right?

I won’t belabor this anymore other than to state the obvious one more time: looking for growth in Microsoft’s cash cows is tough because they already control most of their already saturated markets. So what about some of the new areas Microsoft is jumping into? Reuters:

The report quoted Microsoft Chief Executive Steve Ballmer as saying the company saw growth potential for the company in such new markets as Internet-based television and wireless communications.

That’s it? Out of all Microsoft’s new initiatives, that’s it? Folks were laughing at that one when Ballmer uttered it in his recent Fortune interview.

Predicting stock performance is an attempt to predict crowd behavior, an activity that I studiously avoid, but I think it’s possible to spin a tale of Microsoft as a long term growth stock if you work at it. It doesn’t seem that Barron’s has done so.

Update 12:10: Of course, there was one predictable result:

Microsoft shares rose 38 cents, or 1.4%, to $27.59 after Barron’s profiled the firm, saying that with a slew of new upcoming products, the world’s largest software company has again become a growth story.