Microsoft News Tracker

The folks at the NY Times have developed themselves a custom newspaper reader application for Windows Vista and got Bill Gates to tout it at the American Society of Newspaper Editors convention:

“The Times Reader is a great next step in melding the readability and portability of the newspaper with the interactivity and immediacy of the Web,” said Arthur Sulzberger Jr., chairman of The New York Times Company and publisher of The New York Times. “We continually look for new ways and the latest technology to deliver our distinctive brand journalism to satisfy our audience’s changing expectations for consuming media.”

Overall, the Times Reader enhances the onscreen reading experience through Windows Presentation Foundation, Microsoft’s advanced display technology in Windows Vista. The text in Times Reader is displayed in columns and formats to fit the size and layout of any computer screen and enables readers to customize the display according to personal preferences, such as font size and content relevance. The Times Reader also uses the same font styles as the printed newspaper, extending the strong brand identity of The New York Times.

An uncharitable view would be that the Times staff is unacquainted with Web browsers and Web programming. On the other hand, the Times seems to have obscure notions of customer lock-in for which a proprietary newspaper reader makes a perfect match.

“The Times Reader is a powerful example of how companies can use software to forge new types of customer connections that span beyond the browser to the desktop and mobile devices,” said Bill Gates, chairman and chief software architect of Microsoft.

Perhaps applications that exploit Vista’s new user interface are in short supply?

All of which puts me in mind of Paul Thurrott’s comment on Nintendo’s decision to brand their next generation videogame console as “Wii” (pronounced “we” or perhaps “whee”):

I’m pretty sure this is actually pronounced “why?”

Finally, for really obscure notions, check out Robert X. Cringely’s latest, For Apple’s Windows Strategy to Work, It Must Replace Microsoft Office and Buy Adobe Systems:

Over the past three weeks, we’ve laid out in this column a sequence of clues and events that suggest Apple is planning to next year take on not only Microsoft’s hardware OEMs, but also possibly Microsoft, itself, by leveraging a vestigial legal right to some portion of the Windows API — in this case, literally the Windows XP API. This bold strategy is based on the high probability that — if something called Windows Vista ships at all next January — it will really be Windows XP SP4 with a new name. Microsoft is so bloated and paralyzed that this could happen, but what’s missing is an Apple application strategy to go with this operating system strategy, because Microsoft’s true power lies not in Windows, but in Microsoft Office. Fortunately for Apple, I believe there is an application plan in the works, and I will describe it here.

I wouldn’t want to spoil the ending, because despite some howlers (”Office is how Microsoft makes most of its revenue.”), it’s quite a page turner. Previous episodes here and here.

Exemplifing all that online services investment that has Wall Street upset, Microsoft today launched a beta of Windows Live Shopping at shopping.live.com:

Today we launch the brand new Windows Live Shopping site!

What is it? It is the beta launch of Microsofts Web 2.0 shopping experience, featuring one of the worlds largest product catalogs, user-created content and an easier-to-use interface built on 100% AJAX technology. It uses a unified shopping engine to search or browse almost 40 million products from 7,000 stores ranging from many of the countrys leading retailers to eBay. Results are displayed in an order that is not affected by advertising; merchants cannot pay to have their items show up closer to the top. Users will be able to drag-and-drop items to a shopping list and share lists with friends; see user reviews of products and sellers; and read and create public shopping guides on any subject.

As we have mentioned previously, Windows Live Shopping is MSN shopping with a spiffy new Web 2.0 user interface and features. Unfortunately, it doesn’t support Firefox.

If you consider shopping a team sport, apparently more Web 2.0 social networking is on the way:

What is our vision? In the future, Windows Live Shopping will continue to offer the great comparison shopping services you see today, while also integrating more social and community features that will enable users to better research, share, and have fun with their shopping experiences.

Since online shopping is not exactly a new category, the test will be to see if the new features draw a crowd.

As always, it’s not nice to fool Wall Street and Microsoft shares are getting pummeled this morning as a result. It wasn’t so much that 3Q earnings were bad, as that they were at the lower end of what Wall Street expected. And it wasn’t so much the 3Q earnings, as it was the guidance for FY 2007. Jay Greene at BusinessWeek Online elucidates in Microsoft’s strange spending splurge:

Just when Microsoft investors were getting used to the company’s combination of slowing growth and expanding margins, they got a jolt on Apr. 27. The software giant released quarterly results that were largely in line with expectations. But projections for the fiscal year, which begins July 1, were another story.

Microsoft, under Chief Executive Steve Ballmer, will spend about $2 billion more in fiscal 2007 than Wall Street was expecting. “We decided to aggressively invest in a number of areas, and they do add up,” Microsoft Chief Financial Officer Chris Liddell said on a conference call.

Among those areas: speeding up production of the Xbox 360 game console, pumping money into the company’s fledgling Windows Live service that delivers software applications over the Web, and increasing the pace of acquisitions.
…
The sticking point, though, is that those types of investments were already factored into analysts’ models. Many were left scratching their heads, wondering how Microsoft’s new investments could add up to so much more than they calculated. “It sounds like you’re building a Google or a Yahoo inside the company,” Goldman Sachs & Co. analyst Rick Sherlund told Liddell on the call, referring to Web services, one of the areas targeted for added spending.

Liddell says the company isn’t hiding anything. “I don’t think there’s a Trojan Horse there that we don’t want to talk about, sitting below the surface,” he replied.
…
Analysts were disappointed by the lack of information. “Where is the money going? There wasn’t an answer,” says Charles DiBona, a Sanford C. Bernstein & Co. analyst. “It’s going into a black hole as far as anyone knows.”

It’s an interesting puzzle for the analysts, I’m sure, but models (both Microsoft’s and the analysts’) can be wrong and we’ve touched previously on the fact that in the ad-supported online services game it takes big money (in the form of people, hardware, and bricks and mortar) to make big money, so some large expenditures are going to have to be on Microsoft’s menu if they want to play.

As for the Xbox 360, it certainly is a glaring hole in Microsoft’s wallet. In 3Q, Home and Entertainment (mostly Xbox 360) had 39% of the revenue of Server and Tools, but swallowed up 49% of the S&T profits. Although it is undoubtedly too soon, one wonders exactly when the shareholders are going to get impatient for the Xbox 360 to turn the corner. To soothe potential grumblers, Microsoft’s John Porcaro reports that Business is fine, thanks for asking:

• This quarter, we shipped 1.7 million Xbox 360 consoles, bringing our cumulative sales to date to 3.2 million consoles with 1.8 million in North America, 1.1 million in Europe and 300,000 in the rest of the world.
• According to NPD, our life-to-date attach for software and peripherals in the U.S. through March was 4.5 and 3.0 per console respectively - higher than any other gaming console at this point in the lifecycle.
• Despite a relatively small installed base, three of the top 10 selling video games in the US in March were for the Xbox 360 platform.
• Attach rates on the Xbox Live service remain strong, with more than half of all Xbox 360 consoles sold connected to the service either via Silver or Gold tier memberships.
• Because of our increased optimism and strong console shipments in Q3, we are tightening our previously announced fiscal year shipment guidance of 4.5 to 5.5 million consoles to 5.0 to 5.5 million consoles.

There’s more on the list - I just grabbed the biggies. However, while there is a whiff of largesse in the offing, the proof will be when cash starts flowing in, not out. Everyone knows the “razor and blades” analogy, but they want to be sure the customers haven’t decided to grow beards.

Finally, since the demand for cash is high, I expect there will be renewed interest in milking more cash out of the Office (aka Information Worker) and Client segments. I discussed last week how there appears to be a concerted effort to expand income from Vista by reducing piracy and raising the price per PC sold, and we just saw a new piracy reduction initiative for Office. Perhaps there will be a concerted effort to upsell Office 2007 too.

In the end, the ultimate source of Wall Street’s discomfort seems to be Microsoft acting like a growth stock. From Jay Greene’s article referenced above:

What’s behind the angst? At least part of the reason is that investors had decided to view Microsoft as a value play rather than a growth stock. So they were willing to accept slowing growth in exchange for fattening margins and rising shares. But the investment binge will curtail margin expansion at least into mid-2007.

It’s interesting to see Microsoft again making some big bets, but are they still capable of cashing them in?

Update: More analyst quotes here and here.

Update 2: A couple of commentaries: Microsoft Lost in Space and Dinosaurs like Microsoft don’t run with bulls. Ouch! On a more positive note, see Is Microsoft Preparing a Big Attack?