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April 30, 2008

Microsoft betas heterogeneous system management offerings

Posted by David Hunter at 12:02 PM ET.

The traditional weakness of Microsoft’s system management software has been that no matter how good it was for managing Microsoft systems, it didn’t play in the heterogeneous environments that predominate in large enterprises. Yesterday, Microsoft stepped up to that challenge with public betas of new heterogeneous environment enhancements for their flagship data center management products, Operations Manager and Virtual Machine Manager:

Microsoft today announced the availability of a public beta for System Center Operations Manager 2007 Cross Platform Extensions, which build on the existing Operations Manager 2007 technology and capabilities and are designed to help customers extend the value of their Microsoft System Center investments. Providing customers with a comprehensive management solution, this new end-to-end IT systems monitoring capability incorporates industry standards and proven open source technologies, including Web Services for Management (WS-Management) and OpenPegasus, extending the capabilities across both physical and virtualized Windows and non-Windows operating systems and applications. Microsoft delivers the core foundational cross-platform support out of the box for HP-UX, Red Hat Enterprise Linux, Sun Solaris and SUSE Linux Enterprise Server operating systems so that partners can focus on adding their deep domain expertise in the form of management packs. Companies such as Novell Inc., Quest Software Inc. and Xandros Inc. have demonstrated their support by working to deliver monitoring abilities for applications made by organizations such as The Apache Software Foundation, MySQL AB and Oracle.

Further demonstrating support for its commitment to OpenPegasus, Microsoft also announced today that it will be joining the OpenPegasus Steering Committee and contribute code back to the open source community under the Microsoft Public License, an Open Source Initiative (OSI)-approved license.

Microsoft also delivered a beta of the updated System Center Operations Manager 2007 Connectors, based on many of the same extensible open source technology and industry standards as the Cross Platform Extensions, which provide an integrated administrative experience and the ability to interoperate and exchange System Center monitoring data with third-party management offerings such as HP OpenView and IBM Tivoli Enterprise Console.

Also delivered today was the public beta of System Center Virtual Machine Manager 2008 (formerly code-named “Virtual Machine Manager vNext”), which enables customers to configure and deploy new virtual machines and to centrally manage their virtualized infrastructure, whether running on Windows Server 2008 Hyper-V, Microsoft Virtual Server 2005 R2 or VMware ESX Server.

The proof of the pudding will be in the eating, of course, but Microsoft clearly is making a serious run at the traditional enterprise system management vendors like HP and IBM. If you want to try the free samples, all three betas are downloadable at Microsoft Connect.

Filed under Beta and CTP, Coopetition, HP, IBM, Microsoft, Operations Manager, Virtual Machine Manager

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April 28, 2008

Microsoft 3Q08 earnings underwhelm

Posted by David Hunter at 1:38 PM ET.

Shareholders were justifiably nervous after the first good news called out in the 3Q08 Microsoft earnings report was that the nearly profitless sinkhole of Entertainment and Devices grew revenues by 68%. That such a diversion was necessary was because the milk yields of Microsoft’s leading cash cows, Windows and Office, dropped in a still mostly unexplained manner.

Below are the segment breakouts with some brief commentary based on the 10-Q.


(millions) % change 3Q08 3Q07

Revenue %(24) $4,025 $5,274
Operating Income (26) 3,097 4,204

The big hit here is the $1.14 billion of deferred revenue that got tacked on in 3Q07, but even removing that, revenues were down over last year despite OEM sales (which account for 80% of unit sales) being up 5% and the "premium mix" being up as well. Estimated PC sales growth was 8-9% and theories ranging from piracy to Apple/Linux competition to Microsoft shifting revenue to next quarter have been offered for the shortfall.

Business (mostly Office):

(millions) % change 3Q08 3Q07

Revenue %(2) $4,745 $4,827
Operating Income (8) 3,138 3,399

Subtracting the $500M deferred revenue booked in 3Q07 makes this look much better apparently due to strong Office revenue growth from businesses, but consumer revenue was actually down. R&D expenses were up 19% driven by headcount expenses and headcount itself was up 7%, presumably not to add bells and whistles to the traditional Office product.

Server and Tools:

(millions) % change 3Q08 3Q07

Revenue %18 $3,255 $2,748
Operating Income 20 1,092 911

Another sterling quarter for Server and Tools who launched major new products.

Entertainment and Devices (mostly Xbox):

(millions) % change 3Q08 3Q07

Revenue %68 $1,576 $936
Operating Income - 89 (324)

The good news is that E&D made money in 3Q. The bad news is that it didn’t make much, but then it never does. R&D expense was up 26% and sales and marketing expenses were up 29%.

Online Services:

(millions) % change 3Q08 3Q07

Revenue %40 $843 $603
Operating Income %(33) (228) (171)

Online advertising revenue grew 39% ($175M) to $619 million including aQuantive’s $47 million. aQuantive also added $97 million in agency revenue. So where did it all go? There was a large write-off from the acquisition of aQuantive plus increases in general expenses for infrastructure, "online content expenses," and headcount. One item that caught my eye was "a $24 million in-process research and development write-off." The Online Services Business (OSB) doesn’t seem to be going anywhere fast. The question, of course, is whether it would go any faster with the addition of Yahoo.

Corporate Level Activity (overhead and legal): 

(millions) % change 3Q08 3Q07

Corporate level results %(94) $(2,779) $(1,430)

The big ticket item here was an increase of $1.2 billion in legal expenses including the EU fine.

Bottom Line:

Out of Microsoft’s three cash cows (Windows Client, Office, and Servers) only Servers delivered in accustomed fashion. Entertainment and Devices is all sound and fury signifying nothing, while Online Services is treading water waiting for a Yahoo life preserver

Filed under Acquisitions, Financial, General Business, Microsoft, Yahoo

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Other shoe drops for MSN Music

Posted by David Hunter at 11:36 AM ET.

Back in November, 2006 Microsoft shut the doors on the failed MSN Music download service but kept the DRM servers going to support existing customers. Last week, the end of that service on August 31, 2008 was announced as well.

Like iTunes, PlaysForSure authorizations are bound not only to a user’s individual computer, but to that particular instance of their operating system as well. If a user has to rebuild, upgrade, or otherwise reinstall his or her operating system, authorizations for MSN Music subscriptions will be reset.

MSN Music customers have little recourse, unfortunately. Aside from permanently deciding which computers will keep their account’s authorization – once August 31 passes, authorizations cannot be changed – users have the option of burning purchased MSN Music to CD and then re-ripping the music to another compressed format, such as MP3. However, the process of “transcoding” (converting) lossy-compressed files (as WMA files are) to another lossy format (such as MP3) significantly degrades the quality of the resulting MP3 file. Users can also burn their music to CD and convert to a lossless format, such as FLAC, but lossless formats consume significantly more space in order to make a perfect copy of already-degraded WMA files.

If you aren’t an audiophile, that probably isn’t a bad solution, but the fact that it’s the only solution grated on many. Microsoft’s Rob Bennett defended the decision for the obvious reasons:

In an interview with CNET, Bennett said that continuing to support the DRM keys was impractical, that the issue only affects a "small number" of people and that focusing exclusively on Zune was the best way to go. He also noted that it wasn’t Microsoft’s decision to wrap music into digital rights management.

The reason for shutting down the DRM-licensing servers was "every time there is an OS upgrade, the DRM equation gets complex very quickly," said Bennett, general manager of entertainment, video, and sports for MSN. "Every time, you saw support issues. People would call in because they couldn’t download licenses. We had to write new code, new configurations each time…We really believe that, going forward, the best thing to do is focus exclusively on Zune."

The main takeaway is that DRM schemes for failed download services are like any other failed audio/video format such as 8-track audio tapes or Beta videotapes or HD high-def DVDs – the purchaser is at the mercy of the technology providers and if the business goes south, so does your media collection. Of course, the other takeaway is that if you don’t buy DRM protected digital content, you won’t have a problem and that is getting easier in the audio realm every day.

Filed under Argo, DRM, MSN, MSN Music, Microsoft, Technologies, Zune

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April 27, 2008

Microsoft previews Live Mesh

Posted by David Hunter at 2:08 PM ET.

Last week Microsoft announced a technology preview of Live Mesh, their platform for future Software plus Services applications, and as usual, they seemed to have a hard time explaining it:

As has become the norm with so many of its Software + Services products and strategies, Microsoft isn’t the best at coming up with a succinct Live Mesh definition. The closest I found (in a Live Mesh reviewer’s guide) was this: “Live Mesh is a ’software-plus-services’ platform and experience from Microsoft that enables PCs and other devices to ‘come alive’ by making them aware of each other through the Internet, enabling individuals and organizations to manage, access, and share their files and applications seamlessly on the Web and across their world of devices.” If I were in charge of defining Live Mesh, I think I’d go with “a Software + Services platform for synchronization and collaboration.”

That was Mary Jo Foley and sounds about right to me. If you want a detailed but crisp explanation of what was announced, I recommend Nate Mook’s rundown at BetaNews. If you would like the big picture, the tech pundits have been busy, but I’d offering the following.

Live Mesh is about creating a fixed point on the Web for a user to store, synchronize, and optionally share all his important information from all of his various intelligent devices including PC’s, smartphones, and whatever else comes down the pike. It’s very early days since the developer tooling isn’t ready and the synchronization isn’t even functional yet, but Microsoft hopes to get developers started looking at their platform.

If the vision is appealing, you can sign up to kick Live Mesh’s tires. If you want to be critical, there’s room for that too starting with the usage of the Web as a data "hub" and not a real application platform plus the perennial worry about just how open this supposedly open offering will truly be. In other words, it’s a typical Microsoft technology gambit and duly reflects their corporate perspectives and prejudices.

Filed under Beta and CTP, Live Mesh, Microsoft, Technologies

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