Microsoft News Tracker

Microsoft’s Office Communications Server 2007 RTMed in July, but today was the gala launch event in San Francisco complete with an appearance by Bill Gates who also unburdened himself of an executive email to underscore the importance of the unified communications business to Microsoft. Here’s the full product menu from the press release:

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Today, Microsoft CEO Steve Ballmer and Cisco CEO John Chambers participated in an odd event hosted by PBS talker Charlie Rose that was apparently meant to allay customer fears that the competition between the two for the business communications business would divide the landscape into two non-interoperable warring camps.

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When the first reports surfaced last week that a number of big name IT companies (including Microsoft) had participated in widespread kickbacks on US government contracts, it wasn’t clear to me exactly how Microsoft was allegedly involved. Today, the details are a little clearer in Lorraine Woellert’s report at Business Week. First the big picture:

With some big players already named in lawsuits alleging a widespread kickback scheme, the information technology industry will see further scrutiny as federal prosecutors pursue additional charges in coming weeks. Last week, the Justice Dept. filed civil charges against Hewlett-Packard (HPQ), Sun Microsystems (SUNW), Accenture (ACN), and Accenture subsidiary Proquire as part of a two-year investigation involving potentially billions of dollars in government procurement projects.

The Justice Dept. unsealed complaints Apr. 19 in U.S. District Court for the Eastern District of Arkansas in Little Rock, charging the four companies with fraud and conspiracy in their attempts to win lucrative government contracts. Prosecutors also made public six whistleblower lawsuits that had been filed under seal in September, 2004, by former Accenture employee Norman Rille and Neal Roberts, a onetime partner with Deloitte & Touche who has investigated alliances between technology vendors.

The lawsuits accuse at least a dozen technology vendors of operating rebate and commission programs, referral systems, and strategic alliances that they kept secret from the government agencies that bought their systems or followed their advice. The practice has been going on in some cases for a decade, the lawsuits claim. The Justice Dept. is seeking treble damages plus civil penalties.

There are more details in the article, but the problem is with the payment of referral fees which aren’t uncommon or illegal in many business situations, but have to be disclosed on government contracts. The way the fees were so visibly institutionalized at these companies indicates to me at least that they didn’t understand what trouble they were getting themselves into with the government. Where’s a lawyer when you need one?

As for Microsoft:

According to court documents, the original six civil cases Rille and Roberts filed will proceed against Cisco Systems (CSCO), Electronic Data Systems (EDS), SAP (SAP), Lockheed Martin (LMT), Oracle (ORCL), American Management Systems, CACI International (CAI), SeeBeyond Technology, and Dell (DELL). At least five other defendants remain cloaked under court seal, including one identified in court documents as a wholly owned subsidiary of IBM (IBM).

Boeing (BA), Raytheon (RTN), Microsoft (MSFT), SAIC (SAI), and Exostar were named in the original complaints, but the court, at the urging of prosecutors, dismissed them from the cases last week. The lawsuits themselves describe a network of relationships that reads like a Who’s Who of the nation’s biggest IT companies. Based on documents and information he received while a senior manager at Accenture, Rille claims in one of the original lawsuits, “all the major systems-integration consultants and technology vendors were and are engaged in the same kickback scheme and associated conspiracies.”

So Microsoft isn’t on the hook right now, but they and a number of other big names still seem to have a significant risk. I wonder if it will rate a footnote in tomorrow’s quarterly report?

The crew in Mountain View apparently has time (and certainly money) to spare as evidenced by yesterday’s quiet announcement that Google had acquired Marratech, a Swedish video conferencing provider. They now join Cisco, who just acquired WebEx, and Microsoft, who has Office Live Meeting acquired with PlaceWare, in the scramble for the “unified communications” dollars.

Cisco seemingly reverted to its dotcom boom ways of expansion through acquisition today when it plunked down $3.2B for WebEx, the leader in Web conferencing. Scott Fulton at BetaNews reviews the state of play:

Throughout its history, Cisco has built its vast portfolio talents through mergers and acquisitions. Indeed, startups in the networking field intentionally developed business plans and product portfolios designed to attract a Cisco buyout. But with two new Cisco buyouts this week — storage appliance producer NeoPath Networks on Tuesday, and collaboration software developer WebEx this morning — Cisco appears not just to be building up but building out. And today, analysts believe Microsoft may be on notice.

It’s all part of Cisco’s Unified Communications push which has gotten a lot of notice lately and not coincidentally Unified Communications is the name of the Microsoft Business Division group charged with cornering the business communications market and whose Office Live Meeting Product (created from the 2003 acquisition of PlaceWare) is reported to be number 2 in the Web conferencing market and looks to be clearly in the path of the steamroller