Microsoft News Tracker

Microsoft announced today that starting in 2009 all Hewlett-Packard consumer Windows PCs distributed in the USA and Canada will be preloaded with Live Search as the default Web search engine in Internet Explorer and with a custom Live Search enabled toolbar featuring their Silverlight technology. HP had previously been signed up with Yahoo.

Danny Sullivan has a nice table of PC OEMs, their US market share, and the search engine they have signed up with and adding HP clearly is a leg up for Microsoft since HP is a strong number 2 (24%) to Dell (31%) who signed with Google in 2006. Before this HP deal, Microsoft only had Lenovo whose US share was minimal.

The question, of course, is how many users actually stick with the OEM presets for IE or change them or switch to Firefox (which defaults to Google). All of the search engines track the sourcing from toolbars and preloads (use one of them for a search query and check the parameters on the URL) so they have a good idea on traffic and ROI at least after one of these deals is started, but Microsoft undoubtedly has more than ROI on their mind.

First Microsoft has to grow beyond their single digit Web search share if their advertising aspirations are to be realized and this is one way of doing that. Second, a Silverlight toolbar means a Silverlight preload which Microsoft had yet to ante up for with the OEMs and that’s critical if they expect to get their Adobe Flash killer off the ground. There’s been no insight into what sort of bidding went on for the HP eyeballs, but there are lots of reasons why Microsoft would not want to be outbid.

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.
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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.

Where have we heard this one before? Microsoft may have released Windows Home Server to manufacturing in July but star OEM Hewlett-Packard has delayed release of its MediaSmart Home Server until Microsoft provides a promised fix pack:

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Back in March, Microsoft submitted a novel device to the FCC which would utilize the unused “white spaces” in the US TV spectrum (which vary from city to city) for portable personal digital communications. Last week, the FCC’s assessment came in and it wasn’t a pretty sight because the prototype failed to correctly detect when frequencies were in use and would thereby cause interference. This week, more details came out it and it was revealed that Microsoft’s prototype was defective:

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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?