Microsoft alliances need more than cash
to thrive
By Ben Heskett
Staff Writer, CNET News.com
December 8, 1999, 12:35 p.m. PT
news analysis When it comes to striking deals with the networking industry,
Microsoft's efforts have had decidedly mixed results.
The software giant, looking to expand beyond its dominance in software for PCs, is hoping
to play a part in a rapidly evolving communications market. As the industry gradually turns
from the personal computer to a variety of Net-based devices for communications,
Microsoft is looking toward other opportunities to maintain its healthy profit margins.
The firm today announced a deal with wireless giant Ericsson to develop technologies for
mobile communications devices.
The company has used its vast cash stores to gain access to the telecommunications
world, spreading large investments across cable ventures like AT&T and Comcast, digital
subscriber line (DSL) upstarts like Rhythms
NetConnections and NorthPoint Communications, and
high-speed long-distance carriers like Qwest
Communications International.
But the Redmond, Wash.-based software behemoth hasn't
been as successful in creating and sustaining alliances
with the providers of technology for these firms.
"Microsoft is a necessary evil," said Maribel Lopez, an
industry analyst with Forrester Research. "In many cases,
it's not a true partnership. Each side just wants to know
what the other side is doing."
Such deals may be tailored more to garner favor on Wall
Street than to foster technology innovation, according to
some. "Partnering with Microsoft is good for several points
on your stock," said Craig Johnson, principal with market
watcher Pita Group. "Reality has nothing to do with
anything."
Today's deal with Ericsson bears a striking resemblance to an alliance launched just over
a year ago between Microsoft and Qualcomm, a joint venture called Wireless Knowledge.
The venture has yet to move beyond the trial phase with any of its major
telecommunications carrier customers. Additionally, the company has already changed
chief executives, installing a Redmond veteran in place of a former Qualcomm executive.
And Microsoft executives today did little to dispel the notion that Wireless Knowledge is
not exactly a vital cog in the software firm's ever-expanding communications strategy.
"Mobile Internet access and services are crucial for realizing Microsoft's vision of
empowering knowledge workers and consumers through software any time, anywhere and
on any device," Microsoft president Steve Ballmer said in a statement. "As the world
leader in mobility and mobile communications, Ericsson is an ideal partner to help deliver
this vision."
Wireless Knowledge executives could not immediately be reached for comment.
In other areas of the networking industry, Microsoft has also fallen
short. An ambitious alliance with Cisco Systems announced in 1997
centered around the delivery of an operating system now called
Windows 2000 that has run into one huge problem: Microsoft hasn't
delivered the software.
That software was going to provide the basis for a series of Cisco products that tied into
Windows 2000 technology, like the system's directory service.
Cisco executives admitted to the misstep at the company's recent analyst conference.
"That strategy cost us two years," said Don Listwin, executive vice president at Cisco.
Microsoft does not have a cohesive networking strategy, according to Virginia Brooks, vice
president of networking and communications for industry consultants the Aberdeen Group.
"What Microsoft has tried to do is partner with winners to help drive their own technology."
"Cisco was an active proponent of Microsoft's directory, and that failed to materialize in the
time frame Cisco counted on," she added. "It's one of those public disappointments where
[Cisco] had to face up and say they bet on the wrong horse."
Microsoft recently partnered with Cisco competitor Nortel Networks to make its software
more voice-friendly--a deal that has yet to bear significant fruit, though it remains in its
early stages.
Despite the examples, there have been bright spots in networking for Redmond. An
ongoing partnership with 3Com has resulted in the delivery of a popular set of home
networking technology. The two companies are also working on adding networking
capabilities to Microsoft's Windows NT operating system, to be named Windows 2000 in a
forthcoming version.
3Com also has the largest footprint with consumers among network equipment providers,
possibility facilitating more cooperation. "We're trying to make everything simpler," said
Jeff Graham, 3Com's senior vice president for its personal connectivity business
unit, in a recent interview.
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