Management needs to defend the stock. They mishandled the contract amendment PR and allowed the perception to linger over the weekend that the Centera business was also affected. It appears that they expected the Exchange firewall appliance announcement to make up for it, but it is clearly not working even though that announcement was very significant because it put NENG in a position to sell appliances with 25%-35% gross margins to the very large Microsoft Exchange installed base (see roadmap below).
From the numerous calls that IR got concerning the loss of margins on the Centera business, there clearly is some confusion about the margin contributions of the different parts of the business so why not hold a CC clarifying the situation?
The Centera contract was a lifeline so there are low expectations of margin expansion but high expectations of sales expansion. The distribution biz is the distribution biz. TidalWire remains a way of plugging into the mainstreaming of storage networks. The margin expansion was clearly going to come from their other OEMs so why confuse the market by singling out the declining EMC-approved HBA business when NENG is still a sales growth and sales mix story?
New Microsoft Offerings Enhance Security
The Security Business Unit (SBU) continued to deliver in 2003 on Microsoft's commitment to Trustworthy Computing, launching a Protect Your PC campaign to assist consumers, and, in May, joining forces with prominent anti-virus vendors such as Symantec, Computer Associates, and Network Associates to form the Virus Information Alliance (VIA) to ensure mutual products are more secure.
Microsoft CEO Steve Ballmer reinforced Microsoft's commitment to security at the Worldwide Partner Conference in October when he outlined specific steps to address customer security concerns. These steps include improved patch-management procedures and a number of education and training programs such as the IT Pro Security Zone, a new monthly security Web cast, a new TechNet security bulletin search tool, a monthly security newsletter to IT Pros, and a bimonthly security newsletter to consumers.
In November, Microsoft launched Windows Rights Management Services (RMS) for Windows Server 2003 to help augment the security infrastructure of an enterprise or organization, and assist in protecting sensitive information.
Microsoft Chairman and Chief Software Architect Bill Gates demonstrated Internet Security and Acceleration (ISA) Server 2004 during his keynote at Comdex Las Vegas 2003 in November. Available for public beta early in 2004, ISA Server 2004 is designed to deliver new levels of application layer security, simplified management, integration, and fast Web access.
Also moving forward this year was the Next Generation Secure Computing Base (NGSCB), a new security technology that will be a component of the next version of Windows, code-named "Longhorn." Microsoft gave a first-ever demonstration of NGSCB at the Windows Hardware Engineering Conference (WinHEC) in May, and later released a developer preview for NGSCB at the Microsoft Professional Developers Conference in October.
Release of Exchange Server 2003 Marked By Security, Ease of Use and Value
In October, Microsoft launched Exchange Server 2003, the next edition of its messaging and collaboration server, as part of the Microsoft Office System. Exchange Server 2003, the most reliable and secure version of Exchange to date, has been developed with a focus on the experience of both the information worker and the IT administrator, ensuring superior end-to-end quality for customers. Improvements in productivity, manageability, and security provide a significant increase in value with Exchange 2003 that could lead to a lower total cost of ownership (TCO). The new release delivers increased productivity to information workers through security enhancements and new communications and scheduling tools.
Adding to the already strong anti-spam functionality in Exchange 2003, Microsoft added the Exchange Intelligent Message Filter in November. The filter performs heuristics-based analysis of e-mail to determine whether any message is junk e-mail. It adapts over time, constantly improving its ability to catch unwanted messages and prevent false positives.
The filter builds on security improvements to Exchange Server 2003 and Outlook 2003 that help block malicious content and spam before it ever gets to users' inbox. Support for lists that permit or block certain senders, domain spoofing and a range of other spam-blocking and filtering techniques built into Exchange 2003 allow technology administrators to focus on maintaining a healthy network, thereby keeping users productive.
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