From the WSJ:
July 23, 1999
Microsoft Broadens Vision Statement
To Go Beyond the PC-Centric World
By DAVID BANK and DON CLARK
Staff Reporters of THE WALL STREET JOURNAL
SEATTLE -- Microsoft Corp., describing what it called serious threats to
the company's future, is making plans for an industry no longer dominated
by the personal computer.
Steve Ballmer, Microsoft's president, told analysts that the company has
formally abandoned the PC-centric motto espoused by Chairman Bill
Gates in 1975: "A computer on every desk and in every home." The
company's new vision statement, crafted by Mr. Ballmer, has been
broadened to include Internet-based software and services, non-PC
devices such as handheld computers and TV set-top boxes. It reads:
"Empower people through great software anytime, anyplace and on any
device."
"We had to step back and say, 'With all this flux, new risks and changes in
the market, was this vision still appropriate to the company?' " Mr. Ballmer
said during the company's annual gathering for securities analysts here.
"We decided it wasn't."
The company, known for its PC operating
systems and application programs, is already a
major player in Web services. In a move
announced separately, Microsoft Thursday
fired a new shot at rival America Online Inc.
with a long-awaited Internet instant-messaging
service. AOL makes an extremely popular
version of this service, which allows users to send each other messages
that pop up on their computer screens. But the new Microsoft service
allows users who are also AOL customers to send pop-up notes to users
of both services; AOL users now can only send messages to each other.
Perhaps the most serious threat to Microsoft, however, is the trend among
software developers to write programs that are stored on central server
computers and used via Web browsers, reducing the need for customers
to buy Windows PCs and Windows software to get access to the latest
computing features. The company's internal surveys say that while the
number of software developers writing Windows programs hasn't fallen,
the percentage that say they are targeting the Web is exploding, from 21%
in the past year to 38% in the coming year.
"If we don't get our act together, we are at risk," Mr. Ballmer said.
Microsoft, of course, has often used the analysts' meeting to try to temper
overheated expectations. The notion that the company faces potent
competition also serves its interests in its pending antitrust trial in
Washington.
Toward the end of the briefing, Mr. Gates predicted that the PC would
remain a hub of the digital universe, offering new capabilities in areas such
as digital photography, music and video. For example, he said, Microsoft
is recommending to PC manufacturers that telephone services become a
standard part of personal computers in the next year.
Mr. Gates also highlighted investments in two
major areas. First, he said Microsoft has
thousands of developers working on what he
called a "Web-centric" platform for software that
exploits both the power of PCs and networked
server machines. Second, Microsoft is committed
to revolutionizing the way people interact with
computers, adding greater abilities to recognize
speech and visual cues from users, he said.
Mr. Ballmer, in his earlier presentation, used the
term "crazy" to describe some analysts' estimates
that Microsoft's revenue will grow 25% in the
current fiscal year ending in June 2000. With Microsoft's revenue in the
year just ended near $20 billion, that would require the company to add
$5 billion in new revenue. "We're fighting the law of large numbers," Mr.
Ballmer said.
Microsoft's stock declined $3.625 to $91.0625 in Nasdaq Stock Market
trading Thursday.
Analysts said they are eager for more details about Microsoft's efforts to
sustain its growth in the face of slowing growth in PC sales and a shift to
software hosted on Web sites rather than on stand-alone PCs.
"The most pressing issue for me is how does Microsoft adapt to a shift in
the center of gravity to a more Web-centric form of computing," said Rick
Sherlund, an analyst with Goldman Sachs Group.
Greg Maffei, Microsoft's chief financial officer, told analysts that the
company faces the worrisome prospect of sub-$600 PCs that don't come
with Microsoft applications, and eventually might use an alternative to
Windows or have no operating system. PC makers "are clearly going to
use this to push the average price of Windows down," he said.
Mr. Maffei for the first time broke out revenue for its Consumer and
Commerce Group, which consists mainly of the Microsoft Network Web
sites, putting revenue for fiscal year 1999, ended June 30, at $800 million.
Mr. Maffei didn't quantify the group's losses, but said they would increase
at least through the coming year. He said the company was committed to
investments and acquisitions to bolster the operation, and also would
spend heavily to overtake 3Com Corp.'s Palm computing division in
handheld devices.
Mr. Maffei said Microsoft executives continue to be divided about
whether to create a "tracking stock" to reflect results in its Web and media
operations, though gave no timetable for a decision. In particular, he said,
such a stock would help Microsoft in any initiative to acquire smaller
players in the Internet-access market. "We certainly see strategic reasons
for wanting to do it," Mr. Maffei said.
Microsoft had long been expected to enter the instant-messaging arena,
which has grown at an astounding rate. AOL, for example, says its
customers each day send 750 million of the pop-up messages -- 12 times
more than AOL's conventional email traffic.
Microsoft's new MSN Messenger Service is designed to complement
AOL's service, as well as Microsoft's popular Outlook software and its
free e-mail service known as Hotmail. The new Microsoft service relies on
a Hotmail account and a free piece of software that users download from
the company's Web site.
AOL messaging users who download that software are asked to enter
their screen name and password, and asked if they want to import their
existing "buddy list" of AOL users with whom they correspond. After that
process, those users may use Microsoft's software to send instant
messages to other AOL users or to people who use only the Microsoft
service.
Ann Brackbill, an AOL spokeswoman, said the Microsoft service raises
some "serious" privacy and security issues. "They are violating the cardinal
rule of the Internet by asking users for their screen names and passwords,"
she said, arguing that Microsoft's use of AOL's naming system is "akin to
hacking."
But Deanna Sanford, a lead Microsoft product manager for the service,
said the user data never goes to Microsoft and so poses no privacy
problem. It is only stored in Microsoft's software on the user's PC to
streamline the process of logging on at AOL, she said.
Ultimately, she added, Microsoft would like to see all of the
instant-messaging companies adopt standards that will work together.
Ian |
