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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: JC Jaros who wrote (47876)	7/17/2000 2:35:19 AM
From: ms.smartest.person	Read Replies (1) \| Respond to of 74651

<hi, JC> - Microsoft's Linux Killer Program 17-Jul-00 00:30 ET [BRIEFING.COM - Robert V. Green] Microsoft announced late on Friday a new initiative to support the development of Application Service Providers (ASPs). The program should help bring the ASP marketplace further along. But one unspoken component is clear: this is a Linux Killer program. Linux Is For Web Servers Linux's strongest position is as a Web server platform. As such it is a relatively simple, straightforward platform. Linux's presence as a desktop system is virtually nonexistent. As a server in client server environments, it has almost no presence. (There just aren't many Linux based client/server software programs.) And as a LAN server, it is also negligible. The only real market position of strength that Linux has, is as a Web server platform. But the long term vision of the web is as a broadband service and an application service provider (ASP) platform. To be a long term provider of the web's basic platform, a company has to provide services to make broadband delivery and ASP delivery easy. Microsoft's steps are the first real market announcement of a broad program to build an ASP platform. Good For The Application Service Provider Marketplace The announcement by Microsoft (MSFT) on Friday is good for the application service provider market. The ASP market, which Briefing identified as a key trend of the year 2000 in our Stock Brief of January 3, hasn't exploded yet. At least, not in terms of revenues. There are countless startups, all developing ASP services currently, but none of the markets, with the possible exception of outsourced email, has really blossomed yet. But now, with Microsoft apparently making a strong commitment to the ASP model, we are likely to see the ASP market start to develop. Bad for Linux Why is this development bad for the Linux operating system companies? Microsoft will add functionality for ASP providers that will make it compelling to use their operating system/server platform to provide services. If the ASP market takes off, Linux vendors will have to provide similar features. It will be hard to keep up with Microsoft. No matter how smart or creative the Linux vendors are, they just don't have the resources Microsoft has. Consider Red Hat, the preeminent Linux company. In past twelve months, since becoming a public company, Red Hat has spent just $10 million on research & development. Microsoft's research and development budget in the most recent quarter was $990 million! When Microsoft reports on Tuesday, it is likely that their three month R&D spending will exceed $1 billion! No matter how smart Red Hat is, they aren't going to effectively compete with a company that has $4 billion annually to spend in R&D, which is 400 times more than Red Hat. Even if you consider that Microsoft's R&D budget is spread over hundreds of projects, it is very clear that Red Hat will be grossly outspent. Furthermore, Microsoft's R&D budget just keeps getting bigger, while Red Hat is still struggling to find a model that builds their financial strength each quarter. And to make matters even worse, if Microsoft really is split into two companies, the operating system portion of Microsoft will likely take over this ASP initiative. If it does, Microsoft can create a Microsoft Linux operating system product with the ASP functionality fully integrated. How could Red Hat ever compete with that? Especially if the new Microsoft division uses its existing distribution channels for Linux? There isn't any way to view this most recent Microsoft development as anything but extremely negative for Linux companies. It is particularly bad for Red Hat (RHAT), since Red Hat is the Linux company with no diversity in their revenue stream other than Linux. Dominate Applications From the Bottom Up Microsoft appears now to be applying the same "bottom up" strategy that worked so well for them in the office productivity software area. The bottom up strategy exploits Microsoft's position as the dominant platform provider, and then develops tools that are integrated into the platform. Once the tools become accepted, Microsoft develops the best applications using the tools. The strategy can be summarized as: Own the platform. Develop the toolset. Outdevelop the application companies, using the intimate knowledge of the toolset. This strategy, along with the distribution lock that Microsoft exploited, is how Microsoft dominated the office productivity software market. What this means is that the ASP companies that support the new Microsoft ASP initiative need to be careful. Just ask any of the PC software vendors that worked with Microsoft to embed OLE or RTF functionality into their application software. Summary You have to give Microsoft credit. They haven't lost their nerve one bit, even though the government is on the verge of breaking up the company. Friday's press release shows they haven't changed their strategy and desire to dominate an industry, even by one iota. You have to admire the chutzpa. Its the third largest company, in the US, by market cap, but it still acts like a nimble aggressive small company. And while we think the move is good for further the ASP marketplace, it is a very ominous sign for Linux system vendors. By moving value up to the tools level, instead of the operating system level, Microsoft may make the operating system for the ASP world irrelevant. If Microsoft succeeds in creating value at the tools level, it will make Linux irrelevant. www.briefing.com

To: JC Jaros who wrote (47876)	7/17/2000 2:48:28 AM
From: Charles Tutt	Read Replies (1) \| Respond to of 74651

That suggests to me that StarPortal may be nearly ready for release. JMHO, of course.

To: JC Jaros who wrote (47876)	7/17/2000 2:55:00 AM
From: Charles Tutt	Read Replies (1) \| Respond to of 74651

Just for chuckles, a few minutes ago I decided I'd have a look at Dell's Web site to see if I could find a laptop configured with Windows 2000 (since on the box it says that software is especially good for mobile systems +/-). Alas, I was thwarted in my efforts, because the first time I hit the "Configure System" button, this is what I got: The page cannot be displayed The page you are looking for cannot be displayed because the page address is incorrect. Please try the following: If you typed the page address in the Address bar, check that it is entered correctly. Open the home page and then look for links to the information you want. HTTP 405 - Resource not allowed Internet Information Services Technical Information (for support personnel) More information: Microsoft Support