WinInfo Daily UPDATE, April 22, 2002

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April 22, 2002—In this issue:


  • Mr. Gates Goes to Washington
  • Of Profits and Perception at Microsoft


  • Get One Step Closer to Certification at
  • Microsoft ASP.NET Connections & Win-Dev to Colocate Conferences


  • See this section for a list of ways to contact us.

(contributed by Paul Thurrott, [email protected])


  • The most eagerly awaited spectacle of the Microsoft remedy hearings will begin this week when Microsoft Chairman and Chief Software Architect Bill Gates takes the stand so that lawyers can cross-examine him about his previously recorded testimony. Gates has a big cross to bear; his embarrassing 1998 videotape testimony in the original Microsoft antitrust trial was responsible for removing any shred of credibility that the company might have held with the judge. But this time around, observers expect Microsoft's spiritual and intellectual business leader to perform in line with the public perception of the man who turned the PC industry into one of the world's largest industries.

    Gates' original videotaped testimony remains a source of controversy. In it, he appeared sullen and uncooperative, questioning the meaning of simple terms such as "compete" or "consider." Gates and his handlers have said that the videotaped testimony was never supposed to appear in court, but the government's lead lawyer at the time, David Boies, was able to use select clips from the testimony in court, alleviating the need to call Gates to the stand while being able to show only those parts that were most embarrassing. In the video clips, Gates often appeared completely out of touch with the company's day-to-day operations and products, and Judge Thomas Penfield Jackson, who presided over the original trial, could barely contain his disdain for Gates and his testimony.

    This time, however, the situation is different. The government that sued Microsoft for sweeping antitrust violations has now settled with the company after inexplicably narrowing the case significantly, and only nine US states and the District of Columbia remain, hoping to stick the company with stricter remedies. For the prosecution, the brilliant David Boies is gone as well, although he'll be replaced by one of several lawyers the nonsettling states have retained (they won't say which one will question Gates until it happens, in a bit of courtroom intrigue designed to keep Microsoft guessing). The Gates appearance could very well make or break these hearings. If Gates does well and convinces Judge Colleen Kollar-Kotelly that a fettered Microsoft would be unable to continue the innovation that guided the PC industry for the past 20 years, the importance of other witnesses will be diminished significantly, legal experts say. However, if the states hammer Gates to show him to be disreputable or dishonest, the judge might give more credence to claims from Microsoft competitors and the nonsettling states.


  • Couched as it was with the news that Microsoft has already sold more than 32 million copies of Windows XP, the company's quarterly earnings announcement late last week caused confusion, even for seasoned financial analysts. The company posted a strong profit ($2.74 billion, an increase of 12 percent year-over-year), but for the first time, Microsoft's revenues—$7.25 billion—fell short of analyst's expectations of $7.34 billion. To add to the problem, Microsoft said that earnings for the next two quarters will fall short of previous estimates.

    The news sent Microsoft's stock on a rollercoaster ride Friday; the price finally settled in the high 50s. But after sorting through the company's earnings report this weekend, analysts aren't so sure that all is well with the company. And at least one analyst is charging that Microsoft's revenues are deceptively high because of an accounting change that suddenly—and silently—made the company realize previously unearned income this quarter and an $800 million one-time gain from the sale of the Expedia online travel site.

    Also troubling for the company is its Xbox game system, which is experiencing weak sales in Japan, Europe, and Australia. Microsoft had previously said that the Xbox would sell 4.6 to 6 million units in its first year of availability but has now revised that figure to 3.5 to 4 million units. And enterprise spending is almost flat, year over year, affecting a crucial growth area for the company, which now sells a variety of server-related products. Likewise, Office XP sales are said to be far lower than expected.

    The one bright area in all this is Windows XP. Despite flat or slow-growing PC sales, XP has sold better than any previous Windows version, and its 32 million sold copies—split between retail boxes and new PC bundles—in just 6 months is a major milestone and user endorsement. More amazing, perhaps, is that XP has sold just about as well since the beginning of the year as it did during the 2001 holiday season; generally, sales fall dramatically in this time period. The business version, XP Professional Edition, accounted for about 47 percent of all XP sales; the Home Edition presumably took up the remaining 53 percent. And XP is now preinstalled on 60 percent of all new PCs, the fastest adoption rate ever for a new Windows version.

    So is Microsoft still an economic powerhouse, or is the company on cruise control? The answer will be more obvious in about 6 months, when we find out whether the economy recovered and as Microsoft finally completes crucial late 2002 products—Mira, Freestyle, XP Service Pack 1 (SP1), and Windows .NET Server.



  • Announcing the Web site! Here you can find practice exams, discussion forums, articles, and much more—all designed to help you reach your goal of Microsoft or Cisco Certified Network Associate (CCNA) certification. Check it out!


  • Microsoft ASP.NET Connections, VB Connections, and Win-Dev are co-locating their events to deliver the largest independent .NET developer-focused event in 2002. You can get more than 145 sessions covering Web development, XML and data management, .NET Framerwork internals, .NET Web security, Visual Basic 6.0, C++, C#, and more. Register today before this event sells out!

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