WinInfo Short Takes: Week of July 28 - MS Financial Analysts Meeting Roundup

An often irreverent look at some of the week's other news...

MS Financial Analysts Meeting (MSFAM): Gates, Execs Talk Up Future Advances
At yesterday's annual Financial Analysts Meeting, Microsoft executives were paraded in front of a crowd of fund investors, analysts, and other financial wizards, offering up the kind of dog and pony show that's pure gold for people like me. As a result, I'll be pouring over the talk videos, transcripts, and PowerPoint presentations for the next several days, looking for interesting tidbits, but here are some of the more interesting ones that jumped right out at me...

MSFAM: Longhorn Not Just Windows, But Next Generation
Microsoft Chairman and Chief Software Architect Bill Gates got the day going with a pie-in-the-sky view of the company's objectives moving forward, but the most interesting thing he said concerned Longhorn, which the company views more as a platform generation than a single product. That is, there won't be just a Longhorn client release (and, yes, the corresponding server release as first reported right here in WinInfo), but also corresponding releases of Microsoft Office and other products. "Longhorn is the next generation; it's a big bet for us," Gates said. "We don't know the exact time frame of it. It's clearly many years of work that we're engaging in. We're very excited about the prototypes we've built, and some of the early technology proofs that we have. We've got a major advance in the user interface \[Aero\], a major advance in the API \[Avalon\]. It has this new storage capability \[WinFS\], it's got Web services as sort of a built-in piece of the platform, and it's very oriented around scenarios, making it easy to manage workflows, making it easy to manage contacts. For our customer, taking the idea of the way you deal with photos and music and just unifying those into the single storage metaphor. Longhorn is not just a release of the Windows client, it's also a release where in the same time frame you'll have advances in Office, our server products, virtually everything at Microsoft is synchronized to build on this platform in, and take advantage of that." And lest you still not understand that Longhorn is a huge release, consider CEO Steve Ballmer's comments about the release. "There needs to be periodic big bangs," he said. "That's how we think about Longhorn."

MSFAM: Longhorn Beta 1 Still on Track for 2004
Microsoft Group Vice President Jim Allchin reiterated the Longhorn schedule I reported back in early June: "Now, the next step for Longhorn, we've had some design previews already," he said. "We've shared with partners as well as ISVs and IHVs what we're doing. We do have regular builds running of this. The next big event is PDC, which is our Professional Developer Conference, which is coming up at the end of October. We will be handing out CDs there to get the developers going, to let them see the great capability that we're putting into Windows, and then later next year we will be doing Beta 1, which will be a broad beta of the technology of Windows code-named Longhorn. As Bill said, there are other pieces coming in the Longhorn wave but I'm just talking about the client here." In other words, Longhorn is still on track for a 2005 release.

MSFAM: Longhorn in 2005?
Is Longhorn really on track for 2005? While the company's official stance is that things haven't changed, things really have changed. First, the Longhorn Server release is now official. Second, executives at the company are starting to reiterate how complicated and huge this release is. "Longhorn is a bit scary," Gates admitted during lunch at the meeting. "We have to be willing to change things. It should drive a whole range of upgrades, but that could be sort of delayed. It's so innovative, and there is a lot of work to be done in terms of what has to go in and what has not. If you split it up, then you delay one of the really great pieces." In other words, don't hold the company to a specific release date. This is Microsoft we're talking about, after all.

MSFAM: Windows 9x, NT 4 Still Huge
One interesting little factoid, according to Jim Allchin: "There are probably still 350 million PCs with \[Windows\] NT 4.0 or Windows 9x on them." Allchin mentioned this figure as an opportunity for upgrades, but I bet the figure is quite a bit higher than that, actually.

MSFAM: Windows XP SP2 This Year
Allchin also mentioned a few details about the release of Windows XP Service Pack 2 (SP2), which is one of my most common email questions these days. "We are having Service Pack 2 for Windows XP coming out this fiscal year," he said, a release that is "primarily not \[about new\] features, but there will be a few things that we're adding to that." Those new things, by the way, include the ability to have two interactive users working off the same XP Professional box at the same time, one at the machine, and one remotely using Remote Desktop. The feature is geared toward Smart Display owners, however. Allchin also said that new XP Tablet PC Edition and Media Center Edition release would ship this year too, though we already knew that.

MSFAM: New Version of Plus! Digital Media Edition on the Way
I've often touted the Photo Story feature in Plus! Digital Media Edition as the single reason why all XP users need to grab this $20 package, and apparently Microsoft agrees the tool is a hidden gem. A "Lite" version of the program appears in the recently released Microsoft Digital Image Suite 9, and Allchin revealed that a new version is on the way: "We have an update of the Plus! pack coming out," he said. "We had \[Photo Story\] in the first version, but we've upgraded it in a significant way. \[The new version gives you can option called\] 'Create a video CD of your story.' So, a key improvement that we're making here is that you can select this, and then burn a CD, a video CD, that you can play in virtually any modern DVD player. So, even if you don't have a PC, you can be able to share it with friends and family or others that only have DVD players." Sounds cool, but I hope it's a free upgrade.

MSFAM: Making the Money
Microsoft's $53.5 billion in bond, cash and stock investments has done pretty well for the company, according to CFO John Connors. In the last fiscal year, Microsoft's these investments earned 7.5 percent, and the company now has $49 billion in cash and short- term investments. Not too shabby.

MSFAM: Investing in People, R&D
Microsoft will hire 5,000 new people over the next 12 months (the company already employs over 50,000) and increase its research and development investment by 8 percent, according to Gates. That means the company will spend up to $6.9 billion on R&D between now and June 2004, or more than the gross national product of some countries.

MSFAM: Microsoft, Linux, and Security
One topic CEO Steve Ballmer had no problem broaching is security and the company's arch-foe, Linux. Ballmer touted CERT's operating system advisories from 2002, noting that Solaris and Red Hat Linux both had 12, while Microsoft had 5 across all Windows versions. He also noted that Linux vulnerabilities were growing 21 percent faster than those from Microsoft, with the open source solution suffering 485 vulnerabilities in 2002, compared to 202 for Microsoft. Jumping to an oft-cited "advantage" of Linux, Ballmer then provided evidence that major open source vendors usually deliver important security patches for Linux far later than Microsoft does for Windows. From January to October 15, 2002, he said, Red Hat released 9 security patches one or more months after other vendors; those Red Hat systems, he said, remained vulnerable while customers waited for the patches. "Can IBM give you a product roadmap for Linux?" he asked. "Can they deliver new features and fixes to Linux? Does it indemnify the intellectual property in Linux? No, no and no."

MSFAM: Office Connector for MSN on the Way
It's not clear when it's being released, but Microsoft will issue software later this year that lets Outlook users access and share email and calendaring information on MSN. The Outlook Connector for MSN will link Microsoft's Office team with its MSN unit for the first time, and let non-Exchange users share calendars through Outlook 2003, a feature that is otherwise glaringly absent. In related news, the upcoming release of MSN 9 will also include pop-up ad blocking, a first for Microsoft. This feature "will let consumers choose between wanted and unwanted pop-ups," a Microsoft representative said. It's about time, guys. And where's the free version for IE users?

But Wait, There's More
You didn't really think I was going to focus only on the Microsoft Financial Analysts Meeting, did you?  Here are a few other short takes...

AOL Inflated Its Subscriber Numbers
AOL Time Warner's AOL unit has been caught cooking the books. The media giant this week admitted that AOL's recent loss of a large number of subscribers was probably due to "cleaning up the files," meaning the company hadn't been giving accurate subscriber numbers for some time. AOL inflated the numbers by counting limited usage accounts that had been deactivated for some time, adding almost 1 million non-users to its official subscriber count through 2001 and 2002, or almost 17 percent of the subscriber growth the company reported. According to the latest numbers, AOL has 25.4 million subscribers in the US, down from a high of 26.7 million users in late 2002. Can you believe that many people actually use AOL?

Microsoft Relaxes Licensing Rules
In a bid to calm fears that it is violating the terms of its settlement with the US government, Microsoft this week agreed to ease its technology protocol licensing terms. You may recall that, as part of the settlement, Microsoft agreed to license communications protocols to competitors and partners so that they could create products that interoperated more efficiently with Windows. Since then, Microsoft has licensed the technology, but various companies complained that the cost was too high. So now, pre-payments are reduced from $100,000 to $50,000 and the company is changing the royalty from per-item sold to 1 to 5 percent of total revenues on the licensed products; this will lower costs for many companies, apparently. The move apparently satisfied Judge Colleen Kollar-Kotelly, who is personally overseeing Microsoft's settlement. "I was very concerned with the protocol issue," she said. "I'm pleased there has been some progress made."

Apple Takes Down Switch Ads
Apple, in its own quiet way, has apparently given in to the notion that its Switch ad campaign is a failure, with the company losing market share since it started the high profile campaign last summer: The company removed its collection of Switch ads from its Web site, though you can still access the letters purportedly written to the company by the people who starred in them. The ads removal follows an April decision to remove the "Switch" tab on the company's home page. I think I speak for most of geekdom when I say we need more Janie Porche ("she saved Christmas") and less Steve Jobs ("he saved Apple").

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