News

Analyst: Behind .NET Lurks .DOJ

• By Scott Bekker
• 10/19/2000

Microsoft Corp. has spent plenty of time recently discussing its .NET strategy – which shifts much of the company’s emphasis from software to delivery and support of online services. However, the software giant has been murky about details regarding how .NET will be productized, or how it will fit with Windows. That’s because .NET may be more than a savvy move into the Internet economy. The strategy may be a vehicle to launch the new Microsoft applications company in the event of a forced breakup by the U.S. Department of Justice.

This is the observation of Tom Bittman, vice president and analyst with GartnerGroup, speaking at the consultancy’s ITxpo in Orlando, Fla. “The specifics of .NET – how it’s packaged and so forth – is really dependent on .DOJ,” he said. If a breakup did happen, it’s likely that Microsoft would be split into an operating system company (“Windows, Inc.”) and an applications and middleware supplier. The Microsoft applications company would be the dominant company, with about $28 billion in annual sales, compared with annual revenues of $19 billion for the Windows company.

If the company is forced to split, the Microsoft applications company could take .NET as its underlying platform. “Is .NET an operating system or something that layers on top of the operating system” Bittman asks. “Microsoft says they’re ‘both.’”

The .NET vision “becomes the vision to create a Microsoft platform that is independent of the operating systems; and moves the business model to back-end services,” said Bittman. “If Microsoft is not split, the .NET vision will continue to focus on the Windows operating system as the primary client platform.

Bittman also warned that Microsoft’s install base has been slowing down its rate of upgrades. Therefore, the software giant is seeking new revenue sources, and this is being reflected in new licensing strategies. He noted that Windows 2000 Server licenses are running 15% to 24% higher than Windows NT 4.0 Server licenses. Plus, Microsoft began imposing “reimaging” fees to Microsoft for OEM-purchased PCs; meaning that companies paid for the OEM version of Windows, then had to pay again for a Microsoft-issued license on the same machine. Large companies pushed back, causing Microsoft to back away from this policy. However, smaller to medium-size businesses still need to pay this reimaging fee, Bittman pointed out. “That means 70% to 80% of volume customers are currently not in compliance,” he said. - Joseph McKendrick