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Microsoft's ambitions are anything but small. The world's #1 software company provides a variety of products and services, including its Windows operating systems and Office software suite. The company has expanded into markets such as video game consoles, interactive television, and Internet access. With its core markets maturing, Microsoft is targeting services for growth, looking to transform its software applications into Web-based services for enterprises and consumers. Microsoft has reached settlements to end a slew of antitrust investigations and lawsuits, including agreeing to uniformly license its operating systems and allowing manufacturers to include competing software with Windows.
Late in 2005 the company announced a reorganization designed to streamline its decision-making and speed up execution across its divisions. Its units include Microsoft Platform Products and Services (Windows Client Group, Server and Tools Group, MSN), Microsoft Business (Information Worker Group, Microsoft Business Solutions), and Entertainment and Devices (Home and Entertainment Group, Mobile and Embedded Devices Group).
While desktop applications and platforms remain the cornerstone of its operations, Microsoft has inexorably expanded its product lines, which include video game consoles, enterprise software, computer peripherals, software development tools, and Internet access services. In 2006 the company launched its Zune brand of digital entertainment products and services. The first Zune product, a 30GB digital media player, will compete directly against Apple Computer's iPod.
Microsoft has also reached major settlement agreements with Netscape (paying the company about $750 million); Sun Microsystems ($1.6 billion in addition to royalty payments on certain technologies); Novell ($536 million to settle a suit tied to Novell's NetWare software; Gateway ($150 million); IBM ($775 million and extending $75 million in credit towards Microsoft software deployment); RealNetworks ($761 million in cash and promotions); and Daum Communications ($30 million in cash, advertising, and other terms).
Despite the litigation that has plagued it in recent years, the company has continued to forge ahead in its strategy to extend its core software products into Web-based services for businesses and consumers. By transforming itself from a traditional software provider to a broader technology services and media company, Microsoft hopes to position its operating systems, software, and services as a de facto standard for accessing, communicating, and doing business over the Internet. The company also operates in the Web search space, directly challenging incumbents such as Yahoo! and Google. It has also partnered with mobile devices makers such as Hewlett-Packard and Motorola to develop handheld computers and mobile phones that utilize Microsoft Windows Mobile and Windows Media software.
Microsoft has used selective acquisitions (including the purchases of Navision and Great Plains Software) to expand its enterprise software offerings, which include applications for customer relationship management and accounting. Along with rival enterprise software providers such as SAP and PeopleSoft, Microsoft is increasingly targeting small and midsized businesses. In 2005 it acquired collaboration software maker Groove Networks (founded by Lotus Notes developer Ray Ozzie), anti-virus security provider Sybari Software, email security developer FrontBridge Technologies, and identity management software provider Alacris. Microsoft also bought file synchronization specialist FolderShare, and media-streams.com, a developer of VoIP technology.
Early in 2006 Microsoft acquired Apptimum, a developer of software used to transfer data between computers, and Onfolio, an Internet content collection and organization technology provider.
In November 2006 the company announced a partnership deal with long-time rival (and Linux proponent) Novell to more closely integrate Novell's open-source Linux software platform with Microsoft's Windows operating system. The agreement included Microsoft paying Novell $240 million up front in subscription fees, as well as an additional $108 million for use of patents; Novell will pay Microsoft at least $40 million over five years for use of Microsoft's patents, based on a percentage of revenue from Novell's open-source products. Microsoft also agreed not to sign a similar agreement with any other Linux distributor for three years
Chairman Bill Gates owns about 10% of Microsoft; CEO Steve Ballmer owns nearly 4%. Gates stepped down from his role as chief software architect in June 2006 to concentrate on his charitable work through the Bill & Melinda Gates Foundation.
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When it comes to network computing, it's hard to find an area where the Sun doesn't shine. Sun Microsystems is a leading maker of UNIX-based servers used to power corporate computer networks and Web sites. It also makes workstation computers and a widening range of disk- and tape-based storage systems. Unlike most hardware vendors, Sun makes computers that use its own chips (SPARC) and operating system (Solaris). Its software portfolio includes application server, office productivity, and network management applications. Sun also developed Java, a programming language for creating software that can run unchanged on multiple operating systems.
Sun soared during the the dot-com explosion in the 1990s with hardware optimized for serving Web sites, but the subsequent e-recession leveled the playing field for competitors. The company has responded by significantly growing its product and service lines through internal development and acquisitions -- a strategy that has notably moved it beyond proprietary technology and embraced the open-source movement.
The company's aggressive and outspoken chairman, Scott McNealy, has waged a public battle with Microsoft over the use of Sun's Java programming language. But Microsoft's greatest threat to Sun has been in the server arena, where competitors look to undersell Sun's UNIX-based offerings with servers based on the Wintel platform (Intel processors, Microsoft's operating system). In addition to offering Windows machines, Hewlett-Packard and IBM both sell servers running their own versions of UNIX.
Sun continues to expand its support of Windows and Linux-based products. While the company remains firmly committed to Solaris, it has adopted Linux for select low-end server deployments and developing desktop PC products. With companies such as Dell nipping at its heels at the low end, Sun countered with its own line of inexpensive servers that use Linux and processors from AMD and Intel. It has also made inroads into high-end data centers, a market where IBM has been entrenched with its long history of providing mainframe computing.
Sun's software division develops application server software that competes with offerings from BEA Systems, IBM, and Oracle. Sun's OpenSolaris project, launched in 2005, made Solaris available on an open-source basis. Late that year Sun announced it would also provide its Java Enterprise System, Sun N1 Management software, and development tools for free.
Sun has augmented its internal software development with acquisitions and partnerships. The company purchased Tarantella, a maker of application access software, for about $25 million in 2005. Continuing its software push, Sun purchased enterprise application integration specialist SeeBeyond Technology for $383 million in cash. It also partnered with fellow Microsoft adversary Google, agreeing to bundle the search giant's browser toolbar with its Java Runtime Environment software; the deal has generated wide speculation that the companies could be laying the groundwork for more significant collaboration. Sun acquired Linux systems management software developer Aduva early in 2006.
On the storage front the company has partnered with Hitachi Data Systems to bolster its offerings (pitting it against yet another tech titan, EMC). Its acquisition of startup Pirus Networks furthered Sun's N1 strategy with storage virtualization technology. N1, which is similar to initiatives embraced by IBM and Hewlett-Packard, encompasses a comprehensive effort to build hardware and software that simplifies resource management for network administrators. The company also acquired the assets of network-attached storage (NAS) system provider Procom Technology for approximately $50 million in cash in 2005. Later that year Sun acquired Storage Technology (more commonly known as StorageTek) for $4.1 billion in cash.