Microsoft

Microsoft sides with PSI, goes after IBM’s mainframe market

Platform Solutions Inc., a Sunnyvale, Calif. maker of mainframe computers that is going after IBM’s near monopoly in the sector, has raised filled its war-chest with more than $37 million in fresh capital from a group of investors including Microsoft.

PSI, as the company is known, has also signed joint sales agreement with Microsoft, giving it some good access to the large data centers of companies Microsoft already serves. It is going after the lower end of the IBM mainframe market, valued in the billions of dollars. It plans to undercut the dominant IBM product on price. Other investors include Blueprint Ventures, Goldman Sachs, Intel Capital, InterWest and InvestCorp.

Late last year, IBM sued PSI alleging patent infringement and breach of contract, and the dispute is still in court.

It’s the company’s third round of capital.

PSI’s computers consolidate z/OS, Windows, and Linux operating system into a single operating environment based on Intel Itanium 2 processor technology.

more from wikipedia

Microsoft Corporation (NASDAQ: MSFT) (SEHK: 4338), is an American multinational computer technology corporation with 79,000 employees in 102 countries and global annual revenue of US $51.12 billion as of 20072. It develops, manufactures, licenses and supports a wide range of software products for computing devices.43 Headquartered in Redmond, Washington, USA, its best selling products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software. These products have prominent positions in the desktop computer market, with market share estimates as high as 90% or more as of 2003 for Microsoft Office and 2006 for Microsoft Windows, in line with Bill Gates' vision "to get a workstation running our software onto every desk and eventually in every home"

Microsoft Corporation (NYSE: MSFT) is the world’s largest manufacturer of software, also holding a near-monopoly on desktop operating systems. Recent forays into the entertainment industry with the Xbox, Zune, and Windows Live have made it a player to watch in this area, too. Microsoft's server solutions also remain heavyweight players in their own sector, generating a significant portion (about 25%) of Microsoft's total annual revenue.

Microsoft's biggest current challenge is largely a result of the company's size--the bigger current revenue stream is, the harder it is to significantly increase that number. In order to keep itself from stagnating, Microsoft often branches out into new sectors of technology--hence its current push to develop its Entertainment and Devices and Online Services divisions. Although some of its efforts in these areas are less than successful against established industry giants, Microsoft's extensive supplies of capital give it a big advantage in its catch-up and innovation efforts.

A dramatically changing computer industry landscape is also affecting Microsoft, especially in its core software business. Microsoft must learn to adapt nimbly in order to effectively combat software as service (SaaS) offerings, the reinvigoration of Linux and Open-Source, and declining PC sales worldwide. Increased competition in its lucrative servers business is also an issue.

Shift towards web-based software services

Due to a strong trend of shifting towards web-based services and away from traditional desktop software offerings, it may well be the end of an era for Microsoft and other tech companies. This doesn't mean that Microsoft is "finished"--indeed, it is highly unlikely that Microsoft will be in a position of jeopardy any time soon. But in order to retain its strong position, Microsoft will have to make some nimble adjustments in its business/development strategy and product offerings. Microsoft may have to invest significantly in appropriate acquisitions to bolster its position as it tries to shift gears.

• Slowing rates of PC growth in most developed countries means a decrease in profit growth for Microsoft as well. With an approximately 95% of the total market share in PC operating systems, Microsoft's revenues vary directly with PC upgrade cycles and growth trends. But the story isn't all bleak: Asia and Latin America are still experiencing vigorous PC growth. How well Microsoft taps into these markets will have an important effect on its Client and Business division earnings (see Piracy, above). Microsoft is also making a concerted effort to diversify earnings beyond the PC market, expanding in high-potential markets like Entertainment and Devices.

• The rise of Software as a Service or Software On Demand means that there is more and more competition for traditional Microsoft products like Microsoft Office. Although current shareware, open-source, or low-cost alternative software (like Google Spreadsheet and Writely) are still several years away from the kind of security and functionality required for corporate endorsement, most industry experts agree that software will continue to move towards these browser-based models. However, Microsoft is taking important steps to benefit from this trend itself, starting with the release of a new version of its Microsoft Exchange Server that is available on demand.

• Another recent trend, the shift from client-server to Service-Oriented Architecture (SOA), marks the further and parallel movement of the server industry in the direction of On Demand. Here, the companies that may stand to benefit the most are those with solid bases in the small-to-medium business market, such as Oracle (ORCL). Leading Linux software distributor Red Hat may also benefit significantly, since the resulting restructuring of the software industry could mean a revival of interest in open-source alternatives. Microsoft may have a lot of ground to make up in this area.

New focus on internet services

Microsoft's recent re branding of its Hotmail, MSN, and Live Journal offerings under the name of Windows Live marks an important company decision to focus more intensely on expansion into the internet service market. Microsoft has a number of interesting advances up its sleeve, including the MSN search toolbar, a new graphics-heavy "digital human" search interface, and adCenter, Microsoft's first totally self-developed advertising platform. But Microsoft will have rough competition to subdue, and remains several steps behind internet services giants Google (GOOG) and Yahoo! (YHOO). Google alone currently accounts for 60% of world market share in internet searches.