Microsoft Weighs Challenges Ahead

By Peter Galli  |  Posted 2003-04-15 Print this article Print

Microsoft on Tuesday gave an assessment of the challenges it faces, including the threat posed by Linux and open-source software.

Microsoft Corp. on Tuesday gave an assessment of the challenges it faces, including the threat posed by Linux and open-source software. In a teleconference with the media and analysts on Tuesday to present the Redmond, Wash., companys third-quarter financial results John Connors, Microsofts chief financial officer, said Microsoft is still committed to the broad range of investments it deemed imperative at the start of the year to secure the companys long-term health. "But, as a company, we could perhaps have done a better job of predicting the seasonality and impact of some of these investments, which is why you see a bit of a bump in operating expense for the fourth quarter," he said.
But the company is in a far better financial position ending the current financial year than it was at the outset of the year. And while from a macroeconomic standpoint the company is exiting a difficult year and entering one of uncertainty, its revenue has held up well so far in fiscal 2003, he said.
To garner $32 billion in annual revenue and grow against that number profitably, Microsoft needs to be mindful of the risks and challenges it faces. The general economic environment is the first risk, but also a possible driver. If there is an improvement in global corporate profits, then technology and consumer spending would likely increase, Connors said. But if that does not happen, the pressure on IT spend would probably not abate and consumer spending would remain muted. While Microsoft is not planning for a significant upturn in demand for IT, it also is not planning for a significant decline from current levels, he said. "Linux and non-commercial software is risk number two," Connors said, without elaborating. Microsoft Corp. chairman and chief software architect Bill Gates in February told more than 600 of Microsofts Most Valuable Professionals (MVPs) that he took the Linux threat seriously. In its latest 10-Q quarterly filing, Microsoft also said that the popularization of the open-source movement continued to pose a significant challenge to its business model.

Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel