Microsoft goes for broke?

It's been a busy 10 days for the world's most valuable company. On Friday 10 March, Microsoft launched a games console, the X-Box, to rival Sony's much-in-demand Playstation 2. Three days later, it announced Avanade, a $1bn joint-venture with Andersen Consulting to install Microsoft products, particularly Windows 2000, in the largest companies.

The day after that, the Redmond giant took a 20 per cent stake in web name software firm RealNames, announcing that it will incorporate its technology - which allows internet users to enter a normal name, rather than a URL - into Internet Explorer 3.0 and the MSN web portal.

Oh, and by the way, we've sold a million copies of Windows 2000, it added, despite many analysts suggesting a wait-and-see approach.

It didn't stop there. Wednesday 15 March saw a joint development deal with application service provider Interliant, as well as the news that Microsoft is sponsoring "the largest, most authentic golf event in the history of the internet" - golf being one of the few areas of human activity the firm doesn't yet control.

To round last week off, Thursday 16 March saw Microsoft forming an US online mortgage company with banks including Bank of America and Wells Fargo. And on Friday, the firm announced that the Encarta dictionary is to go online free from 17 April.

"Unlike some competitors, it contains definitions that clearly reflect today's language," said Craig Bartholomew, general manager of Microsoft's learning business unit, perhaps referring to the somewhat older and more authoritative Oxford English Dictionary, which went live online on Tuesday 7 March.All this is not bad for a company under threat of execution. The US Department of Justice (DoJ) antitrust trial continues, with last November's hostile document from Judge Jackson leading many to suspect that break-up is likely. Jackson's verdict is expected in April or May.

But is Microsoft using its last days as a united corporation to strengthen its divisions before they have to stand on their own?

Breaking up is never easy
Robert Greenhill, a consultant brought in by the DoJ to give it advice on the Microsoft case, is understood to favour a 'slice-and-dice' approach to handling the software giant. This would mean Microsoft being split into three competing operating system firms, with its applications and internet divisions becoming one or two separate companies.

"A lot of what Microsoft has been doing recently is preparation for break-up," said Mike Thompson, director of research at analyst Butler Group. "The promotion last year of MSN as a separate entity was a clear indication of where the company is going."

A glance at the fine print of recent press releases supports Thompson's view. The mortgage company will integrate with MSN, and the RealNames press release has MSN in its title rather than Microsoft.

Perhaps Microsoft is simply going for broke. With the antitrust battle all-but lost, is it simply doing all it can to give its daughter companies the best possible endowment, by assuming it is too late to sway the DoJ through avoiding new deals?

"The games device and the Andersen deal are radical steps in one sense, although in another, they are just part of the Microsoft bid to conquer the world," said Martin Brampton, chief analyst at Bloor Research. He added that games consoles are increasingly important because of their new-found ability to act as web browsers.

"Here, Microsoft doesn't have a stranglehold. But it has to have a go," said Brampton.

Consulting behaviour?
Of more interest to corporate users is the link with Andersen Consulting, to form Avanade, of which Microsoft will own 49 per cent. Microsoft has few in-house consultants, unlike rivals such as IBM and Oracle which have done well from such staff. But analyst GartnerGroup thinks the link, which also involves Andersen setting up an internal division of 3000 consultants dedicated to Windows 2000, will lead to trouble.

"As Microsoft increases its offerings for large enterprises and strikes high-end service deals through Avanade, some of Microsoft's service partners may become Microsoft's competitors," wrote GartnerGroup analysts Michael Silver and Thomas Bittman last week.

This is likely to lead Microsoft service partners such as Compaq, Hewlett Packard, IBM, Unisys, EDS and KPMG into competition with a company half-owned by their software supplier.

However, Butler's Thompson thinks this conflict may not be a problem for users. "Andersen is a professional organisation, and at least it is being open about this alliance," he said. "You know where you stand."

Sun Microsystems chief executive Scott McNealy has said he thinks Microsoft chairman Bill Gates and chief executive Steve Ballmer should be "disbarred" from the software industry, in the way junk-bond seller Michael Milken was booted off Wall Street in the 1980s for his crimes.

Maybe the two kings of Redmond are planning for the day when some of their subjects are barred from operating systems: and are readying them to colonise brave new worlds, such as internet content, high-end consulting, the English language, and golf tournaments.