Microsoft opens Web for small biz

Microsoft Corp. plans to shed its image as a "no-show" competitor in the explosively growing electronic commerce market this week, unveiling a strategy to help companies do business over the Internet.

At a media briefing in San Francisco today, Microsoft Corp. Chairman Bill Gates and President Steve Ballmer will roll out a new set of software and services based on its msn.com Internet portal site and the forthcoming Windows 2000 system, industry analysts say.

The company is expected to announce the details of an upgraded and renamed version of its server software for electronic commerce to be released with Windows 2000, the long-delayed upgrade to the high-end Windows NT operating system due out this year. And Microsoft will take special aim at small businesses with its MSN Marketplace, a set of tools and services that allow companies to set up Internet "storefronts" with transaction capability using simple browser-based tools, according to analysts who have been briefed on the plan.

"It's kind of the Holy Grail right now of electronic commerce," said Jack Staff, chief economist of Zona Research. "The major driving force in the economy is small business and thus far nobody has really cornered that market with e-commerce."

The appearance of Microsoft's top two executives at the briefing appears intended to change the perception that the computer software group has lagged in efforts to grab a piece of the enormous electronic commerce opportunity. By some estimates more than $400 billion in business will be conducted over the Internet by 2002, including consumer sales and business-to-business transactions. Microsoft has quietly built a strong business supplying back-end software for Internet commerce based on Windows NT, but has been overshadowed by rival International Business Machines Corp.

While Microsoft has been bogged down by a headline-grabbing antitrust trial, IBM has used savvy marketing and its strong relationships with big business to establish a reputation as the leader in e-business. "Microsoft has for all intents and purposes been a no-show, at least in the war of words," said Dwight Davis, an analyst with Summit Strategies.

At the briefing, Microsoft is expected to disclose the names of large businesses handling electronic commerce over Windows NT systems rather than the mainframe and minicomputer options promoted by IBM. "Microsoft is a tough competitor no matter what segment they're playing in and they bring a lot of resources to any situation," said Karl Salnoske, general manager of electronic commerce for IBM. "We don't underestimate Microsoft."

For its MSN Marketplace, Microsoft will get a running start from its $265m (£162m) acquisition last year of Link Exchange, which offers ad placement, transaction capability and other features to a network of some one million businesses. But Microsoft faces intense competition from major portal site operators, including Yahoo Inc., Excite Inc., Lycos Inc., and Netscape Communications Corp. "The small business area is going to get very competitive because people do understand that the opportunity is there," said John Keister, president of Go2net Inc., which is adding 20,000 businesses a month to its HyperMart community. "There is a ton of growth still left in this category."

As a result Microsoft will offer services that undermine its core Windows franchise by supporting businesses without requiring them to invest in the platform, said Vernon Keenan of Keenan Vision, who estimated the number of online merchants would rise to 400,000 by 2003 from about 17,000 currently. "This is the typical eat-your-own-young approach," he said. "What they're hoping to do is get people hooked into the services business with MSN Marketplace in the hopes that they will graduate to Windows 2000."

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