Monthly Archives: September 2009

Microsoft’s Free MSE “Good Enough” to Take Consumer Share from Symantec, Others

As Microsoft today releases its free anti-malware suite, Microsoft Security Essentials, the for-pay vendors of competing products are moving the goalposts and repositioning to fight on different turf.

A replacement for Windows Live OneCare, the for-a-fee security suite that was retired at the end of June 2009, Microsoft Security Essentials (MSE) includes anti-malware and anti-rootkit protection. It does not come with a firewall, but Microsoft provides a free firewall with Windows.

Microsoft is positioning MSE as a capable, lightweight anti-virus, anti-spyware program, pointing out that it consumes fewer resources than for-pay anti-malware suites from the likes of McAfee, Symantec and Trend Micro. Microsoft also has positioned MSE as a worthy rival to any of the free anti-malware offerings on the market.

As eWeek notes, the product will be available in eight languages and 19 countries.

Mary-Jo Foley of ZDNet’s All About Microsoft points out that Microsoft is aiming MSE at the consumer market, where many customers are unwilling or unable to pay for security software. She explains that Microsoft representatives believed it was worth offering customers a free product to help thwart security breaches on unprotected Windows PCs that could be used as bots to infect other users’ systems.

The free suite is a client-only offering, with no centralized server capabilities. It does not include the enterprise-class business features associated with Microsoft’s for-pay Forefront security products, which provide not only anti-malware protection but also real-time reputation services, archiving, encryption, disaster recovery, and policy enforcement. Then again, not many consumers require those features.

Predictably, the for-pay anti-malware vendors are attempting to change the rules of engagement. Recognizing that Microsoft is a threat to vaporize revenues they derive from for-pay consumer anti-virus products, these vendors are trying to play on consumers’ fears and on Microsoft’s status as a relative newcomer to the anti-malware space.

Said Con Mallon, EMEA Consumer product marketing director at Symantec:

“The security industry has moved on from the product Microsoft is launching. Unique malware and social engineering fly under the radar of the traditional signature based technology employed by free security tools such as Microsoft’s. . . . “

“We believe the false sense of security provided by this tool is almost as dangerous as having no security at all. The latest generation of internet security is real-time and reputation-based, operating in real-time and not relying on a signature being produced and downloaded before the computer is protected.”

You can almost see the smoke billowing from his ears. Considering some recent anti-malware test results, Symantec might want to hold its fire.

Microsoft’s MSE received plaudits recently from independent testing firm AV-Test GmbH, which evaluated its performance in combating nearly 3,2000 common viruses, bot Trojans, and worms.

Said AV-Test’s Andreas Marx of MSE:

“All files were properly detected and treated by the product. That’s good, as several other [antivirus] scanners are still not able to detect and kill all of these critters yet.”

What’s more, Symantec’s Endpoint Protection failed a recent Virus Bulletin anti-malware test that Microsoft passed using the same AV engine built into MSE.

The fact is, for many consumers, especially in developing markets, what Microsoft is offering with MSE will be sufficient, particularly considering the price. The for-pay vendors of consumer anti-malware suites will lose market share and revenue to Microsoft. It’s not a question of whether they will lose business, but of how much.

Microsoft will continue to charge for its Forefront offerings for enterprise security, and that’s where Symantec, McAfee, and Trend Micro should look to make their stands. In enterprise markets, they will have a better chance to successfully exploit Microsoft’s relative inexperience as a security player.

SEC Foists Well-Intentioned Governance Reforms on Dell

Dell has filed a tentative settlement with the Securities and Exchange Commission (SEC) relating to an investor lawsuit.

Dell pursued the settlement after the SEC determined that the company had exaggerated sales by $359 million and profits by $92 million during a period extending from 2003 beyond 2006.

As John Oates of The Register put it:

Dell has settled a long-running court case brought by disgruntled shareholders, who accused management of artificially boosting Dell’s shareprice so they could offload their personal holdings.

Even so, nothing in the settlement concedes wrongdoing by Dell representatives. Instead, the agreement requires the company to fork over $1.75 million in legal fees and to enact numerous corporate-governance reforms.

Dell, for example, must ensure that at least 60 percent of board directors will be independent (at least in name and in theory). In future, each director will receive training at Dell’s expense, and directors will have “complete and open access” to Dell management and employees without requiring coordination involving the chairman or board-liaison office.

That last provision, well intentioned but somewhat naive about the wily ways of the boardroom, will be a double-edged sword for Dell employees. In my experience, board members can have their own hidden agendas, often impenetrably opaque and inscrutable, not to mention intensely politicized.

While I understand that the provision is meant to foster laudable honesty, probity, and transparency within the company, I also know that board members cannot always be trusted to put the interests of a whistle-blowing employee above their own convoluted priorities. Employees best tread warily in that serpent’s den.

Still, in no way do I condone the dubious practices alleged to have been perpetrated at Dell. So let me make my position clear: I encourage employees to speak out emphatically on ethical violations and questionable business practices within their companies, but I also encourage them to document all relevant interactions and to consult counsel every step of the way.

Remember, people at the top of the corporate food chain rarely serve themselves up as scapegoats, as a certain case involving a former McAfee employee makes clear.

Auspicious Timing and Plans for Newegg IPO

I like a few things about the IPO announced today by Newegg.

First, I like that the company — a web-based retailer of computer products for businesses as well as of consumer electronics — is taking advantage of a window of opportunity on the equities markets.

At least for the moment, sunny rays of optimism have broken through the dark clouds of despond. Conditions could change again, though, so Newegg is striking while the markets are comparatively hot (hey, tepid is the new hot). The psychology of American investors, in particular, could be negatively influenced by chronically constrained consumer spending domestically.

I also like what Newegg wants to do with a portion of the IPO’s $175 million in proceeds. The company wants to expand its business operations in China, where it is seeing considerable growth. It’s a smart move. The Chinese economy has continued to grow throughout the worldwide downturn, and it will grow faster as China’s consumer class reaches critical mass in the next five to ten years. A strong presence in high-growth China could insulate Newegg from slow growth in North America. (The company also is expanding into Canada.)

Finally, I like that Newegg is responding proactively to competitive threats, seeking to preclude incursions into its established markets while moving aggressively into new ones.

The timing of Newegg’s IPO, as well as the underlying strategy and use of proceeds associated with it, has been well considered.

Does Microsoft Appreciate Its Core Market?

Over at TechCrunch, Michael Arrington is running a serialized interview with Microsoft CEO Steve Ballmer. The piece published today, on what Microsoft perceives as major opportunities, is well worth reading.

What interests me about how Ballmer articulates and categorizes Microsoft’s big opportunities is that he doesn’t clearly cross-reference or group them according to whether they are aimed at consumer or business markets. Instead, he breaks them down into three broad buckets: short-term opportunities, predicated on and extending businesses in which Microsoft already is active; long-term opportunities, comprising big-market ideas that will take ten years to bring to fruition; and shortcuts, comprising acquisitions of various shapes and sizes.

The article supplies plenty of grist for the analytical mill, but Ballmer’s conflation of business (enterprise) and consumer opportunities is particularly intriguing, if only because it might account for Microsoft’s inability to fully realize its growth potential in enterprise markets. Of course, it also might explain Microsoft’s longstanding and ongoing failure in consumer markets.

This blind spot, which is all the more remarkable in a company as rigorously logical and systematic as Microsoft, comes to the fore in the Arrington interview when Ballmer discusses what he calls “communications collaboration and productivity,” the biggest area of investment for the company.

At one point in the interview, Ballmer defines the area as represented by “the tools and technologies both at home and at work to help people communicate, collaborate, to be productive.” I don’t doubt that these tools and technologies will be used at home as well at work, but they’ll be used primarily for business purposes, regardless of where they’re used. It’s a distinction that Microsoft needs to make.

One of the things Microsoft must be clear about in future, regardless of whether its products or services are used in an office or in the home, is whether the primary value of the offering is connected to business (productivity) purposes or to recreational consumer use. Microsoft sometimes fails to draw that distinction as clearly as it should, which is why we see consumer failures such as the Zune and also why we see the company fail to tap its full enterprise potential.

Here’s a simple question that starkly illustrates the issue: Do people use Office — a gargantuan Microsoft cash cow that is present in businesses and homes — because it provides productivity value as a business-oriented tool or because it delivers fun as a recreational vehicle? I think the answer is obvious.

Following from Ballmer’s conception of deriving and extending growth from areas in which Microsoft already is successful, that understanding should lead to adjacent short-term opportunities predicated on business utility. I am not saying Microsoft isn’t pursuing such opportunities, but I am wondering whether they’re fully exploiting them.

If Microsoft had remained focused on what it does well, how did it end up in the consumer weeds with Bob, MSN, Zune, Xbox and even the Xbox 360 (which continues to struggle toward profitability)? Does Microsoft fully understand what it does well and why?

Fortunately, Ballmer seems to be placing greater emphasis on Microsoft’s enterprise growth prospects. That’s a wise choice. Microsoft has plenty of headroom in enterprise markets — SMB and above — but it needs to reinforce and extend its presence before others start cutting into it.

Startups Fewer in Number, Less Ambitious in Scope

The economic downturn, called the Great Recession by some, is supposed to be over. Numerous economists and pundits have pronounced an incipient recovery. If it has arrived, it’s an odd sort of recovery that is barely perceptible, even invisible to many.

We know the downturn has taken an enormous toll on the information-technology industry in North America. We know that jobs have been lost, companies have gone out of business, and that venture capital has contracted. We also know, as an article in today’s Wall Street Journal notes, that fewer startup companies – in all industries, not just technology – are getting off the ground.

From the WSJ:

Company formation typically dips slightly in recessions, says Brian Headd, a Small Business Administration economist. Earlier this decade, business starts — including new businesses and units of existing businesses — fell 9% between the third quarter of 2000 and the first quarter of 2003, the BLS says.

This time, the decline has been steeper. Business starts fell 14% from the third quarter of 2007 to the third quarter of 2008; the 187,000 businesses launched in that quarter were the fewest in a quarter since 1995. The number ticked up slightly in the fourth quarter, the latest data available. But those new establishments created only 794,000 jobs, the fewest since the government began tracking the data in 1993.

The reasons behind the declining numbers of startup companies are relatively easy to identify. Funding, from venture capitalists and banks, is harder to get. Entrepreneurs, recognizing the funding squeeze, are become less tolerant of risk, choosing to pursue less-ambitious startup ideas or not to pursue them at all. Many would-be entrepreneurs have chosen to ride out the economic turbulence as employees of larger, established companies.

For the most part, businesses that are getting started are smaller than those launched in previous periods, even in past recessions. That’s directly attributable to constrained funding, which compels entrepreneurs to focus on businesses and markets that require relatively modest capital expenditures and that already exist as established niches. Unfortunately, these smaller businesses are inclined to grow less than previous generations of startups. That means they will generate fewer jobs, too.

Also troubling is that many new businesses are in areas – such as babysitting and house-cleaning services – with low income potential. Relatively fewer businesses have been launched in areas with higher income potential.

One mistake being made by the mainstream business media is that they continue to treat the downturn we’ve been experiencing as just another recession in just another business cycle. That diagnosis just isn’t correct. I think this downturn’s origins, its immediate effects, and its long-term repercussions are different from what we’ve experienced previously.

We’re witnessing a reconfiguration of the global economy, not just an attempted rebound from a typical recession. Some things, such as high-powered spending by US consumers, are not coming back to their former glory. With new regulations and an overdue wariness inhibiting financial chicanery, Americans will save more and spend less. Their homes are no longer veritable automated teller machines, their jobs are no longer secure, and their retirement savings are no longer assured.

Conversely, China, which funded US consumerism by buying US bonds, has begun to lay the groundwork for its own consumer economy, largely in a bid to lessen its reliance on manufactured exports to the USA and Europe.

These are huge tectonic shifts beneath the surface of the global economy, and they don’t seem to be fully appreciated by the business press. Looking back at the past-performance charts of previous cycles won’t give us an accurate guide to where we’re heading this time.

Nortel’s LTE Patents Could be Auctioned by End of Year; Nothing Set

As most keen observers of the situation know, Nortel has yet to sell its LTE patents.

During the next 15 years, Nortel’s LTE patents could be worth from $915 million to $2.9 billion, according to calculations from JP MorganChase analyst Ehud Gelblum. (The estimate varies depending on the royalty rate ascribed to the patents.)

Even at the lower end of that range, the patents would have considerable strategic and financial value, which is why they are eagerly sought by RIM, Ericsson, and perhaps a few other players that have yet to declare their intentions. It’s also why so many interested and disinterested observers want to know how and when Nortel will dispose of them.

Earlier today, I asked Jay Barta, a Nortel spokesman, whether he could specify a date by which Nortel will auction off its LTE patent portfolio.

His first reply to me was surprising, because he didn’t explicit state that an auction would occur. Instead, he wrote the following:

“I can’t speculate. We’ve said that we are looking for buyers, but I can’t speculate beyond that. When/if we have a buyer we will announce via press release.”

That’s odd, I thought. Given the interest that’s been expressed in the patents from more than one quarter, not to mention the value attributed to them, one would assume Nortel would auction them off. After all, that’s the course it has followed in selling its other major business assets.

I asked Barta to confirm that the patents would be sold at auction. I also asked when we might expect the sale to take place. He replied that the patents would likely be sold at auction, though there’s no guarantee “it will play out that way.”

He also said Nortel doesn’t have an announced sales date, auction process, or staking-horse bid for the LTE patents. He said an announcement will be made when more is known and the plans are set.

The Ottawa Citizen’s James Bagnall, who has provided exemplary coverage throughout the Nortel saga, informed me via email that Lazard, Nortel’s investment banker, has told prospective bidders the patents could be sold by yearend. Bagnall cautioned that the timetable could slip.

For those of you interested in new developments related to the LTE patents, that’s all I can offer for now.

Considering Chrapaty’s Move from Microsoft to Cisco

A senior Microsoft executive left for Cisco Systems earlier this week, setting off speculation about what the move signified.

Debra Chrapaty was Microsoft’s VP for Global Foundation Services, responsible for the company’s physical infrastructure, security, and global delivery operations. She would have been involved with data-center rollouts of Microsoft’s Azure, a cloud platform designed for intra-enterprise or Internet-delivered application services. She also would have been involved with the delivery of the online version of Microsoft Office.

It’s the connection to Office Web Apps that is particularly interesting about her move to Cisco, where she will become the senior vice president of Cisco’s collaboration software group (CSG). The group was previously run by Doug Dennerline, who left Cisco to become SalesForce.com’s executive vice president of sales for the Americas.

A few months back, Dennerline said Cisco might compete with Microsoft and Google in offering office applications, such as documents, spreadsheets, and presentation packages. He said Cisco was “thinking about it, but (is) not there today.”

What Cisco already has, of course, is WebEx, the web-based conferencing and collaboration service it bought for $3.2 billion in 2007. Cisco also competes against Microsoft and others in premise-based unified communications. It also is adding its telepresence to its collaborative portfolio.

Earlier this year, Cisco CEO John Chambers talked about “Cisco’s collaboration imperative,” terming it one of Cisco’s “market adjacencies.” Said Chambers:

“We believe that we are very well positioned in the industry from a vision, differentiated strategy, and execution perspective. We believe we are entering the next phase of the Internet as growth and productivity will center on collaboration enabled by networked Web 2.0 technologies. We are going to attempt to execute a strategy over the next decade that is similar to what we did in the early 90s and as we’ve said before, it powered our growth for the next decade.”

One could argue Cisco is on the brink of imperial overstretch, taking itself in too many ambitious directions at once. One could also argue that while Cisco has a sound collaboration strategy, and strong underlying products that show well against competitive offerings, it might be folly for Cisco to add online document, spreadsheet, and presentation packages to its roster. Are they something Cisco really needs? Is that it a battle it wants to fight?

Maybe the answers are yes, maybe they’re no. Nonetheless, Cisco plans to play a leading role in hosted collaboration, and it has a solid foundation on which to work.

Irrespective of why and how Chrapaty made her way to her new corporate home, Cisco attaches considerable strategic importance to the group that she’ll run.