Gates, Ballmer: Licensing 6.0, .Net Services Key For Microsoft In 2003

Microsoft

During an hourlong QandA session between Wall Street analysts and key Microsoft executives, company Chairman and Chief Software Architect Bill Gates would not comment on planned acquisitions directly but said Microsoft "systematically" evaluates the purchase of 30 or 40 companies every day.

"We love buying little things," said Microsoft CEO Steve Ballmer. "Ten-, 20- or 30-person companies that are private," he said. "I imagine we'll do some acquisitions but I don't know if any large ones. The fact that there are [companies that are 5 [percent to 10 percent cheaper makes it slightly more attractive, but it's only worth doing if the value is clear-cut."

Executives also fielded questions about Licensing 6.0, stock options and the fate of .Net MyServices as the daylong briefing ended on Thursday.

Under questioning, executives declined to answer what percentage of Microsoft's customer base had signed up for Licensing 6.0 but noted that the number of Enterprise Agreements,multiyear annuity licensing with annual payment plans,represented a higher percentage of licenses sold.

Ballmer, hinted, however, that a good many of Microsoft's customers have signed up. "A large percentage of the companies represented here have signed Enterprise Agreements," Ballmer told the financial analysts. Bank of America and Goldman Sachs are among the many investment banks and research firms that have signed Enterprise Agreements.

Microsoft CFO John Connors noted that the numbers for fiscal year 2003 unearned revenue will benefit from the licensing deals booked, but warned Wall Street not to expect the level of increase seen this past year, when they jumped about $2 billion to $7.7 billion.

Microsoft executives also disclosed under questioning that the company is not in favor of standardizing the accounting practice of listing stock options as an expense. While Microsoft lists the number on its quarterly 10Q filings, it is not in favor of regulation requiring the practice,as of yet,but is awaiting industry consensus before reaching a final decision.

"We're not changing our number today but [taking active participation in that discussion inside the industry," said Ballmer.

Ballmer confirmed Microsoft is participating in a "discussion" with other high-tech executives in the industry before reaching a conclusion.

When Gates was asked if he was concerned about the impact of shrinking PC margins and mergers such as the one between Hewlett-Packard and Compaq Computer on his software business, he was quick to retort that there is no end to profitability.

"It's not fair to say there isn't profit," said Gates, noting that Intel is profitable, as are proprietary component manufacturers and flat-screen manufacturers. "It's natural to expect the consolidation. We don't see anything that would alter our role in that market."

In a discussion about the fate of .Net MyServices, Gates repeated that the company decided to change the model so partners and customers could host the services and to add extensions to XML Web service schemas that will allow the software services to tap into the company's forthcoming Yukon database, which will serve as the united corporate store for all corporate data residing on Microsoft clients and servers.