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Wednesday, July 12, 2006 - Page updated at 12:00 AM

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Microsoft reassures partners about new products

Seattle Times technology reporter

BOSTON — Microsoft assured the people responsible for most of its revenue that it will mount a huge marketing push for its biggest wave of new product launches in a decade. But exactly when those launches will occur remains an open question.

"We're going to put massive effort into launching these products ... at the consumer level as well as at the business level," Microsoft Chief Executive Steve Ballmer said Tuesday at the company's Worldwide Partner Conference.

The 7,000 people gathered here got no update on the timeline for releasing either the Windows Vista operating system or the Office 2007 software suite.

But at a separate event in Africa, Microsoft Chairman Bill Gates put the likelihood of meeting Vista's January release target at 80 percent.

The Microsoft partners in Boston represent a diverse group of businesses serving the entire spectrum of information-technology needs, all based on Microsoft products.

In addition to retailers, there are partners that build advanced networks or write industry-tailored software. Others consult on upgrades or install and service systems.

They range in size from sole proprietorships to global giants such as Accenture, which has 133,000 employees. Microsoft counts 640,000 partner businesses globally.

The one thing they have in common is they're critical to Microsoft: As a group they bring in 96 percent of the company's revenue — everything except what Microsoft sells from its Web site.

Microsoft is critical to them, too. It will spend $2 billion this year on marketing, sales and technical support of partners.

But Vista and Office 2007 — new versions of products that made up 58 percent of Microsoft's revenue last year, and are crucial to the partners — have faced continued delays.

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Most recently, Microsoft said the Office suite, including word-processing, spreadsheet and communications software, would be available to large-volume customers by the end of 2006, pushed back from a planned October release. Office is to be broadly available in "early 2007."

Vista, Microsoft's flagship operating system, is scheduled for release to large-volume customers in November and to everyone else in January.

Gates delivered his 80 percent prediction yesterday to a group of software partners in Cape Town, South Africa.

"We got to get this absolutely right," Gates said. "If the feedback from the beta tests shows it is not ready for prime time, I'd be glad to delay it."

Microsoft shares lost 40 cents, or 1.7 percent, to close at $23.10 Tuesday.

Back in Boston, Ballmer told partners Microsoft will not allow its core operating system to go so long without an overhaul again. Windows XP, the predecessor to Vista, was released in 2001.

"Rest assured, we will never have a gap between Windows releases as long as the one between XP and Windows Vista," Ballmer said. "Count on it."

For some partners, delays are actually helpful, providing an opportunity to gain expertise on the new products.

"A slip in the technology in some ways gives us time and room in the services business," said Allison Watson, Microsoft's corporate vice president of the Worldwide Partner Group.

Likewise, software vendors building applications to run on Vista and Office have more time to test and fine-tune their applications. Microsoft said Tuesday nearly 1,000 of its software partners have built applications to run on Vista.

The delays will hurt most at partners that build and distribute computers and network systems, because they rely on marketing campaigns and promotions to spur their customers to buy, Watson said.

Jupiter Research analyst Joe Wilcox said he sees the possibility of further delays, which could erode confidence in the company among its partners.

"How much confidence does it instill when the chairman of the company says 80 percent?" Wilcox said.

Partner confidence and trust in Microsoft is at a premium — and at an all-time high, according to Microsoft executives — as the company seeks to enter new areas.

Ballmer outlined Microsoft's moves into business-intelligence software to track a company's performance; collaboration and search products designed to let workers easily find and share information across the Internet, desktop computers and company databases; communications technologies to centralize e-mails, instant messaging, Internet phone calls and video conferencing; and security.

"You will have choices this year," Ballmer said. "Do you work with us on security or do you work with your traditional vendors on security [or] do you work with both of us?"

Microsoft has also placed more emphasis in the past year on the emerging services model of selling computer software. Instead of users buying a program for tasks such as tracking customers, and running it on their own machines, the software would be a service, hosted on external computer servers and delivered to the customer via the Internet.

Microsoft announced plans Tuesday to make its customer-relations-management software available as a hosted service during the second quarter of 2007, challenging companies such as SalesForce.com that have established positions in the services market.

The shift will likely cause angst for some Microsoft partners who will need to adapt to a sales model based on advertising and subscriptions.

"One of Microsoft's biggest assets is the partner network, and that ends up being one of the biggest challenges when it comes to selling software as a service," said Rob Bois, senior research analyst at AMR Research in Boston. "There aren't many software companies that have been successful making a change to software as a service and maintaining that partner network. It's very difficult to do."

Ballmer said Microsoft wants to do exactly that.

"We are 100 percent convinced that the transition our industry will make over the next five to 10 years ... is going to require that we bring you, our partner community, with us," he said.

The Associated Press contributed to this report.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com.

Copyright © 2006 The Seattle Times Company

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