Guild Companies

Windows & Linux Edition
Volume 2, Number 3 -- January 22, 2003

But Wait, There's More . . .

When I grow up, I want to be a judge. U.S. District Judge J. Frederick Motz handed down a court order this week that Microsoft had 120 days to comply with an injunction he issued in December as part of the $1 billion antitrust lawsuit Sun Microsystems launched last year, claiming that Microsoft's anticompetitive and monopolistic practices had undermined Java. Judge Motz issued the injunction because, in his opinion, not requiring Microsoft to add Java to Windows would further undermine Java and potentially cause more damages. In a moment of absolute clarity that only a judge can give to corporate monoliths like Microsoft, Motz reportedly said during the hearing, when Microsoft's lawyers pressed for more talk and delay, "I can't sit here, hearing after hearing. I want this done in 120 days." Microsoft will almost certainly appeal Motz's injunction to the Fourth U.S. Circuit Court of Appeals, and has time to do so before the court order takes effect. It's up to the appellate court to decide if it will hear Microsoft's complaint.

Microsoft released its financial results for its second fiscal 2003 quarter last Friday, and as you might expect the company is having some difficulties because of the adverse IT climate, but it is doing better than just about any other vendor. Seeking to take advantage of the upcoming Bush tax removal on corporate dividends, Microsoft has for the first time started paying a dividend to shareholders. Microsoft split its stock at the same time, and is offering a measly 8 cents a share to Microsoft shareholders. Why? The prospect of tax-free money to the large stakeholders is too good of a deal to pass up, and Microsoft Chairman Bill Gates and CEO Steve Ballmer will be the main beneficiaries of the dividend, owning big chunks of stock. That dividend may end up being their mainstay of great wealth if the company comes under intense legal and market pressure--particularly if Linux starts taking a serious bite out of sales for servers, workstations, and high-end PCs. Microsoft certainly wants to get more people excited about the company's stock, and John Connors, Microsoft's chief financial officer, said that's what the dividend and stock split are all about. In any event, for the second quarter ended December 31, 2002, Microsoft raked in $8.54 billion in sales, an increase of 10 percent from the prior year. Operating income was $3.26 billion after a charge of $210 million for pending lawsuits (in the second quarter of fiscal 2002, the company booked $660 million in legal and related costs). Net income was knocked down to $2.55 billion in the quarter after a $421 million charge for investments that were written off. The company said that sales from server platforms were up 12 percent in the quarter to $1.76 billion, driven by Windows 2000 Server and Windows 2000 Advanced Server sales; sales of SQL Server 2000 were up 40 percent in the quarter, which is probably the best indicator that some companies are abandoning Unix for Windows for real work. Client platform sales were off a smidgen at $2.54 billion, and the home and entertainment unit posted sales of $1.33 billion, up 38 percent. This unit, which is a money loser, nonetheless propped up Microsoft's total sales and accounted for nearly 5 out of 12 points of its overall revenue growth. That's why Microsoft cares about Xbox. But what Microsoft is really afraid of is Linux, and it should be. Connors told Wall Street analysts that Linux is a threat to its server platform business, as any free and popular software would be a threat to a company that sells closed-source programs and has a monopoly on the desktop and a big portion of the server biz, too.
IBM last week reported its year-end and fourth-quarter financial results for 2002. IBM's worldwide sales across all products were up 7 percent in the quarter, to $23.7 billion, and down 2.3 percent for the year, to $81.2 billion. Net income per share for the fourth quarter was down 24 percent in the quarter, to $1.11, not counting a 52 cent hit against earnings for discontinued operations, and was down 53 percent for the year, to $2.06 a share, after a $1.01 hit for those discontinued operations (mostly chip and disk businesses that have been sold or closed.) Server and storage sales were down 1 percent (at constant currency) to $4.2 billion. In the fourth quarter, zSeries mainframe sales were down 4 percent, pSeries sales were flat, iSeries sales were down 13 percent, and xSeries sales were up 14 percent. Next week, we'll go through IBM's financials with a fine-toothed comb, since how IBM does in specific markets is such an indicator of what's going on in various IT sectors.
Server maker IBM and chip maker AMD have signed up as technology partners for the UnitedLinux distribution of the open-source Linux operating system being put forth as a concerted effort by commercial Linux distributors Conectiva, The SCO Group, SuSE, and Turbolinux. The basic goal of UnitedLinux is for these Linux distributors to create a single core Linux distribution and then do value-adds (like language support or adjunct programs), to differentiate themselves from one another. IBM and AMD are not full members of the UnitedLinux consortium, since neither wants to be an OEM distributor of its own variant of the Linux code. They do, however, want to ensure that their respective products support UnitedLinux-based distributions and, more important, want to use their weight to ensure that UnitedLinux evolves with their server and workstation platforms in mind. IBM and AMD are the first companies to sign up at the technology partner level. Red Hat, the market leader in commercial Linux distributors, has officially ignored UnitedLinux as if it were not there, but it is undoubtedly going to watch and see if other companies come in to the consortium as technology partners and then weigh its options.
Until now, there has been no truly rigorous scientific method available to rank today's popular operating systems. Behold, the Operating System Sucks-Rules-O-Meter, the first Web site devoted to quantifying users' experiences with their operating systems and publishing the results. By periodically performing in-depth Alta Vista searches for the number of times that a particular operating system is mentioned on a Web page directly followed by the words "sucks," "rules," or "rocks," the Operating System Sucks-Rules-O-Meter is able to report, with a high degree of accuracy, the relative popularity and strength of a platform's following, in real time. According to the results--and this will probably not surprise you--Microsoft's Windows is a big-time loser, with 88 percent of Windows references being negative ("Windows sucks"). Linux, on the other hand, has an 82 percent approval rating ("Linux rocks" or "Linux rules"). To see how the operating systems fared against one another, go to http://srom.zgp.org. It's a pretty picture, ain't it? Our thanks to the site's creators for adding to the font of knowledge and for making us laugh out loud.