But Wait, There's More

Microsoft Shuffles SMB Executives

Doug Burgum, former CEO of Great Plains Software, which was acquired by Microsoft two years ago, has been tapped by Microsoft CEO Steve Ballmer to head the company's Microsoft Business Solutions unit, which includes the Great Plains, Navision, and Axtapa software suites. Burgum will report directly to Ballmer, and the scuttlebutt is that Microsoft wants to see better return on its $2.4 billion investment in Great Plains and Navision. Orlando Ayala has been named as chief operating officer of the Microsoft Business Solutions unit. Previously, Ayala spearheaded Microsoft's small and midsized business efforts and worked side by side with Burgum, reporting to Jeff Raikes, group vice president of Microsoft's Productivity and Business Services unit. Now Ayala will report to Burgum. As part of the restructuring, Microsoft is eliminating around 100 jobs in research, development, and product support and says it will hire approximately the same number of sales people. The Microsoft Business Solutions unit is not firing on all cylinders, and Ballmer wants Burgum and Ayala to change that.

Microsoft Appeals European Union Antitrust Ruling

As expected, Microsoft has appealed the ruling of the European Commission in late March that it had engaged in anticompetitive behavior and broken antitrust laws. That ruling, which was based on complaints by software maker Real Networks in the media player market and by Sun Microsystems in the server market, instituted a $613 million fine on Microsoft and seeks to change the company's behavior. Since then, Microsoft has settled its antitrust concerns in the server and Java markets with Sun for $2 billion, so the EC case really has only one leg to stand on now. It is unclear what the European Court of First Instance, which hears such appeals, will do, but it is fair to say that antitrust commissioner Mario Monti's hand has been severely weakened by the Sun settlement.

Microsoft issued the following statement upon filing its appeal: "We believe that the interest of consumers and other European companies should be at the heart of this case. Consumers and the industry benefit from product innovation and competition. The Commission's decision undermines the innovative efforts of successful companies, imposing significant new obligations on successful companies to license their proprietary technology to competitors, and restrict companies' ability to add innovative improvements to their products. The legal standards set by the Commission's decision significantly alter incentives for research and development that are important to global economic growth. As we pursue this appeal, we remain firmly committed to Europe and will continue our efforts to work collaboratively with European governments on the important issues facing European consumers."

First 64-Bit Windows Virus Emerges from the Big Gray Cloud

The virus, known as W64.Rugrat.3344, currently only affects Windows systems running in 64-bit mode on Itanium processors. It will not, according to security software company Symantec, execute on 32-bit Windows machines. The new virus infects the directory it runs in and all subdirectories, but does not (yet) propagate itself on the Internet, as many viruses do, using infected machines to bomb other addresses on the Internet. The good news is that it is created in Itanium assembly code, a very low level language that is beyond comprehension for all but the brainiacs in the hacker community.

SSA Global Files to Go Public

SSA Global last Friday filed for an initial public offering. SSA Global is, at its core, the old SSA and its Business Planning Control System (BPCS) software, plus an amalgam of other software companies, making the company the number-five player in the worldwide ERP market. The company has a large presence in the Unix and OS/400 application markets, but also has a fair number of Windows applications, and like all application providers, has aspirations in the growing Windows server market.

The second that the company filed its S1 with the Securities and Exchange Commission, its top brass had to go into a quiet period, which means no one would talk to us about what the IPO deal might mean. As SSA Global becomes a public company, it must abide by the rules and not indulge in selective disclosure. The executives running Salesforce.com, who filed to go public late last year, had to delay the IPO because they had given interviews prior to going public that could get them into hot water with the SEC and could have apparently even forced the company to buy back shares at market value after going public if investors were disgruntled. This would be a fiscal nightmare, to say the least, which is why the people in the investor relations office at SSA Global would not even answer the phone on Friday. They basically said read the S1 if you want to understand the plan.

The S1 filing with the SEC is not an exhaustive document, but it is detailed. System Software Associates went through a lot of heartache in the late 1990s, but after going bankrupt, being acquired by a takeover specialist, and then acquired by venture capitalists, SSA Global was by late 2001 generating cash and had access to venture money. In early 2002, it started making acquisitions, buying the interBiz unit (with suites formerly known as PRMS, ManMan, MK, and Masterpiece) in April of that year, followed by Infinium (formerly Software 2000, costing $95 million), Ironside Technologies, Elevon, and EXE Technologies. All of these companies were good companies trying to sell into a down market, and when venture capitalist General Atlantic Partners kicked in $75 million for SSA Global to make acquisitions, these companies were happy to take the money. So was upstart Baan--remember Baan, the company that was giving SAP such headaches in the 1990s?--which in June 2003 was sold by Invensys for $135 million. Invensys, a specialist in manufacturing plant controls that had aspirations to control everything from the shop floor to the data center, paid $710 million for Baan three years earlier and could not make it work.

When it announced the Baan acquisition, SSA Global said that it would have annual revenues in the range of $600 million per year and 16,500 customers. When General Atlantic Partners kicked in that $75 million in April 2003, it got 25 percent of the shares of SSA Global, which means it was valued at approximately $300 million at the time. This is prior to many of SSA Global's acquisitions, which have subsequently boosted its value as well as its debts to its venture capitalists. As of January 2004, according to the S1, SSA Global owes Cerebus Partners $223.7 million and General Atlantic $7.7 million.

The prospectus for the IPO says the initial value of the stock that SSA Global will float is around $200 million worth of shares. Goldman Sachs and Credit Suisse are handling the IPO, and the company says that the $200 million figure was put out there--as is often the case--just to reckon the fees going to Goldman Sachs and Credit Suisse. The offering could generate more money if the company raises the striking price on the shares or floats more shares; it could also offer a second pass at the IPO if it is oversubscribed. The Chiacgo-based company plans to trade once again on the Nasdaq National Market, this time under the symbol SSAG.

It is hard to guess the valuation of SSA Global at this point, but the company has 3,700 employees, a broad portfolio of products with customers who by and large pay for software maintenance, and was making some money until it started to absorb Baan. According to the S1, SSA Global had software license sales across all of its product lines of $68 million for the six months ended January 2004 and services revenues of $229.7 million, for a total of $297.7 million. Gross profits were $203.3 million, or about 68.3 percent. Operating income was $28.8 million and net income was $13.6 million. However, it kicked out $14.1 million in dividends on preferred stock, which pushed it to a $500,000 loss for the six months. The company has $94.4 million in cash and equivalents in the bank, which means it can pay off its investors and still have about $65 million in the bank if it only raises $200 million on the IPO. The odds are it will try to raise a lot more and thereby build a new war chest for acquisitions and get a cushion against any potential hard times in the future. SSA Global, perhaps more than many other companies, knows the value of a cushion. BPCS V6, the object-oriented software that debuted in 1997 from the original SSA, cost $200 million to develop, which was $75 million over budget and which contributed mightily to the company's downward spiral. You can bet SSA Global won't make that mistake again, even as it tries to glue together its disparate product lines.

NEC Launches Two-Way Itanium Blade Server

NEC is this week rolling out its third generation of blade servers, and this one, called the IPF Blade, is based on Itanium. The announcement makes NEC the first company to ship Itanium blade servers in volume. While IBM and HP have dominated blade shipments to date, most of their blades--in terms of shipments--are based on Intel's Xeon processors. IBM will this week get its PowerPC 970-based blades out the door, and HP is flirting with Opteron and Itanium blades. But for the lowest cost per flops on technical workloads, a compelling case can be made for Itanium, and that is what NEC intends to do.

In the IT market, NEC is perhaps best known for its first generation AzuzA and second generation Asama Express5800 32-way Itanium 2 servers, which are among the most scalable servers in the world. These are general purpose machines that can run Windows and Linux--and even HP-UX if NEC wants to, since NEC has been one of HP's Unix development partners for a long time.

In the blade market, according to Scott Schweitzer, product manager for the Itanium server family with NEC Solutions America, NEC will be focusing on peddling Itanium blade servers into the clustered Linux environment, particularly for high performance computing (HPC) customers who want high-speed InfiniBand interconnections as the backbone in their clusters. Windows support will not come until next year.

While NEC is announcing the IPF Blade this week, the server will not start shipping until September, since NEC timed its development and manufacturing for the IPF Blade to the delivery of the Madison Itanium 2 processor with 9 MB of cache. While this chip is expected to be available at 1.6 GHz, 1.7 GHz, and 1.8 GHz clock speeds, according to the industry scuttlebutt, NEC is only planning on using the 1.6 GHz version of the chip in its blade servers because the extra flops in performance is not worth the extra heat they generate. A fully loaded IFP Blade chassis, which has nine blades with two 1.6 GHz Madison, 9 MB chips per blade, will consume approximately 5,700 watts of electricity as it runs, delivering about 100 gigaflops of computing power. Three of these IPF Blade chassis can be packed into a standard 42U rack, with enough space left over for interconnection and storage, for a total of 300 gigaflops per rack. Each blade has 12 DIMM memory slots--for a maximum of 24 GB of main memory, soon to be doubled to 48 GB--a single PCI-X slot, and dual Gigabit Ethernet ports. NEC is going to try to sell the chassis with nine blades--presumably with a single Itanium 2 processor--2GB of main memory, a 36 GB disk on each blade, plus redundant power supplies, installation, systems management software, and maintenance, for about $79,000 per chassis. If you do the math, that works out to around $8,700 per blade. NEC is going to sell these directly around the world as well as through its distribution channel.

IDC Says Oracle, Not IBM, Rules Relational Database World

The great thing about having two large researchers in the IT market is that you can very rarely get them to agree on anything. Last week, we reported on the market share figures from Gartner, which showed that IBM squeaked by rival Oracle to capture the biggest piece of the relational database market in 2003. This week, we can tell you that IDC has declared Oracle the winner in 2003, and by more than a nose.

IDC says that Oracle, IBM, and Microsoft control three-quarters of the relational and object relational database markets, which accounted for $13.6 billion in 2003, a slight upturn. IDC reckons that Oracle had 39.8 percent of the market, followed by IBM with 31.3 percent, and Microsoft with 12.1 percent. The company's analysts reckon that the relational database market will grow to reach a $20 billion level by 2008. It is hard to figure how that growth will come about with the proliferation of open source and commercial derivatives of databases for all kinds of platforms.

Open Source Community Weaves Geronimo Java App Server Under Apache Project

IBM's WebSphere and BEA Systems' WebLogic J2EE-compliant application servers were served notice from the open source development community last week as the Apache Software Foundation announced the Geronimo Java application server. Apache Geronimo, started in August 2003, is now an official Apache project, and the foundation of open source developers hopes to have Geronimo certified as an official J2EE application server by the end of the third quarter this year. Geronimo will be supported on Windows, Unix, Linux, and other platforms that support Apache and J2EE.

Geronimo is a lot of different programs woven together to make a single server, including Apache Tomcat and Apache Axis; OpenEJB and ActiveMQ from Codehaus; JOTM and ASM from ObjectWeb; CGLIB and MX4J from SourceForge; and Jetty from Mortbay. Geronimo will compete with commercial application servers from IBM, Sun Microsystems, Oracle, and BEA Systems. Customers will get to choose a Web application server based on its merits, which is what a competitive market is all about. Find out more on the Apache Geronimo Web site.