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Follow UsScott Hillis
SEATTLE: Microsoft Corp.'s new president and chief operating officer spent
his first day on the job on Wednesday listening to the unwelcome news that the
US government was probing the software giant's investment in Corel Corp., maker
of a rival office program package. Microsoft promoted its consumer unit chief,
Rick Belluzzo, to the posts of president and COO, picking the man who staged a
comeback for its MSN Internet business to handle daily operations at the world's
top software company.
Belluzzo, 47, takes over as COO from Bob Herbold, who will retire after more
than six years with Microsoft but plans to work part-time on industry,
government and consumer affairs. Belluzzo takes the presidential title from
chief executive Steve Ballmer, who told Reuters in an interview that the move
will let him focus on product development and sales.
"Rick is a fantastic business thinker. He is strong operationally and is
really a mature leader," Ballmer said. "I'm looking to Rick to be the
guy day-to-day who has got the business model in its totality in his head."
Ballmer is a long-time friend of Belluzzo, and recruited the tech industry
veteran from the top job at Silicon Graphics Inc., a struggling maker of
powerful workstation computers that Belluzzo was trying to turn around.
It is unclear how much Belluzzo will have to do with Microsoft's legal woes,
which appeared to deepen on Wednesday as the Justice Department confirmed it was
looking into the competitive effects of the company's $135 million investment in
Corel, maker of the WordPerfect office software that competes with Microsoft's
Office suite.
Microsoft said it had received a request for information from antitrust
enforcers and was cooperating fully, but that it believed there were no legal
concerns in the deal.
New engine of growth
Analysts said the rise of Belluzzo, who oversaw Microsoft's march into handheld
devices and the upcoming Xbox video game console, illustrated a shift in the
company's focus amid a slowdown in the once-booming PC market that fueled its
rise to the top of corporate America.
"One of the biggest things it says to me is how important the consumer
business is to Microsoft. It is the engine of growth for the future," said
David Smith, an analyst with Gartner Group.
Belluzzo said the coming months were crucial as Microsoft rolls out new
versions of its core products - the Windows operating system and Office suite of
business software - and tries to build steam behind its .Net plan to transform
software into Internet-based services.
"It's an exciting year. We have new important product announcements in
our core business, new Windows and Office for example," Belluzzo told
Reuters in an interview. "There's .Net, and that set of opportunities has
challenges as well, how we get the most out of all the things we have going
on."
Analysts said Belluzzo's track record - rescuing the MSN Internet access and
portal business so it could compete with the likes of America Online and Yahoo!
- indicated he could fill his new shoes well.
"Rick had been brought in as a turnaround manager," said Rob
Enderle, an analyst with the Giga Information Group, a technology consultancy.
"He was never perceived to be a yes man. He had his own agenda. He didn't
go to Steve and tell him what he wanted to hear."
Probe adds to legal woes
The new probe comes as Microsoft appeals a federal judge's ruling that it
broke US antitrust law with its actions in the Web browser market and should be
split in two to prevent further violations. "We're looking at the
competitive effects of the (Corel) transaction," said a Justice Department
spokeswoman.
The news, first reported by the Wall Street Journal, sent Microsoft
shares down about $2 before the stock recovered to end up 3/16, or about 0.3 per
cent, at $58-3/8. Microsoft Office dominates the business market, but Ottawa,
Ontario-based Corel had developed a version of its WordPerfect Office for the
Linux operating system, which competes, with Windows. After Microsoft made its
investment, Corel announced plans to sell its Linux software unit.
The Wall Street Journal said regulators were also examining terms of a
contract in which Corel committed to develop software for Microsoft's .Net
initiative before it wrote similar programs for other operating systems.
Microsoft characterized the subpoena as a narrow request with no legal issues of
any concern, and Ballmer said the Corel deal was appropriate and benefited both
companies.
"We don't really have much to say about it," Ballmer said of the
investigation. "We always comply with requests for information and
investigations by any government authority, including the Department of
Justice." The investigation drew mixed reactions from observers, some of
whom said the Corel deal was fishy while others expressed skepticism that
anything was amiss.
Mike Pettit, president of ProComp, a trade group of Microsoft rival, said the
probe was mandated by circumstances and that Corel's dumping of Linux
"raises an automatic red flag." But industry and stock analysts said
they doubted Microsoft strong-armed Corel out of the Linux business, with
Bluestone Capital analyst Jean W Orr saying the exit from Linux was a
"basic business decision."
(C) Reuters Limited 2001.