Microsoft sees server growth, no cost worries

David Lawder and Tony Munroe

HONG KONG: Software king Microsoft Corp sees big revenue growth from server

software over the next few years and is not worried about its cost structure in

the current industry downturn, chief executive Steve Ballmer said on Thursday.

"I'm very comfortable with our cost structure," Ballmer told a news

conference in Hong Kong, adding that the company had scaled its growth to

account for the current downturn in the US personal computer sector. "We

continue to take a long-term view of the business," Ballmer said. "A

short-term downturn is not going to dissuade us from continuing to invest in

great products for the future."

Certain segments of the technology industry will continue to suffer as long

as the US economy is weak, he said, but added that PC demand in Asia remained

"pretty darn good." Ballmer said sales of Microsoft's server software

now account for US$3 billion in sales, or 12 per cent of overall revenue, but

"could easily be 20 per cent of our business within the next several

years."

At the Fortune Global Forum gathering of business and government leaders

here, he said Microsoft was "absolutely" going after software rival

Oracle Corp and server maker Sun Microsystems Inc. Microsoft has in recent years

increased its focus on high-end enterprise software.

Asked whether he thought the US Justice Department under the Republican Bush

administration would drop the antitrust suit against Microsoft brought under the

Clinton administration, he said the matter was in the hands of the courts.

"The courts will let us know when they're ready," he said.

Broadband congestion



He also said broadband - the much-hyped fatter telecoms pipes that make the
Internet much faster and more interactive - is taking longer to roll out than

expected. "The key for the next wave of advancing our business is to make

sure that there is broadband Internet access to the home," said Ballmer.

Microsoft has invested in telecoms and satellite firms to that end.

"Despite all the good work, real broadband, and a broadband experience,

is for most people, at least at home, further out in the future than we all had

anticipated," Ballmer said. That more realistic reconciliation of hope with

reality is "what part of this whole bubble popping has been about," he

said.

"People are coming to grips with the fact that, just because something's

exciting doesn't mean it's easy to advance, it's easy to make profit from, it's

easy to raise the capital for." Still, Ballmer said Microsoft is confident

it has made the right choice, through its .Net strategy, in betting on the

Internet and XML (extensible markup language), the standard format for

exchanging data over the Internet.

"It's a safe bet," Ballmer said.

Piracy remains problem



After announcing a HK$20 million (US$2.56 million) grant for local information
technology education, Ballmer said software piracy in China remained a problem

that would inhibit the development of a local software industry on the mainland

if strong intellectual property protections are not erected.

"The critical issue is not so much for Microsoft, as it is for the

development of software in China," he said. "As a company we will

live, even if we can't sell our software without piracy in China, but the whole

software ecosystem won't develop at the same rate." Microsoft shares ended

on Wednesday down 2.3 per cent to $70.40.

(C) Reuters Limited 2001.