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Microsoft plans huge "dot com" blitz

The company will open a multimillion-dollar advertising campaign tomorrow to highlight the Windows 2000 operating system and software used to build e-commerce sites.

Microsoft is changing the way it targets customers as part of a continuing reorganization intended to broaden the software maker's appeal among "dot com" Internet firms.

The company will open a multimillion-dollar advertising campaign tomorrow to highlight the Windows 2000 operating system and related software used to build e-commerce sites, Microsoft representatives say. A new unit will serve as a single point of contact for Internet-based customers.

The ad campaign will be among the largest ever for Microsoft, spanning Puppet masters: Who controls the  Net print, television and Web outlets, said Tod Nielsen, a vice president in the company's developer tools group. The theme of the campaign will be "the business Internet" according to Microsoft. Nielsen would not disclose the exact cost of the campaign but said it is in the "mid-hundred-million-dollar range"--which would put on par with other high-profile initiatives, such as the "Where do you want to go today?" program.

The new unit and ad campaign underscore today's reality for Microsoft and the degree of concern within the company for creating new e-commerce business. Although the company has been hugely successful selling software and services to Fortune 500 companies, it is considered something of a laggard among dot-com firms more likely to favor non-Microsoft technologies.

"In terms of dot coms, a lot of the initial wave of companies were based on Netscape, Apache and Linux. So Microsoft might not be the natural first choice (for new Internet companies)," said Dave Kelly, an analyst at the Hurwitz Group, a Framingham, Mass.-based consultancy.

Nielsen concedes that the company has had difficulty presenting itself as a full-service technology shop to Internet firms. "We were not as effective reaching dot coms." He blames a diffuse organization hampered by a variety of contact points for customers.

The new unit, called e-business solutions, is to be headed by Microsoft vice president Peter Boit and employs roughly 100. The unit "will function as a one-stop shop. Customers want to know what they need, how they get it, who can build it," he said.

Boit's organization will target Internet firms and present the entire picture of what Microsoft offers. "We have about 50 percent of the organization in place and will have 100 percent by January. We have been working to build partner relationships. Now we're working to build one-on-one sales and put a services organization in place," Boit said.

The unit will focus on "getting companies to market more quickly and will explain how to take advantage of the extended reach of MSN and the capability to provide (Internet applications) through new devices such as WebTV and handhelds," Boit said.

In recent years, competitors such as IBM and Oracle have begun pitching a general "solutions sell" of what their companies can do and how their various technologies can be used to solve problems. Microsoft has instead marketed its individual products, such as its flagship Windows operating system and Office applications, to big businesses already familiar with its products.

"Microsoft has always been very product focused. Historically, (Microsoft) has not been strong at providing a technology or solution perspective," Kelly said. "IBM has been successful in articulating a brand vision and a solution sell. HP is just starting to do the same. But they have a ways to go."

A new plan to market Web services built on Microsoft products, called Windows DNA, has so far failed to take off, Kelly said. "Microsoft has done a very poor job of explaining DNA or even articulating the value proposition of how or why to use it. Customers still don't get it and how it can help their businesses," he said.

Nielsen said Microsoft has landed large deals to supply software to the likes of Buy.com, Barnesandnoble.com and other Internet firms but has not successfully communicated its abilities to potential customers. "The one thing we have done a poor job of is educating the world on our successes. We're trying to target the new dot coms that the classic Microsoft software sales model did not address," Nielsen said.

"If you look at Web sites and platform share, Windows NT has 25 percent share of all Web sites," he said. "If you look at sites doing real transactions, those doing more than just slinging HTML, we have about 50 percent of the top sites."

Even with a new sales model and an expensive ad campaign, Microsoft faces an uphill battle for the dot coms. Its federal antitrust trial and constant delays in delivering key products, such as Windows 2000, have tarnished the company's reputation.

The dot-com assault "is not surprising," said Dan Kusnetzky, program director of operating environments and servers at International Data Corporation in Framingham, Mass. "One way to (drive adoption) is to select a market segment that's extremely influential and literally drive certain members of that community to success. So they can point and say, 'See, they were successful. It's safe for you to come out to the water.'"

With Windows 2000, "Microsoft is faced with a situation where their software has been delayed, delayed and delayed," Kusnetzky said. "It's full of new capabilities, but surveys have repeatedly shown that people will delay adoption of the software until it proves itself."

Kusnetzky said companies do have plans to adopt Windows 2000 eventually, but not immediately. "Microsoft is faced with a business model that requires that their stock price increases, and they need to have a steady stream of revenue from a low initial price and series of version upgrades after."

Most companies, according to IDC studies, plan to wait at least six months after Windows 2000 is released before installing it on crucial systems. "It will be successful over time. But you have to consider the context of the Linux companies and their IPOs," he said, referring to firms developing the Windows alternative.

"They are leaping to the forefront. It puts pressure on Microsoft," Kusnetzky said. "Stockholders will ask, 'What are you going to do that is flashy?' Microsoft has to have fast adoption."

News.com's Wylie Wong contributed to this story.