Microsoft alliances need more than cash to thrive

Although the software giant throws billions of dollars at telecommunications firms, its record is decidedly mixed in creating and sustaining alliances.

3 min read
Microsoft has had decidedly mixed results in its many attempts to become a player in the rapidly evolving communications market.

The company has used its vast cash stores to gain access to the telecommunications world, spreading large investments across cable ventures like AT&T and Comcast, digital subscriber line (DSL) upstarts like Rhythms NetConnections and NorthPoint Communications, and high-speed long-distance carriers like Qwest Communications International. Today, it announced a deal with wireless giant Ericsson to develop technologies for mobile communications devices.

The move falls in line with Microsoft's overall effort to expand as the high-tech industry turns from the personal computer to a variety of Net-based devices for communications. But the Redmond, Wash.-based software behemoth hasn't been the most successful in creating and sustaining alliances.

"Microsoft is a necessary evil," said Maribel Lopez, an industry analyst with Forrester Research. "In many cases, it's not a true partnership. Each side just wants to know what the other side is doing."

Such deals may be tailored more to garner favor on Wall Street than to foster technology innovation, according to some. "Partnering with Microsoft is good for several points on your stock," said Craig Johnson, principal with market watcher Pita Group. "Reality has nothing to do with anything."

The Ericsson deal bears a striking resemblance to an alliance launched just over a year ago between Microsoft and Qualcomm, a joint venture called Wireless Knowledge.

The venture has yet to move beyond the trial phase with any of its major telecommunications carrier customers. Additionally, the company has already changed chief executives, installing a Redmond veteran in place of a former Qualcomm executive.

And Microsoft executives today did little to dispel the notion that Wireless Knowledge is not exactly a vital cog in the software firm's ever-expanding communications strategy.

"Mobile Internet access and services are crucial for realizing Microsoft's vision of empowering knowledge workers and consumers through software any time, anywhere and on any device," Microsoft president Steve Ballmer said in a statement. "As the world leader in mobility and mobile communications, Ericsson is an ideal partner to help deliver this vision."

Wireless Knowledge executives could not immediately be reached for comment.

See related story: The new world order In other areas of the networking industry, Microsoft has also fallen short. An ambitious alliance with Cisco Systems announced in 1997 centered around the delivery of an operating system now called Windows 2000 that has run into one huge problem: Microsoft hasn't delivered the software.

That software was going to provide the basis for a series of Cisco products that tied into Windows 2000 technology, like the system's directory service.

Cisco executives admitted to the misstep at the company's recent analyst conference. "That strategy cost us two years," said Don Listwin, executive vice president at Cisco.

Microsoft does not have a cohesive networking strategy, according to Virginia Brooks, vice president of networking and communications for industry consultants the Aberdeen Group. "What Microsoft has tried to do is partner with winners to help drive their own technology."

"Cisco was an active proponent of Microsoft's directory, and that failed to materialize in the time frame Cisco counted on," she added. "It's one of those public disappointments where [Cisco] had to face up and say they bet on the wrong horse."

Microsoft recently partnered with Cisco competitor Nortel Networks to make its software more voice-friendly--a deal that has yet to bear significant fruit, though it remains in its early stages.

Despite the examples, there have been bright spots in networking for Redmond. An ongoing partnership with 3Com has resulted in the delivery of a popular set of home networking technology. The two companies are also working on adding networking capabilities to Microsoft's Windows NT operating system, to be named Windows 2000 in a forthcoming version.

3Com also has the largest footprint with consumers among network equipment providers, possibility facilitating more cooperation. "We're trying to make everything simpler," said Jeff Graham, 3Com's senior vice president for its personal connectivity business unit, in a recent interview.

News.com's John Borland contributed to this report.