Chairman Bill Gates, delivering a keynote address at Intel's Exchange conference in San Francisco, said the deal was part of the overall strategy to move deeper into the market for software that runs data centers and Web sites. Currently, the market is dominated by companies such as Sun Microsystems.
"We need to bring the same type of miracle to the data center that we brought to the desktop," he said.
NetIQ, moreover, won't likely be the only company to see its technology embedded into Windows 2000 or .Net, Microsoft's new strategy for Web-based software and services. Microsoft wants to popularize this technology rapidly and will obtain software from outside the company to achieve that goal, said Jim Ewel, vice president of the .Net server group.
"We will use a mix of Microsoft technology and technology that we acquire," he said. "A lot of it depends on whether there is (software) that is mature and well-tested."
NetIQ's software essentially automates many computer management functions and helps automatically detect and resolve problems with servers.
Like Gates, Intel CEO Craig Barrett, Hewlett-Packard CEO Carly Fiorina and nearly every other speaker at the two-day event, Ewel made it clear that the overall goal is to dislodge Sun as the leading provider of servers and software for complex computing operations.
Sun's business has exploded with the Internet. The PC powers, however, claim that combined, they can dedicate more research and development, cut costs quicker, and come out with a wider variety of hardware and software than Sun.
"The bar (for these companies) is, 'Is it more cost-effective than the proprietary systems?'" Ewel said.
Under the NetIQ deal, Microsoft will pay the company $175 million in licensing fees and $6 million in engineering codevelopment funds over the next three years. Microsoft will also invest $5 million annually in the company and provide it with $5 million more annually in marketing funds.
In turn, Microsoft will release a version of NetIQ's Operations Manager under the name Microsoft Operations Manager. Some of NetIQ's technology will be incorporated into Windows 2000. The company will also come out with additional products that enhance Windows 2000 management.
During his keynote, Gates also sketched out his now-familiar vision of the future, where smaller, easier-to-use and ubiquitous computers will all chatter to each other in Extensible Markup Language (XML).
"The PC is not the ultimate communications tool that it will become," he said. "We have to build user interfaces that are far simpler than user interfaces today."
Ubiquity and new applications will also increase use. "The number of hours in front of the PC will increase substantially with collaborative technology and these new form factors," he said.
No Gates appearance would be complete without gag videos featuring Ballmer, Gates and celebrities, and the chairman did not disappoint, showing parodies of "Austin Powers," "The McLaughlin Group," MTV's "The Real World," "Judge Judy" and a Viagra ad with Leslie Nielsen.
"I put the sin in syntax, baby," Gates said in the "Austin Powers" spoof.