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Up For A Fight

The European Union, product delays, and Linux momentum test Microsoft, but they also may drive its competitive spirit
During a March 24 teleconference to discuss the EU decision, Ballmer said Microsoft's long-term product strategy won't change as a result of the ruling. But its product road map is anything but static. Upgrades to the company's database, developer toolset, and patch-management system have all been bumped into future quarters. The shifting dates, along with uncertainty about future Windows releases, make planning difficult.

"Their road map seems like a moving target," says Tim Stettheimer, VP and CIO at St. Vincent's Medical Center, a hospital in Birmingham, Ala., with about 1,500 Windows PCs. "We're scratching our heads."

Damien Bean, VP of corporate systems at Hilton Hotels Corp., says, "They have to tell me what building blocks I can rely on."

The delay in Microsoft's Windows Update Services, which promises to make it easier for businesses to download and install Microsoft-issued software patches, was a big miss, given the high priority the company has placed on improved patch management.

But Ballmer touts what Microsoft has accomplished: monthly patch distributions that make life more predictable for systems administrators and an almost-ready security update for Windows XP. "I think we're doing a very good job on the [security] action plans we laid forward," he says. Ironically, the Windows XP work is partly to blame for the Windows Update Services delay; Microsoft deemed Windows XP a higher priority and shifted its resources there.

As Microsoft confronts the growing open-source threat, it's also paying closer attention to how it might turn things to its advantage in China, which has open-source initiatives under way. China is "getting more and more comfortable with Windows as part of their infrastructure," Ballmer asserts. Microsoft last year hired Tim Chen, the former head of Motorola Inc.'s Chinese operations, to spearhead its work there. Ballmer points to a recent deal with the China Ministry of Information Industry to establish technology labs equipped with Microsoft software as a sign of progress.

With pirated versions of Windows widely available in China, Ballmer jokes that the acquisition costs are comparable to Linux. And illegally acquired software gives Microsoft a wide base from which to grow. "Our market share relative to Linux is better in China than almost any other country in the world," he says.

So much for bowing to the pressure. Rather than set Microsoft back, analyst Cherry says hard-to-solve problems tend to fuel the company's competitive drive. "I think they see these challenges as an opportunity," Cherry says. "If you solve these challenges, then there's unlimited opportunity ahead of you."

Among the opportunities Microsoft wants to seize are more deals with manufacturing companies. It's sketching out plans to create sales teams that target the aerospace, chemical, consumer packaged-goods, high-tech manufacturing, and oil and gas industries. It also intends to deliver more job-specific software for employees in finance, sales, and other roles.

But first, Microsoft has to get past the current mix of challenges. And that's going to require more than Ballmer's can-do attitude.

-- With Aaron Ricadela

Continue to the sidebar: Q&A: Micrososft CEO Steve Ballmer On Windows, Longhorn, And The EU's Ruling