Bigger role beckons for MSN, Passport in New Zealand

An enhanced local presence for MSN, Passport and Microsoft Corp.'s other Internet services is likely as the company works to put the beef in its .Net strategy.

At a briefing on Microsoft's New Zealand business strategy yesterday, general manager Geoff Lawrie listed MSN, bCentral (the small business portal already launched in the US), wireless initiatives and smart card developments as the key areas of new business for the company.

In a deal done in 1998, MSN in New Zealand has been the responsibility of Ninemsn Pty. Ltd., a joint venture between Microsoft and Australia's Publishing and Broadcasting Ltd. The Australian Ninemsn portal has gone on to become the most popular web property in that country -- and according to a Media Metrix survey last year, the first site outside the US to achieve an audience "reach" of more than 70 percent.

While the New Zealand MSN site enjoys consistently high ratings by virtue of Microsoft's presence on PC desktops, it has offered fairly modest content, mostly served from the US. Microsoft's Passport personal identification service -- a key example of the kind of "software as a service" on which it wants to base .Net -- can be used by New Zealanders, but has not been promoted extensively to local merchants and consumers.

But the use of the free Web-based email service Hotmail demonstrates the extent to which Microsoft can drive an online service to consumers. Lawrie said yesterday that at last count there were 580,000 Hotmail accounts in New Zealand (Microsoft counts accounts used in the past two months as active) -- roughly equivalent to the number of PCs or electronic game consoles in use here.

But while Microsoft's future ostensibly lies internet services, Lawrie was unabashedly PC-centric in his market analysis, dishing out numbers not on Internet access trends but boxes sold.

He pointed to year-on-year growth of 11 percent in PC shipments and expected "at least a 50 percent upside" in sales potential for Microsoft as New Zealand's consumer PC penetration edged up to that of Australia (50 percent) and the U.S. (60 percent).

The PC would remain "very central" to what Microsoft did, Lawrie said, noting that Microsoft in New Zealand sells more of its software per PC than it does in many other territories.

The company doesn't release financial numbers for New Zealand, but Lawrie said revenues were up 25 percent for the half year to December, driven largely by Windows 2000 (which appears to have found momentum here as elsewhere, with sales rising 60 percent of the previous half year), SQL Server (up 80 percent), Office (up 16 percent) and Services (up 80 percent from a very small base).

The impression that Microsoft is still more talk than action on .Net was lent by the fact that the head of the company's business solutions group, Terry Allen, had only the same .Net presentational video to hand as at last year's TechEd conference. Allen pointed to the company's new Enterprise Servers as the "first tangible sign" of .Net's arrival and the largest single roll-out or server products in the company's history.

Allen said the Stinger mobile phone touted by Microsoft will be available locally in six months to a year, but Microsoft is unlikely to have any wireless services lined up for the launch of Telecom New Zealand Co. Ltd.'s CDMA (code division multiple access) mobile network this year. The idea that the eSolutions "virtual" joint venture between Microsoft, EDS Corp. and Telecom New Zealand would lead to New Zealand becoming a test bed for new Microsoft technologies -- touted at last year's eSolutions launch -- appears some way short of reality.

Lawrie said he was "happy with the progress of eSolutions. But building it has been more challenging than we expected. I don't have a problem with the way it's developed and its capability as an organization. The model is exactly where we want it to be."

He said eSolutions' business model, which has come in for some criticism over its lack for formal structure and transparency, was "exactly the right structure" for Microsoft's software-as-a-service model.

Like Allen, Lawrie emphasized the key role XML will play in Microsoft's vision"It's a leap of faith, I know, but in the next year you will see Microsoft begin to be regarded as an integration leader around open standards."

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