Gates Opens Windows - TheStreet

Gates Opens Windows

Microsoft unveils its latest operating system.
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A wobbly, distorted keyboard riff slopes lazily across a block-rocking techno beat. A barrage of images -- cities, bridges, infrastructure -- vanish in split-second time, yielding to shots of workers packing boxes. One word at a time, the music video's message hits the screen:

The Business Internet Starts Here.

Beamed across the Internet, the energetic display served as a virtual warm-up act for Bill Gates, chairman and chief software architect for

Microsoft

(MSFT) - Get Report

. As he took the stage at the Moscone Center in San Francisco Thursday, fans packed amphitheaters in dozens of U.S. cities and hunched over computer screens in countless cubicles to watch the official debut of the Windows 2000 operating system.

The software was nearly a year behind schedule; the presentation captured the attention of the corporate world. But Microsoft's stock price was, if anything, somewhat muted. The shares gained 2, or 2%, to close at 99 5/8.

"Microsoft is trying to conduct the Windows 2000 rollout as if absolutely nothing were going on," said James Lucier, analyst for

Prudential Securities

. Businesses have tested so-called beta versions of the software, shipped on gold CDs, for months. "The whole purpose of such a campaign is to remove news from such a date," he said.

But news was not completely absent, and the company added its own spin. Steve Ballmer, Microsoft's president and chief executive, told the

Associated Press

that delays in shipping the software gave other operating systems, especially Linux software, a chance to grab market share. Microsoft has "a chance to come back," he told the wire service.

The show and his comments came on the same day the

U.S. District Court for the District of Columbia

set Feb. 22 as the date for final arguments in the

Department of Justice's

antitrust case against the company. The company and the department are in negotiations with a mediator.

"This is the day the consumer systems start shipping, and it's a good day for them to point out that they face competition," Lucier said, noting that Microsoft has maintained that message all through the trial. Lucier's firm rates the stock a strong buy and has not performed underwriting for Microsoft. Lucier covers regulatory issues and does not set the firm's ratings.

Some analysts dispute that Linux poses quite the threat Ballmer describes.

Just under 25% of the operating systems for servers, the back-office systems that run networks of computers, are Linux systems, according to

International Data Corp

. But Dan Kusnetzky, program director for operating environment research at the research firm, said the data on Linux's popularity is difficult to quantify. Variants of Linux and Microsoft operating systems are used on handheld devices, PCs, servers and host computers.

On a revenue basis, Linux products take in only $63 million annually, and "Microsoft makes more than that every day before coffee," he said.

But the business models are different as well, further complicating any analysis of the threat Linux poses to Microsoft.

"You think of Linux the way you think of

Gillette

(G) - Get Report

," Kusnetzky said. "They're glad to give you the handle because the handle sells the blade."

Companies that distribute Linux give it away in order to sell services, upgrades and repairs later.

Conversely, Microsoft will charge $149 for Windows 2000 software for an individual workstation, with versions for computer networks priced at $599 or more.

And the free system's chances at widespread acceptance must overcome Microsoft's dominance in the applications market, said Aaron Scott, analyst for

Advest

. Scott rates the stock a buy, and his firm has not done underwriting for the company.

Linux may gain popularity in back offices and technology departments, but Linux companies will have trouble facing down Windows elsewhere "until you see Word for Linux and Excel for Linux, and what are the chances of that?" Scott said.

As the festivities continued, few such questions were asked. The state of Pennsylvania, which was not among the states to sue Microsoft for its operating system dominance, declared Feb. 17 to be Windows 2000 Day.

Back in San Francisco, Gates, joined on stage by employees and by

Patrick Stewart

(of

Star Trek: The Next Generation

fame), walked his software through a series of demonstrations.

Despite its name, Windows 2000 is intended to replace the business software Windows NT, not necessarily the consumer software Windows 98. The new viral marketing campaign's jarring dance beats contrasted the debut of the consumer software Windows 95, promoted with a backdrop of outsized product boxes and the earthy electric guitars of the

Rolling Stones'

Start Me Up

.

Viewed through a T1 connection, the movements of Gates' image appeared stilted, herky-jerkier than the man in life, closer to

Buster Keaton

as he clasped and unclasped his hands with each pause. Gates was interrupted early in his show after asking, seemingly rhetorically, how the beta version had performed. Thunderous applause, shrill hooting and screeching filled the air, then died as suddenly as it began.

"We're excited that this will become the standard on the desktop," Gates told his audience.