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Microsoft unveils services
March 20, 2001: 1:01 p.m. ET

Software maker showcases key personal data element of .NET strategy
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NEW YORK (CNNfn) - Shares of Microsoft rose Tuesday after the company unveiled the latest elements of its plan to transition its software business from the desktop to the Internet.

Microsoft on Monday unveiled the first real initiative of its so-called .NET strategy when it showcased a new array of software aimed at helping consumers manage and share personal information on the Internet.

The collection of software, nicknamed "Hailstorm," provides a set of "building block" services designed to link with other companies' software. The software enables users to access and manage personal data on the Internet using a wide range of software applications and computing devices. It is expected to be available to consumers next year.

Microsoft said elements of Hailstorm will be embedded in its Windows operating system and Office suite of productivity applications such as Word and Excel. The Redmond, Wash.-based company, which is the world's largest supplier of computer operating system software, plans to charge users as yet unspecified subscription fees for use of the Hailstorm services.

"It's actually very crucial for the financial model to be based on end-users paying for the value they receive," said Bob Muglia, Microsoft's group vice president of .NET services. "It's a reboot of the Internet business model." graphic

Shares of Microsoft (MSFT: Research, Estimates) rose 53 cents to $54.84 in afternoon trading as analysts weighed in on the new technology and investors tried to decipher what it will mean for the company's bottom line.

Some Microsoft watchers praised the new initiative, which they said represents the first substantive move toward putting the .NET vision -- introduced last year as a way for Microsoft to extend its Windows franchise onto the Internet -- into practice.

"This is just one step closer to reality," said Dwight Davis, an analyst with Summit Strategies. "Now they've taken it a step further by specifying the services they are going to offer. It's nice that it sort of puts meat on the bones for .NET, but it's still at the vaporware stage. The bulk of the suite is still far from beta (test version)."

Henry Blodget, an analyst who covers Microsoft at Merrill Lynch, said the new services -- which pit Microsoft even more directly against AOL Time Warner, especially in the fast-growing instant-messaging field -- are not likely to have a material impact on the company's earnings until the end of 2002 at the earliest. AOL Time Warner is the parent company of CNNfn.

"Hailstorm services will be deeply integrated with future versions of Windows, which will essentially 'make the OS the online service,' a feature that will place Microsoft in more direct competition with America Online," Blodget said in a note to clients Tuesday.

"We expect that this will eventually lead to either a partnership or a war between the two companies," Blodget added.

Because the Hailstorm services will be accessible most easily from a Windows-based computer, Blodget said if it is successful it also could help boost sales of Microsoft's Windows XP, its next-generation consumer PC operating system.

However, Hailstorm also is reportedly being scrutinized by antitrust enforcers, who are looking into the initiative for signs it would give Microsoft the kind of dominance in the services field that prompted a judge to order the company's breakup last year.

Richard Blumenthal, Connecticut's attorney general, was quoted in published reports Monday saying that he thinks Hailstorm "raises serious questions." Connecticut was one of 19 states that joined U.S. Justice Department in the antitrust suit against Microsoft which ended in a court-ordered breakup of the company.

Microsoft is currently appealing that decision.

Several of Microsoft's key competitors also have protested that the company's latest announcement sends a clear signal that it plans to use its monopoly in computer operating systems to try to dominate the market for Internet services.

Executives at Microsoft countered those claims by saying that Hailstorm is based on open standards and can run on any of its rivals' technology platforms.

-- Reuters contributed to this report graphic