Behind the headlines:
In 2005, it was hardly business as usual for the world's largest software maker.
Microsoft moved closer to shipping the long-anticipated updates to its flagship Windows and Office products. But the company's strategic focus shifted toward a new industry model--Web-based services--and an increasingly dangerous new competitor: Google.
References to Google and a budding rivalry were clearly evident in comments made by Chairman Bill Gates and CEO Steve Ballmer. Where once Microsoft lavished its greatest attention on rivals like IBM and Sun Microsystems, now Google, Salesforce.com and a growing number of open source companies--and the technology model they represent--are Microsoft's prime concerns.
As part of the restructuring, Ray Ozzie, who earlier in the year came to Microsoft through the acquisition of Groove Networks, was tasked with driving the move toward services. Ozzie's ascendancy was confirmed in November when a call-to-action memo detailing the company's services plan--later amplified in an all-hands memo by Gates himself--became public.
Microsoft in November announced its initial foray into services with two offerings, Windows Live and Office Live, to augment the company's cornerstone products. A similar plan linked to server software has also begun to take shape.
When Microsoft wasn't battling Google in the marketplace, it was combating the company in the courtroom. The two companies engaged in a highly publicized legal spat over Kai Fu Lee, a former Microsoft researcher who defected to Google.
There were many moves on the personnel front in 2005. Leading the list: Jim Allchin, a top company executive and the man behind Windows for the past 15 years. Allchin will retire at year's end.
In August, Microsoft announced the hire of a new COO, Kevin Turner, a former Wal-Mart executive. And reverberations continued from October's reorganization. In December, the company said it was retooling its entertainment division.
On the product side, an update to Microsoft's client version of Windows, developed under the Longhorn code name and now officially called Vista, inched toward release next year. Microsoft also began testing a new file system, originally intended as part of Longhorn but now expected to debut separately.
Office 12, an ambitious update of one of Microsoft's most profitable products, entered beta testing in November with a final release due next year. At the same time, a closely watched drama was playing out in the Commonwealth of Massachusetts, where state agencies debate whether to ditch Office for software based on the OpenDocument format. And Microsoft submitted its own 1,900-page document to an Ecma committee to standardize Microsoft Office document formats.
SQL Server 2005, a long-awaited new version of the company's database software, finally
In the security area, the Zotob worm slammed Windows 2000 systems in August, disrupting business at companies including CNN, the New York Times and DaimlerChrysler. Zotob exploited a serious flaw in Windows and appeared only days after Microsoft released a fix for the bug.
On the product side, Microsoft released test versions of software to help consumers fend off spyware and viruses, called Windows AntiSpyware/Windows Defender and OneCare. It is also eyeing the enterprise market, with a new product, code-named Microsoft Client Protection, expected to debut in 2006.
Behind the headlines:
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