Dec. 25, 2002 - Jan. 24, 2003

IBM Goes Direct for New Channel Head
The fact that IBM’s head of channels, Peter Rowley, is stepping down at the end of February, just a couple of weeks after IBM’s 2003 Partnerworld event, may not be a huge surprise. But the immediate past of his replacement is raising a few eyebrows. Mike Borman, who’s slated to step into Rowley’s shoes, was previously VP of IBM’s direct model project. Those shoes, incidentally, are quite large: During his 37-year tenure with IBM, Rowley authored the business partner charter, and during last year’s Partnerworld event pledged "consistency, commitment, and continuing growth" in front of some 3,000 IBM partners. Besides, this really isn’t a good time for IBM to be shaking up anything, at least not with resellers. Members of that community have voiced unhappiness with a letter they received at the end of November, announcing that IBM would no longer fund its Business Partner events, which included support services such as audience generation, registration, post-event follow-up and logistical planning.

More on Unix vs. Linux
Here’s more proof that at least some of Linux’s gains in the corporate computing environment are coming not at the expense of Windows, but of other flavors of Unix. Intelligence indicates that a leading server vendor has commissioned technology research firm International Data Corp. to make recommendations on the viability of implementing Linux in the corporate data center. The company may ultimately make the findings available to a broader audience through a public webcast, but that will depend on the results. This particular vendor has built its reputation on Solaris solutions, but the costs of that option are high and mounting. That’s why, before making any major commitment, the company wants concrete numbers on how much of its research and development budget, sales training and overall focus should be devoted to high-end servers running Linux.

EMC Enters The Matrix
We're hearing that EMC will be ready to deliver its next Symmetrix storage architecture either late this month or in early February. Termed Symmetrix DMX, for Direct Matrix Architecture, the series will be positioned to address customers' storage needs at the high end. Sources close to EMC say that there will be two separate announcements. The first will be to introduce the DMX architecture, the second to highlight three products billed as the "DMX Series." Look for the marketing campaign accompanying the new release to emphasize not just the Symmetrix DMX architecture but "the matrix."

Dell Admits to Channel Experiment
Because of his surprise assertion that the PC will be the focus of any home entertainment center, another of Dell CEO Michael Dell’s comments during his keynote address at CES didn't get much notice initially. During a Q&A session after his speech, Dell mentioned that not only would there be no white-box servers coming from the company, but that the company’s entry into the channel with white box-PCs had been "an experiment." His laissez faire attitude towards his company’s attempt to pull the wool over resellers apparently doesn't come as a huge surprise to many within the VAR community. Some angry resellers have subsequently taken to message boards, noting that Dell actually charged more for its products in the channel than it does for equivalent direct sales offerings. Some are even beginning to voice suspicions that Dell's offer to sell its unbranded systems was just another attempt by the company to build a better direct trap for resellers’ customers...

Microsoft Already Fixing Smart Display
Here’s a tip that’ll have Microsoft critics nodding their heads in recognition: The company is already readying fixes for bugs in a product that officially got unveiled Wednesday. The product in question is Smart Display technology, which was officially unveiled within a ViewSonic portable monitor as part of the opening festivities at the International CES event in Las Vegas. Smart Display software is meant to create a portable monitor for accessing and viewing content from a PC using wireless connectivity. However, the software giant acknowledges that some users will find Smart Display shutting down their computers if they attempt to use it in wireless mode. No word on when "bug-free"—call it second-generation—displays will be available.

TSA Signs Major Outsourcing Deal
In one possible example of the increased government IT spending that’s so much in the news, the Transportation Security Administration (part of the federal Department of Transportation) has signed a major outsourcing deal with consulting firm Accenture for "professional, administrative, and management support services." The contract award amount is estimated to be just shy of $215 million. According to a new report from Input, which tracks federal IT spending, the TSA will play a significant role in defining future outsourcing projects in civilian agencies.

Faster Wireless Devices Ship to Skeptical Channel
The next race in Wi-Fi is already in high gear, with serious competition between Buffalo Technology and Linksys. Both SMB vendors are vying for pole position as the first to ship wireless gear based on the new 802.11g standard. The devices tout 54 Mbps network speeds and backward compatibility with existing Wi-Fi equipment. Linksys, working with chips from Broadcom, had hoped to ship in early December, but had only managed to ship 15,000 units to distributors by the beginning of the new year. Look for a few other vendors, including D-Link and NetGear, to start shipping 802.11g products in January. The channel is often first to jump on a new trend, but resellers appear, for the moment, to be taking a wait-and-see attitude toward the new standard.

McDonald’s Fries Oracle Network
McDonald’s isn’t the only company suffering from the cancellation last week of its ambitious plan to create a global network linking all outlets, suppliers and corporate headquarters. Intelligence suggests that the company’s partners in the effort were software giant Oracle and e-business consulting firm Bearing Point (perhaps still better known by its original name, KPMG Consulting). The project, called "Innovate" and using Oracle’s ERP technologies, officially targeted everything from greater efficiencies in supply chain management to paperwork reduction. The decision to pull the plug before any part of the network had been deployed came as a huge surprise to almost everyone involved in the initiative. As a result of the abrupt termination, McDonald’s, and perhaps other companies in the retail space, may be gun-shy about undertaking huge projects, at least in rough economic times.

AMD’s Hammer Server Roadmap Gets Public Airing
Did AMD leak information about the processing speeds and price tags of its not-yet released Hammer servers? Scheduled for launch in Q1 of 2003, the Opteron servers will command speeds of 1.4GHz and 1.6GHz and initially cost between $3,000 and $6,000, followed by the SledgeHammer systems (1.8GHz and 2GHz, costing $25,000 or more) in Q2. Rumors have suggested that its Athlon 64 (code-named the "Clawhammer") will be released at 2GHz, while the Opteron sees the light at around 1.6 Ghz. The price range will target high-end Xeon systems and low-end Itanium systems. The fact that these roadmaps are public could mean AMD is fairly confident it can deliver on time with the Opterons. That’s certainly not always the case with the processor market. AMD has not confirmed any buyers of the Opteron chip yet, but rumor has it that Dell’s name is high on the list.

Groupwise: Back from the Dead
From the "Where is it now" department, even analysts who track the collaboration/groupware market are surprised by the return of Novell Groupwise, which is due to be re-launched with new features in February. The product was put "in mothballs" nearly two years ago, even though it still has an estimated 35 million users. As one analyst notes, Novell made the mistake of never marketing Groupwise as a killer groupware product, only as part of a suite. That enabled rivals such as Microsoft Exchange and Lotus Notes, both of which usually received much poorer reviews, to take over the lucrative market This time around, Novell seems to understand the value of commanding real estate on the desktop in order to hold on to the back end, but the consensus is that it’s too late: Most of the market has solidified around a few players, and any attention saved for the new kid on the block will go to Oracle’s offering.

Dec.14- Dec.23, 2002

Handheld Handshakes
Even before the ink dries on the deal between IBM and Nokia to jointly provide end-to-end, secured business applications on advanced mobile handsets, sources indicate that a deal could be brewing between Ericsson and Motorola, for their own bundling arrangement. Analysts say that these partnerships allow service providers to add security features to their enterprise portfolio, as well as providing IT chiefs the comfort level they need to grant wireless devices access to the corporate infrastructure. Nokia’s reason for signing with IBM is no secret: It wants access to IBM’s huge base of enterprise customers. Analysts acknowledge the number of wireless enterprise devices deployed and predict enormous growth in enterprise wireless mobility solutions. So look for Big Blue to offer not just Nokia’s solution but also installation, maintenance, financing and consulting.

Legend Palm Becomes a Reality
Sources have confirmed that Legend, China’s leading PC supplier, will be launching a new Palm OS-based handheld to the Chinese market in January 2003. The Legend Palm 168 boasts new specs—such as a Chinese language version of PalmSource’s OS 4.2 operating system, a color QVGA screen (2410x320), MP3-playing ability, and a dictionary—and a price tag below $240. The new silver gadget will ship with a variety of bundled software and a "hidden" virtual graffiti portion on the device. Where traditional devices now have the lower portion of the screen blocked off for graffiti purposes, the new device has a virtual window that can be opened and closed as needed, thus enabling the user to utilize more of the screen when viewing applications.

AT&T Playing Dual Role in Cometa
One odd detail emerging from Cometa Networks, the new Wi-Fi entity backed by AT&T, Intel and IBM, among others: there’s a possibility of competition between AT&T and AT&T Wireless. That’s because Cometa has been set up to provide broadband, wholesale, wireless Internet access nationwide through hotspots, not a continuous wireless network. The latter is still the main goal of operators on the cellular network side, such as Sprint. PCS, Nextel and AT&T Wireless, which was spun off from the parent company and is not involved in the Cometa initiative. No partnerships have been revealed to date, but smaller wireless broadband players who have been signing up subscribers over the past year may take on more importance. Expect to see an uptick in consolidation in this sector in the coming year. Analysts say that once the technologies start to arrive, the brand name and existing customer relationships of companies like AT&T and IBM will go a long way toward allaying IT concerns about security.

Nextel: The Next Generation
Sources inside Nextel Communications confirm that the company is definitely on track to exploit emerging wireless technologies and build, in essence, a 4G network. Once in place, this would put it technologically ahead of rivals such as Sprint PCS, AT&T Wireless, Cingular and Verizon, all of whom have 3G networks in place. Primary equipment vendor—and, according to rumor, investor—Motorola will likely have a major hand in the implementation. It’s a risky move, given that many of the new technologies haven’t been fully tested, but if the company can pull it off successfully, it will be one of the first carriers to charge into the 4G market.

Dell Conflicts with New Channels
Picking a fight with yet another channel, Dell Computer is going after the rent-to-own and rental markets, including trade shows and industry conventions. By all accounts, Dell is surprised by its own success in this field. We hear the company expected to make about $1 million from rental markets this year; instead, since July, it has reportedly racked up revenue of $25 million, representing the movement of about 130,000 units. Moving forward, Dell anticipates revenue of as much as $100 million from this sector in 2003. But that will only come by taking away some earnings from established rental organizations, such as Las Vegas-based USA Host. This company handles huge Las Vegas Convention Center trade shows such as the Consumer Electronics Show and Comdex. And, by no coincidence at all, it’s a Dell customer.

Veritas in the News, Hopefully
For those interested in keeping score, here’s how storage management software vendor Veritas (number two behind EMC) wants to see itself covered in the first half of 2003. According to an internal document, the company wants to secure two feature articles in top-tier business press, no less than 10 earnings-related stories (in print, online or broadcast outlets), "significant" coverage in five top-tier business publications for Tier 1 announcements, one customer win announcement per month starting in Q1’03, and two opinion editorial pieces per quarter. We’ll let you know how they did in about six months.

Spreading the Blame for OS/2
We hear some IBM marketing insiders are seething at recent reports that the company has decided to stop marketing OS/2 because, despite having a great product, Big Blue’s marketing team was unable to get the message out. They note that the product hadn’t received a major upgrade is six years—an eternity in operating system circles. By then, OS/2 was already the butt of jokes for desktops, but had established a customer base within the server community, particularly with specific markets such as European financial services companies. But in the past few years, reportedly at the company’s bidding, the enterprise sales and marketing teams had gradually weaned corporate clients away from OS/2 and toward Windows 2000, Java and, more recently, Linux.

Veritas Plans Splash at LinuxWorld
Sources at Veritas indicate that the company plans to greatly intensify its efforts within the Linux market during the first quarter of 2003. The company has developed a full-fledged marketing plan specifically for January’s LinuxWorld trade show in New York, where it will set up a booth and try to maintain the momentum captured from its earlier high-profile event, Linux Storage Day. The company also plans to make a series of new product announcements, particularly around its Adaptive Software Architecture. Veritas is even considering announcing mainframe support for part of its product line.

Accenture Refocuses on Tech Implementation
Sources tell us that Accenture is in the middle of a significant strategic and operational refocus, quietly shifting its business development and go-to-market strategy toward an emphasis on lower-margin implementation engagements and away from strategy and business consulting. After significant layoffs earlier this year, Accenture has been hiring low-cost technical expertise to help execute on the new plan. The company is also emphasizing partnerships, as opposed to winning total control of client engagements, and is expected to announce a series of technology agreements within the next few weeks. Senior partners have been meeting with employees at offices around the world in recent days to hammer out details of how to put the new strategy into practice.

School’s Out for IBM?
In a surprise announcement last week, the division of the FCC that oversees the e-Rate program for providing communications and Internet technology to low-income school districts announced that a "sizeable number" of 2002 applications would be denied due to alleged improper involvement by IBM in the RFP process. Application denials aren’t unique, but they typically involve unknown companies looking to make a quick buck off a government program. In the past, the agency’s denials have been explained in a one- or two-sentence note; the letter to the only school district that’s been identified runs 15 pages and, according to one analyst who monitors the e-Rate program, goes into "an extraordinary level of detail."

EMC's Symmetrix 6 Upgrade Delayed
Customers waiting for the next version to EMC’s high-end storage offering, Symmetrix 6—the product’s first true upgrade in several years—will have to wait quite a while longer. We hear the company won’t be able to announce the full feature set in the new offering until mid-February, and the upgrade version itself won’t ship until April at the soonest. The market had expected the new version as early as May of this year. Symmetrix, once considered the best high-end storage solution on the market, has fallen behind the competition in recent years, losing significant market share to other vendors and much of the fat margins it once commanded. This latest delay won’t help EMC’s standing, either. Look for IBM to make some upgrade announcements of its own for the high-end "Shark" storage units, the ESS 800 and ESS 800 Turbo.

Apple Takes on Videoconferencing
Sources confirm that the business videoconferencing category will soon have a new competitor: Apple. Mac users have long been frustrated by their inability to use conferencing software like WebEx and PlaceWare, and Apple appears ready to deliver a solution. Built upon the company’s iChat instant messenger product, Apple’s new application will incorporate voice and videoconferencing functionality currently found in the QuickTime media layer. It will likely be unveiled as part of OSX 10.3 (codenamed Panther), which is expected to debut in about six months

Sun Set to Phase Out Midrange Server
Sources tell us that the next Sun Microsystems offering to bite the dust will be Sun Fire 3800 midrange server, following the recently retired Sun Fire 4810. Sun’s spin will likely be that the newer V880 low- to mid-range server has been so successful that it makes these other releases redundant. The company is also expected to phase out some current I/O offerings for midrange servers, which have caused problems for certain database applications, and replace them with I/O offerings now used only for higher end servers. In the near future, look for Sun to release re-packaged midrange servers that are based on the current high-end Sun Fire 6800 architecture and design.

Legend Targets Two Million Cell Phones in 2003
Legend, China’s largest PC maker, is seeking to leverage its position to become a major supplier of mobile telephones, as well. Intelligence indicates that Legend plans increase its sales to over two million units in 2003, more than double its 2002 sales. Legend, which is not manufacturing its own phones, is looking at several Korean manufacturers (Pantech, LG Electronics, Innostream) for its next wave of branded phones. Legend has built on its strong PC name recognition and channel presence to expand into other product lines, including servers and mobile computing devices. The company has also used close government connections to ensure sweetheart trade protection practices, giving it a significant advantage over non-Chinese vendors in any technology sector.

Dec.02 - Dec.13, 2002

One OS Only, Please
A new potential area of conflict between PC makers and Microsoft may be the software giant’s decision to prevent OEMs from offering dual-installation options for Windows. The policy change, which is set to go into effect next year, means that users will no longer have the option of choosing between different versions of Windows. While confirming the change, the company stresses that its primary motive is to curb software piracy and adds that users can downgrade to older versions after purchasing a new PC. Nevertheless, such downgrades are often problematic because installation technology is typically designed to support upgrades. Some observers that some manufacturers are miffed by this further infringement on their ability to configure PCs based on their perception of customer needs.

Unisys Set to Boost Microsoft-based Enterprise
Inside sources at Unisys confirm that the company has opted to fully support Microsoft's new Systems Architecture for the Enterprise Data Center (EDC). While the process was several months long, the two companies are well-matched to provide global customers pretested, fully documented guidance for planning, building and managing an enterprise data center configuration. The configuration comprises software and hardware, backed by services and support, that deliver enterprise IT services such as messaging, authentication, access control, database, file and print, and Web-access network. Analysts say this initiative gives Unisys a strong platform with which to compete well against IBM.

Dell Seeks New Singapore Chief
Intelligence indicates that Dell Computer’s march into Singapore is not going as smoothly as the company would like it to. Sources say that the newest sign of problems is the unexpected departure of General Manager Teo Sok Cheng, who just left "to pursue her own interests." The management change comes only two months into a major marketing campaign that involves a $2 million advertising blitz and the opening of the company’s first retail kiosk in Singapore, widely seen as a test run before a broader launch in the Asia Pacific region. The company has appointed only a temporary GM, and is seeking a permanent replacement.

Brocade Brouhaha Brings Big Bucks
Some very lucky—or very prescient—people bought 18 million shares of Brocade Communications stock Monday. That was when Brocade launched an employee stock option swap that allowed company workers to swap currently held options (at high strike prices) for prevailing prices "six months and a day" away (presumably at lower strike prices). This was at the end of a bad quarter when the share price fell 44 percent. On Tuesday, however, Brocade temporarily dodged a bullet when a US District Court judge denied a request made by McData to issue an interim preliminary injunction ahead of a full court hearing of a lawsuit it launched last February. Brocade will still be in court, but the stock rose this week.

Will BEA Acquire Borland?
Rumors are growing that BEA Systems is setting its sights on Borland Software. A potential deal could take on new urgency in the wake of IBM’s announced acquisition of Rational for $2.1 billion last week. Giga , which has in the past urged the companies to merge, argues that BEA might not have much choice left if it’s to remain competitive in the software development marketplace. What makes Borland so desirable right now is that IBM, in its bid to gain dominance in software development, may not be done deal-making.

Dell Squeezes Channel Again with SMB Services
Intelligence indicates that Dell and the channel are on a collision course—again. Some VARs are voicing frustration over Dell’s foray into the SMB market with a suite of low-cost services (starting price: $199) for high-touch services, such as training and support, to companies with fewer than 100 employees and little or no on-staff IT support. At least one analyst gives the initiative a thumbs-up from a customer’s perspective, but notes that it won’t provide a huge source of revenue to Dell and will further strain ties with resellers. "This move is in direct competition to the bread and butter of many VARs" the analyst said. "This takes food right out of their mouths."

AOL: Layoffs on Line
Industry buzz about layoffs at AOL, its not a not a case of if or when, but how many. Estimates range as high as 25%, with drastically reduced severance packages. Look for the biggest cuts to take place in Columbus, OH and Mountain View, CA. Still by far the largest Internet service provider, AOL has peaked with subscribers, and for the past year has been struggling to regain, even retain, market share amidst declining usage and sagging advertising revenues. Newbie subscribers once wooed by AOL’s CD-ROM carpet-bombings and ever-increasing free hours have turned to lower-priced options and broadband carriers, particularly as they become more Internet-savvy. Ultimately, most analysts believe that Internet access is a commodity, and it will become difficult for any company to stand out in this space.

Legal Writing on Tablets
It’s never too early for a new form factor to become the subject of a legal dispute. Hardware maker Acer is exploring whether some of the new Tablet PCs violate its U.S., Taiwanese and Chinese patents for a flat-panel display apparatus and tilt/swivel mechanism. However, while Acer cites only a couple of the new products, several more offer the convertible screens for landscape or portrait viewing that Acer believes its patent covers. Look for Microsoft to get involved and quietly urge a resolution if this dispute spills into public view.

Disney Details Enterprise PDA Standards
Corporate IT organizations getting ready for the holidays are expecting an onslaught of new PDAs for their users. Disney’s IT department, for example, got a little grumpy in a recent internal missive to corporate users reinforcing its "PDA Policy and Standards." The department will support only iPaqs and Blackberrys, Mickey Mouse’s parent company warned. Worried about poisoned handhelds, Disney is also requiring all PDAs to have anti-virus software before connecting to the enterprise network. Some analysts argue that because PDAs are small-ticket items, corporate IT departments will be reluctant to get involved. Disney, by contrast, may be demonstrating an important trend here...

Gateway Pulls Back From Training
The downsizing, restructuring and retrenchment of Gateway continues. According to sources, the company is chopping most of its computer training department. Training has been under pressure at Gateway for some time. Many of the department’s administrative responsibilities were already outsourced to its Gateway call center under the guise of saving time. Following that, salaried employees became hourly workers and had their work week reduced from a 40 hours to 32 - a 20% pay cut. This pullback supports industry rumors that Gateway is further shifting its focus from the business market and toward a purely consumer-based business strategy cut.

BP Set to Do More Outsourcing
BP Amoco, which has made its reputation as a company unafraid to outsource major aspects of its operations, is on the hunt for yet another partner. Intelligence indicates that the oil conglomerate is this week meeting with IT outsourcing providers—including Deloitte Consulting, a relative newcomer in the outsourcing world—at its Houston offices to discuss a new series of contracts.

Disney Details Enterprise PDA Standards
Corporate IT organizations getting ready for the holidays are expecting an onslaught of new PDAs for their users. Disney’s IT department, for example, got a little grumpy in a recent internal missive to corporate users reinforcing its "PDA Policy and Standards." The department will support only iPaqs and Blackberrys, Mickey Mouse’s parent company warned. Worried about poisoned handhelds, Disney is also requiring all PDAs to have anti-virus software before connecting to the enterprise network.

Micro-Star Promises Sub-$1,000 Tablet PC
Tablet PCs have only just entered the market in their latest incarnation, but they’re already in danger of becoming commoditized. Taiwanese motherboard manufacturer Micro-Star plans to invade the market sometime in 2003 with a device that costs less than $1,000, or half of the current market standard. If the company is able to deliver such a product at such a reduced price point, it will force better-known vendors to react quickly, perhaps sparking a price war. For now, however, getting into a profit-challenged situation with an unproven form factor seems like a potentially risky move.

Sun Sends Out Executive Contingent
Insider sources tell us Sun Microsystems CEO Scott McNealy is putting pressure on his executive team to reach out to customers through an active round of speaking engagements at industry shows and forums in 2003. He believes this is the most cost-effective way to stay in front of customers and influence their views and opinions of Sun. McNealy has reportedly tapped 14 executives to push the public face of Sun, and has even structured compensation around not just how many times they peak, but the caliber and impact of the presentation made to different strategic audiences. Evaluation of the latter is based on on-site surveys of attendees at the events. Executive handlers are on notice to ensure quality engagements are lined up for 2003.

Analyst Report Pans IBM’s Linux Plan
A report due out next week from analyst firm The Aberdeen Group pokes large holes in IBM’s much-touted plan to make Linux available across all its platforms, including middleware. An Assessment of IBM's Enterprise Linux Strategy stresses that ISVs and corporate clients of IBM’s e-Server line will run into difficulties stemming from a variety of issues. Chief among these is the evolving nature of Linux itself: Some versions are 32-bit, others 64-bit, and application portability will cause serious consistency problems. While coverage of IBM’s "Linux, Linux everywhere" plan has been generally positive, this report could spark a spate of more negative reviews.

EMC Prowling for More Software
Intelligence suggests that EMC, in its quest to deliver more software revenue, is on the hunt for potential acquisitions, and the latest firm on its radar is stealth startup Incipient of Waltham, Mass. Incipient’s pending software for SAN switches could be critical for the WideSky initiative, EMC’s attempt to manage heterogeneous storage environments. While there are also rumors that Incipient is looking for $20 million in funding, the company’s origins suggest that EMC could be a potential suitor. Incipient founder Ric Calvillo has long-standing ties to EMC, having been CEO of Conley Corp. when it was acquired by EMC in 1998 and subsequently serving as general manager of EMC’s Cambridge software development center, where he oversaw the development of PowerPath optimization software. Meanwhile, CEO Joe Tucci has made it very clear that EMC will have to grow software revenue through acquisitions, and the company’s recent trips to the bargain basement confirm this strategy.

Trouble in Store for Brocade
As if Brocade Communications wasn’t in enough trouble already, analysts are taking note of the fact that the company’s target market is in Cisco Systems’ gunsights. This comes at the worst possible time for Brocade, which, after a stock free-fall, just depressed the stock further with a warning of a coming revenue shortfall. Only weeks after laying out nearly $175 million to buy Rhapsody, Brocade laid off 15 percent of its staff. COO Mike Byrd will soon be leaving too, though by a stroke of good luck he’s been dumping shares all year long.

EDS Buyout Just a Rumor (For Now)
For the record, the word from IBM is that the rumor about IBM buying troubled IT services provider EDS is just that--a rumor. Savvy industry observers note that Big Blue isn’t very vehement in its denials, which means the rumor could be more than just a rumor. However, our intelligence indicates that the rumor was started by EDS shareholders in an effort to boost the stock price. The fact that IBM’s denials were so low-key is what’s kept the story in the forefront.

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