Burgum Explains Key Decisions

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Microsoft has made two major decisions involving Microsoft Business Solutions. It adopted the name Dynamics for its accounting and CRM products and collapsed seven businesses into three. Burgum, a Microsoft senior vice president and head of MBS, who was reporting to Microsoft CEO Steve Ballmer, will report to SVP Jeff Raikes, as he did just over two years ago. Burgum addressed these issues in two telephone interviews conducted in September. What is the reseller reaction to the product name change?

Burgum: I would say the piece the partners are most positive about is that we have a strong clarity in a road map and we have security for the existing product line. On the user side, it gives people the confidence that whichever product line they have bought that no one can say those product lines are going away You have given these products immortality.

Steve Ballmer [Microsoft CEO] frequently mentions SAP as the most important competitor in the mid-market and never mentions Sage. Does MBS see SAP as its biggest competitor?

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Burgum: I share Steve's view that over time in the mid-market our toughest competition will be SAP. That also underlines the need for the name change. We ended up with a string of emails with people from SAP telling prospects that "before you consider buying GP or Axapta, remember that product is going away." Solomon was the one getting beat up the most. Now, a Solomon partner doesn't have to worry that the product is going away.

You have told financial analysts that one reason for keeping four accounting products is that they are at the most profitable part of their lifespan. But as you launch the Dynamics/Project Green, isn't investment in a new line going to cause you to lose more money?

Burgum: Not if we are smart about it. As we increase the amount of advertising for one brand, we will be decreasing it on the four older products. We can increase market recognition and gain more revenue. There are also some efficiencies to be recognized with the new line. We don't need to have four user interface teams.

Why did Microsoft change the number of divisions? How will this impact MBS?

Burgum: The company needs to increase its agility, not to have so many decisions running through Steve's office.

Will financial results for MBS continue to be publicly reported?

Burgum: I think the P&L structure was working. However, it may not be an externally reported P&L. For the future, we will continue to be MBS as one of seven reported P&Ls. Because of Sarbanes-Oxley, that cannot change quickly. It is a question that will be studied by the financial people down the road. You might end up with more P&Ls; you might end up with less.

The operating losses for MBS increased year-over-year in the last March and June quarters. Analyst Charles DiBona described the run-rate as deteriorating. Have you reacted to his comments?

Burgum: There isn't anything I would see as deteriorating. We feel we've got the right fundamentals. We don't just see this as losing money. We are investing in the business. It is a strategy choice that Microsoft is going to ask certain groups to make money and others to lose money. You have to invest in a level of scale. Xbox was losing a $1 billion a year.

Microsoft's discussions about its development plans sounds as if the difference between applications and operating systems will blur. Is that an accurate description?

Burgum: We would like to blur the line between popular Web services and the operating system. Wouldn't it be nice if you can search the desktop, the Web, and everything else?

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