Microsoft Spending $500 Million on 'Largest Ever' Business Marketing Campaign

Microsoft Corp. announced a $500 million marketing initiative Thursday aimed at competing with IBM Corp. for corporate spending on information technology.

In doing so, Microsoft continues on its traditional course of persuading businesses to spend money on desktop-bound software, even as rivals are emphasizing more Web-oriented applications that aren't as firmly tied to Microsoft's Windows operating system.

The $500 million, to be spent over a year to buy ads and expand its sales force, is the largest business-oriented marketing campaign ever for the company, said Jeff Raikes, president of the business division.

By comparison, Microsoft spent $200 million on a four-month marketing campaign when Windows XP was launched in 2001.

"People will look to Microsoft and they will look to IBM" for leadership in business technology, Chief Executive Steve Ballmer said, speaking to reporters at an executive conference. "They are the competitor."

Although Microsoft competes directly with IBM in a few areas, like collaboration software, Gartner analyst David Cearley said, its latest campaign springs out of a more basic conflict about the future of software.

IBM's vision is about Web-based and to some extent open-source software, where the developers make their blueprints available to others. IBM aims to profit from that trend through its enormous consulting and services arm.

Microsoft, on the other hand, doesn't have a consulting arm and wants its proprietary software, in which the blueprints are closely held, to be the main driver of innovation. The Redmond, Wash., company has made most of its money from such products _ namely the Windows operating systems and the Office business suite that includes a word processor, a spreadsheet and other tools.

Thursday's announcement by Ballmer was an affirmation of that position, Cearley said.

"IBM is increasingly a services company ... and we are, at the end of the day, a software company," Ballmer told reporters at a conference of business executives.

Ken Bisconti, IBM's vice president for the Lotus Workplace division, said IBM is the second-largest software products company, not just a consulting organization.

"Windows and Office are attempting to prolong a pre-Internet, proprietary, one-size-fits-all computing model which we do not see the market adopting," Bisconti said.

Microsoft's ad campaign, with the slogan "people ready," kicked off Thursday with eight-page advertisements in The New York Times and The Wall Street Journal. TV ads will follow during the NCAA basketball tournament.

The campaign will promote a number of products the company will release throughout the year, including new operating system Windows Vista and new versions of its server software and Office business tools.

Microsoft will try to make the case that its software is familiar and easy to use _ a message that takes advantage of Microsoft's success so far in penetrating office computers as it promotes newer applications like collaboration tools and databases for customer-relationship management.

Raikes said the marketing push comes at a time when business customers are ready to spend to increase revenue rather than cut costs, which has been the theme in recent years.

"We do think this is a different economy than we saw two to three years ago," Raikes said.

He estimated that up to three-quarters of Microsoft's $40 billion of annual revenue comes from business customers. IBM had $91 billion in revenue last year, mainly from business customers.


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