Foundation Server Is Foundation for What?

He'll shoot his mouth off about this new product or that forthcoming widget, long before there's any official announcement. He was chock-full of heart-stopping pre-announcements today.

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The big one is big because of what it could represent to Microsoft: Windows Server Foundation Edition. Steve told Wall Street analysts about the software earlier today, Feb. 24. Twice a year, Microsoft gives Wall Street the big bear hug—during a July gathering at the Redmond campus and during winter in New York. The winter meeting lasted for about 75 minutes today. Steve told analysts:

From a revenue perspective, we are introducing a new low-cost, low-price, low-functionality Windows Server SKU. If you take a look at it, as server prices, hardware prices have come down, we don't exactly have a netbook phenomenon. But if somebody can buy a $500 server, they're a little loth to spend $500 for the server operating system that goes with it. So we have something that's akin to [a] netbook at the server level, and we'll be introducing our Foundation Edition over the next month or two.

Context explains Microsoft's objectives for Foundation Edition—or so I interpret. Before and after introducing Foundation Edition, Steve spoke about the Web serving and hosting market:

Linux still dominates Web and scientific computing workloads ... So for us, really investing to get after, in a technology sense and in a business sense, Web, Web hosting, Web applications and scientific applications has been a major point of investment ... The hosting space, we have low share. We have some things we think we need to adjust in our pricing that will be important, but it probably is to the revenue or the share upside, but it's not—it's a price decrease, if you will.

So I must assume that this "low-functionality" version of Windows Server will be for Web serving, but perhaps more. Windows Server comes with about a dozen-and-a-half preconfigured roles, with Web serving being just one. There are still a few scenarios in which servers are deployed for specific tasks, like Web serving or file and print, that require limited functionality and for which Linux would be a compelling lower-cost alternative to Windows Server. Server roles are good, but Microsoft could still notch down the functionality and price for single-function servers.

This is going to be important for Microsoft during these economic hard times. About two-thirds of its Server and Tools division revenue comes through annuity licensing. The other third comes from server hardware sales, which analysts say are slowing. Steve should be concerned about low-cost server sales picking up, but possibly with IT organizations picking up Linux instead.

I chuckled at the Foundation Edition nomenclature, wondering why Microsoft recycles these product names. Anybody recall Microsoft TV Foundation Edition? Microsoft now calls its TV platform Mediaroom.

Windows Server Foundation Edition isn't enough to give all those PR folks heart failure. There was more product disclosure. Steve told financial analysts:

Windows, Windows Mobile, and those two will become I'd say closer in many ways. There's still a real distinction between what's a phone and what's a PC. And yet the amount of technology that can be shared across that border continues to go up ... I actually showed you the union of Windows and Windows Mobile, compared to Apple, compared to RIM, because I think that's the right way to think about it, that's the way we think about it. There will be really shared technology across Windows and Windows Mobile.

Steve didn't exactly say there will be one operating system for PCs and handsets, but did he have to? "We've got Windows Mobile 7 coming next year," he said, reaffirming release time frame. By the way, I presume next year is 2010, but Steve was speaking to financial analysts and Microsoft's new fiscal year starts July 1. That could put release sooner rather than later.

The other bit of news definitely could send some PR folks into cardiac arrest: "The next big innovation milestone is Office 14, our next Office release, which will not be this year," Steve said.

There are plenty of implications in that news, for example, for businesses that bought Office 2007 annuity contracts in 2006 expecting that Microsoft would release the new version within three years. Many of those contracts will expire this year, putting some businesses in a buying quandary and quite possibly leading some IT organizations to not renew their contracts.

Something else: Steve didn't say Office 14 would ship next year, just not this year. No one should bet on 2010, yet.

[Please send your tips or rumors to watchtips at live.com.]