October 16, 2007 / 4:20 PM / 12 years ago

Microsoft sees fast unified communications growth

SAN FRANCISCO (Reuters) - Microsoft Corp (MSFT.O) said on Tuesday it expects its unified communications product — the company’s effort to link e-mail, instant messaging and phone systems over Internet networks — to become one of the fastest-growing segments of its $16 billion business division.

A man walks by the logo of Microsoft in a shop of Brussels September 17, 2007. Microsoft Corp. said on Tuesday it expects its unified communications product -- the company's effort to link e-mail, instant messaging and phone systems over Internet networks -- to become one of the fastest growing segments of its $16 billion business division. REUTERS/Sebastien Pirlet

Revenue growth from unified communications will outpace “by a multiple” that of the overall Microsoft business division, which had revenue growth of 13 percent in fiscal 2007, Jeff Raikes, president of the business division said in an interview without offering specific figures.

Microsoft Chairman Bill Gates joined Raikes at an event to introduce its Office Communications Server 2007, which allows users to e-mail, instant message, video conference or make Web-based phone calls from within the company’s Office applications.

The multibillion dollar transition of office phone systems to Internet protocol networks has the world’s largest software maker headed for a showdown with network equipment leader Cisco Systems Inc. (CSCO.O)

Microsoft sees software at the center of that transition, while Cisco wants to cash in on years of experience making telecommunications equipment such as switches and routers.

“Customers don’t care about the fact that you are changing the plumbing,” said Raikes. “You change the plumbing only for what you bring in terms of new value and that comes with software and that’s where our strength is.”

Cisco has said it already has years of experience in Voice over Internet Protocols (VoIP) and a roster full of customers compared to a newcomer like Microsoft.

In a demonstration, Microsoft showed how a worker can move from an instant message conversation to a phone call with one click and then drag and drop other people into the phone call box to start a conference call. The conference call can become a video conference with another click.

Workers looking at a colleague’s name on an e-mail or word document can find out if the person is available and then choose whether to make contact though a call to desk or mobile phone, or with a message via e-mail, text or instant message.

“Now is the time that communications will be revolutionized,” Gates said.

Microsoft said its server software and the Office Communicator software application that runs with it also will transform communications and the industry at large.

“This is just like the computer industry was before the personal computer came along,” said Gates, referring to how PCs dramatically changed a computer market dominated by large mainframe manufacturers.

Gates said the telecommunications industry was becoming more specialized much in the same way the computer industry had divided into companies focused on different types of parts and software.

The Microsoft co-founder said personal computers and mobile phones have taken huge technological strides in recent years, but that office telephones have not kept pace.

Microsoft said its offering is less expensive than those of rivals because it adds to and uses functions in existing products such as Exchange e-mail server and its Active Directory service used by IT administrators.

When asked how a possible slowdown in technology spending could affect demand for the new unified communications products, Raikes said he expects a slowdown not to have any effect because the product can save companies money in travel and phone implementation costs.

Raikes, who said Microsoft’s business division is doing well, declined to comment on the overall outlook for technology spending.

Shares of Microsoft rose 30 cents to $30.34 in late afternoon Nasdaq trade.

Editing by Brian Moss and Carol Bishopric

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