Microsoft wins biggest order in its history

Wednesday, June 25, 2003

Microsoft wins biggest order in its history
$470 million Army software deal covers 494,000 computers

SEATTLE POST-INTELLIGENCER STAFF AND NEWS SERVICES

Microsoft Corp. has won a six-year contract worth more than $470 million to provide software to the U.S. Army, the biggest order ever for the company's programs.

The deal covers 494,000 desktop computers, Microsoft spokesman Keith Hodson said. The Army will buy the software from a Microsoft reseller, Softmart, based in Downingtown, Pa. Hodson declined to say how the companies will divide the revenue.

The Defense Department has questioned the security of Microsoft and rival products in the wake of the Sept. 11 terrorist attacks.

One of the department's server computers was attacked in March using a flaw in Microsoft's Windows program. The contract demonstrates that the Army has decided that Microsoft's security is sufficient, said Rob Enderle, an analyst at Forrester Research Inc.

"It looks like whatever that problem was, it wasn't great enough to stop the sale, or it was fixed," Enderle said. "The Army wouldn't buy this stuff if it still had exposures they couldn't mitigate."

In fact, Army leaders "stated openly that they put a lot of faith in the security of our platform," Hodson said, citing Microsoft's overall security model, its Trustworthy Computing initiative, and the enhanced security features in its Windows operating systems.

The deal includes a wide range of software for new and existing computers within the Army, Hodson said. The applications to be used by the Army include desktop programs such as Windows and Microsoft Office applications, in addition to server software such as SQL Server and Microsoft Exchange Server.

Microsoft, the world's biggest software maker, is trying to boost sales to federal, state and local governments, which are spending to combat terrorism and improve security.

Chairman Bill Gates is scheduled to speak in Washington, D.C., today at a conference on the role of information technology in homeland security.

The company has lost some government contracts outside the United States to the free Linux operating system, and it has been working to assure the U.S. government that its programs are secure.

The Army also will buy licenses for 10,000 copies of Windows for servers that run computer networks, and software for 5,000 Microsoft Exchange e-mail servers, Hodson said.

Calls to the Army command administering the contract and to Softmart weren't returned.

Shares of Microsoft fell 8 cents to $25.70 in Nasdaq Stock Market trading. They have added 4.4 percent this month.

P-I reporter Todd Bishop contributed to this report by Bloomberg News.

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