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April 27, 1998

MICROSOFT ANNOUNCES MAJOR INITIATIVES IN ISRAEL

By CBR Staff Writer

Senior Microsoft staff were in Israel last week to announce new initiatives and meet with key Israeli political and high-tech decision makers. Steve Ballmer (Executive VP Sales and Support) was accompanied by Jonathan Murray (GM of Enterprise Technical Marketing) as well as Microsoft Israel staff. The three main topics were: Microsoft’s investment in the new Orion Israel venture capital fund; a joint venture with the government and NetVision to promote Hebrew-language email, and software piracy in Israel. Later in the week a developers’ conference was devoted to informing Israeli companies about upcoming releases from Microsoft and future developments.

Venture Capital investment

Probably the most substantial project announced was Microsoft’s first foray into venture capital funding. The company will invest at least $7.5m in the newly founded Orion Israel Fund. The fund will begin full operations in June and intends to raise $100m to be primarily invested in Israeli companies. Eyal Levy will manage the fund together with Boaz Misholi and Gary Leibler. All three are heavily involved in Israeli high-tech ventures and Levy until recently was the CEO and President of Pelephone. The focus will be on companies developing internet technologies, products and services. Levy specifically mentioned IP based voice and video systems, virtual community services such as ICQ, security systems, development tools and broadband IP wireless and line-based systems. Microsoft will be a Founding Corporate Affiliate of the fund and has reserved the option of directly funding companies supported by Orion. Several other major companies are negotiating entrance into the fund. Microsoft will also offer marketing advice and other support services to companies who receive funding from Orion. Microsoft has been active in Israel for a number of years, starting when a group of Israeli employees in Redmond decided in 1989 to return to Israel, and proposed setting up a development center in Haifa. The center was the first and now the largest such center outside of the US with an anticipated expansion of 50% in 1998, according to General Manager Yaron Shamir. It has developed the company’s Proxy Server, Message Queue Server, Web IVR Server, Fax Server and Modem Sharing Server products. It serves as a model for other remote development centers and maintains close connections to Israeli universities, especially Haifa’s Technion. Microsoft has also invested in, set up partnerships with, and acquired a number of Israeli companies in the recent past including VDO, Panorama and BackWeb. Ballmer said that the company’s increased activity in Israel was due to the quantity of the quality adding that, Technical people in Israel are extremely well qualified, and many possess leadership qualities which are very difficult to find. However he did not believe that the company’s development work in Israel would make much of a dent in Microsoft’s current shortfall of approximately 1200 development staff due the relatively small size of the country.

Hebrew email deal

Together with Israeli Communication Minister Limor Livnat, Ballmer announced an initiative to rapidly widen the use of Hebrew email in Israel as a project marking the 50th Anniversary of the State. The deal struck by Microsoft, NetVision (Israel’s largest ISP) and Bezeq will apparently give all Israelis with a PC and a modem (running Windows) 12 hours free use per month of a personal electronic mail box.

Software piracy

The US trade commission is considering classifying Israel as a country that does little about software piracy and this is the background to recent comments from senior figures at Microsoft on the subject. The company has brought up the issue a number of times recently as a means of encouraging the authorities to crack down on it. In a press conference during his visit, Ballmer estimated that Microsoft was losing more than $50m in sales revenue in Israel while Arye Scope (GM of Microsoft Israel) noted that it was ridiculous that Microsoft in Denmark was selling twice as much software as Microsoft Israel. Under pressure, the government has been working on legislation to tighten up enforcement. In light of these efforts Ballmer said, It has been my impression that the government is honestly fighting piracy.

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Microsoft Vision Day developers conference

At the Vision Day Developers conference, Ballmer and Murray in separate presentations outlined future developments for the company and technology as a whole. A large emphasis was placed on NT 5.0 to be released at the beginning of 1999 with a Beta 2 due in July of this year. Murray talked at length about the Active Directory feature which would give a single point of administration and location to all networked resources and would be massively scaleable. The OS will incorporate public-key based security. Intellimirror would allow users to be, sometimes connected – sometimes not, storing user profiles and making connection transparent to the user. Murray claimed that a new machine plugged into a network could be automatically configured in full according to a user’s personal profile. He also said VPN enabling technology would be incorporated into the OS as would QoS (Quality of Service) End to End service guarantees. The latter are key for enabling usable video conferencing and other wide-bandwidth applications. QoS will be managed from the Active Directory thus helping to lower costs. Furthermore there will be a single interface for all storage, the user will no longer need to understand where or how information is stored. Murray also predicted that NT will grow into a consumer market and not just a server technology, the integration of client-side and server side technologies will reduce development costs by sharing large sections of code although he noted that the user interfaces will probably need to be separate. In the future he predicted that the telephony market will move away from proprietary technologies towards NT based systems which will be able to serve voice, video and data transfer needs. Microsoft will continue to support 32 bit systems after the introduction of Merced / Alpha 64 bit technologies and there will be a high portability of code onto 64 bit systems to help independent developers. Secure IP functions will be deployed whether communication is via a LAN or the external internet. In response to a question from the floor, Ballmer said that Microsoft will continue to heavily expand it’s proxy server. Such an expansion is likely to bring the company into competition with CheckPoint, the Israeli developer of FireWall-1, because the proxy separates the organization from external connections.

Consumer market

On the mass market front, Murray outlined plans for Windows ’98 and beyond. Integration of televisions and PCs were a major focus of his presentation as were moves to create easy networking solutions for home environments. To a somewhat skeptical audience of Israelis he drew out a vision of wireless (no-new-wires) easy to install (‘plug and play’) networking for multiple appliances in the home. RF, Power-line or telephone cable networks would be adequate for – home high-bandwidth systems in 3-5 years time he claimed. The home will become a sub-net served by a small server box linked to ISPs via high-speed modems. The skepticism probably resulted from the fact that unlike the situation increasingly prevalent in the US, the vast majority of Israeli households do not have more than one PC.

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