Andersen Consulting, Microsoft Form New Firm

In a deal worth about $1 billion, Andersen Consulting and Microsoft Corp. Monday formed a new firm to offer enterprise platform services on Windows 2000.

Microsoft (MSFT) will contribute $385 million cash as well as solutions development support and other intellectual capital to support Avanade, the new company. Andersen Consulting will provide intellectual capital, training, resources and other services.

With headquarters planned for the Seattle area, Avanade, which will be co-owned by Andersen Consulting and Microsoft, will develop reusable e-commerce applications, Windows DNA development, application integration and enterprise and Web infrastructures.

Within the first 24 months, Avanade will hire more than 3,000 technologists with expertise in Microsoft's products. Mitchell C. Hill, an Andersen Consulting partner with more than 20 years' experience with the firm, will be Avanade's chief executive officer. The board of directors will comprise executives from both organizations, including Jack Wilson, managing general partner of AC Ventures, John Connors, chief financial officer at Microsoft, and Paul Maritz, group vice president, developer group at Microsoft.

In addition to its Seattle location, Avanade plans to open offices in San Francisco, Dallas, New York, Paris, London, Sydney, Sao Paulo and Singapore in the next 18 months. Plans also call for taking Avanade public at some future date.

"The Internet creates unparalleled potential for customer and supplier intimacy through new business models," Hill said. "Avanade will help customers realize this potential by providing large-scale, highly reliable e-commerce applications based on the Microsoft Windows 2000 platform. Our skills will be coupled with the business and technical expertise of Andersen Consulting and Microsoft to increase speed-to-value for our clients."

Microsoft and Andersen also expanded their previous alliance to allow about 25,000 Andersen Consulting professionals to receive enhanced training on the Microsoft enterprise platform, including Windows 2000, Microsoft SQL Server, Exchange Server, e-commerce technologies, Windows DNA 2000 and Visual Studio development system-based tools.