Microsoft Gets Army Contract

Microsoft Corp. won the single largest software contract to date from the
U.S. Army and will now provide software for nearly 500,000 personal
computers, according to published reports.

The six-year deal is reportedly worth an estimated $471 million. The Army
will buy the software from a Microsoft reseller, Softmart, based in
Downingtown, Pa.

The deal is evidence that even governments agencies and municipalities
are embracing the trend to standardize software technologies in order to
save money. The Army estimates it will save from $50 million to $100 million
compared with what it likely would have spent over the same six-year period,
according to a CNET report.

Meanwhile, analysts reacted bullishly to the news. Charles Di Bona,
software analyst at Sanford C. Bernstein, said in a research report that the
deal would most likely add $16.6 million per quarter of “high-margin (in the
range of 89 percent) revenues and add $0.001 per quarter to EPS,”
Reuters reported.

Officials from Microsoft and Softmart weren’t available for comment.

For Microsoft, the Army contract also represents a chance for it to
redeem itself. Despite its efforts to step up software sales to governments,
Microsoft’s own track record on security has been its greatest detractor,
especially in the wake of a renewed focus on terrorism and national
security.

On the heels of the U.S. House’s passage of a $30 billion budget for the
Department of Homeland Security, Microsoft Chairman Bill Gates met with
lawmakers as well as Bush administration officials including Vice President
Dick Cheney and Homeland Security Secretary Tom Ridge to discuss technology
and security, according to the Associated Press.

Gates described efforts to improve the security and reliability of
Microsoft software under its Trustworthy Computing campaign.

Gates made his comments at a conference sponsored by the Information
Technology Industry Council and the Center for Strategic and International
Studies, a Washington, D.C.-based think tank.

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