Microsoft scores $617m deal

REUTERS

Customers shop at the new Microsoft Store in Washington, November 18, 2010.

Microsoft has won a $617 million (R5.3 billion) contract with the US Defense Department to provide its latest software, including the Windows 8 operating system.

The three-year agreement announced on Friday by the largest software maker covers 1.5 million of the Pentagon’s computers. The deal gives the Army, Air Force and Defense Information Systems Agency access to the latest versions of Windows 8 and programs such as Microsoft Office 2013.

“The large majority of the US Department of Defense just made the decision to go with Microsoft,” Tim Solms, the general manager for Pentagon business at Microsoft, said. “That’s very positive from a business perspective.”

The military said last month that it had received seven bids for the contract. The competitors were not identified. The award went to a division of Insight Enterprises, a reseller of Microsoft products.

In the four weeks after Microsoft released Windows 8 on October 26,

US retail sales of devices running Windows fell 21 percent from a year earlier, researcher NPD Group said.

The decrease has been fuelled by a 24 percent drop in sales of notebook computers as customers opt for Apple’s iPad or tablets powered by Google’s Android software.

The Pentagon award was “a validation point for Windows 8 after the media has been fairly negative on it as an operating system”, Cross Research analyst Richard Williams said.

“The fact that large organisations are adopting it adds credence to the idea that this software is an industry standard.”

Brad Reback, an analyst at Stifel Nicolaus, said the deal might buoy Microsoft’s business selling applications that compete with internet-based documents offered by Google.

The Pentagon contract might also allay corporate clients’ concerns about the security of some of the services covered by the deal, he said.

The Defense Department said it expected to save “tens of millions” of dollars through lower software licence costs under the agreement.

The Pentagon takes up about two-thirds of all direct federal contract spending by the US government.

– Nick Taborek in Washington for Bloomberg