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Microsoft Gets NASty: Page 2 of 3

Charles Stevens, corporate VP of product development in Microsoft's enterprise storage division, says the company will absolutely compete with NetApp -- but it will work with NetApp, too, to ensure Windows interoperates with Network Appliance devices. As testament to this co-opetition, he points to NetApp's recent licensing of Microsoft's Windows protocols. [Ed. note: Actually, the U.S. government forced Microsoft to do this, but perhaps we're splitting hairs.] (See NetApp Scores Windows Protocols.)

"Our biggest competitor in the NAS space is Network Appliance... If a customer asks whether they are our partner, we say, 'No,' " Stevens says. "We are trying to offer a different proposition." However, he says, for customers that have installed Network Appliance, Windows must interoperate.

U.S. Bancorp Piper Jaffray analyst Ashok Kumar warns that NetApp will find it increasingly difficult to sell into Windows environments as vendors like Dell integrate Windows 2003 Server technology into their NAS products. Kumar, in a note to investors today, points to the Shadow Copy of Shared Folders feature in the new Microsoft OS as a "serious threat to NetApp's crown jewels."

Other analysts say it's no surprise to anyone, least of all Network Appliance, that Microsoft has NetApp filers in its gun sights. But to imply that NetApp is about to get its head handed to it by Microsoft is a little extreme.

"To suggest that a copy function is NetApp's single crown jewel -- now threatened by Microsoft's lust to commoditize -- is ludicrous," says John Webster, founder of Data Mobility Group. "While the folks at NetApp don't admit publicly that Microsoft is hot on their heels with this strategy, they are absolutely aware of a hostile presence and have been so for a while." (See NetApp on Red Alert, NetApp: 'Thanks, Microsoft!', and Microsoft vs. NAS: The Sequel.)