This story appeared on Network World Fusion at www.nwfusion.com/nw200/200mixings.html

Sector by sector: Software Even with the promise of dramatic change in telecom and Wall Street-savvy leaders like Ebbers and AT&T CEO C. Michael Armstrong leading the charge, the street still puts a higher value on companies like Microsoft. If you add up the revenue of AT&T, MCI WorldCom, Sprint and Qwest, you come up with a whopping $102 billion, equivalent to the GDP of Finland. Their combined market capitalization is a respectable $349 billion. But that's $39 billion less than the market capilization - $388 billion - of Microsoft, a company with $14.5 billion in revenue last year. Apparently, the trick to winning the stock game is to have a great position and keep growing like gangbusters. Microsoft revenue jumped 28% last year, and profits leaped 30% to $4.5 billion. In fact, it was a good year for many of the software players: Oracle's revenue was up 26%, Computer Associates' was up 17%, Platinum Technology's (acquired in March 1999 by CA) was up 55%, and Sterling Software's was up 26%. Even Novell bounced back, pushing revenue up 8% to just more than $1 billion and posting $102 million in profits. Clearly, CEO Eric Schmidt's recipe for recovery is working. Life on the systems side of the aisle was a little less sure last year. Compaq, Dell, Gateway, Hewlett-Packard and Sun squeezed double-digit growth out of the market, while companies such as Data General, NCR, Sequent and Silicon Graphics saw revenue decline. The two biggest computer makers, IBM and HP, grew sales 4% and 10%, respectively, but HP profits declined 6% for the year. In reaction to that, CEO Lewis Platt took the radical step of splitting the company in two, separating the computer and network operations from the testing and instrumentation business, which will be renamed. With Compaq having blended into a soup-to-nuts systems house by acquiring Tandem and Digital, it is hard to compare how it fared last year against pure PC rivals Dell and Gateway. As noted, Compaq's revenue jumped 27% to $31.2 billion last year. Although a distant second with revenue of $12.3 billion, Dell is coming on strong: Sales were up 59% last year. And the fastest growing segment for the company is sales of servers and other equipment into enterprises, traditionally Compaq's stronghold. It will be interesting to see if Dell can keep up, especially as Compaq integrates Digital's massive service organization and pitches a complete managed desktop story. Compaq's ability to pull that off is now up in the air, of course, with the recent dismissal of CEO Eckhard Pfieffer. On the network front, Compaq last year seemed to step back from earlier efforts to become a full-blown network player when it redeployed network products among various product groups. Server adapters were shifted into Compaq's server group, and modems and workstation adapters went into the PC group. Compaq's hubs, switches and routers will remain in the Network and Access Communications Division. For the time being, anyway, it is still safe to call Compaq something of a pure computer player. Who knows how corporate strategy will shift once the company brings in Pfeiffer's replacement. Change, of course, begets more change. The industry blending that has happened so far will spur more mergers and acquisitions as competitors react. It is one thing, after all, for a billion-dollar company to compete with a like-size billion-dollar company. But when that competitor becomes a division of a $15 billion company, it is quite another. Not everyone will make it. The packet feast won't be served up until the flotsam is skimmed off and discarded. All contents of Network World Fusion are copyright 1995-1999 by Network World, Inc., Framingham, MA, 01701.