Powering Up

By LESLIE HELM

Aug. 7, 1997 12 AM PT

TIMES STAFF WRITER

SEATTLE —

Microsoft Corp.’s stunning $150-million investment in Apple Computer Inc. on Wednesday not only helps prop up its beleaguered rival, but also provides the software giant significant benefits of its own.

For Redmond, Wash.-based Microsoft, the deal with the maker of Macintosh computers is the latest in a slew of investments in everything from cable TV to Internet companies that expands its influence and unique power in the world of computers.

“This gives [Microsoft] the ability to have some influence on Apple,” said Robin Young, editor of Windows Watcher, a Redmond-based industry newsletter.

With this deal, longtime foes Apple and Microsoft could become important allies against Netscape and Sun Microsystems in the critical area of developing software for the Internet.

“The bonds that bind us are greater than our differences,” said Dennis Tevlin, director of marketing for Microsoft’s desktop division.

Cupertino, Calif.-based Apple said it has agreed to make Microsoft’s Internet Explorer the default browser of its Macintosh operating system. Mac users would have to reconfigure their computers to use Netscape’s more popular Navigator browser.

“Apple sells millions of machines a year,” Tevlin said. “This is clearly a big opportunity.”

The two companies also agreed to collaborate on the technology they will put into their operating systems as “virtual machines” that will enable personal computers to run “applets,” or mini-applications, written for the Java language developed by Sun.

“For Microsoft to win, it’s not exactly the case that Apple must lose,” said Greg Maffei, Microsoft’s chief financial officer and a Harvard Business School graduate who is considered a key architect of Microsoft’s decision to more aggressively invest the company’s $9-billion cash reserve.

Microsoft has been in an ongoing struggle with Sun over Java standards and stands to gain an important ally in this battle if Apple takes a similar approach to implementation of Java.

“We want the best virtual machine for our platforms and not have that dictated by Javasoft but respond to customers--Apple’s and Microsoft’s,” Maffei said.

Although Microsoft has come under antitrust scrutiny over some of its investments, the Apple deal--which includes broad cross-licensing agreements--is seen as bolstering its arguments that it is not a monopolist. Apple’s share of the PC market has shrunk to 5.3%, but its existence allows Microsoft to continue arguing that consumers have the option of an alternative operating system.

But the cross-licensing agreement, which allows each company to make use of the other’s patents, also removes an important potential obstacle to the two companies collaborating on a range of technology issues.

“Historically, Apple has played its cards pretty closely,” said Jeff Tarter, editor of SoftLetter, a Watertown, Mass.-based newsletter. “This gives them an inside look at things.”

Microsoft is the second-largest marketer of software for the Macintosh platform, according to Dataquest in San Jose. It earns hundreds of millions of dollars a year selling its Office software suite to a broad base of 8 million users. In spite of Microsoft’s importance to Apple, Apple has not always been forthcoming with Microsoft about its development plans.

In January, Microsoft created a special division to develop software for the Macintosh as a show of support for the faltering PC company.

Microsoft has agreed to develop its Office software for the Macintosh platform for at least five years. Analysts say that commitment is important at a time when many Mac users fret about staying with an operating system that has declining support from applications developers.

The deal also provides some tactical advantages for Microsoft. Larry Ellison, chief executive of Oracle Systems Corp., has been trying to steer Apple toward becoming a manufacturer of network computers as a way of getting around Microsoft’s dominance in that arena. Network computers would get their software from central servers and would not require the Microsoft operating system.

“If Apple made NC computers, that could be a threat to Microsoft,” Tarter said. With Wednesday’s agreement, he added, that is unlikely to happen.

Among the issues left unresolved in the agreement are how Apple will deploy Rhapsody, its next-generation operating system, and what impact that could have on Microsoft.

Rhapsody, which will be based on the Next software acquired from Steve Jobs, is designed as an operating system for networking applications. The software, if successful, could emerge as a competitor to Windows NT, Microsoft’s advanced operating system for corporate applications.

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Branching Out

Microsoft Chairman Bill Gates has been busy diversifying his software empire with investments in TV networks, entertainment firms and Internet start-ups.

- Apple Computer

(maker of personal computers)

$150-million investment

- Progressive Networks

(provider of technology to send audio-video over the Web)

10% nonvoting stake

- Comcast

(nation’s 4th-largest cable firm)

$1-billion investment

- WebTV Networks

(provider of technology to browse the Internet on TV)

$425 million purchase price