Software’s Big Fish May Catch Piece of Net
Microsoft Corp.’s purchase of a stake in Apple Computer isn’t a big deal in money terms, but the startling transaction and investors’ enthusiasm for it stand as a poetic symbol of Microsoft’s growing hegemony all across the computer world.
Microsoft’s Windows long ago had won the competition with Apple’s Macintosh to supply the operating system--the basic software instructions--for personal computers. Buying a piece of Apple now will bolster Microsoft’s efforts in the infant and wide-open field of the Internet, and help it beat back Internet darling Netscape Communications.
And the Apple deal could also indirectly help Bill Gates and his troops win a ferocious war for the loyalty of the businesses and engineers that use computers far more powerful than the typical PC.
For the Microsoft of today is much more than a vendor of personal computer software. It’s an influential presence in nearly every important part of the burgeoning computer world, and aims to occupy a similar position in key parts of the communications business. Increasingly, it’s willing to spend its $9-billion cash hoard to buy companies and technologies that can advance those goals.
To be sure, Microsoft’s continued success as computing combines with telecommunications and evolves in the Internet age may not be certain. But the company and its chairman, William H. Gates III, are favorites at this point.
Bill Gates, the 42-year-old founder and owner of almost 24% of his company’s stock--a stake worth more than $40 billion--is a big reason behind Microsoft’s success. “Big companies make strategic decisions by compromise, the sandpaper makes everything smooth,” says a former top executive of a major company.
“But Bill Gates makes his own decisions, tells people, ‘We have to do this.’ And he’s betting his own money,” the executive says.
Gates is not so much an innovator as a ferocious adapter and competitor. He sees the way the wind blows and marshals resources to grind out victory.
For example, Steve Jobs, the founder of Apple, led the commercialization of an easy-to-use operating system--one that used graphical symbols and a pointing device called a mouse--first in a system called Lisa, and then successfully in the Macintosh.
But Microsoft adapted the “graphical interface” technology to create Windows, a fact it tacitly admitted Wednesday when it settled a long-running patent infringement suit with Apple. Through shrewd marketing and understanding of the needs of emerging PC manufacturers, it eventually relegated Apple to a mere market niche.
With its Windows NT operating system, Microsoft hopes to do something similar to the operating systems that now guide workstations made by Sun Microsystems and Hewlett-Packard. The way Gates developed NT illustrates the Microsoft method and indicates the computer industry’s direction in the years ahead.
Complex operating systems like NT allow users to perform multiple tasks simultaneously without overloading, or “crashing,” the computer. Such systems are used by scientists and engineers and increasingly by financial firms, which need fast, flexible and highly reliable computers.
IBM, Sun and Novell Inc. supply software for such work, most of it based on the Unix operating system, which was developed initially by AT&T;’s Bell Labs.
Gates worked with IBM in the 1980s to develop an answer to Unix, but the entrepreneur and the big company had a parting of the ways. IBM went on to develop its OS2 system. But Gates hired some of the world’s leading programmers and put them to work devising NT, which has proven successful since its introduction in 1993.
Gates is criticized by high tech competitors as a mere adapter of others’ innovations. But he sees more clearly than most computer wizards and Microsoft does far more than simply adapt. Right now, Gates understands that the personal computer is taking on work once done by mainframe and powerful workstation computers. That’s why Microsft will spend almost $2 billion this year on research and development for NT and related systems. Along with Intel, which makes the computer’s inner circuitry, Microsoft advances the computer’s capabilities.
Yet Microsoft can be nearsighted, too. It didn’t see the Internet developing and those who did see that new world as a way to defeat Gates and Microsoft. Lawrence Ellison, chairman of Oracle Corp., who became an Apple director on Wednesday, maintains that the Internet will soon make personal computers, and Microsoft software, unnecessary.
In Ellison’s vision, applications software will be available on the Internet and computer users will get access to them with a simple, $500 network access machine.
But Gates’ view is that access to those Internet applications--when such systems become practicable--will still depend on a Windows operating system. Wednesday’s Apple deal will help him ensure Microsoft’s place on the Internet because Apple will provide a new outlet for Microsoft’s Web browser.
And Apple’s software skills will help Microsoft develop an Internet computer language to compete with Sun’s Java product.
As before, Microsoft won’t be the innovator, but it could be the prevailing competitor.
For the future, which will see further combining of computing and telecommunications, Gates is making investments in Comcast, a cable television company, and WebTV.
Questions arise. Microsoft, a 22-year-old company, has grown extremely fast in recent years, more than doubling sales and trebling profits since 1994. It is now a sizable company with 20,561 employees and $11.4 billion in sales.
It also has virtual monopolies in many of its markets.
Can it keep those employees motivated and avoid becoming a bureaucratic big company? And how long can it avoid antitrust action from the federal government? So far, a sharply rising stock has handled the motivation and adroit negotiation has dealt with antitrust inquiries. But the questions will continue as long as Microsoft, like IBM and even Apple before it weakened, achieves a growing leadership of the world computer industry.
