Here is a writeup that gives a little insight into the successful licensing tactics of
Microsoft and how it beat out such giants as IBM and Apple at the time...
No matter whether technology stocks recover strongly or go still
lower, we still wish we had invested in Microsoft, Dell and other
wonders of the Personal Computer revolution back in the 1980s, or
even the early 1990s. It is normal to use hindsight to kick ourselves
for what "could have been." Looking back makes it all seem so
simple, but if we really look back and remember the details, it
wasn't so simple after all. In the mid-1980s, companies making
personal computers popped up like the dot-coms did in 1998 and
1999. IBM's competitors were building machines fast and
furiously, and prices came down rapidly. Who would win? The
winner turned out not to be a computer maker at all. The winner
was Microsoft.
When IBM decided to build personal computers, Big Blue turned to
Microsoft for the operating system. The deal gave Microsoft some
money but no royalties. If IBM had been smarter and managed to
keep its lock on personal computers, Microsoft would be a shadow
of what it is today. The deal between Microsoft and IBM did not
give IBM an exclusive. Microsoft was free to license the MS DOS
operating system to others. They did just that, on a royalty basis,
and made billions. If IBM had insisted on an exclusive and given
Microsoft royalties, IBM probably would have been king of the
personal computer market for a long time. It was corporate hubris
that led to the decision to use MS DOS and not get an exclusive
deal.
Believe it or not, the IBM-Microsoft story doesn't end there. IBM
wanted to create its own proprietary operating system. It was
called OS-2. IBM asked Microsoft to help create the system.
Microsoft agreed but made it clear that they were working on their
own new system called "Windows." In 1990, IBM and OS-2 lost to
Windows. Today most have forgotten OS-2, but it once was
believed to be a power in the PC world. Instead, we all know about Windows and
wish we had
bought some Microsoft back in the 1980s, or at least before 1990.
There was another personal computer maker at that time, Apple. They also made
a huge mistake.
Apple had the superior operating system, but instead of licensing that system to
all comers, Apple
decided to take a page out of the IBM business manual and keep their system
proprietary. Apple
attacked IBM's machines in popular TV ads. At the time, when IBM was
vulnerable and about to
lose to "IBM compatible" clones, Apple was fighting the wrong war.
I am telling you this history to remind you that business is always rough and
tough, and the winners
aren't always clear at the time. I am sure Bill Gates would readily admit that he
was lucky back in
the 1980s. IBM's mistake became the foundation for his fortune. The same is
true today. Businesses
need a little luck in a fast-changing highly competitive world.
investorplace.com
General Magic is now focusing on Licensing... Will history repeat itself?
Jim |
