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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Selectric II who wrote (43977)	11/6/2001 1:32:34 PM
From: stockman_scott	Respond to of 65232

Bill Bites Back by: Elizabeth Corcoran, Forbes Magazine, 11.12.01 <<Competing against Microsoft will only get harder. Rivaling the fanfare of the launch of Microsoft's latest operating system, Windows XP, has been the muttering chorus of critics who charge Microsoft is once again planting hooks to lock in customers. To wit: XP offers a universal passport that lets computer users bypass logging on to hundreds of Web sites while Microsoft keeps track of the passwords. Some of Microsoft's "open" standards for exchanging business data work best with other Microsoft wares, making switching to non-Microsoft products difficult. The accusations and Microsoft's defense are densely technical. But even under rosy conditions, competing against the cash-rich giant is as brutal as ever, as witnessed by the pain spreading to two technology pioneers--Palm and Real Networks--that once seemed invulnerable to Bill Gates' relentlessness. For years its Windows CE operating system was considered too clunky for handheld computers. But now it is gaining converts fast. In the first six months of this year Microsoft (nasdaq: MSFT - news - people) sold 1.1 million units of its Pocket PCs. Its share of the market has gone from 17% to 23% since 2000, mostly at the expense of longtime leader Palm, whose operating systems runs Palm and Handspring handhelds. Real Networks has 235 million users globally for its video and audio Web streaming software, giving it 51% of its market. Microsoft? An estimated 11%. But Microsoft's Media Player, which is free and tightly bound with XP, is gaining. "You have to be a Dolby snob to appreciate the nuances" between Real and Microsoft's technology, says Jack Ripsteen, a senior analyst with JP Morgan H&Q. As their technological leads shrink, can the young competitors survive? Not if they simply try to improve their existing products, suggests David B. Yoffie, a Harvard Business School professor and coauthor of Judo Strategy. "If they don't continually move, it's impossible to fend off competition from Microsoft," he says. One answer is to change direction. "We know the lead isn't forever," admits Donna Dubinsky, chief executive of Handspring. "I'm not so surprised they caught up, but now they are going to have to catch up again." While Microsoft is placing new emphasis on the corporate market, featuring integration with its office software, Handspring plans to roll out early next year a new line of consumer-focused devices called Treo, merging PDAs with cell phones. Real Networks is moving on, too, particularly as Microsoft gives away its streaming products in each copy of Windows. Microsoft's reluctance to let PC vendors pick and choose among streaming software is at the heart of its ongoing antitrust settlement talks with the feds. In August 2000 Real started a subscription program that aims to be a virtual cable channel, with music and video content such as outtakes from shows like Big Brother and Survivor. Real already claims 400,000 subscribers. Unlike Microsoft, Handspring and Real are in a grueling race against time. Handspring is expected to have $75 million in operating cash at the end of this year, and will likely burn in excess of $15 million a quarter, predicts Michael Kim, a senior analyst with Robertson Stephens. Real posted $2 million in profit ($45 million in revenue) in the third quarter. Ripsteen expects Real's 2001 earnings per share to be down 67% from last year. Building a better mousetrap no longer cuts it. Microsoft has its eye on keeping all the cheese for itself.>>