Paul and ALL, Article...Microsoft, Intel not wed outside of PC box
March 11, 1999
SAN FRANCISCO, Reuters [WS] : Microsoft Corp. (MSFT.O) and Intel Corp. (INTC.O) may go together in most of the world's personal computers, but outside the PC box the computer industry giants are moving apart.
Together, the companies created the ''Wintel'' pairing of Microsoft's Windows operating software and Intel chips that hold a more-than-80 percent share of the PC market.
But as the high-tech world begins to focus on the Internet and not the PC box, the marriage of convenience between the two leading PC powers looks to be in a state of drift.
This week's settlement by Intel of U.S. Federal Trade Commission charges one day before a major antitrust trial was to start was just the latest example of how the two are diverging.
''Everyone thinks Microsoft and Intel are married, but we've just seen that they aren't. They don't always behave the same way. They're very different companies -- their temperaments, their way of doing business,'' said one executive at a leading Silicon Valley company.
Their fates remain intertwined for a time, though, as both face continuing federal charges of using their respective monopoly positions to unfair advantage.
In Intel's case, the chip giant won a settlement of narrowly based charges regarding licensing agreements, but the FTC said there would be an ''expedited'' look at pending issues with the government. Microsoft is still defending itself against state and federal charges.
''A year ago we were talking about narrow cases with both of them. Now we are talking about the possible breakup of Microsoft -- while Intel has settled,'' said Kevin Arquit, a partner at law firm of Rogers & Wells in New York and a former director of the FTC's competition bureau. ''You have to wonder how it got to this point.''
Some blame corporate cultures, with Bill Gates and his Redmond, Wash.-based company highly focused on sales and marketing targets, while Intel -- steeped in Silicon Valley's engineering tradition -- is perhaps driven more by its scientific and manufacturing priorities.
Arquit noted that Microsoft's own sales materials, corporate e-mails and memos have been used against it in the trial in Washington to paint a picture of a company bent on using whatever it takes to win and hold its market.
''That attitude was pervasive at Microsoft. They didn't use much care when they created e-mails and documents and they created a richer treasure trove for the government than Intel,'' he said. Intel, by comparison, plays up its wide programme to adhere to antitrust compliance rules.
Although their corporate styles may differ markedly, both Intel and Microsoft have reputations as hyper-aggressive competitors that push their advantages as far as they can. That's how they became virtually unchallenged players in the PC market -- and raised the wrath of regulators.
Style alone doesn't explain what has happened, legal analysts and industry experts agree. A deeper and more compelling reason for their diverging paths is that the landscape of the high-tech world has shifted dramatically as the Internet has fundamentally changed the focus of computing.
In declaring its priorities at a recent development conference for its flagship Pentium III chip, Intel declared that the Internet was now the main driver of the industry.
''The Internet is as important to Intel's future as silicon was in our past,'' Intel said. At the gathering, Intel estimated electronic commerce would be worth $1 trillion by 2002.
In a sign that it was not just crafting its words to make Internet-oriented investors happy, Intel launched its biggest ever acquisition, the $2 billion buyout of Level One Communications Inc. (LEVL.O) -- a networking company, and, significantly, a company not directly involved in PCs.
Intel appears to be gearing up to handle the huge demand for network equipment -- so-called ''systems on a chip'' that embed software operations into tiny pre-programmed circuits.
Microsoft, meanwhile, is busy reminding the world that it still owns the ''platforms'' on which computing takes place. But the ''computer as network'' message is resonating more clearly.
''For the first time since the dawn of the PC, you can build an application and deploy it with zero Microsoft involvement. The dominance is broken,'' said Mark Barrenechea, a senior vice president of Oracle Corp. (ORCL.O), a company that has long promoted the importance of networking.
Microsoft is hardly on the ropes. Its installed base is in the hundreds of millions of users, and it remains the single most dominant force in the industry.
But some are seeing parallels to International Business Machines Corp. (IBM.N), which, after a long legal battle over antitrust issues, finally had its case dismissed. It no longer dominated the market, making the case moot, but the delaying strategy may have kept the company intact.
Microsoft could buy two to three years of time, on appeals, by fighting the government's charges, legal experts say, and the shifting landscape already shows it is in a less dominant position than a year ago.
''It's how close you get to the core of the company with a legal action that tells how hostile the reaction is,'' said William Kovacic, of George Mason. ''You have to wonder whether Intel would have acted with the same relative placidity if it faced a comparable threat to its business strategy as Microsoft.'' |
