Behind the Big Shift on Windows
A Fear That Consumers May Go Somewhere Else
Tomorrow
By JOHN MARKOFF -- April 9, 1999
SAN FRANCISCO -- Microsoft's dramatic shift,
shelving strategic plans to blend its consumer and
business Windows operating systems into a single
product, reflects profound changes in the consumer
personal computer marketplace that have surprised both
the software giant and its partner, Intel Corp.
Almost overnight the PC market has moved from a
business defined by office products to one that is
increasingly delineated by both consumer prices and
features.
The shift became apparent on Wednesday at a Los Angeles
hardware developers' conference, when Steven Ballmer,
Microsoft's president, announced that the company
planned at least one more release of its aging Windows
operating system for desktop computers. A version,
based on Windows 98 that is scheduled to ship this
fall, will fix software flaws and add some new
consumer-oriented features.
Then the company, based in Redmond, Wash., plans
"sometime in 2000" to release a new consumer version of
Windows that will offer an as-yet-unannounced set of
easy-to-use consumer features, such as "instant on."
The strategy shift, industry
analysts said, may indicate
that Microsoft has found
itself at a crossroads as
significant as the one it
faced in late 1997 when it
abruptly shifted direction
and embraced the growing
Internet.
By redefining the computer
marketplace and
acknowledging the failure of its strategy to use a
single operating system for desktop machines, Microsoft
is leaving itself vulnerable to competition -- just as
Intel is being successfully attacked at the low end of
the chip market by companies like the Advanced Micro
Devices Corp. and the Cyrix Corp.oration.
Moreover, consumer electronics companies like the Sony
Corp. are investing in software and operating systems
and refining consumer products like its Playstation
line so they will increasingly serve as Internet
computers.
"This is an explosive problem," said Mark Anderson,
president of Technology Alliance Partners, a research
and consulting firm based in Friday Harbor, Wash. "The
consumer market will be the largest market in the world
for operating systems," and Microsoft does not have a
product.
Ballmer's strategy shift included an acknowledgment
that the company's "Simple PC" initiative, intended to
clean up the increasingly complex design of the PC, had
not gone far enough. That effort, in connection with
Intel has now been renamed "Easy PC," and Microsoft's
president said that it would remain a multiyear effort.
Moreover, Ballmer, by announcing Microsoft's intent to
add a new operating system between its Windows 98 and
Windows CE product lines, is in effect admitting that
the company's CE strategy has been a disappointment.
In its recent corporate reorganization, the Windows CE
consumer product line was divided in two, between
set-top box and hand-held and portable groups. The
shift raised questions about the future of Windows CE,
which has so far had only lukewarm support among
consumers.
At the same time, Anderson said, while Intel's failure
to respond quickly enough to the threat at the low end
was a billion dollar mistake, Microsoft may not pay
such a price if it responds promptly because there are
not yet viable competitors in the consumer space.
For example, the Linux operating system remains at
least a year away from being simple enough to install
and having a meaningful number of consumer
applications. The Be operating system, developed by Be
Inc., of Menlo Park, Calif., has yet to take off.
Although Apple Computer has gained some market share
and been revitalized since the return of its
co-founder, Steven Jobs, it still remains at a price
disadvantage to PCs in consumer markets.
Still, the competitive situation at the low end of the
PC market is likely to become more volatile because the
Windows 98 operating system is increasingly the wrong
product for consumers who are oriented toward
entertainment and away from Microsoft's Office
productivity suite.
"This is just the tip of the iceberg," said Jeffrey
Tarter, the editor of Softletter, an industry
newsletter based in Watertown, Mass. "The real problem
is the more you look at the innards of Windows the more
complicated and more flaky it gets. I don't see any way
that they can fix the mess they created without going
back to the beginning."
That appears to be exactly what Microsoft is doing in
announcing a new operating system that may appear in
the year 2000 or 2001. Ballmer said the new operating
system would include advances in digital media
handling, home networking, Internet technologies and
improvements in the ease of installation and use. That
product outline has evoked a skeptical response from
competitors.
"At a risk of being called sexist, ageist and French,"
said Jean Louis Gassee, chairman of Be, "if you put
multimedia, a leather skirt and lipstick on a
grandmother and take her to a night club, she's still
not going to get lucky."
Even with its consumer plans in a state of flux,
Microsoft also announced plans for its corporate
Windows 2000 operating system, raising new concerns
that by fragmenting its product line the company may
inadvertently sew confusion among customers.
"This raised a red flag for me," said Louis J.
Mazzucchelli Jr., a financial analyst at Gerard Klauer
Mattison, a New York investment firm.
He said that the company now had as many as four or
more versions of its high-end Windows 2000 operating
system (formerly Windows NT) in the works.
"Remember when Apple had more than 17 different product
lines?" he said. "I have trouble understanding how
Microsoft is going to keep customers from becoming
confused."
In addition to Windows Server Appliance, which Ballmer
announced on Wednesday, he said the company was working
on Windows 2000, Windows 2000 Professional, Windows
2000 Server, Windows 2000 Advanced Server and Windows
2000 Data Center.
Conceivably, this could leave the software developer at
a disadvantage against Linux and other versions of the
Unix operating system, which have been growing rapidly
among both Internet server and software developer
markets.
Copyright 1999 The New York Times Company |
