Windows to the world
With today's investment in AT&T, Microsoft may be aiming for a foothold in tomorrow's Internet appliance market
By Elliot Zaret
MSNBC
May 6 — When Microsoft ponied up $5 billion Thursday for a stake in AT&T, the world's largest software company may have been reaching into its bag of very successful tricks to take a step toward controlling the future of Internet appliances. How? The deal places Microsoft's fledgling Windows CE operating system squarely on as many as 10 million living room television sets. And as the Internet appliance market grows from TV set-tops to smart cell phones to game systems, Microsoft may be gambling that customers will demand that each device is compatible with the last.
MICROSOFT may be aiming to take its software from the desktop to the set-top to nearly everything with a battery or a plug, many analysts believe. (Microsoft is a partner in MSNBC.)
What's at stake is nothing less than the future of computing and the Internet.
So-called “Internet appliances” — everything from Internet-enabled PDAs and cell phones to portable Internet music players — will be a $15.3 billion market by 2002, according to International Data Corporation. Worldwide shipments of the devices will reach 55.7 million units a year in 2002 compared to 5.9 million devices shipped in 1993 — with a total 151 million of them installed, the consulting firm estimates.
“Five years ago we used to be wandering around to companies and shaking them by the lapels, saying when are you going to put a computer in a television set,” said Andrew Lippman, associate director of the MIT Media Laboratory. “The reason was if you designed and defined the interface to that corner of the living room, you would own that portion of the living room now and forevermore.”
But owning the corner of the living room is only the first step. What Microsoft is actually buying is “mental real estate,” said Lippman. That is, people will learn how to use their Windows CE television set and not want to relearn another system in the future.
“If Windows CE becomes the standard for large numbers of televisions, when people move, they're going to want that kind of box in their next set, won't they?” Lippman asked. “And they're presumably going to want that interface in other devices of that ilk… Maybe that box will connect to other boxes that also run Windows CE. Maybe that box will be buying the mindshare of people who use television.”
And that's why the deal may be the key to the emerging Internet Appliance market, said Rick Doherty, a consultant with Envisioneering Group in Seaford, N.Y.
‘Once the box is in the home and it has Windows CE and a Windows server behind it, it's much easier to attach to and bring that content to other Internet devices,'
— RICK DOHERTY
Envisioneering Group “Once the box is in the home and it has Windows CE and a Windows server behind it, it's much easier to attach to and bring that content to other Internet devices in the home — some will be wired and some will be wireless” said Doherty. “You can imagine that content from a Windows server will look best on a CE device.”
The AT&T deal may also be the latest blow in Microsoft's war against Sun Microsystems. Sun's Java programming language — with it's “Write Once, Run Anywhere” promise — and its Jini networking counterpart has become the early favorite among developers as the guts that will run and connect all the devices.
Fred Cohen, an analyst at Daiwa Research who follows Sun, said that Sun has already been positioning itself well, both in the U.S. and in European markets. Cohen said that Sony plans to use Java in some 50 million Playstations, and Nokia is planning to include Sun's technology in its Internet cell phones — 10-to-15 percent of Nokia cell phones that will ship next year will include Internet connectivity.
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Sun Vice President of Marketing for Java Software George Paolini agreed that it looks like Microsoft is trying to make inroads in the appliance market.
“That would be a reasonable strategy for Microsoft to try to pursue,” said Paolini. “That's the kind of thing they have done in the past.”
It all boils down to a simple business strategy said Venky Harinarayan, Amazon.com's director of marketing and product development and founder of Junglee.
“You want your business to be as consolidated as possible and you want your suppliers and your customers to be as fragmented as possible,” said Harinarayan.
Being consolidated in a fragmented PC market has been the key secret to Microsoft's success with Windows. There is only one Windows, but dozens of PC manufacturers, so Microsoft sets the rules.
Many believe that Microsoft envisions a similar future for Internet appliances, with CE on every one.
That's why Abhi Chaki, a director at Jupiter Communications, believes that the deal has little to do with Microsoft trying to get eyeballs for its msn.com portal — something many have said was the driving force behind the deal.
“That's not even on the radar,” said Chaki. “It's all about CE acceptance. It's not about Microsoft's media strategy.”
But not everybody is sure Microsoft will be successful.
“There is a lot of reticence against being subjected to the power of Microsoft — I don't think this is going to be embraced wholeheartedly,” said Cohen. “Even if you have 10 million units that have Windows CE, it pales in comparison… All cell phones are going to be using Java/Jini. The information appliances that everybody talks about — all of those are going to use Java/Jini.”
Sun's Paolini said that his company's success and Microsoft's aren't necessarily mutually exclusive.
“This isn't about Windows CE versus Java — Java interacts with every operating system, including CE,” Paolini said. “They're buying marketshare. But I'm not convinced they will be wholly successful in doing that for the same reason they have not been successful wielding that clout against other open Internet standards.”
Chaki noted that Sun's technology already is widespread in Europe.
“Their products have worked in markets that the U.S. is looking at,” Chaki said. “They have mindshare in those markets… Microsoft has had very little success.”
But Doherty said that while he agrees that Microsoft's deal is nowhere near the death-knell for Sun, it is a threat.
“It's not pushing out as much as it will start diluting (Java/Jini) a bit,” he said. “It's not that Sun's role is diminished, but it certainly does seem smaller in comparison to Windows CE.”
For most industry watchers, it is simply too soon to predict anything that will happen in the rapidly-moving industry.
“Things change more quickly now,” said Lippman. “It's not just your imagination. It's really true.”
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