March 5, 1995 in Business

New Worries Chip Away At Microsoft’s Invincibility Competitors Turn Up The Heat As Software Industry Leader Confronts Lingering Problems

Associated Press
 

After the stinging rebuke of Microsoft in its antitrust case, more complaints are being heard about business tactics that have had its competitors seething for years.

The company is a tempting target - biggest maker of personal computer software, hugely ambitious and led by the richest man in the country.

What could harm its dominant role in high technology?

Many industry watchers say nothing can, even with the scrutiny of U.S. District Judge Stanley Sporkin, who rejected the company’s antitrust agreement with the Justice Department as not in the public interest.

But one sign that Microsoft Corp. itself feels pressure came last month when, accused by Apple Computer Inc. of bullying tactics and threats, chairman Bill Gates’ cool facade crumbled.

“I am writing to make clear how disappointed I am in the lack of candor and honesty Apple has shown in dealing with Microsoft during the last several months,” Gates said in a letter to Apple that Microsoft distributed publicly.

Some of his own discomfort showed through the point-by-point response to Apple’s charges.

For instance, Gates has long bristled at suggestions he hates Apple’s Macintosh, the only big-selling personal computer that doesn’t use Microsoft programs at its base. Worried, perhaps, that Apple’s charges fed that impression, he wrote, “I think the Macintosh has a bright future.”

Like any company, Microsoft is vulnerable to customers’ images, the strength of competitors and its own mediocrities.

And recently, there have been signs of trouble in all three areas for Microsoft, led by growth in customer dissatisfaction.

For example, it has been sharply criticized for troubles in the update of the Microsoft Word word processing program for Macintosh. And the continuing delay bringing out an update of its core Windows product has angered software developers as well as corporate and individual customers.

In addition, the company has been criticized for eliminating choice in the software market and turning out shoddy rather than better products.

But an even bigger problem for Microsoft is the potential for a marketplace dethroning similar to what IBM and Digital Equipment suffered earlier.

Paul Grayson, chief executive of Micrografx, a large software maker near Dallas, said Gates has studied why other companies have stumbled and fears rapid change in technology the most.

“They really scrutinize all technology developments,” Grayson said. “They tend to overreact to make sure they don’t make a mistake.”

Another problem for the company is that the products that compete directly with its core Windows software, including IBM’s new version of OS-2, are getting more attention.

While it will be difficult for another company to dent Microsoft’s 85 percent market share in PC operating systems, the time is ripe while its attention is diffused by the antitrust battle and new markets.

The software industry is littered with products that sold fantastically for a while but were replaced. Word processing was led first by Word Star, then Word Perfect and now Microsoft Word, for instance. And Microsoft’s Excel spreadsheet program now leads Lotus’ 1-2-3.

“Was there a time when you thought there wouldn’t be a legitimate competitor to 1-2-3?” said Scott Wald, chief executive of ASAP Software Express Inc., a software reseller near Chicago. “There was a time when I wasn’t sure there would be.”

A final problem for Microsoft is the prospect of losing direction as it becomes more diverse.

“Nothing drives Microsoft crazier than for the rap to be placed on them that they’re not innovators,” said Bill Bluestein, analyst at Forrester Research in Cambridge, Mass. “But Lotus has led with Notes. Apple has led with multimedia and America Online has led with on-line services.”

© Copyright 1995 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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