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. Last Updated: 07/27/2016

Microsoft Gives IBM the Blues

WASHINGTON -- Two shapes loom large on the computing landscape in 1996, the new IBM and the old Microsoft. But the labels can be misleading. In short, the new IBM still doesn't get it. The old Microsoft does.

This is not a partisan issue: This observer counts himself neither a Microsoft diehard nor an IBM enemy. But you don't have to look far to see that these two organizations are going in different directions.

Both Microsoft Corp. and International Business Machines Corp. are smart enough to know that manufacturing PC hardware isn't a place to be: Microsoft has never engaged in that unnatural practice; IBM knows it's just another Compaq or Dell if it can't play a role as a major provider of software

So what's the report on 1995 for these two heavy hitters?

IBM spent $3.5 billion buying Lotus Development Corp. That's billion, not million. And what did IBM receive for its money? As it turns out, little. Lotus has the distinction of once dominating the desktop software market with its flagship Lotus 1-2-3 spreadsheet. Its further distinction lies in losing that dominance, bit by bit, to Microsoft. So now here we are, with Microsoft Office utterly dominant and most other software developers -- IBM included -- floundering around on the boundaries.

To IBM, the acquisition of Lotus was another chance to be a major PC software supplier. Never mind that over the past dozen years, Lotus has built, acquired and introduced one mediocre program after another: Symphony, Jazz, Approach, AmiPro/WordPro and a dozen others.

The reason IBM was so interested lay primarily in Lotus Notes, an information-sharing product it viewed as having great promise. IBM's gamble that Notes was on its way to becoming a big winner in corporate America and elsewhere was just that: a gamble. It hasn't panned out and its prospects grow dimmer weekly with the rise of the Internet, with its own capabilities for sharing.

After eight years and $2 billion of software development, IBM refused to abandon its OS/2 Warp operating environment. A solid product, it's been obvious to everyone on the planet that OS/2 Warp has lost out to Microsoft's Windows 95 and Windows NT as the operating environment of choice for PCs.

Then there's IBM's lack of interest in taking over Apple Computer Inc. during the past year. Along with Apple could come its Macintosh operating environment, a symbol of Apple's vastly superior experience in building user interfaces. IBM's refusal to dump Warp is probably connected to its unwillingness to see acquisition of Apple as a chance to compete realistically with the Microsoft/Intel juggernaut.

Meanwhile, Microsoft's behavior during 1995 reflects a radically different approach to running a business.

Setting aside an excess of hype, Microsoft introduced a universally admired operating platform with Windows 95. It delivered on the promise of a definitive level of new capability to a market used to much less and has been delivered largely bug-free to as many as 20 million PC users since August. It gave the whole computer industry a shot in the arm.

As successful as Windows 95 has been, it is Microsoft's shrewd navigation of its Microsoft Network (MSN) through dangerous waters that demonstrates the company's agility in a changing world. It was just this past summer that MSN was seen as a threat to established proprietary online providers such as America Online Inc. and CompuServe Inc. Would MSN steamroll its competition? Hardly, as it turned out.

The ground is shifting in the online arena as World Wide Web access via the Internet becomes the dominant access path. So what did Microsoft do? It didn't retrench. Instead, it rethought the issue and announced its intention to make much or all of the material it was planning on providing in a proprietary fashion available on the Web.

As with other Web participants, Microsoft isn't clear on how profits will derive in this new, traditionally no-charge medium. But it has sensed that the rules have changed and it modified its game plans promptly and decisively. And all this over a period of six months or less.

A new IBM has purportedly re-engineered itself over the past five years. The outward signs are all there: A work force slashed by nearly 50 percent, successive reorganizations designed to streamline its relevance to changing markets. But beneath the surface, is it the same old story?

In the meantime, Microsoft keeps plugging along, making the right decisions for the right reasons.