Microsoft on Course to Dominate Market

N.Y. Times News Service

This may not be the year that the Microsoft Corp. finally takes over the world, but the world's biggest independent software company is hoping to consolidate its hold over large chunks of the personal computer software industry.

Already, the company has made a trademark of the new year by naming the latest version of its industry-dominant operating system Windows 95. And even though Microsoft recently announced that shipments of the new Windows may be delayed until August, in the all-important battle for what marketers call mind share, the product has already won.

More than any previous operating system, Windows 95 will incorporate features that hitherto were the domain of independent software companies that produce software "applications" like electronic mail, online services and remoteaccess software for logging onto the corporate networks from outside the office.

Windows 95 also has strong hooks into the company's own Microsoft Office suite of applications _ word-processing, spreadsheet, database and other programs.

This is is likely to put its already weakened competitors in the desktop personal-productivity software market _ like Lotus Development and the teetering Borland International _ at a still greater disadvantage. Microsoft now owns the desktop.

But Microsoft is also venturing beyond the business desktop and into the heart of corporate information-systems management.

Its Windows NT network operating system is meant as a direct competitor to Novell Inc.'s market-leading Netware product. And Microsoft's SQL Server 95 is being pitched as a lower-cost alternative to database-management software from the Oracle Systems Corp., Sybase Inc. and the Informix Corp.

And in the last year, Microsoft also expanded the consumer side of its business through its At Home line of products, which includes the Encarta CD-ROM encyclopedia and the Cinemania compilation of movie reviews.

"Quite clearly Microsoft is gaining share, quite clearly it is pursuing a monopoly policy in populating the world with its operating systems," said Tony Picardi, an analyst with International Data Corp., a research company in Framingham, Mass. "They've been running people out of business in packaged software. There will next be pain and suffering in the database market."

Analysts, venture capitalists and competitors say that opportunities remain for competitors _ some of them markets that are big enough to be rewarding while small enough to escape the giant's attention, and others in which Microsoft has historically not been a strong player.

But Microsoft, with sales expected to have exceeded $5 billion for 1994, continues to grow at a rate outpacing the rest of its industry. Preliminary numbers from the International Data Corp. show Microsoft's share at 6.2 percent of the worldwide software market of $77.2 billion, up from 5.5 percent in 1993 and 4.5 percent in 1992.

Microsoft, the leader in personal computer software, is second only to the International Business Machines Corp. in software of all types. IBM currently has a 14.6 percent share of the total software market, which includes mainframe, mini-computer and workstation programs. But IBM's share is shrinking, down from 15.8 percent in 1993.

Microsoft officials readily admit that they are pursuing new markets, but they insist that they are a long way from _ and do not seek _ world domination. "Whenever you are a growing company, you need to continue to find areas you can invest in that provide comparable levels of return," said Mike Maples, Microsoft's executive vice president for worldwide products.

Within the software industry, it is widely expected that Microsoft will seek to underprice the big data-base software companies _ Oracle, Sybase and Informix _ and thus devalue their franchises while Microsoft's huge sales volumes in all sorts of software would enable the company to prosper.

But the database vendors are a tough bunch and are accustomed to providing a higher level of customer support, consultation and individual attention than is Microsoft.

"You can try to do everything, but it's hard to do everything well," said Marc Benioff, an Oracle vice president. Microsoft is already straining to maintain quality across its broadening product line, he said, pointing to the much criticized new release of the Microsoft Word word-processing program as an example.

"Every company will have a problem and you have to look for the symptoms," Benioff said. "I think there are some symptoms out there now and they weren't there two years ago."

Indeed, Stewart Alsop, editor of the trade publication Infoworld, said that many of the big corporate computer customers that he talks to are worried about the prospect of fewer choices in desktop software and the perception that Microsoft's products are getting worse, not better.

"I think this is the year Microsoft makes a mistake," Alsop said. "Microsoft's own expectations for Windows 95 are too high, so they are planning on making more money from it than they actually will. Meanwhile, their costs are going up too quickly."

Even without a Microsoft stumble, there are ample opportunities in the nearly 94 percent of the market it does not command, said Ann Winblad, a general partner in Hummer Winblad, a venture capital firm that invests only in software companies.

"For Microsoft to grow at the the average rate of the industry, 16 to 20 percent, they can't pick off $100 million sectors," she said. "They have to pick off $400 million pieces. So there are many, many opportunities they will have to pass up.

"The software industry has only reached adolescence," she said. "It's out of its childhood, but it's far from mature."

Copyright 1995
Provided by ProQuest Information and Learning Company. All rights Reserved.