Microsoft's Mobilization: The Rival

Bracing for a Microsoft Onslaught, Apple Sees No Reason to Panic

By John Markoff
The New York Times

July 31, 1995

In Silicon Valley it is fashionable to predict that the imminent arrival of Windows 95 spells the ultimate demise of Apple Computer Inc.

A growing chorus of pundits and Wall Street analysts has zeroed in on Apple and its home-grown operating system as the biggest potential losers in the wake of the introduction, due in late August, of the Microsoft Corporation's updated computer operating system. Apple popularized the personal computer in the late 1970's and made computing much simpler with the introduction of the Macintosh in 1984. But its lead in simplicity will be narrowed by Windows 95.

There is another view within the industry, however, that holds that the computer maker is not in danger of losing its innovative edge or significant market share in the face of the Windows onslaught.

In contrast to the PC world, where Microsoft sets the software standard while dozens of computer makers compete for hardware sales, Apple designs the operating system software that controls the inner workings of the machines it makes and sells.

That tradition has given Apple the ability to coordinate hardware and software design and to define new technologies that the PC world often eventually imitates. And even though only about 1 of every 10 personal computers in the world uses the Apple Macintosh operating system, Apple's integrated hardware-software approach gives the company a position of strength that belies its small market share.

"The perception of Apple's ability to survive is much less than the reality of their ability to survive," said Stewart Alsop, a columnist at Infoworld, a computer industry weekly. "You have to remember there are now almost 20 million Macintosh users, and they're not going away any time soon."

Mr. Alsop and some other analysts contend that while Apple may have long ago lost the mass-marketing war to Microsoft, the company can probably still run a profitable business by selling computers and operating-system software to schools, universities and home users; graphic designers; advertising agencies; publishers, and other users who care about the ease of use and higher performance for which Macintoshes are known.

And so, there is no panic at Apple's headquarters in Cupertino, Calif. The computer maker believes that Microsoft and the entire PC world are about to enter a challenging period of transition, similar to the one that Apple is completing in its shift from Motorola Inc.'s older chips to its PowerPC microprocessor.

Apple executives also predict that with price cuts planned for their machines this fall, and with the arrival of an updated version of Apple's operating system in the middle of 1996, the company will be able to hold its own against the PC world.

The new Macintosh operating system, which will be the eighth version of the software and is code-named Copland, is expected once again to give Apple a significant technological advantage over Microsoft's operating system. For users, that will mean Macintoshes will run faster than now, with less risk of crashing. And because Apple plans to add a layer of artificial intelligence to the software, the computers should be even easier to operate.

Apple is planning an aggressive marketing campaign for the months after Windows 95 is introduced, including television and print advertisements that will focus on what the company perceives as Microsoft's weaknesses.

"We're taking the gloves off right now," said Guy Kawasaki, a top software executive at Apple. "Windows 95 will be roughly equivalent to our System 6," he said, referring to the version of Macintosh software released in the late 1980's.

"We're at System 7.5 right now and at System 8 by next year," he continued.

Apple executives also dispute a widely held view in the industry that software developers, the companies that create the programs that work with an operating system, are losing interest in the Macintosh. To begin with, they note that Microsoft remains the largest developer of word processing programs, spreadsheets and other applications for Macintosh computers.

They also say that the number of software developers for the Macintosh has held steady in recent years at around 12,000. And they point to data from the Software Publishers Association that indicate that market share for Macintosh applications, as measured by revenue, actually increased last year.

Meanwhile, because the prices of Apple computers have become more competitive with those of PC's in the last year and are expected to become even more so in the fall, Apple executives are looking for sticker shock to catch up with Microsoft. Many users will find that their current PC's are underpowered for Windows 95, and Apple hopes that when those users contemplate the cost of upgrading their hardware, or buying new machines, they will take a look at Macintoshes.

Perhaps the best case for Apple's continued existence in an impending Windows 95 world has been made by Cary Lu, a respected writer about personal computers.

In a piece titled "Computing's Holy War," published recently in several newspapers and circulated widely on the Internet, Mr. Lu wrote: "Within the computer industry, the description 'more like a Macintosh' is always high praise. The description 'more like Windows' is rarely used as praise."

GRAPHIC: Graph: "Operating Systems: A Shrinking Field"

Analysts at Dataquest predict that I.B.M. will cease development of the OS/2 operating system in January of next year, leaving only Apple's Macintosh operating system as a viable competetor to the increasingly dominate Windows. Graphs show market shares in 1994 and projections for 1999. (Source: Dataquest)