Microsoft Widens Its Split With I.B.M. Over Software

By Andrew Pollack
The New York Times

Redmond, Wash. -- July 26, 1991 -- The Microsoft Corporation is moving its software strategy farther away from that of the International Business Machines Corporation, its one-time partner, company executives said.

Microsoft supplies the MS-DOS operating system used on I.B.M. and compatible personal computers. And the company worked with I.B.M. on OS/2, which was supposed to be a successor to DOS. But recently Microsoft and I.B.M. have had a bitter divorce, with I.B.M. continuing to support OS/2 while Microsoft supports its own program known as Windows.

At a meeting for securities analysts at Microsoft headquarters here late Thursday afternoon, company officials clarified their strategy for providing operating systems, the software that controls the basic functions of computers.

The company's shares soared $5 today, to end the day at $71, because analysts were impressed both with the clear statement of the company's direction and with the strong financial results Microsoft reported earlier this week. In addition, the company's outlook for the future was positive.

Reflecting their widening split with I.B.M., Microsoft executives said they would no longer call a new operating system they are working on OS/2 3.0. Rather, the new operating system will be named Windows NT, standing for New Technology. And Windows NT will not be able to run programs written for OS/2, as had previously been planned.

Microsoft said its strategy was to sell two different versions of Windows tailored for different types of computers but able to run the same programs. A low-end version of Windows will run on top of MS-DOS in computers using Intel Corporation microprocessors. Windows NT, which will be released next year, will be geared for more powerful computers and workstations using microprocessors from Intel as well as from MIPS Computer Systems. Windows NT will also be able to run programs like Lotus 1-2-3 written for MS/DOS.

"We do not see a technical discontinuity over the next four to five years," said Steven Ballmer, Microsoft senior vice president of systems software. "We think we can evolve Windows." Microsoft officials seemed clearly stung by I.B.M.'s recent attempts to form alliances with Microsoft rivals, like Apple Computer Inc. and Novell. Mr. Ballmer said all these alliances were confusing and presented no clear picture of I.B.M.'s strategy.

OS/2 Called 'Dead End'

"I can't tell you what I.B.M.'s strategy is," Mr. Ballmer said. "But I do know it's not working together with us. It's to our benefit because their customers can't understand it either."

Mr. Ballmer said I.B.M.'s agreement to work on a new operating system with Apple Computer seemed to suggest that OS/2 was "a dead end."

Microsoft executives pulled few punches in describing the company's dispute with I.B.M. To refute I.B.M.'s contention that OS/2 is more stable than Windows, Mr. Ballmer demonstrated several ways he could "crash" or stall a computer running OS/2.

I.B.M. maintains that it is fully behind OS/2, which will be its strategic personal computer operating system. It has said that any operating system it will develop with Apple will not be out for several years and that the operating system will run programs written for OS/2, so customers who commit to OS/2 now will be protected.