IBM Could Have Trouble Over Windows Without a New Licensing Pact

IBM Could Have Trouble Over Windows Without a New Licensing Pact

By Therese Poletti
Reuters News

May 24, 1992

New York -- International Business Machines Corp. could find itself locked out of the market for personal computers that run future versions of Windows, if the computer giant fails to strike a new bargain with software publisher Microsoft Corp., analysts say.

IBM currently has a licensing agreement with Microsoft for the Windows source code that enables its rival OS/2 operating system to run Windows 3.0 and Windows 3.1.

But IBM's rights to any new versions of the best-selling Microsoft system that might follow Windows 3.1 will expire in 1993.

And if a deal is not reached, Armonk, N.Y.-based IBM would be locked out of any changes to the programme, which Microsoft, the world's biggest software manufacturer, hopes to make into a PC industry standard.

Windows is one of the PC industry's leading software programmes, offering computer operators the kind of graphics popularised in the 1980s by Apple Computer Inc. of Cupertino, Calif.

IBM declined to comment on its confidential agreement with the Redmond, Wash.-based Microsoft. But an IBM spokesman emphasised that the computer giant's rights to Windows 3.0 and Windows 3.1 code continue on "forever."

"We have all the intellectual property we require. We have everything we need to be successful in the future," said IBM spokesman Scott Brooks.

He declined to speculate on the company's future plans with Microsoft.

"Anything beyond (Windows) 3.1 is nothing more than a brochure at this point," he said. "For the future, what we think is important is OS/2."

A Microsoft executive confirmed that IBM's rights to future code expire in 1993. Infoworld, a computer trade publication, also addresses the subject in an article published Monday.

"At some point, they will not be able to include that code into OS/2, said Jonathan Lazurus, Microsoft's vice president of systems strategy.

"They will no longer be able to track the changes that we make (in Windows)."

He declined to speculate on whether IBM and Microsoft would strike a new deal. The two firms, once partners in developing the MS-DOS software standard for PCs, are feuding over the future direction of industry.

IBM also has an alliance with Apple, the nation's No. 2 ranked PC maker after IBM itself, which is aimed at developing a new operating system that can serve as the PC industry's standard.

Analysts said the end result could be damaging for IBM if Windows keeps its dominant role among PC users in the future.

"It's the trump card that Microsoft may hold if OS/2 is no longer able to stay in step with enhancements that are made with Windows," said Rick Sherlund of Goldman Sachs.

"It's clearly not material today. But in the long run if they don't have another solution it could become material," said Rick Martin, a Chicago Corp. analyst.

IBM recently unveiled OS/2 2.0, an improved and much anticipated version of the original OS/2 system. IBM's Brooks said the upgrade is selling better than expected. Since its unveiling, over 400,000 copies were sold to first time users.

On the other hand, Microsoft said 3 million copies of Windows 3.1 were shipped during its first six weeks on the market.