FROM THE ARCHIVES - WSJ Interactive Edition

The Wall Street Journal Interactive Edition -- November 18, 1996
The Wintel Alliance Tackles A New Foe in a New Arena By G. CHRISTIAN HILL Three years ago, Ed Zander, president of Sun Microsystems Inc.'s computer operations, lamented that his industry had "gone to sleep for 10 years," awaking to find Microsoft Corp. in complete control of the vast market for personal computers. "We'll never let that happen with the network," he vowed, referring to the flotilla of interconnected desktop and host computers used by corporate America. Wake up, Ed. Yes, Microsoft and chip maker Intel Corp. -- the dreaded Wintel duopoly that has a hammerlock on the PC industry -- are doing it again. And this time with corporate networks -- perhaps the most lucrative segment of the computer industry. Wintel is trying to wrest control of this explosive market from the companies that have dominated it for years -- Sun, Hewlett-Packard Co., International Business Machines Corp., Digital Equipment Corp. and Silicon Graphics Inc. Wintel's network strategy is close to its PC strategy: flood the market with products that are so cheap and effective they become the industry standard. The big players' response? To cede Wintel the lower end of the market for network machines -- and put their efforts behind new Internet technologies they hope will change the face of networking in the next few years, thus destroying any base Wintel can build up. Wintel's Momentum The stakes are huge, as companies embrace networks as a way to simplify internal and external communications and slash operating costs. Corporate spending on servers alone -- the computers that run networks -- totaled $60 billion last year. According to an analysis by Gartner Group, a Stamford, Conn., research firm, Wintel technology will account for one-third of that market by the year 2000, up from close to zero in 1994. The Wintel standard's "momentum is awesome," says Gartner analyst Scott Winkler. Wintel's strategy is a complete turnaround for the networking business. For years, makers of servers and workstations -- powerful desktop computers used for networks and number-crunching -- took a low-volume, high-profit-margin approach to the business, selling expensive proprietary hardware and a proprietary version of server software called Unix, both of which were incompatible with other makers' products. Now Wintel is changing the game around, with two weapons: the Pentium Pro -- a new, powerful microprocessor from Intel -- and a new version of Windows NT, Microsoft's operating system for networks. Low-Cost Links Mirroring the computing duo's successful PC strategy, Wintel earlier this year began offering the chips and software to manufacturers at bargain prices relative to comparable Unix offerings. That means PC makers such as Compaq Computer Corp. and Gateway 2000 Inc. could enter the network business cheaply -- and offer buyers combinations of machines and software at one-fourth to one-half the cost of comparable Unix offerings. Given these economies of scale, PC makers are taking the lower end of the workstation and server markets by storm, offering new levels of performance, compelling prices, simplicity and standardization. For example, by unit shipments, Compaq is already believed to be the biggest maker of network servers, and dollar sales jumped 64% last year to $1.8 billion, according to an estimate by Dataquest Inc., a market-research firm in San Jose, Calif. At the same time, a huge volume business is created for Wintel products, which are fast becoming industry standards in the low end of the network market. Microsoft alone will sell $3.74 billion of server and workstation software in 1998, up from close to zero in 1994, predicts a Montgomery Securities report. The Size of the Prize Worldwide corporate spending on information technology, in billions: 1996 1992 Servers and mainframes $58.82 $65.88 PCs and workstations 101.22 56.12 Packaged software 85.08 53.04 Data communications equipment 20.02 11.40 Services 165.15 124.25 Total 430.28 310.69 Note: 1996 figures are estimates Source: Scott Winkler, Gartner Group When it comes to buying a network system, the math is hard to avoid. Measurex Corp., based in Cupertino, Calif., provides networks of servers and control panels that operate big factories. The company is switching entirely to NT, estimating the technology will reduce its hardware, software, installation and service costs by 50%. Ditto for workstations: Gateway 2000, a direct-mail PC maker in Sioux Falls, S.D., now sells a $5,000 Pentium Pro workstation that Animation House, an Evansville, Ind., graphics-software designer, finds comparable to $25,000 workstations from Sun and Silicon Graphics. "The handwriting is on the wall when you've got machines costing [about] 25% of the competition's" that are just as good, says Gary Davis, Animation House's president. And as more companies buy NT servers and workstations, more software makers are flocking to develop products for the new standard -- a huge advantage for Wintel, especially since Unix software is usually expensive and often must be customized to a particular company's system. Frankfurt-based SAP AG, which provides the best-selling accounting software for large corporate networks, says that as many customers now choose NT as Unix to run its programs. And Wintel offers another potential software advantage to NT buyers. Microsoft will try to solidify its hold on network computing by offering tightly integrated software packages that work easily with its operating system -- just as the company did in the PC market. In this case, the product is called BackOffice -- a group of programs for NT that handle e-mail, database management and security, and transaction processing. Little Incentive These applications' advantage over rival programs: They will work together, and with NT, seamlessly. Moreover, they'll be cheaper. A company that invests in a Wintel network would therefore have little incentive to go to another software company for these applications. "The advantage of having all of your desktops and your major application servers supported by the same [technology] is just enormous," says Peter Bakalor, chief information officer of Thorn EMI PLC's EMI Music, a world-wide music-publishing and distribution company. The result of all this? Dataquest estimates that unit shipments of NT servers will more than triple those of Unix servers in 1999, at 1.7 million, while NT workstation shipments will be nearly six times the Unix level, at 4.6 million. The Wintel Cartel Unit shipments and estimated unit shipments, in millions, for computers running Microsoft's Windows NT software and those running Unix: 1995 1996 1997 1998 1999 NT workstations 0.2 0.7 1.7 3.0 4.6 Unix workstations 0.7 0.7 0.7 0.7 0.8 NT servers 0.4 0.6 0.9 1.3 1.7 Unix servers 0.4 0.4 0.5 0.5 0.5 Source: Dataquest Inc. Most of this surge will come from the low end of the market. Computer experts expect the NT standard to take over the bottom half of the corporate network market by 1999, occupying the majority of networks in small and medium-size businesses, and the smaller departments of big companies. Future of Unix As NT takes over the low end of the market, experts expect a rough road for many Unix companies, including software providers. Novell Inc., the dominant provider of a basic operating system for managing files and printing tasks within PC networks, faces big trouble, according to some industry watchers. The NT servers perform the same chores, and much more. Oracle Corp., the king of database software, and other database companies face a continuous price war with Microsoft's cheaper BackOffice program package, at least in the low end of the market. Both Oracle and Novell say their products are much better suited for larger networks than Microsoft's. Many traditional Unix and mainframe vendors have seen the future, and have begun selling NT workstations and servers. Some are even helping Wintel speed into the high end of corporate computing. H-P, for instance, is in a joint venture with Intel to develop Intel's next-generation microprocessor, essential for bigger servers. IBM is forming a unit just to make NT workstations running on Intel chips, reflecting its own lagging workstation effort. Digital has signed a contract with Microsoft, making it the main service and support organization for NT in the field. And Tandem Computers Inc. plans to provide technology to link NT servers together for more power and reliability. But what about Unix? Most of the companies on that standard are still promoting it -- but mainly on the high end of the market. The companies are now hoping to take business away from mainframes and other big computer systems. Analysts think this crowding higher up on the network food chain might lead to a shakeout or consolidation, with Sun having perhaps the best chance of thriving. But as ominous as that sounds, the Unix world isn't going to implode. Although Wintel machines are powerful, it will be years, if ever, before they can carry out the complex functions of the high-end Unix servers and workstations. Large corporations will continue to rely on Unix technology for their most intensive design work, and for running their biggest networks and the data centers that handle such tasks as payroll and billing. Moreover, the overall demand for servers and network applications is expanding at a tremendous clip -- and analysts say enough of this demand will come from high-powered users, who need Unix machines, to balance losses in low-end users. Companies such as Sun and Silicon Graphics aren't standing still as Wintel encroaches, either. Sun has introduced a new generation of servers that are about three times as powerful as its current servers. And Silicon Graphics has just started shipping a new series of graphical workstations that are 10 times as fast as the previous line, at similar prices. Nets Aweigh In addition to holding the high end of the market, many in the Unix crowd see reason for hope in reclaiming some of the lower ground, as well. The salvation, they say, will come from sources completely outside the Unix world: intranets and network computers. Intranets are corporate networks that use the Internet's programming standards, so they can piggyback on the Net to link far-flung employees and customers. Intranets can vastly simplify much of the daily work of corporations, such as marketing, taking orders, providing customer service, billing and buying services and equipment. Thus, the Internet and its graphical arm, the World Wide Web, provide companies with marketing, distribution and communications channels that save them millions of dollars, and extend their reach to potential customers around the world at little extra cost. The boom in intranets is potentially of great importance to the big Unix companies, because the systems use a common language that allows them to run just as easily on Unix machines as Wintel's. But to get the upper hand, those companies need help from two major developments. On the one hand, the companies are closely watching Netscape Communications Corp., maker of the popular Navigator Web browser and Web server software, as it introduces corporate versions of its products. Netscape currently offers SuiteSpot, a version of its Web server software that lets companies maintain pages on the Web for intranet communications. And next year the company will introduce a corporate version of its browser, Netscape Communicator, which not only will allow users to view Web pages, but will also allow for a measure of collaboration not available now on networks: The software will let far-flung users work on the same file at the same time. The big hope for Wintel's foes: that Netscape can use its leverage and expertise in Web systems to gain a big advantage in intranets, and provide an alternative to Wintel in the field. At the same time, Wintel's opponents reason, this shift to intranets will help enable a shift to a new alternative to the PC -- the so-called network computer, or NC, a bare-bones device without a hard drive and limited memory capacity. If so much communication is going on via intranets sharing a common language, the theory goes, it's much more economical to put software programs on networks as well, for workers to download as needed, rather than giving each employee a huge hard drive full of applications. That, by implication, means no need for Wintel PCs, with their complicated operating systems. Java Men Sun is mainly responsible for Unix companies' feverish interest in the NC, developing a "universal" programming language, called Java, that allows applications to be sent from a server to any machine in a network, so long as that machine contains software to interpret Java. Sun says the excitement is justified. Scott McNealey, Sun's chief executive officer, promotes the NC as ideal for corporate computing, a machine that would slash annual upgrading and maintenance costs to less than $2,500 per workstation from the current $8,000 to $9,000. Mr. McNealey -- and his colleague Mr. Zander, the company's computer-operations chief -- sees the NC as a way to break the tightening grip of Intel and Microsoft. "I'm not going to tell you NT is not going to succeed," says Mr. Zander, revising his prognosis of three years ago. But he says corporations sense a historic opportunity to get more choice. "They're telling me, 'We want to be free from the lock-in of the Microsoft operating system.' " But the rise of the intranet and the NC is unlikely to signify the decline of Intel and Microsoft. Their unexpected surge into corporate computing gives them another sustained source of revenue growth, and an excellent chance to co-opt both intranets and NCs. Microsoft was caught unaware by the Internet explosion two years ago, allowing Netscape practically to own the browser market and get a giant head start in selling Web servers for intranets. But starting in the spring of 1995, Microsoft chief Bill Gates refocused the software giant with stunning speed, developing browser software to match Netscape's and engineering exclusive marketing deals with every major provider of Internet service to give away its browser, Explorer. Microsoft has now neutralized Netscape's browser advantage, and the battle is shifting to the corporate server market, where Microsoft can play the growing acceptance of NT and BackOffice as a trump card. Here's how. Netscape's Web server software is widely used; in fact, it's the company's major profit producer. But Microsoft is giving away its version of Web server software free of charge, as well as integrating that software with BackOffice -- a package of products companies will most likely need to turn their Web sites into viable commercial enterprises linked to customers. So corporations are faced with a choice: buy server and browser software from Netscape, or get it free from Microsoft, and have it work smoothly with BackOffice besides. "For intranet projects, NT's the platform to choose until you come up with a reason not to," says Mr. Bakalor, EMI's chief information officer. "Why on earth would you choose anything else, unless you already had a big infrastructure in place with Unix?" Adds Mr. Davis, the president of Animation House: "I'd be floored if Netscape or anyone is able to compete with BackOffice." Co-Opt City As for the NC, marketing efforts of the first companies to introduce the machines -- Sun and IBM among them -- will be plagued by the slow development of Java-based applications and the plummeting costs of buying PCs and managing them. Corporations can now buy powerful, fully functional Pentium machines, loaded with big drives, for less than $1,000 each -- compared with $700 to $1,700 for the first NCs. And Microsoft and Intel last month announced plans for a new version of the PC, called the NetPC, intended to cut the costs of managing networked PCs by more than half. Further, even if the NC is a big success, Intel and Microsoft have an excellent chance to win a major chunk of that new market. Intel has said it will build microprocessors for NCs if they take off, and Microsoft has its own competitor for Java, called ActiveX. Microsoft thinks ActiveX will be faster and better than Java, because it will be fine-tuned to download applications from NT servers to other Windows machines. But, just in case, Microsoft has licensed Java, asserting it will develop the fastest Java technology in the marketplace. The upshot: Market researchers believe that up to 20% of corporate computers sold in 2000 may be of the NC variety, mainly for simple, repetitive tasks. But given the prevalence of Wintel servers, a lot of them are likely to contain Intel chips and Microsoft software. So, will anything stop the Wintel duopoly? Mr. Winkler, the Gartner analyst, thinks Microsoft's competitors have to hope for an assist from two possible events. He believes there is a high probability that the U.S. Justice Department will file another antitrust action against Microsoft, alleging it can't leverage its dominance in desktop software to monopolize the intranet market. But he also thinks such litigation won't succeed in stopping Microsoft for long. It's more likely, he says, that Microsoft could stumble because it is trying to fight on so many fronts, including new thrusts in electronic media and consumer software. "We believe the greatest threat to Microsoft is itself," Mr. Winkler wrote in a recent report. "Working on such a broad range of initiatives and competing with nearly every vendor, Microsoft is sure to disappoint in many arenas." --Mr. Hill, a Wall Street Journal senior editor in San Francisco, was contributing editor of this Report. Copyright © 1997 Dow Jones & Company, Inc. All Rights Reserved.

The Wall Street Journal Interactive Edition -- November 18, 1996

The Wintel Alliance Tackles
A New Foe in a New Arena

By G. CHRISTIAN HILL

Three years ago, Ed Zander, president of Sun Microsystems Inc.'s computer operations, lamented that his industry had "gone to sleep for 10 years," awaking to find Microsoft Corp. in complete control of the vast market for personal computers.

"We'll never let that happen with the network," he vowed, referring to the flotilla of interconnected desktop and host computers used by corporate America.

Wake up, Ed.

Yes, Microsoft and chip maker Intel Corp. -- the dreaded Wintel duopoly that has a hammerlock on the PC industry -- are doing it again. And this time with corporate networks -- perhaps the most lucrative segment of the computer industry. Wintel is trying to wrest control of this explosive market from the companies that have dominated it for years -- Sun, Hewlett-Packard Co., International Business Machines Corp., Digital Equipment Corp. and Silicon Graphics Inc. Wintel's network strategy is close to its PC strategy: flood the market with products that are so cheap and effective they become the industry standard.

The big players' response? To cede Wintel the lower end of the market for network machines -- and put their efforts behind new Internet technologies they hope will change the face of networking in the next few years, thus destroying any base Wintel can build up.

Wintel's Momentum

The stakes are huge, as companies embrace networks as a way to simplify internal and external communications and slash operating costs. Corporate spending on servers alone -- the computers that run networks -- totaled $60 billion last year. According to an analysis by Gartner Group, a Stamford, Conn., research firm, Wintel technology will account for one-third of that market by the year 2000, up from close to zero in 1994.

The Wintel standard's "momentum is awesome," says Gartner analyst Scott Winkler.

Wintel's strategy is a complete turnaround for the networking business. For years, makers of servers and workstations -- powerful desktop computers used for networks and number-crunching -- took a low-volume, high-profit-margin approach to the business, selling expensive proprietary hardware and a proprietary version of server software called Unix, both of which were incompatible with other makers' products.

Now Wintel is changing the game around, with two weapons: the Pentium Pro -- a new, powerful microprocessor from Intel -- and a new version of Windows NT, Microsoft's operating system for networks.

Low-Cost Links

Mirroring the computing duo's successful PC strategy, Wintel earlier this year began offering the chips and software to manufacturers at bargain prices relative to comparable Unix offerings. That means PC makers such as Compaq Computer Corp. and Gateway 2000 Inc. could enter the network business cheaply -- and offer buyers combinations of machines and software at one-fourth to one-half the cost of comparable Unix offerings.

Given these economies of scale, PC makers are taking the lower end of the workstation and server markets by storm, offering new levels of performance, compelling prices, simplicity and standardization.

For example, by unit shipments, Compaq is already believed to be the biggest maker of network servers, and dollar sales jumped 64% last year to $1.8 billion, according to an estimate by Dataquest Inc., a market-research firm in San Jose, Calif.

At the same time, a huge volume business is created for Wintel products, which are fast becoming industry standards in the low end of the network market. Microsoft alone will sell $3.74 billion of server and workstation software in 1998, up from close to zero in 1994, predicts a Montgomery Securities report.

The Size of the Prize

Worldwide corporate spending on information technology, in billions:

                                1996      1992
Servers and mainframes        $58.82    $65.88
PCs and workstations          101.22     56.12
Packaged software              85.08     53.04
Data communications equipment  20.02     11.40
Services                      165.15    124.25
Total                         430.28    310.69

Note: 1996 figures are estimates
Source: Scott Winkler, Gartner Group

When it comes to buying a network system, the math is hard to avoid. Measurex Corp., based in Cupertino, Calif., provides networks of servers and control panels that operate big factories. The company is switching entirely to NT, estimating the technology will reduce its hardware, software, installation and service costs by 50%. Ditto for workstations: Gateway 2000, a direct-mail PC maker in Sioux Falls, S.D., now sells a $5,000 Pentium Pro workstation that Animation House, an Evansville, Ind., graphics-software designer, finds comparable to $25,000 workstations from Sun and Silicon Graphics.

"The handwriting is on the wall when you've got machines costing [about] 25% of the competition's" that are just as good, says Gary Davis, Animation House's president.

And as more companies buy NT servers and workstations, more software makers are flocking to develop products for the new standard -- a huge advantage for Wintel, especially since Unix software is usually expensive and often must be customized to a particular company's system.

Frankfurt-based SAP AG, which provides the best-selling accounting software for large corporate networks, says that as many customers now choose NT as Unix to run its programs.

And Wintel offers another potential software advantage to NT buyers. Microsoft will try to solidify its hold on network computing by offering tightly integrated software packages that work easily with its operating system -- just as the company did in the PC market. In this case, the product is called BackOffice -- a group of programs for NT that handle e-mail, database management and security, and transaction processing.

Little Incentive

These applications' advantage over rival programs: They will work together, and with NT, seamlessly. Moreover, they'll be cheaper.

A company that invests in a Wintel network would therefore have little incentive to go to another software company for these applications.

"The advantage of having all of your desktops and your major application servers supported by the same [technology] is just enormous," says Peter Bakalor, chief information officer of Thorn EMI PLC's EMI Music, a world-wide music-publishing and distribution company.

The result of all this? Dataquest estimates that unit shipments of NT servers will more than triple those of Unix servers in 1999, at 1.7 million, while NT workstation shipments will be nearly six times the Unix level, at 4.6 million.

The Wintel Cartel

Unit shipments and estimated unit shipments, in millions, for computers running Microsoft's Windows NT software and those running Unix:

                 1995  1996  1997  1998  1999
NT workstations   0.2   0.7   1.7   3.0   4.6
Unix workstations 0.7   0.7   0.7   0.7   0.8
NT servers        0.4   0.6   0.9   1.3   1.7
Unix servers      0.4   0.4   0.5   0.5   0.5

Source: Dataquest Inc.

Most of this surge will come from the low end of the market. Computer experts expect the NT standard to take over the bottom half of the corporate network market by 1999, occupying the majority of networks in small and medium-size businesses, and the smaller departments of big companies.

Future of Unix

As NT takes over the low end of the market, experts expect a rough road for many Unix companies, including software providers. Novell Inc., the dominant provider of a basic operating system for managing files and printing tasks within PC networks, faces big trouble, according to some industry watchers. The NT servers perform the same chores, and much more. Oracle Corp., the king of database software, and other database companies face a continuous price war with Microsoft's cheaper BackOffice program package, at least in the low end of the market. Both Oracle and Novell say their products are much better suited for larger networks than Microsoft's.

Many traditional Unix and mainframe vendors have seen the future, and have begun selling NT workstations and servers. Some are even helping Wintel speed into the high end of corporate computing. H-P, for instance, is in a joint venture with Intel to develop Intel's next-generation microprocessor, essential for bigger servers. IBM is forming a unit just to make NT workstations running on Intel chips, reflecting its own lagging workstation effort. Digital has signed a contract with Microsoft, making it the main service and support organization for NT in the field. And Tandem Computers Inc. plans to provide technology to link NT servers together for more power and reliability.

But what about Unix? Most of the companies on that standard are still promoting it -- but mainly on the high end of the market. The companies are now hoping to take business away from mainframes and other big computer systems. Analysts think this crowding higher up on the network food chain might lead to a shakeout or consolidation, with Sun having perhaps the best chance of thriving.

But as ominous as that sounds, the Unix world isn't going to implode. Although Wintel machines are powerful, it will be years, if ever, before they can carry out the complex functions of the high-end Unix servers and workstations. Large corporations will continue to rely on Unix technology for their most intensive design work, and for running their biggest networks and the data centers that handle such tasks as payroll and billing.

Moreover, the overall demand for servers and network applications is expanding at a tremendous clip -- and analysts say enough of this demand will come from high-powered users, who need Unix machines, to balance losses in low-end users.

Companies such as Sun and Silicon Graphics aren't standing still as Wintel encroaches, either. Sun has introduced a new generation of servers that are about three times as powerful as its current servers. And Silicon Graphics has just started shipping a new series of graphical workstations that are 10 times as fast as the previous line, at similar prices.

Nets Aweigh

In addition to holding the high end of the market, many in the Unix crowd see reason for hope in reclaiming some of the lower ground, as well. The salvation, they say, will come from sources completely outside the Unix world: intranets and network computers.

Intranets are corporate networks that use the Internet's programming standards, so they can piggyback on the Net to link far-flung employees and customers. Intranets can vastly simplify much of the daily work of corporations, such as marketing, taking orders, providing customer service, billing and buying services and equipment.

Thus, the Internet and its graphical arm, the World Wide Web, provide companies with marketing, distribution and communications channels that save them millions of dollars, and extend their reach to potential customers around the world at little extra cost.

The boom in intranets is potentially of great importance to the big Unix companies, because the systems use a common language that allows them to run just as easily on Unix machines as Wintel's. But to get the upper hand, those companies need help from two major developments.

On the one hand, the companies are closely watching Netscape Communications Corp., maker of the popular Navigator Web browser and Web server software, as it introduces corporate versions of its products. Netscape currently offers SuiteSpot, a version of its Web server software that lets companies maintain pages on the Web for intranet communications.

And next year the company will introduce a corporate version of its browser, Netscape Communicator, which not only will allow users to view Web pages, but will also allow for a measure of collaboration not available now on networks: The software will let far-flung users work on the same file at the same time.

The big hope for Wintel's foes: that Netscape can use its leverage and expertise in Web systems to gain a big advantage in intranets, and provide an alternative to Wintel in the field.

At the same time, Wintel's opponents reason, this shift to intranets will help enable a shift to a new alternative to the PC -- the so-called network computer, or NC, a bare-bones device without a hard drive and limited memory capacity. If so much communication is going on via intranets sharing a common language, the theory goes, it's much more economical to put software programs on networks as well, for workers to download as needed, rather than giving each employee a huge hard drive full of applications.

That, by implication, means no need for Wintel PCs, with their complicated operating systems.

Java Men

Sun is mainly responsible for Unix companies' feverish interest in the NC, developing a "universal" programming language, called Java, that allows applications to be sent from a server to any machine in a network, so long as that machine contains software to interpret Java.

Sun says the excitement is justified. Scott McNealey, Sun's chief executive officer, promotes the NC as ideal for corporate computing, a machine that would slash annual upgrading and maintenance costs to less than $2,500 per workstation from the current $8,000 to $9,000. Mr. McNealey -- and his colleague Mr. Zander, the company's computer-operations chief -- sees the NC as a way to break the tightening grip of Intel and Microsoft.

"I'm not going to tell you NT is not going to succeed," says Mr. Zander, revising his prognosis of three years ago. But he says corporations sense a historic opportunity to get more choice. "They're telling me, 'We want to be free from the lock-in of the Microsoft operating system.' "

But the rise of the intranet and the NC is unlikely to signify the decline of Intel and Microsoft. Their unexpected surge into corporate computing gives them another sustained source of revenue growth, and an excellent chance to co-opt both intranets and NCs.

Microsoft was caught unaware by the Internet explosion two years ago, allowing Netscape practically to own the browser market and get a giant head start in selling Web servers for intranets. But starting in the spring of 1995, Microsoft chief Bill Gates refocused the software giant with stunning speed, developing browser software to match Netscape's and engineering exclusive marketing deals with every major provider of Internet service to give away its browser, Explorer.

Microsoft has now neutralized Netscape's browser advantage, and the battle is shifting to the corporate server market, where Microsoft can play the growing acceptance of NT and BackOffice as a trump card.

Here's how. Netscape's Web server software is widely used; in fact, it's the company's major profit producer. But Microsoft is giving away its version of Web server software free of charge, as well as integrating that software with BackOffice -- a package of products companies will most likely need to turn their Web sites into viable commercial enterprises linked to customers.

So corporations are faced with a choice: buy server and browser software from Netscape, or get it free from Microsoft, and have it work smoothly with BackOffice besides.

"For intranet projects, NT's the platform to choose until you come up with a reason not to," says Mr. Bakalor, EMI's chief information officer. "Why on earth would you choose anything else, unless you already had a big infrastructure in place with Unix?" Adds Mr. Davis, the president of Animation House: "I'd be floored if Netscape or anyone is able to compete with BackOffice."

Co-Opt City

As for the NC, marketing efforts of the first companies to introduce the machines -- Sun and IBM among them -- will be plagued by the slow development of Java-based applications and the plummeting costs of buying PCs and managing them. Corporations can now buy powerful, fully functional Pentium machines, loaded with big drives, for less than $1,000 each -- compared with $700 to $1,700 for the first NCs. And Microsoft and Intel last month announced plans for a new version of the PC, called the NetPC, intended to cut the costs of managing networked PCs by more than half.

Further, even if the NC is a big success, Intel and Microsoft have an excellent chance to win a major chunk of that new market. Intel has said it will build microprocessors for NCs if they take off, and Microsoft has its own competitor for Java, called ActiveX. Microsoft thinks ActiveX will be faster and better than Java, because it will be fine-tuned to download applications from NT servers to other Windows machines. But, just in case, Microsoft has licensed Java, asserting it will develop the fastest Java technology in the marketplace.

The upshot: Market researchers believe that up to 20% of corporate computers sold in 2000 may be of the NC variety, mainly for simple, repetitive tasks. But given the prevalence of Wintel servers, a lot of them are likely to contain Intel chips and Microsoft software.

So, will anything stop the Wintel duopoly? Mr. Winkler, the Gartner analyst, thinks Microsoft's competitors have to hope for an assist from two possible events. He believes there is a high probability that the U.S. Justice Department will file another antitrust action against Microsoft, alleging it can't leverage its dominance in desktop software to monopolize the intranet market.

But he also thinks such litigation won't succeed in stopping Microsoft for long. It's more likely, he says, that Microsoft could stumble because it is trying to fight on so many fronts, including new thrusts in electronic media and consumer software.

"We believe the greatest threat to Microsoft is itself," Mr. Winkler wrote in a recent report. "Working on such a broad range of initiatives and competing with nearly every vendor, Microsoft is sure to disappoint in many arenas."

The Wintel Alliance Tackles A New Foe in a New Arena

The Wintel Alliance Tackles
A New Foe in a New Arena