Steve Lohr
United States federal and state officials are now racing to determine what antitrust action, if any, they should take against Microsoft before its next-generation operating system, Windows 98, is shipped to personal computer makers in May and goes on sale in June.
But the PC industry has been gearing up for Windows 98 far longer than the antitrust authorities. And the early impact of Windows 98 on the marketplace, computer executives and analysts predict, will be only a ripple compared with the tidal wave of its predecessor Windows 95 – with sales projected at less than half the volume of Windows 95.
Still, even with a sluggish start, Windows 98 seems destined to become the next operating system standard.
Industry executives and analysts note that it represents a technological improvement over Windows 95 and that every PC maker plans to load Windows 98 onto their new machines.
A new operating system from Microsoft, whose software runs 95% of new PCs sold, is a renewed opportunity for the company to powerfully influence the direction of computing. The Justice Department’s antitrust division and state attorneys general are examining whether Microsoft’s plans for Windows 98 will give it an advantage in the new markets of Internet software and online commerce.
In addition, according to industry executives, Microsoft is offering price discounts on Windows 98 to PC makers who install certain equipment – a practice that some antitrust experts say shows how the company uses its near-monopoly in the operating-systems business to try to gain an advantage in new markets. Microsoft, for example, is said to be offering discounts on Windows 98 to PC makers who agree to install television-receiver circuitry into their computers, an apparent move by Microsoft to stimulate demand for its WebTV online service.
Industry analysts who have tested the preview “beta” version of Windows 98 agree that it is not a big technological step ahead compared with Windows 95, which represented a radical overhaul of its predecessor. In Windows 98, they say, the notable improvements are the seamless integration of Internet browsing into the operating system, faster start-up for applications, fewer crashes and fewer headaches in attaching hardware peripheral equipment like joy sticks, scanners and video cameras.
Even Microsoft executives refer to Windows 98 as an ideal tune-up from Windows 95, seeing the new product as a next-step operating system for consumers, while corporations will be steered toward Microsoft’s Windows NT program.
The promotional push behind Windows 98 will also be modest compared with that for Windows 95. In the earlier rollout, Microsoft bought rights to the Rolling Stones’ Start Me Up as a product theme song and threw a big party with Jay Leno as host on the day Windows 95 went on sale in 1995. “Windows 98 is not going to be any Windows 95 in terms of marketing spending and hype,” said Yusuf Mehdi, a Windows marketing director.
Industry expectations are similarly scaled back for Windows 98. Sales of the new operating system, analysts say, will increase gradually in contrast to the early buying frenzy with Windows 95, when shoppers lined up for blocks waiting for the software to go on sale.
International Data, a research firm, estimates that in 1998, 7,6-million copies of Windows 98 will be sold after its scheduled June 25 introduction. By contrast, it says, Windows 95 sold 19,5- million copies in 1995 even though it went on sale in August, two months later in the year than with Windows 98.
For the producers of PC hardware add-on equipment, Windows 98 is seen as opening the door for a surge in sales of devices like digital cameras, scanners, gaming joy sticks, specialised computer mice and speakers. The new operating system supports easy-to-use hardware plug-in technology called a universal serial bus. With Windows 98, the user can plug in many different devices without getting special software and installing it.
Guerrino DeLuca, president of Logitech International, which makes hardware peripheral devices, said, for example, that the ease of using plug-in cameras could make e-mail with video or still pictures a routine household use of PCs.
“With Windows 98, we’re finally getting the software support that the hardware manufacturers have wanted for the last two or three years,” DeLuca said. “It shows that ultimately the pace of change in the industry is controlled by software.”
But Microsoft’s strategy for Windows 98 goes beyond selling operating system software. It is also using its leadership position to try to prod the personal computer industry into providing new equipment and services.
The company is offering PC makers discounts on the price of Windows 98 if they install tuner cards to receive television signals and display the video images on their PC screens.
Four years ago, some PC makers began offering TV reception on their more expensive lines, but there was scant demand. The tuner equipment was costly, the picture quality was fuzzy and few consumers saw any advantage in watching standard TV programs on their computers. But today, the technology has improved and a key use could be to receive hybrid TV-and-Internet services that show TV-style video accompanied by articles, maps and statistics on the same subject, from nature programs for children to basketball games.
These services are in their infancy, but the one Microsoft demonstrates with Windows 98 is its own – WebTV for Windows. The company acquired WebTV last year for R2,125-billion.
“Microsoft is trying to use its Windows operating-system dominance to leverage itself into a dominant position in another market,” said Kevin Arquit, a partner in the law firm Rogers & Wells and a former Federal Trade Commission official, who is a consultant to a Microsoft rival, Sun Microsystems. – The New York Times