‘Nightmare’ a Reality, Microsoft Chief Warns
Some of Microsoft Corp.’s worst fears about its competition are coming true, Microsoft Chairman Bill Gates acknowledges in an internal “state of the company” memo.
“Our nightmare--IBM ‘attacking’ us in systems software, Novell ‘defeating’ us in networking and more agile, customer-oriented applications competitors getting their Windows act together--is a reality,” Gates wrote.
In the eight-page, single-spaced memo sent out last month to his top people, Gates candidly describes the troubles of a software company whose public image has been one of nearly unparalleled success.
Besides concerns about IBM and others, he mentioned worries over potentially “disastrous” results if the company loses a copyright infringement suit filed by Apple Computer as well as concerns about an ongoing investigation by the Federal Trade Commission.
The memo was obtained by the San Jose Mercury News, which published excerpts this week. A Microsoft spokeswoman Wednesday confirmed the accuracy of material quoted by the newspaper.
News of the memo sent Microsoft’s stock skidding sharply in trading Wednesday on the over-the-counter market where the company’s shares closed at $103.375 a share, down $8.125.
Analysts said the memo was the first public indication that Gates is seriously worried about Apple’s suit.
Analyst Robert Kleiber of Piper Jaffray & Hopwood, a Minneapolis brokerage, noted that Microsoft has long maintained that it will win the Apple suit.
“This is the first admission that, ‘Gee, we could lose it,’ ” Kleiber said. “I think it scares him to death, and it should.”
If the judge in the case hinders Microsoft’s development of Windows, “then IBM has an open field for OS/2,” he said. OS/2 is an operating system developed for IBM and compatible computers.
Gates wrote the memo in April after taking a week off to think about his company--the world’s largest producer of personal computer software--and the entire software industry.
In the memo, Gates reiterated that the company, which he founded 16 years ago, is betting its future on Windows, a program that makes IBM-type computers nearly as easy to use as Apple Computer Inc.’s Macintosh. “Everything we do should focus on making Windows more successful,” he wrote.
Microsoft developed MS-DOS, the original disk operating system for use on IBM-compatible computers and led it to become the industry standard. It had been working with IBM to develop OS-2, a second-generation operating system designed to replace DOS. But the huge success of Windows, which works with DOS, has led to a parting of the ways.
Working with IBM has forced Microsoft to accept “poor (computer) code, poor design and other overhead,” Gates wrote. But he said Microsoft “will not attack IBM as a company, and even our public ‘attacks’ on OS-2 will be very professional.”
