Digital, Microsoft Plan to Expand Windows : High tech: The new strategy for the popular program is an effort to counter IBM’s alliances with some archrivals, analysts believe.
Leading software maker Microsoft Corp. and Digital Equipment Corp. are planning a broad alliance that would make the popular Windows program available over vast computer networks, a Digital spokesman said Monday.
The new strategy, viewed by analysts as a move to counter alliances between International Business Machines Corp. and some of Microsoft’s biggest rivals, will first be unveiled Thursday at Microsoft headquarters in Redmond, Wash.
Another announcement is set for Nov. 19 at Digital’s offices in Maynard, Mass. Digital is the nation’s second-biggest computer maker after IBM.
A Digital spokesman said the strategy will enable customers to use Microsoft’s Windows applications across distant networks.
Digital will introduce a Windows version of its All-In-One office software, combining electronic mail with other program functions. It also will use Windows in high-powered personal computers.
The Digital spokesman said the alliance results from a series of collaborative efforts between the companies over several years.
“It is a continuation and official introduction about what the companies are talking about” with each other, he said.
“We’ll be talking about an expansion of that relationship between the companies, linked to the products.”
The news underscored a widening rift between Microsoft and IBM, which turned Microsoft into a powerhouse in 1981 by choosing its DOS operating system for the first IBM personal computer.
Microsoft developed the operating system, or underlying software, that runs International Business Machines Corp. personal computers. But IBM and Microsoft have recently become bitter rivals over the development of operating systems.
Observers say the relationship was threatened further when IBM forged an alliance this year with onetime rival Apple Computer Inc.
But by turning to Digital, which is the world’s second-largest computer company, Microsoft could bolster one of IBM’s fiercest competitors, said Marc Schulman, an analyst with UBS Phillips & Drew in New York.
“Given the less-than-kind words IBM and Microsoft have said to each other, Microsoft might like the idea of strengthening (Digital),” Schulman said. He added that the cooperation between Digital and Microsoft will be as strategically significant as that between Apple and IBM.
Meanwhile, Wall Street greeted the prospect by sending Microsoft shares to a record high of $98 in NASDAQ over-the-counter trading. The stock later fell back from its high and closed $2.25 higher at $97.50.
Digital shares closed down 12.5 cents at $61 on the New York Stock Exchange. IBM also fell 12.5 cents to $100.125.
Analysts said an alliance between Microsoft and Digital may prove powerful enough to blunt IBM’s efforts to rival the Windows program with a new OS/2 computer operating system.
IBM has been working more closely with Microsoft rivals such as Novell Inc. and Lotus Development Corp. since it decided to press ahead with OS/2, originally developed for it by Microsoft.
Microsoft’s Windows, a graphics intensive computer program, has sold over 7 million copies in less than 18 months.
Analysts cautioned that while Microsoft Chairman William Gates has said there will be increased collaboration with Digital and Hewlett Packard Co., neither has the personal computer sales to replace IBM.
IBM accounts for about one-fifth of the desktop computer market.
“It certainly helps,” Goldman Sachs analyst Rick Sherlund said. “But don’t think you can say, ‘Well, we gave up IBM but we picked up DEC and it’s a wash.’
“But then again, IBM still markets Microsoft products as well,” Sherlund added. The companies maintain a complex web of of royalty and rights accords.
“The divorce (in the Microsoft-IBM strategic direction) is probably more important than this little affair that’s going on (with Digital),” said another analyst, noting that Digital has been using Windows on its VAX minicomputer.
