Global Hype Raises the Curtain on Windows 95 : Computers: Microsoft introduces new software--and softer image--with myriad of grandiose gimmicks.

As the clock struck midnight Wednesday in the far eastern reaches of the Microsoft Corp. empire, consumers poured into an Auckland, New Zealand, stationery store called Whitcoulls, hoping to be the first to buy the software program Windows 95. In neighboring Australia, a four-story-high Windows 95 balloon was prepped to sail over Sydney Harbor, accompanied by musicians and dancers.

On the other side of the globe, the Times of London was preparing to print the first fully sponsored edition in its 307-year history: All 1.5 million copies of Thursday’s paper were bought by Microsoft to be distributed free with a special advertising supplement. In New York, a new Windows 95 light show was created for the Empire State Building.

And all across Southern California, computer and consumer electronics stores were revving up for what may go down in the books as the most grandiose and over-hyped product introduction in the history of capitalism--a $1-billion marketing extravaganza.

Windows 95 is only a software program--and in many people’s view a rather mundane one at that--but through a remarkable combination of shrewd marketing, lucky timing and pure financial muscle, Microsoft has turned its debut into a worldwide social phenomenon.

“You have to create a lot of excitement to overcome inertia,” said Microsoft Chairman Bill Gates, who vowed at a meeting of analysts a year ago that he would transform the new Windows program into an unprecedented event. “We think we’ve met that test with Win 95,” he said.

In many respects, the software itself is not even the story anymore. Windows 95 is the latest in a line of Microsoft operating systems, which control the basic functions of computers, and it is much easier to use than its predecessors, MS-DOS and Windows 3.1. It will almost certainly become a standard for most personal computers--even though, from a technical point of view, it barely matches the brilliance of the 10-year-old Macintosh operating software produced by competitor Apple Computer Inc.

But Windows 95--which will retail for under $100 but require hundreds of dollars more in related upgrades--will make computers more accessible to millions of consumers, and it is coming to the market at a time when the non-technical masses are looking for ways onto the information highway. Computers and computer software, traditionally the province of businesses and hobbyists, are becoming true consumer products, and Microsoft is both benefiting from that trend and helping to create it.

Indeed, for Microsoft, Windows 95 marks the firm’s coming-out as a consumer company. It is spending an estimated $150 million to $200 million to advertise the product, the kind of expenditure normally associated with athletic shoes or snack foods. Including the money that retailers, personal computer hardware vendors and others are spending, the total advertising and promotion expenditures for Windows 95 are expected to reach the billion-dollar mark.

In Southern California, crowds started hitting the stores Wednesday, eager to see what all the fuss was about, said Randy Benson, regional manager for the giant CompUSA computer store chain. CompUSA outlets and many other stores were open at midnight today to get the jump on Windows 95 mania, and all were bracing for big crowds through the day.

At the chain’s Culver City store, employees were running special promotions, offering free pizza and Windows training sessions each hour leading up to the midnight opening of the warehouse. Rather than scramble to stock the store’s shelves at the agreed-upon hour, managers decided to allow customers into the warehouse area.

“It’s like a right-off-the-truck kind of thing,” said retail manager Liana Dunlap.

Microsoft is seizing the opportunity to build a consumer-friendly image that it hopes will long outlast Windows 95. Forget the Microsoft you may already know: the technically minded, sometimes monopolistic company that has drawn constant scrutiny from government antitrust watchdogs and that critics characterize as arrogant and ruthless.

The new Microsoft now being seared into the world’s collective consciousness is a warm, helpful company with a sense of humor that builds friendly, easy-to-use products.

Gates, the nation’s richest man, may be known in the computer industry as an intense, extraordinarily competitive person who is contemptuous of those he doesn’t think are his equals. But now he’s being remade as a folksy company spokesman, cheerfully answering softball questions on CNN’s “Larry King Live” and NBC-TV’s “Today,” or patiently giving instruction on PC basics during a half-hour infomercial with TV star Anthony Edwards.

“Given that software is moving from a technical thing to a consumer good, Microsoft has to interface with people in a more amicable way,” said Rajiv Lal, marketing professor at the Stanford University Business School. “When you look back in five years, you will say this is the moment Microsoft began to create an image for itself.”

The company has generated free publicity worth untold billions of dollars by cleverly exploiting the media and taking advantage of public fascination with Gates. Later today, Gates, reportedly joined by “Tonight Show” host Jay Leno, will appear before thousands gathered at a tent city that has popped up overnight on Microsoft’s 270-acre Redmond, Wash., campus to give an address that will be beamed by satellite to some 50,000 more people in dozens of locations across the country.

For Russ Stockdale, who is in charge of the consumer marketing campaign for Windows 95, the consummate sign of success is taped up on his door: a Doonesbury comic strip featuring the product.

“I have an operating system that is in the comics page,” said Stockdale, smiling wryly at the notion that the set of codes used to run a personal computer could ever become so embedded in popular culture. “It speaks to the phenomenon this has become.”

The success of Windows 95 isn’t as automatic as the blanket coverage of the product might suggest. Even generous reviewers say that when it comes to ease of use, Windows 95 just barely meets the standard set by Apple Macintosh. Apple is launching a massive campaign of its own to underscore the point. Also, 30% to 40% of the computers in use aren’t powerful enough to run the new program.

A weak start could be devastating to Microsoft.

“It would be a self-fulfilling prophecy if few decide to upgrade,” said Steve McClellan, an analyst at Merrill Lynch’s San Francisco office. By contrast, he said, if buying is strong, “there could be a windstorm.”

Microsoft has broadened its sales channels to reach the broadest audience possible for what remains a relatively complex, technical product. Among the 25,000 retailers that will sell the product are bookstores, video rental shops, home shopping channels and even grocery stores that have not traditionally sold software.

Retailers around the country have put the finishing touches on “World of Windows” displays in their stores in hopes that consumers who come in curious about the Windows 95 frenzy will go home with the expensive new computers and software required to run the program effectively.

Publishers interested in offering Windows 95 materials have been so pampered and nurtured by Microsoft, there will be a glut of new books. An estimated 450 books are available to help users with the product including “The Complete Idiot’s Guide to Windows 95” and “Windows 95 for Dummies.”

Microsoft has made an extra effort to reach out to new customers. That’s especially important at a time when Microsoft’s share of the software market has grown so large it can no longer expand by taking market share from competitors.

“They are trying to get people into computers that have never had them before,” said Jesse Berst, editor of Windows Watcher, a Redmond-based industry newsletter.

Analysts are betting the investment--and the hype--will pay off. Market research firm Dataquest estimates Windows 95 sales of 30 million copies by the end of the year and 127 million by 1998. A strong start will encourage the development of new applications that will in turn attract new customers in what Gates calls the “positive feedback loop.”

And such success will have crucial long-term implications for Microsoft and the computer industry as well. The start button and white clouds on blue sky motif that computer users will see when they boot up Windows 95 will also establish the look and feel that the company will put on its business product line, Windows NT. Eventually the company hopes consumer products like VCRs will be controlled by the same windows software.

Windows 95 also marks Microsoft’s entry into the competitive computer on-line business: The Microsoft Network can only be reached via Windows 95. Twenty other applications software products, such as word processors and spreadsheet programs, that take advantage of the new program’s capabilities will also be launched today.

Windows 95 wouldn’t be Microsoft’s first successful effort to reach the mass consumer. Its first big hit was a flight simulator, and it has had a string of hits in the educational software market beginning with its popular CD-ROM encyclopedia Encarta. But consumer products have gained new recognition with the establishment of an entire new campus dedicated to the consumer division. The new orientation is also reflected in the cartographers, ethno-musicologists, artists and writers that are a part of Microsoft’s effort to reach a broader audience.

Then there is Bob Herbold, who was hired away from consumer goods giant Proctor & Gamble Co. last November to take over as Microsoft’s chief operating officer and to oversee Microsoft’s new image-building effort.

Microsoft has long been known for aggressive advertising. But Herbold brings a new understanding of the touchy-feely aspects of marketing where Microsoft has never been effective.

In a recent presentation, Herbold criticized two recently developed commercials for lacking the personal touch necessary to make technophobes comfortable. “This next really cranks up the humanity,” he said, introducing a new ad that shows a family gathered around a computer.

But the marketing hype isn’t fooling anybody on the Microsoft campus, where 80-to-100-hour workweeks and a fiercely competitive culture belie the new homespun image.

“We are doing what we’ve always done,” said Chris Peters, a senior Microsoft executive. “If you don’t work hard and invent useful things, in two years you will be nothing.”

What has changed, Peters says, is the world recognition of the importance of personal computers. “When I joined 14 years ago, nobody knew what Microsoft was. Now people know what we do impacts their lives.”

Times staff writer Jeff Leeds contributed to this story.