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 Forbes ASAP, February 26, 1996 Goliath At Bay Microsoft suddenly sees itself beset by broadband rebels with its own middle age. Goliath in the vale of Elah roared his contempt at the weapons and zeal of David: “Do you think me a dog that you contest me with sticks and stones?” Bill Gates, the Goliath of software, sees himself similarly beset by zealous rivals with risible weapons. Entering his modest second-floor office on the edge of the Microsoft campus on a twilight evening in late November, I find him irked and addled by what he sees as a siege of slingshots from irrational media and capital markets in his industry. Microsoft entered November on an autumnal blaze of upside news-earnings up 53%, sales up 63%, a double gigabuck quarter. But now, amazingly, people were speaking of a “crisis” at Microsoft. “That’s an emotional word,” says Gates, twisting uncomfortably in his chair. It was bad enough when Netscape came on with 9,000 lines of code for a World Wide Web browser that took six weeks to build and that was given away free, and people began talking of his company’s downfall. Gates had pulled that trick himself in 1976, with a few thousand lines of code for the Basic programming language for the PC and then again in 1980 with MS- DOS. But to do it to Goliath seemed lese-majeste. Then comes Sun Microsystems with a new programming language called Java, and people like me, who by Microsoft standards don’t know anything about programming, who have never written a single line of code, presumed to tell him about its virtues. It’s safe, secure, interpreted, platform independent; it collects your garbage (automatic garbage collection). It compiles as if by incantation. It builds market cap as by magic. Give poor Bill a break. “Yeah, right,” says Gates. “I have to wonder who screwed your head around . . .” Oh, he knows, he knows. “The Internet” makes everything different. You can make any claim you want, however bizarre or ludicrous, that would ordinarily be laughed off the stage, and if you add the mantra “on the Internet” at the end . . . you can morph yourself from a typical media clown into a visionary, a prophet, a guru. “Nobody pauses to say, ‘Huh?’“ Even the analysts will nod and the market will bow. It’s “on the Internet.” One day in November, three days before my visit, Rick Sherlund, the Goldman Sachs analyst who helped bring Microsoft public in 1986 and had touted the stock for a decade, downgraded Microsoft’s shares from buy to “moderately outperform” on the basis of Internet incantations from Sun and Netscape. Sherlund also replaced Microsoft with Netscape on his recommended list. Indeed, Goliath’s net worth was shrinking by the minute as Microsoft’s market cap sank by $9 billion, and Sun’s and Netscape’s surged by $9 billion in a matter of weeks. Does Bill Gates know Rick Sherlund, by any chance? Sure, Gates answers, “extremely well.” “He’s your man, he’s great,” says Gates, “if you want to run a spreadsheet.” In this world of manias and emotions, “I have to make rational decisions,” Gates says, glaring at me. “Somebody who thinks that because of a browser that anyone can clone, because of a language that is magic, they [Netscape and Sun, the unmentionables] can overthrow the world—that person can’t even think two chess moves ahead. You’re not even in the game I’m playing.” Okay, thinking forward a couple of moves, what is the big thing bearing down on Microsoft on that road ahead? It’s middle age. No, in Redmond, they have another name for it. Throughout the company, wherever you go—from hummus on pita bread at the cafeteria with a glib former Hollywood agent hired to handle publicity, to a Starbucks latte at the Microsoft model “home” with software sage Rick Rashid incandescent on a couch, or off to Rover’s Restaurant where Nathan Myhrvold spiels refulgently at a corner table through 12 courses of rococo “fatware” and my two missed flights—the word is middleband. From the top down, Microsoft is becoming a middleband company. Gates, Myhrvold, James Allchin, Craig Mundie—nearly anyone in Redmond will step you through it. The future is not broadband, not narrowband; it is some middle way. It takes Excel and Word and Powerpoint presentation graphics and multimedia CD—ROMs and the new Video ROMs—indeed all the front and back Office suites that are the core of the company, all the teeming towers of legacy code—and attaches that to the Internet. It’s Encarta and Baseball and digital TV all tied to the Web over middleband circuits. Gates explains: “We will translate Encarta into many languages and make it a front end to the Internet, so that whenever you look up a topic in the encyclopedia, we can link you into what there is in the Internet on that topic. “Now the Internet is not fast enough when you just want to go pure Internet, so every year you can buy the CD that holds the bulk of the material.” It will be a middleband world. I see the millennium at hand: People are all queuing up at Egghead for their Encarta update CDs. From Gates on down, however, Microsoft leaders do grasp the essence of the change. Myhrvold trenchantly points out that communications standards no longer rise from the center out, from the LAN to the WAN. They begin on the Net and move inward to the LAN and transform it. “The LAN is dead,” as Myhrvold says. But these same Microsoft leaders seem to believe that the transforming power of the Net stops short of the PC and operating system. Sun will set, but Windows will open wide on the World Wide Web (up to ISDN speeds). After all, as Allchin puts it, “We see the Internet as an extension of the operating system.” I ask Gates how we can have a middleband world in the face of a rising tide of bandwidth. Gates in the past has spoken of virtually “infinite bandwidth.” But he does not see it today. [ back to top ] [ page | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 ]
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