2018-02-23 18:58:03 +00:00
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---
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created_at: '2017-11-20T17:08:09.000Z'
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title: Microsoft Has It All—Almost (1985)
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url: http://www.nytimes.com/1985/09/04/business/microsoft-has-it-all-almost.html
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author: coloneltcb
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points: 208
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story_text:
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comment_text:
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num_comments: 146
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story_id:
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story_title:
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story_url:
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parent_id:
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created_at_i: 1511197689
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_tags:
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- story
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- author_coloneltcb
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- story_15741381
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objectID: '15741381'
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2018-06-08 12:05:27 +00:00
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year: 1985
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2018-02-23 18:58:03 +00:00
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---
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2018-03-03 09:35:28 +00:00
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**BELLEVUE, Wash—** Something is gnawing at Microsoft.
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By all accounts, the Microsoft Corporation, the first major company
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spawned by the personal computer to reach its 10th birthday, has a lot
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to celebrate. Clearly the company has prospered, with revenues leaping
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by more than 40 percent in its last fiscal year. It has by far the
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broadest product line among software companies. And recently it signed a
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long-term agreement with the International Business Machines Corporation
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that is seen as cementing Microsoft's position at the center of the
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personal computer universe.
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''They're just on top of the world right now, as far as I'm concerned,''
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said David S. Wagman, co-chairman of Softsel Computer Products, a
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leading distributor of software.
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But what is spoiling the party is that the company was eclipsed last
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year as the largest personal computer software concern by the Lotus
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Development Corporation, creator of the highly successful 1-2-3
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spreadsheet program. Lotus's revenues totaled $200 million for the 12
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months ended June 30. Microsoft's revenues came to $140 million in that
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period.
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Some Shortcomings
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While Lotus and Microsoft remain friendly rivals, Microsoft and its
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29-year-old chairman, William H. Gates, clearly want to be No. 1 again.
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''It drives him up the wall,'' said one friend of Mr. Gates. Perhaps
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more important, however, the ascendance of Lotus has pointed out some
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Microsoft shortcomings that the company is hastening to correct.
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To catch up to Lotus, or even merely to continue to grow, Microsoft must
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continue to expand beyond systems software, which governs the basic
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functions of the computer, to the far larger market of applications
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programs, such as word processors and spreadsheets, which guide the
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computer in particular tasks. Lotus sells only applications software.
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Microsoft is now unleashing a barrage of programs, including Excel, a
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spreadsheet program for the Macintosh computer, and Access, a
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communications package for the I.B.M. computer. It is also finally
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bringing Windows to market. That program, a key part of its strategy, is
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more than a year behind schedule.
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But selling software to consumers is different from selling highly
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technical operating systems directly to computer companies. To compete
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against sophisticated marketers like Lotus, Microsoft is also undergoing
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a corporate makeover, trying to shed its ''techie'' image in favor of a
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flashier one. The corporate image perhaps is a reflection of Mr. Gates
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himself, who is a technical genius but is much less outgoing than
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Mitchell D. Kapor, Lotus's chairman.
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Perhaps symbolically, the company has already replaced its drab green
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packaging cartons with more colorful boxes and will concentrate its
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advertising on fewer products to make a bigger splash. ''We're taking a
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look at everything,'' said Jean Richardson, a former Apple official who
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now heads Microsoft's corporate communications. ''A year from now you
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will see a very different image of Microsoft.''
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Going public next year is also part of the plan. Officials say that the
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need for money is not the primary reason for a public offering. The
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company has been consistently profitable and is believed to have more
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than $15 million in cash on hand. But going public is expected to win
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increased attention and credibility. In addition, such a move would
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provide a way of rewarding Microsoft employees, who have received stock
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or options.
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Microsoft was founded in 1975 by Mr. Gates, then 19, and a friend, Paul
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Allen, who is now less actively involved in the company. Mr. Gates, who
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as a teen-ager had developed a previous computer programming business,
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dropped out of Harvard and wrote a version of the Basic computer
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language for one of the first personal computers. Selected by I.B.M.
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Microsoft's big break came five years ago, when its MS-DOS - which
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stands for Microsoft disk operating system - was chosen by I.B.M. for
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use on its personal computer. As I.B.M. soared to prominence in the
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personal computer business, so did Microsoft, in a relationship that one
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Microsoft official recently described as ''five years on a raft.'' There
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was always the risk that I.B.M. would go its own way. But the agreement
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signed recently between I.B.M. and Microsoft seems to remove this threat
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for the next few years at least.
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Last year, MS-DOS accounted for about 20 percent of Microsoft's
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revenues, while other systems software, mainly programming languages,
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totaled 30 percent. In applications software, which accounted for most
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of the rest of the revenues and is expected to grow fastest, Microsoft
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has done only moderately well.
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It got a late start in the applications software market for I.B.M. and
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faced entrenched, highly specialized competitors. The I.B.M. computer
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version of Microsoft Word, the company's word processing software,
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trails programs by Multimate, Micropro International and I.B.M. itself,
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according to audits of computer stores by IMS America, a market research
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firm.
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Microsoft was also hurt by its reputation for bringing products to
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market behind schedule and full of ''bugs'' or errors. In a letter in
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the latest issue of Macworld magazine, for instance, a reader gripes
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about finding ''15 bugs and 7 shortcomings'' in the initial Macintosh
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version of Microsoft Word. ''Word is typical untested Microsoft
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software,'' he said.
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To improve its production process, Microsoft has changed its management.
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Mr. Gates, while still chief executive and clear leader of the company,
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has no one reporting directly to him. That allows him to concentrate on
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the direction of the company while leaving day-to-day management to
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others, particularly the president and chief operating officer, Jon
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Shirley, former head of the Tandy Corporation's personal computer
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merchandising.
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The company has also moved quickly into software for the Macintosh
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computer, and now dominates that market. It is also expanding overseas,
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where its Multiplan spreadsheet outsells 1-2-3.
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But Microsoft is still in search of a hit product. One contender, coming
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this month, is Excel, a spreadsheet program for the Macintosh that Mr.
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Gates expects will become Microsoft's best seller. Excel is more like
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1-2-3 than Lotus's own program for the Macintosh, which is called Jazz
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and has sold below expectations.
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Microsoft officials predict that Excel will do better. The company also
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plans a multifunctional product for Macintosh, known as Microsoft Works,
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that will be lower priced than Jazz. Yet it is unclear whether any
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product for the Macintosh, which has suffered a sales slowdown, will
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sell all that well.
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Windows Coming in Fall
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For the I.B.M. world, Microsoft this fall is introducing Windows, a
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program that allows various applications to appear on the screen at
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once, each in its own ''window.'' Microsoft hopes to make Windows a
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standard on all MS-DOS PC's.
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While Windows, which is operating system software, might be a big
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product in its own right, it could also help increase sales of other
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Microsoft applications software. Since Windows makes the I.B.M. computer
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screen resemble the Macintosh screen, Microsoft will be able to convert
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its Macintosh programs for use on the I.B.M. computers using Windows. A
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version of Excel running on Windows for the I.B.M. computer, which would
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directly compete with 1-2-3, is expected early next year.
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But Windows faces an uphill battle. While more than a dozen companies
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expressed support for Windows when it was announced in 1983, enthusiasm
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has cooled.
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graph of Microsofts annual revenue for fiscal year in millions of
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dollars; photo of William Gates and Jon Shirley (AP)
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