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HYPE IS IN HIGH GEAR FOR WINDOWS 95 Upgrade carries potential to affect industry, economy and trade deficit


Somewhere in the remote highlands of Borneo, where orangutans swing through the forest primeval, there may live a tribe so isolated that on Aug. 24, its members won't know that Windows 95 is going on sale that day.

But not if Microsoft Corp. can help it.

The Redmond, Wash.-based computer giant is reaching Himalayan heights of hype in promoting the long-delayed launch of its latest upgrade to Windows, the world's dominant system for personal computers.

The software colossus will support the rollout with an international publicity blitz costing an estimated $100 million. But by the time you add in all the advertising by companies with Windows 95-related products, the ballyhoo bill could exceed $500 million, according to Dataquest, a San Jose, Calif.-based research firm.

"There's never been anything like it in terms of a consumer rollout," said Peter Krasilovsky, senior analyst at Arlen Communications in Bethesda. "Microsoft's going to go whole hog on this with broadcast buys, magazine buys and billboards and custom displays."

The flood of publicity could easily obscure the simple truth that Windows 95 is a big deal. It will likely set off a boom in the sales of other products. It could bring closer the day when a computer in the home is as commonplace as a VCR.

The release of Windows 95 is also likely to further solidify Microsoft's role as the arbiter of standards in the computer industry. This has raised concerns that Windows 95 could make Microsoft, already the 800-pound gorilla of the software industry with nearly $6 billion in annual sales, into a corporate King Kong.

Such concerns led to the scuttling in May of Microsoft's planned acquisition of Intuit Inc. under Justice Department pressure. Windows 95 could still face a delay if antitrust officials agree with Microsoft critics that the inclusion of its new on-line service as part of the package gives it an unfair advantage.

As much as many people in the computer industry would love to see Microsoft Chairman Bill Gates toppled from his pedestal, the nation's economy could have a lot riding on Windows 95.

Its success could give retail sales an important boost this holiday season and shave a few hundred million dollars off the nation's trade gap.

A disappointing reception could turn the market sour on technology stocks. Investors got a preview of that last week when top Microsoft executives cautioned analysts not to get too enthusiastic and reminded them that the company would defer some of its Windows 95 revenue windfall until future years.

The news helped spark a technology sell-off that saw Microsoft topple from its high of $109 Monday to $92 by the market's close Friday.

Windows 95 had originally been scheduled for release for the middle of 1994, but the company's deadlines were steadily pushed back as programmers grappled with the monumental tasking of debugging a system that must interact with thousands of other programs seamlessly.

Computer users who have tested it say the delays paid off.

"From a usability perspective, it's head and shoulders above the Windows 3.1 family of products," said Bob Coen, director of advanced technologies for Cap Gemini America, a leading technology consulting firm. "I think it's going to have a monumental impact. . . . It's going to quick-start the whole software industry."

High retail expectations

Alan Bush has a clear vision of what the scene will be the morning of Aug. 24 outside his Baltimore-area Computer City stores.

"You'll see newscasts of people standing outside Computer City stores much like a Rolling Stones concert," said the president of the Fort Worth, Texas-based computer "superstore" chain. "You'll see the parking lots in Timonium and Glen Burnie jammed."

He said he expects the release of Windows 95 to spur sales of applications software, disk drives, memory, accelerator cards, faster modems and other products designed to take advantage of Windows 95's advanced features. He also expects many consumers to trade up to more powerful computers, many of which will have Windows 95 pre-installed.

"This is the largest single event to happen in the industry this year, and on a relative basis Windows 95 showing up at Computer City is something like Elvis showing up at Graceland," said Mr. Bush.

The early indications are that Mr. Bush won't be having a blue Christmas. The home shopping network QVC Inc., which previewed Windows 95 during a two-hour special July 15, reported that it took more than 12,200 orders during the show at a price of $89.99 for each upgrade program, for delivery Aug. 24.

Rob Enderle, senior analyst at Dataquest, predicted that Microsoft could end up shipping 11 million copies of Windows 95 to customers just on Aug. 24. He predicted sales of 29 million copies by the end of the year and 63 million in 1997.

Maarten de Jong, an analyst with Bear Stearns & Co. in San Francisco, predicted that Microsoft will take in $650 million in fiscal 1996 for Windows 95 upgrade kits, with $500 million in sales of new Windows 95 programs and at least $600 million from applications software upgrades such as Microsoft Office 95.

The bulk of Windows 95's early sales are expected to come from individual users. Industry analysts said savvy business buyers, who have learned to be wary of first-release software, are more likely to wait.

"In the consumer market, this is going to be a successful product," said Mr. de Jong. "In the business world, it's going to be a steppingstone toward Windows NT" -- an alternate version of the Microsoft operating system that is regarded as more suitable for large networks.

There is widespread agreement that Windows is badly in need of upgrading -- even though it is the system that controls 85 percent to 90 percent of the world's personal computers.

The original Windows won its dominant position with muscle rather than charm. It helped IBM and IBM-compatible machines that ran on Microsoft's cumbersome DOS emulate Apple Computer Inc.'s more user-friendly Macintosh.

Apple executives jettisoned their proprietary approach only after IBM and its clones -- operated mainly by Microsoft software -- had long since captured the bulk of the market.

Windows became the industry standard -- not because it had the best interface but because it ran more software on more machines. The Macintosh operating system's market share has fallen to less than 10 percent, while IBM's OS/2 barely shows up on the radar screen.

With Windows 95, Microsoft is attempting to capture users' hearts as well as their minds, and many outside testers say the new software is usable enough to win over even dedicated Mac-heads.

"I've used it. I've installed it and it looks pretty good. They're catching up to the Macintosh," said Greg Bean, director of administrative computing at the University of Maryland Baltimore County. "I don't think it'll make anyone who uses the Mac do cartwheels."

Disappointed in advance

But Ben Shneiderman, head of the Human-Computer Interaction Lab at the University of Maryland, said he was disappointed that Microsoft hadn't been more ambitious.

"Microsoft's still left us in the Valley of 1984, managing one window at a time, giving us one more view of the cluttered desktop . . ." he said. "There's a lot of ways to improve the interface that they haven't explored."

But proponents say there's more to Windows 1995 than just another pretty interface. They note that it brings the ability to run speedy 32-bit programs, where the old Windows went no higher than 16 bits.

They praise its so-called plug-and-play capability, which allows users to simply hook up hardware accessories such as printers and modems without having to configure the software, and its ability to run multiple programs at the same time (multi-tasking, in computerese).

Especially appreciated is its easy connection from the desktop to the Internet.

But one added feature is creating a ruckus. By bundling its Microsoft Network on-line service with Windows 95, Microsoft has raised alarms with the existing on-line services that would not have built-in access.

The on-line services have appealed to the Justice Department's Antitrust Division, which was considering late last week whether to seek an injunction against Microsoft's delivery of Windows 95 with the network feature included.

A Microsoft spokesman would not speculate on whether it would be able to adhere to its delivery schedule if an injunction is granted. But the company shipped its final version of its Windows 95 release to manufacturers nine days ago, raising the stakes considerably.

There is little doubt that any delay would not go down well in a marketplace that has been counting on Windows 95 to give the technology sector a boost.

"Anything that happens that's adverse to Microsoft would have an adverse effect on the market," said Mr. Enderle.

On the other hand, if the release goes ahead as scheduled, "it will have echo effects throughout the economy and the retail sector," said William F. Ford, an economist and former president of the Federal Reserve Bank in Atlanta.

Not only will Windows 95 spark a boom in the electronics retailing business, it will also have positive effects on worker productivity and the U.S. balance of trade, he said.

'Seminar-ed to death'

In the short term, the release will also have a positive effect on employment, he said.

"Everybody's going to have to go to seminars to learn about using system 95. They're going to be seminar-ed to death," said Dr. Ford, who now serves as senior adviser to the TeleCheck Inc. check verifications service. "The people who give lessons for playing with this new toy are going to have a boom."

Ben Vanzutphen, chief executive of Orange Systems in Gaithersburg, is counting on it. He said the software and computer training company is expanding its classroom space and adding staff to handle the anticipated demand for courses in how to use Windows 95. "It's the product for the times," he said.

That view seems to be the consensus in the industry.

"The only possibility that it would fall flat on its face is if there are very serious bugs or problems," said Glen Ricart, director of UM's Computer Science Center.

Some critics worry that a smooth-running Windows 95 poses more problems than a buggy one because it increases Microsoft's clout.

Mr. Shneiderman said one concern about Microsoft's dominance the basic operating system is that technological progress is limited to whatever pace the company adopts. "I would hope that a technological leader would take more innovative steps," he said.

But Mr. de Jong said fears of Microsoft's domination of the industry are exaggerated. Somebody has to create a common platform for applications software, and it might as well be Microsoft, he said.

"Who else is going to do it?" he asked. "Who else is going to pull everything together and create the standard on which this new medium will be built?"

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