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Not unselfishly, Microsoft helps out Apple Keeping one's competitor alive has advantages

PRETEND for a moment that you're the chief executive of a fabulously successful company. You dominate your industry, and you're making money so fast that you need a whole new generation of computers just to count it.

Thanks to years of dumb marketing decisions, your biggest competitor is washed up, losing money so fast it needs a whole new generation of computers to count the outflow.

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Do you: A) Stand by and wait for your old adversary to die a lingering death? B) Try to buy him out for nickels on the dollar? C) Lend him pocket change to try to keep him alive a while longer?

If you're Bill Gates you choose "C," which is why Microsoft announced that it was investing $150 million in its old nemesis, Apple Computer, a decision that sent Apple stock soaring. Well, maybe not soaring, but up far enough to look respectable for a while.

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To Apple's fanatically loyal Macintosh users -- many of whom booed at an industry conference when the deal was announced -- it looked like a pact with the devil. And indeed it was. But Microsoft's effort to keep Apple afloat could ultimately benefit both sides -- and make sure that Mac users can continue to worship at the temple.

While Mac enthusiasts have long viewed Gates & Co. as the enemy, the two computing giants have always had a more complex relationship than their sparring would indicate.

True, Microsoft was imbued with the color of Big Blue when it got the operating system contract for IBM's new personal computer back in 1981.

And a few years later, Apple launched the Macintosh as "The computer for the rest of us." Its elegant new graphical operating system was as much an assault on IBM's stern-faced business image as it was a step forward in computing. When IBM lost its defining role in the PC market, Microsoft took over as the Mac lover's Evil Empire.

But in reality, Apple and Microsoft always had a business relationship that went beyond their well-publicized court fight over who owned the "look-and-feel" of a graphical operating system.

In the early days of the Macintosh, when no other major software publishers would take the risk, Microsoft made a major commitment to developing programs for the Mac.

Not many people remember it now, but Microsoft Works -- which combines basic word processing, spreadsheet, database and communications software into one package -- was introduced on the Mac. Back in 1985, I created our newspaper's first computer-generated graphic using a Macintosh Plus and a program called Microsoft Chart.

In the days of DOS, when Lotus 1-2-3 ruled the IBM spreadsheet world and WordPerfect dominated word processors, Microsoft was learning how to develop graphical applications on the Mac.

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When Windows finally became a usable operating system for IBM-compatibles, Microsoft was ready with Word and Excel.

WordPerfect and Lotus never could catch up. Today, Microsoft dominates word processors and spreadsheets -- on the PC and the Mac.

In fact, Microsoft is still the largest third-party producer of Macintosh software. While other software publishers may rule the Macintosh graphics trade, Microsoft makes the bread-and-butter programs that Mac owners use every day to write letters and run their businesses.

Mac users, who have rarely had the benefit of real competition, also pay more for their software than PC owners. So Microsoft's investment in Apple -- not much more than pizza money by Microsoft's standards -- will actually protect a profitable market niche.

For Mac owners, Microsoft's promise to release improved Mac and Windows versions of its most important programs at the same time guarantees the availability of up-to-date software.

It may persuade developers of other programs to write for the Mac, too. This is critical for Apple because people don't buy operating systems -- they buy software. And developers concerned by Apple's declining market share are jumping ship.

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But the true benefit for Microsoft may lie elsewhere. The Justice Department's antitrust lawyers already foam at the mouth every time Microsoft buys another software company. With Apple dead, it would be much harder for Microsoft's acquisitions to pass muster. With Apple alive, it's easier for Microsoft to argue that it still faces real competition.

More importantly, over the last two years, Apple hasn't been Microsoft's most serious competitor. Microsoft is much more worried about Netscape Communications, which jumped on the Internet bandwagon before Microsoft realized what was happening and stole the lion's share of the World Wide Web browser market.

As part of the latest deal, Apple agreed to make Microsoft's Internet Explorer the default Web browser on new Macs. While Macs only account for 10 percent or so of the desktop computer market, they're still the favorite among Web developers. Also, Netscape's Navigator was originally a Mac product and dominates among Mac users. So the arrangement will give Microsoft an advantage in a critical section of the browser market.

Does all of this mean Apple will survive? It's hard to say. The company has snatched defeat from the jaws of victory before. And computer buyers, who have been shying away from Macintosh by the millions, may never return. But the deal gives Apple a psychological boost and some breathing room. And Mac users will continue to get software from the company they love to hate.

Pub Date: 8/10/97


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