Microprocessor chip makers are being hammered on Wall Street. Competition seems to be at the heart of it: the bearish securities analysts fear that Intel will suffer as the IBM-Motorola team seeks to invade Eighty-sixland using Power 600 chips and the glamour of the Apple Macintosh. At the moment, it does not seem that Intel’s […]
Microprocessor chip makers are being hammered on Wall Street. Competition seems to be at the heart of it: the bearish securities analysts fear that Intel will suffer as the IBM-Motorola team seeks to invade Eighty-sixland using Power 600 chips and the glamour of the Apple Macintosh. At the moment, it does not seem that Intel’s predicted malaise will be the result of a downturn in production volume. If anything, even gloomy stock watchers think Pentium production will zoom upwards during 1994 while 80486 volumes will continue to increase. Wall Steet fears, instead, a decline in profit margins at Intel and, by implication, other microprocessor makers because sale prices of brain chips will fall faster than costs. The concern is quite legitimate, as it is obviously based on an eventuality that benefits one company more than any other: Microsoft Corp. For the past several years, no company in computing has been luckier, nor, generally speaking, more clever than the pre-eminent supplier of systems software for desktop computers. Microsoft fostered the pricing and technology battles among personal computer makers that has made the desktop workstation market what it is.
It also stimulated the pace of progress in the Unix world that must offer comparable price-performance – at least in the workstation business – to remain viable in a market that can easily move from RISC-based machines to Intel-based machines if economic forces so dictate. The combination of cheap clone personal computers and obsessive contests among the Unix vendors has undermined the power of all the traditional manufacturers, because that power was based on product development cycles that are slow by current standards and price-performance improvements that generally lagged rather than led developments in the semiconductor business. Even the IBM mainframe must now be recast as an array of miniaturised computers to remain viable, while IBM, as fearful as a Custer footsoldier with a good head of hair, tries to persuade a somewhat bored public that its mainframes are as vital to life in general and commerce in particular. While there is indeed a future for large central systems, IBM’s recent efforts to promote the things while it stumbles around without a vision evokes the brief era of the Yankee Clippers. Yankee Clippers were among the last of the commercial sailing vessels. They were faster than steamships, quieter and much more beautiful. Promoters of the Clippers were able to show that they were more economical, too. But commercial shipping companies opted for steam; it didn’t depend on the weather, nor on crews with the brilliance a finely-tuned sailing ship necessitates. The clumsy, stinking, noisy steamboats transformed sailing from a science to an art, where it will always be with us but not when we want to move bananas. So, too, the networks of desktop machines and their larger cousins, the servers, will not only replace traditional mainframes but force makers of central systems to do that which was unthinkable in the very recent past: IBM and any other company that wants to provide large systems to big business will have to build a network of smaller systems and unify it with the combination of a large metal cabinet and a semantic tarantella.
By Hesh Wiener
Whether Microsoft’s Windows, Unix, MVS/ESA or a yet-unnamed bit of software provides the underlying environment may be of great importance to the computer industry but it will be of rapidly diminishing interest to practical end users. The typical applications interface is more likely to be (or to support or very closely resemble) Windows than anything else, because 30m or 40m or 50m computers a year will be sold with Windows or one of its progeny already installed. The direct consequence of this will be the elevation of successful applications software companies to a level of wealth and power that could never occur in the clubby mainframe world, nor even in the more youthful if bohemian Unix universe. To prosper – and even, we suspect, to survive – the makers of underlying systems fr
om small servers to the mainblobs that will supplant mainframes will vie for the privilege of providing links between their operating systems and databases and the ubiquitous gadgets on desktops. In its attempt to tap into the wellsprings of Intel’s impressive success, IBM will undoubtedly stimulate a price war. Motorola, more than IBM, could be a direct casualty as the processor chips that promise soon to be among its most popular offerings will be priced to undermine Intel’s hegemony. Whatever profit margins Motorola might have hoped for when it was the supplier of its original processor designs – the 68000 series – to Apple and others will be put on a diet, whether or not the 600 family of chips becomes successful. Intel’s unit profits will most likely fall, too, if the 600 chips threaten to give Apple (and others) a price advantage in processors that is the mirror image of the situation that prevailed ever since IBM, in a suicidal moment, made the Intel-based personal computer as popular a basis for mimicry as Winston Churchill in his prime. IBM hopes to stay on the sidelines, presumably because it has no desire to use its own semiconductor manufacturing capacity in what promises to be a dangerous if not destructive bit of business. Customers will flock to the scene of pricing battles, cheering like Romans attending a gladiatorial festival and throwing tons of money at the victors to compensate them for their inability to obtain ordinary life insurance. But Bill Gates may not be entirely secure in the role of emperor he now enjoys. Microsoft has found it difficult to withhold improved versions of its applications for the NT, Chicago and Cairo environments; it has instead chosen to make its best efforts available to users of ordinary Windows. Unless Microsoft can produce software that makes future operating environments as compelling as Windows is today, it will find itself in a stasis that closely resembles IBM’s dilemma in the mainframe world.
Should this occur, the decline of Microsoft could be very rapid… and irreversible. Bill Gates is too rich and too wily to be knocked out by an enemy that he can identify, such as IBM or Novell. But for the very same reasons, he has become terribly vulnerable to an army of software guerrillas no different from the one that spawned his own company and its many competitors in the applications world during the early days of the IBM personal computer. If none of these tiny bands of programmers could replace Microsoft as the IBM of desktop systems software, any several of them will be dangerous enough to prevent Gates from ever raising his prices enough to fund a successful attempt at their extermination. This cannot bode well for IBM, which by virtue of its massive size, glorious history and hubristic corporate culture still imagines that it can sentence Microsoft to death. Big Blue may yet pronounce such a verdict, but it looks very mush as if Bill Gates’s last meal will turn out to be IBM.Copyright (C) 1993 Technology News