Life is never dull in the computer industry, and last week Apple and Microsoft made sure that the few who weren't paying attention sat up and took noticeShow full article

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Life is never dull in the computer industry, and last week Apple and Microsoft made sure that the few who weren't paying attention sat up and took notice. At Steve Jobs's keynote address at Boston's Macworld Expo, Jobs and Microsoft CEO Bill Gates announced a wide-ranging technology agreement. The highlights of the agreement include:

• Microsoft will purchase $150 million of non-voting Apple stock (a new class of stock created expressly for this purpose).

• Microsoft will continue to ship Microsoft Office, Microsoft Internet Explorer, and other Macintosh programs for at least five years.

• Apple will bundle Microsoft Internet Explorer with the Mac OS and make it the default Web browser in future releases.

• The companies agreed to a broad patent cross-licensing agreement.

• The companies plan to collaborate to ensure compatibility between their respective Java virtual machines.

<http://product.info.apple.com/pr/press.releases /1997/q4/ 970806.pr.rel.microsoft.html>

Reality Check -- Much of this announcement is pure public relations, nothing more. The money sounds good, but $150 million is pocket change for Microsoft, and although Apple's finances don't compare with Microsoft's, Apple still has about $1 billion in cash, so $150 million won't make a significant difference in the long run.

Don't assume that a public relations ploy is pointless though, because it's precisely the shot in the arm that Apple has needed for some months. Many people believe that ex-CEO Gil Amelio did a good job of putting Apple back on a firm business footing, and the success of Mac OS 8 sales (Apple claims that over 1.2 million copies were purchased by 08-Aug-97, quadruple Apple's expectations) show that Apple still has a customer base willing to spend money with Apple.

Despite Amelio's efforts, press coverage of Apple has remained heavily negative, or more accurately, coverage has remained heavy and negative. Macintosh sales have been down, but it seems clear that the damaging press coverage about how Macintosh sales were down in large part created the public perception that buying a Mac would be a bad idea. You see the feedback loop - the press may not have been so much reporting the news as creating it.

This announcement of support from Microsoft could break the loop and create some positive press coverage, which would in turn improve public perception of Apple's condition. The announcement had the immediate effect of driving Apple's stock price up six points, and several analysts raised their ratings of Apple's stock, which, in the equally feedback-driven world of the stock market, may help Apple's stock in the near future.

Apple's Reasons -- It's obvious why Apple wanted this announcement. The public relations impact was a big reason, as was the commitment from Microsoft on Office and Internet Explorer. Apple's not so foolish as to believe the Mac could thrive without Microsoft Office. Love them or hate them, Office mainstays Word and Excel are a big reason the Macintosh is still alive today. Without Word and Excel, the Mac simply wouldn't have stood a chance at competing in the business market, where interoperability is of tremendous importance. That Microsoft makes hundreds of millions of dollars a year selling Office for the Macintosh is proof enough of this fact.

Microsoft's Reasons -- Less clear are Microsoft's motivations. Keep in mind that Microsoft is as driven by the bottom line as any company. You can assume that Microsoft doesn't feel that it's wasting its money. This is the company that's losing hundreds of millions of dollars a year on MSN, with the assumption that sooner or later, there will be a big payback from Internet services of some sort. That said, here are my thoughts on why Microsoft offered its support to Apple.

• By bolstering Apple's fortunes in this relatively minimal way, Microsoft helps assuage anti-trust concerns. If Apple were to disappear, the U.S. Justice Department would look more closely at allegations of monopolistic practices on Microsoft's part. By investing the $150 million in non-voting stock, Microsoft has no control over Apple, which would have made the Justice Department take note as well. In addition, it's unclear how much more money Microsoft would make even if every Mac user converted to Windows. In the past, Microsoft made more money per Mac user than Windows user, and although that's no longer true, Microsoft doesn't have nearly as much financial incentive to eliminate Apple as many people assume.

• Apple CFO Fred Anderson said that in addition to the previously mentioned $150 million investment, Microsoft will pay Apple an undisclosed sum over the next few years as part of the patent cross-licensing agreement. In the computer industry, patents are used like trading cards. The additional payments may account for Apple's patents being worth more than Microsoft's in the cross-licensing agreement; alternately, the money may settle patent squabbles between the two companies.

• In my opinion, Microsoft needs competition, and it's possible that someone within the company has recognized that fact. Competition prevents stagnation, which serves no one because users don't benefit from added functionality and companies don't earn upgrade money. Microsoft is in the enviable position of being able to reap the rewards of having competition from Apple while having little to fear from even a healthy Apple.

• Finally, Microsoft gets another leg up on its Internet strategy by Apple making Internet Explorer the default Web browser in future versions of the Mac OS. Some version of a Netscape Web browser (it's difficult to talk about Netscape's Web browsers by name, because the names keep changing and the Web browser is now part of the Netscape Communicator suite) will probably continue to be bundled with the Mac OS, but it won't get top billing.

The Mac Faithful -- There are undoubtedly many Macintosh users who feel that Apple has sold out to the Evil Empire. I think that's an overreaction. There isn't much new in the announcement, other than the $150 million investment, which doesn't even give Microsoft any voting power. Microsoft was already developing Office 98 and Internet Explorer 4.0 for the Mac, and Apple was already bundling Internet Explorer with Mac OS 8. It's just a ploy to regain the confidence of the press and Wall Street, and if it works, it's good for the Mac, which is what we all want.

There are a few other twists in all this that should reassure Mac loyalists. First, Bill Gates and Microsoft don't always share the same opinions. Bill has supported the Mac personally for quite some time and is probably the primary reason why other forces at Microsoft haven't eliminated Mac development. Strange as it may sound, Bill and a relatively small group of Macintosh supporters within Microsoft have probably been one of the most important factors in keeping the Mac alive all these years. The fact that Mac support within Microsoft is on an upswing can only be a good thing.

Second, Steve Jobs also announced sweeping changes to Apple's board of directors. It's hard to say much interesting about the specifics, since the names won't mean much to most people. However, new to the board are Pixar CEO Jobs (who reportedly sold $22 million in Apple stock several months ago), Bill Campbell, president of Intuit (previously a long time Apple and Claris executive); Jerry York, former CFO of IBM and Chrysler (said to have been instrumental in the financial turnarounds of both companies); and Larry Ellison, the chairman of Oracle. Ellison is a bit scary, because he's made some statements about what he thinks Apple should do that betray a seeming ignorance of the existing Mac community, if not the entire personal computer industry. However, Ellison is also one of Microsoft's most outspoken opponents, so his vote in board decisions will always be something of a wildcard.

<http://product.info.apple.com/pr/press.releases /1997/q4/ 970806.pr.rel.board.html>

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As I sat in my Boston hotel room on the first night of Macworld Expo, the local public television station was running "Triumph of the Nerds," a somewhat silly documentary about the history of the personal computer industry. When asked by the interviewer about Apple's historical arch-rival, Steve Jobs replied, "Microsoft has no taste, and I don't mean that in a small way; I mean it in a big way." With Jobs's surprise keynote announcement of a broad deal with the software giant, his sentiment seems to have changed to, "Microsoft may have no taste, but it's got cash and clout." (See Adam's article in this issue for more on the Apple-Microsoft deal.) A Bombshell Keynote in Plain Brown Wrapping -- After enduring the celebrity-heavy, effects-laden, razzle-dazzle keynote of Gil Amelio's Macworld keynote last January, I was surprised by the lack of flash in Jobs's performanceShow full article

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As I sat in my Boston hotel room on the first night of Macworld Expo, the local public television station was running "Triumph of the Nerds," a somewhat silly documentary about the history of the personal computer industry.

When asked by the interviewer about Apple's historical arch-rival, Steve Jobs replied, "Microsoft has no taste, and I don't mean that in a small way; I mean it in a big way." With Jobs's surprise keynote announcement of a broad deal with the software giant, his sentiment seems to have changed to, "Microsoft may have no taste, but it's got cash and clout." (See Adam's article in this issue for more on the Apple-Microsoft deal.)

A Bombshell Keynote in Plain Brown Wrapping -- After enduring the celebrity-heavy, effects-laden, razzle-dazzle keynote of Gil Amelio's Macworld keynote last January, I was surprised by the lack of flash in Jobs's performance. Dressed in black pants, white shirt, and a black casual vest, Jobs delivered a straightforward "status report" on Apple. Only the crowd's cheering and screaming belied the fact that Jobs is the computer world's equivalent of a rock star.

He began by saying, "Apple is executing wonderfully on many of the wrong things." News that Apple had dumped its old board of directors was met with surprise by the crowd of approximately 1,500, while the appointment of Oracle CEO Larry Ellison to the board elicited a number of boos. Jobs noted that a board chairman wouldn't be announced until Apple picks a new CEO.

After a long period of apparently rudderless direction, Apple will focus more on its core markets: education and what Jobs termed "creative content." Education, for example, provides Apple with revenues of nearly $2.5 billion annually; likewise, 80 percent of computers used in advertising, graphic design, prepress, and multimedia production are Macs. Jobs also said that the company intends to capitalize on its core assets: the Apple brand, the Mac OS, and Apple's users, to whom Jobs commented, "I don't think we've been taking care of you." Addressing the need for valuable partners in the industry, he then announced the Microsoft deal, followed by a guest appearance by Microsoft CEO Bill Gates via satellite. (Originally, Gates was supposed to be present at the keynote, but since the deal wasn't inked until 3 A.M. that morning, there wasn't enough time to jump on a plane.) The keynote ended five minutes early with a new slogan mounted beneath the Apple logo: "Think Differently."

Keynote Reactions -- I was genuinely surprised at the negative reaction to the Microsoft announcement during the keynote, where most of the crowd booed not only at the news that Microsoft was investing $150 million in Apple stock (though people cheered when Jobs said that the shares were non-voting), but also that Internet Explorer would be the default browser to ship with the Mac OS.

I haven't subscribed to the Evil Empire theory for the last year or so, believing that the whole "good versus evil" attitude is starting to hurt Apple more than help it. I also have to admit that I use Internet Explorer - if a company makes a product that's smaller, faster, and requires less RAM, I don't care who developed it; the point is that it serves my needs best as a user.

Despite the boos, most of the people I talked to on the conference floor were happy about Microsoft's investment. Not only does it give Apple some working capital, it should improve Apple's stature in the industry by way of association: if Microsoft likes Apple, maybe everyone else should too.

The Spectre of Mac OS Licensing -- Aside from the Microsoft news, most talk at the show centered around Power Computing and Apple's hardball stance on licensing the Mac OS. The process of hammering out licensing agreements for Mac OS 8 and beyond has been a protracted, bitter affair, and to date there is no signed agreement covering this vital area. Various rumors have indicated that Apple might be considering abandoning OS licensing altogether, though I suspect the company is just playing tough to convince the clone makers to toe the line.

Power Computing, known for making a splash at previous Expos, took every opportunity to make their feelings known about licensing. The most vocal Power proponent was Joel Kocher, Power's President and COO. During a post-keynote session where vendors displayed their wares, Kocher spent only a few minutes touting the new PowerPC 750-based Power Tower Pro G3/275 and the rest of the time railing against Apple. Lifting a prototype Mac OS laptop clone powered by the PPC 750, Kocher said, "You can't have this."

Although his point was valid, his presentation struck me as veering several degrees to the side of being whiny. Other people I talked to felt that Power was hurting itself by taking such an offensive stance, even expressing that the company came across as an immature child. However, they also pointed out that Power's approach ensured a hefty amount of discussion and brand awareness. Other clone makers, namely Motorola and UMAX, were noticeably mum about the whole affair.

Enough Politics, What About the Show? This being my first Boston Expo, I can't compare it to previous shows. Several people commented that the show was smaller than last year, pointing out notable absences such as Macromedia and Iomega. But at the same time, this Macworld wasn't the ghost town that some anticipated. The floors were crowded and attendees were generally upbeat.

One interesting mini-trend this year was the floor presence of industry leaders. Be's CEO, Jean-Louis Gassee, could be seen just hanging out at the Be booth, chatting with people and answering questions; Power Computing's CEO Steve Khang was spotted in several locations. I also heard stories of attendees striking up conversations with the product manager for Mac OS 8 and the president of Claris Corporation; in both cases, the attendees spoke their mind about products before realizing to whom they were speaking. Such interaction is highly commendable.

Hardware -- On the hardware side, speedy new machines from Power, Motorola, and UMAX appeared in nearly every booth. Motorola's boxes were actually CHRP (Common Hardware Reference Platform) machines, and a vendor I know claimed that her machine positively screamed.

<http://www.powercc.com/>
<http://www.mot.com/GSS/MCG/starmax/ products.html>
<http://www.umax.com/>

The coolest product that made people turn around and gawk was Mitsubishi's Leonardo monitor. This huge 40-inch gas-plasma display boasted good image quality and a 160-degree viewing angle despite being only 4.4 inches deep. The carpet was a bit damp from attendees drooling on it.

<http://www.mitsubishi-display.com/>

My personal favorite, and the item that elicited the most "wows" when I told people about it, was Canon's STARS system. This Specialized Transfer Art Replication System combines computers and a special press into a system that creates images and transfers them to surfaces such as glass, ceramic, wood, or plastic. Canon showed examples of images that had been applied to ceramic tile, showing how anyone with access to the system could redesign a kitchen or bathroom with custom designs.

<http://www.usa.canon.com/>

Also fascinating was Hitachi's MPEG Cam (see TidBITS-391 for its features), which popped up not only in Hitachi's booth, but also connected to several machines in Apple's area. Because Hitachi is a new TidBITS sponsor, I particularly wanted to see its digital camera in person, and I noted that the unit is built with the field user in mind: it's built tough, with black rubber shock absorbers.

<http://www.mpegcam.net/>

Software -- Also garnering attention was Sienna Software's Starry Night Deluxe, an astronomy package that boasts a database of 19 million celestial objects, photo-realistically rendered 3D planets, an Orbit Editor for adding new comets, asteroids, and other objects, and more.

<http://www.siennasoft.com/>

Wandering through the Developer Greenhouse, I saw a demo of J*Stream's WiredWrite, an application that uses Java to publish electronic documents. Unlike Adobe's Acrobat PDF technology, which tries to duplicate an original, WiredWrite creates files the way electronic documents should be created: it retains style information, allowing you to change fonts, size, spacing, and other attributes, but these formats remain flexible in the reader software. Most impressive are WiredWrite's compression ratios and Java output: a sample 190-page FrameMaker document containing text, images, and diagrams ended up being less than 400K. Because the resulting file is a Java applet, anyone with a Java viewer or Java-enabled Web browser can read it, regardless of platform.

<http://www.jstream.com/>

Final Impressions -- Overall, this Macworld Expo had an air of solidity to it - many of the products and solutions were geared toward getting work done, enhancing productivity, and offering functionality that made computing easier. The show almost carried with it an air of maturity, as people come to realize that although the Macintosh is cool, it's also extremely powerful and functional. Of course, we've known that all along, haven't we?

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One of the most enjoyable aspects of Macworld Expo is looking for items, products, and events that draw attention for unusual reasons. My search this year was rewarded with several that were out of the ordinary. Most Creative Use of a Pickle -- David Pogue, hawking his book, The Weird Wide Web, made a pickle glow and flash using a contraption he made from a wood frame, two nails to skewer the pickle, and a power cord from an old lampShow full article

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One of the most enjoyable aspects of Macworld Expo is looking for items, products, and events that draw attention for unusual reasons. My search this year was rewarded with several that were out of the ordinary.

Most Creative Use of a Pickle -- David Pogue, hawking his book, The Weird Wide Web, made a pickle glow and flash using a contraption he made from a wood frame, two nails to skewer the pickle, and a power cord from an old lamp. The electricity activates the salt used to cure the pickle. When people started laughing, he justified the show by exclaiming, "Please, this is science!"

Cool-But-Underwhelming Attraction -- Power Computing made its mark last year with its Power Tower, a tall rig where brave show-goers could bungee jump over the Boston Harbor. Power brought the Power Tower back, but in a shorter, less exciting version: the Power Zip Line, where you strapped yourself into a harness and slid down an angled cable towards the ground. Although it looked fun, it wasn't quite the same as plummeting headfirst at the harbor.

Best Entertainment -- I unfortunately missed this one, but many people told me that this year's best party act was at the Mac OS 8 rollout. Soul godfather James Brown entertained the crowd with a rousing two-hour set.

Most Unfortunate Costume -- Every Expo there seems to be one company that delights in dressing up an employee in a costume. This show's winner belonged to the folks at Hitachi, who created an MPEG Cam costume to accompany the release of their cool new digital camera. The only problem was that the costume was made of cloth and foam, so the sleek camera ended up looking like a squishy Star Wars droid.

Best Floor Entertainment -- This award is presented hands-down to magician Joel Bauer, whose pitches for Motorola's StarMax line of Mac compatible systems drew a crowd of people that consistently blocked the aisle in front of the booth. Not only was he a good magician, he knew his information thoroughly and performed without a script. So even if you'd seen his act before, the next show was guaranteed to be different. It's no trick: he was the real deal.

Most Useful Tchotchke -- Motorola gave out sturdy nylon show bags to anyone who would listen to its presentation, easily besting some of the other companies' bags that were usually torn by the second day.

Best Tchotchke -- Although this Expo seemed a little short on free goodies, I was particularly taken by the rubber aliens given out by the folks at Alien Skin Software. Not only were they an interesting mixture of cute and gross, the colors often matched the hair colors of the employees handing them out.

Best Little-Mentioned Addition to the Show -- Tucked deep into Apple's pavilion, a line of companies featuring Rhapsody applications proved that the next generation operating system is moving along nicely. Although Apple is currently drawing attention away from Rhapsody in favor of selling millions of copies of Mac OS 8, when the next-generation OS arrives, there will be software to take advantage of it. Attendees were able to play with functional programs running under pre-release versions of Rhapsody.

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