Comments suitworthy for flaming (as well I'm good at doing):
1. Gates eats 8 cheeseburgers in an evening!? Geez, Rohit, and I
thought your Arch-Deluxe consumption was unparalleled.
2. Interesting how anti-Microsoft Time magazine is in this article.
3. Was it December 7, 199FIVE?! Geez, it's amazing how much changes
in just 9 months.
4. Interesting how stupid the article position that Netscape are a
bunch of guerillas. Gorillas, maybe. Guerillas? No way.
5. IE 3.0 takes 8 Meg!? Goodness, what for?
6. Navio includes "just about everyone but Microsoft." Hmmm.
Been there, done that. When it was CORBA. When it was OpenDoc.
When it was Open Standards.
7. Microsoft only had $6billion in cash reserves? I thought it
was more. Hmmm.
8. Gates is always one for melodrama. "You'd be writing our epitaph."
9. Why does the Next Big Thing have to be a gleam in an
*undergraduate*'s eye? Why couldn't it be a gleam in a FoRKlist
10. Has anyone read Andy Grove's new book touting the "only the
paranoid survive" position? What a bunch of self-extolling pap. Man, I
wish I could make him poor.
11. Barksdale says Netscape's focus is to "keep building products."
Notice the word "quality" is missing from that focus.
12. Marc A is "boy wonder"?! Holy batdung.
13. Netscape's only worth $3.1 billion on paper? Why doesn't Microsoft
just buy it with cash reserves?
14. "Where were you when you first saw Mosaic?" I think I was using a
metal fork to prod an electricity outlet at the time...
15. Clark's fortune "derives from vision more than execution." See,
Rohit, it *can* be done.
16. Barksdale. Goizuetta. Welch. Khare. Yeah, I can see it. :)
Barksdale's Most Important Trait: "the confidence of a winner."
17. Netscape's programmers still report to Andreeeeeeesssssen. This
explains a whole lot.
18. Netscape's motto: "Work less!" Microsoft's motto: "When I'm awake,
I'm working." Neither of these mottos contains the word "think." Hmm.
19. "Embrace and extend" explained to the masses. Hmmm.
20. IE 4.0 is now slated for Xmas!? I thought it was supposed to be
unrolled end of Q1 '97. Shoot. That pushes IE 5.0 by Xmas '97.
Probably earlier. Darn. Darn, darn, darn. Rohit, we have to move.
21. "Victory today means little more than the right to come back and
fight again tomorrow." I like that line.
An epic battle is taking place between Microsoft and Netscape. Each
company wants to be your guide to the Internet, the key to personal
computing in the future. The victor could earn untold billions; the
loser could die.
WINNER TAKE ALL
JOSHUA COOPER RAMO
War belongs to the province of business competition, which is also the
conflict of human interests. --Karl Von Clausewitz
On a cloudy morning last December, as the white light of winter picked
its way across the face of Mount Rainier, William H. Gates III,
chairman and chief executive officer of Microsoft Corp., rolled out of
bed after a brief night's sleep. There was no time for breakfast. He
showered, pulled on his customary slacks, open-necked shirt and sweater,
and climbed into his Lexus for the 20-minute drive from his suburban
Bellevue, Washington, home to the Seattle convention center.
Gates had been at the center late into the previous evening--an
eight-cheeseburger night, he calculates--preparing what he suspected
would be the most significant Microsoft announcement in a decade. For
two years the rapidly expanding global computer matrix called the
Internet had nagged at Gates like a low-level headache. Even as his
company shipped Windows 95 last fall--an 11-million-line program that
solidified Microsoft's PC hegemony--Gates worried about what lay ahead.
Microsoft had long dominated the world of personal computing by
providing the software that controlled the way users interacted with
their machines--a program called an operating system. Microsoft's
operating systems, first DOS in 1980 and then Windows 10 years later,
had given the company intimidating control over PC software. And lush
profits, enough to vault Gates to the top of the list of the richest
But the Internet could undo all that. Gates had been warning his top
lieutenants that the Net could change everything about the way people
used computers, perhaps even the fact that they needed an $89 copy of
Windows to make their machines work. But he hadn't quite figured out
Microsoft's proper place in the new terrain, and the company's thus far
tentative market initiatives reflected that indecision.
This morning he planned to bring the uncertainty to an end. Microsoft
would reorient every effort, every project and product to the new
reality of the Internet. He was about to send a company with $6 billion
in sales and 19,641 workers--all $70 billion worth--hurtling in that
direction. In the future, as in the past, nothing was going to stand in
Bill Gates' way.
Nine hundred miles down the Pacific coastline, in Mountain View,
California, James Barksdale, president and CEO of Netscape, was bracing
for another day of standing in Bill Gates' way. Barksdale slipped into
a suit, grabbed a quick breakfast and pointed his Mercedes toward
Netscape's Mountain View headquarters.
With $81 million in sales and 600 employees, Netscape had enjoyed a
comfortable dominance of the infant Internet world. Its killer app was a
program that made navigating the Net as simple as pointing at what you
wanted to see and clicking on it. Browsers brought order to the chaos
of the World Wide Web, a corner of the Net stuffed with text, sounds and
pictures. Netscape's Navigator browser was the best on the market, and
it had propelled the company through a wildly successful initial public
offering in August. Some analysts were saying Netscape had an invincible
lead in the browser business, even against Microsoft.
Barksdale knew better: more was at stake than merely the market for
browsers. Netscape's Navigator had the potential to be the next Windows:
a method for launching programs and calling up information not only from
the Internet but also from corporate networks and even from the user's
own PC. In short, it could supplant the operating system and finally
break Microsoft's hammerlock on the PC industry. Barksdale knew
Microsoft wouldn't--couldn't--ignore the challenge. "It was such an
obvious opportunity," he says. "They weren't going to miss it. We had
always expected Microsoft to get hard core about the Internet."
And so it did. That morning in Seattle, addressing hundreds of analysts
and media, Gates hit a rare rhetorical high, offering up what amounted
to his new digital gospel. To hammer the message home, he reached back
into history, recalling the words of Admiral Yamamoto on the day the
Japanese attacked the U.S.: "I fear we have awakened a sleeping giant."
The crowd chuckled its recognition: it was Dec. 7, 1995, and Bill Gates
was taking Microsoft to war.
The conventional army loses if it does not win. The guerrilla wins if he
does not lose. --Henry Kissinger
Since his December announcement, Gates has backed up his martial
rhetoric with action. Over the past three months, Microsoft programmers
have released a stream of new products designed to seduce Net users away
from Netscape. With everything from software giveaways to massive
developer conferences (Microsoft rented 40 movie theaters on July 16 for
a programmers' gathering), the gang from Redmond, Washington, has
pressed home one message: Microsoft is playing for keeps.
Proof of that came on Aug. 13, when Microsoft unveiled Explorer 3.0, the
newest version of its Web-browsing software. The 8-megabyte behemoth
matched Netscape's franchise browser, Navigator, feature for feature,
and at a much better price--free. Available over the Web, the browser
notched a million downloads in its first week. Netscape stockholders
voted with their feet: by late August, Netscape stock had shed half its
value from a December high, while Microsoft shares approached record
levels. And Gates swore the best was yet to come.
Netscape wasted little time in counterattacking. Two weeks later, on
Aug. 26, company founder Jim Clark unveiled blueprints for a new
software firm called Navio that will try to outflank Microsoft by
putting browser software on pretty much anything with a screen and a
modem. The first stop is likely to be an Internet TV, followed by a $500
network computer, online video gaming machines and Net-surfing cell
phones. Organized around a powerhouse electronics alliance that includes
just about everyone but Microsoft (Sony, NEC, Nintendo and IBM are
supporting the venture), the company has one aim: to use the Internet to
make Microsoft Windows irrelevant.
That sort of direct challenge to their business is the stimulus
Microsoft employees love best. In just six months, Gates has refocused
the work force onto Net-related projects, mercilessly eliminated a dozen
others that were Holy Grails a year ago, and geared up an
Internet-content group that will spend tens of millions of dollars this
year. He has even withdrawn $1.5 billion in R.-and-D. money from a $6
billion cash stockpile Microsoft has tucked away against the sort of
rainy business days they aren't used to seeing in Redmond.
The transformation that has set Microsoft on the road to a Net-based
future has also completed Gates' beatification as not just a great
hacker but also a world-class CEO. Microsoft's warp-speed reinvention
may set the standard for information-age corporate agility. "I don't
think you'd be interviewing me on this topic if we were any less
nimble," Gates told Time. "You'd be writing our epitaph."
But in the odd world of high technology, a great product, a remarkable
corporate transformation and market acceptance could in fact be an
epitaph. The Next Big Thing, just a gleam in some undergraduate's eye
today, could put your company out of business tomorrow. Andy Grove, the
Intel CEO who led his microprocessor company through a series of
similarly wrenching changes a decade ago, has distilled the essence of
competing in a high-tech world down to a single sentence: "Only the
paranoid survive." He's right. Uncertainty is the watchword of the new
digital age. That's why Microsoft is throwing everything it's got at
Netscape. And that's why, despite that onslaught, Netscape still has a
When absolute superiority is not attainable, you must produce a relative
one at the decisive point by making use of what you have. --Clausewitz
In the heady days after Netscape's ballistic IPO last summer--the stock
shot from $27 to $71 during its first day of trading--Barksdale preached
humility in the company's cramped halls. "I have a rule," he explains.
"You can't talk about the stock price internally. We're not going to get
focused on paper worth. We're going to keep building products." So the
sandy-haired CEO was surprised to discover that his assistant had set up
an electronic stock ticker in his office. "I said, 'Did you think I was
kidding? Take that away!'" Barksdale recalls, laughing. "I try to lead
by example, and here she was flashing the price."
Friends say the story is typical of Barksdale, 52, who brought his
lead-from-the-front style and slow Mississippi drawl to Silicon Valley
last spring from AT&T, where he was CEO of AT&T Wireless Services.
Though less well known than Netscape's co-founders, Jim Clark and boy
wonder Marc Andreessen, 25, Barksdale has what is clearly the most
difficult, and most essential, job of the three: getting Netscape to
live up to its $3.1 billion market value.
That will take some doing. Matching its fiscal reality to Wall Street's
hopes will mean completing one of the great Horatio Alger stories in the
history of American business. As every self-respecting teenage computer
ace knows, Netscape was born in the ratty University of Illinois dorm of
Andreessen, then 21, a Midwesterner who liked nothing so much as an
afternoon in front of the computer, geeking out. Over a few dozen of
those code-filled afternoons in 1993, Andreessen and his youthful
collaborators put the finishing touches on the Model T of Web-browsing
programs. They called it Mosaic, because it combined all the pieces of
the Net--text, audio, images--onto "pages" that could be viewed from
anywhere in the world. Mosaic was the first glimpse of a multimedia
future that giants such as Microsoft had been predicting but not
delivering. And it changed everything. Among the digerati, the question
"Where were you when you first saw Mosaic?" is as significant as asking
people from an earlier generation where they were when they first heard
The sound of the Net revolution quickly made its way to Silicon Valley,
where venture capitalist ears are always eagerly listening for the
ringing music of a great new idea. Clark, a Valley millionaire who had a
similar revelation a decade earlier when he founded Silicon Graphics to
build high-end graphics computers, hired Andreessen and set up shop as
Mosaic Communications. Six months later, the company shipped its first
A classic entrepreneur, Clark is good at founding companies but less
interested in running them. His fortune derives from vision more than
execution. By late 1994, with Netscape growing fast, he knew the time
had come to look for help. Clark cast a rich, stock-baited hook into a
pool of one: Jim Barksdale bit.
Barksdale is one of a handful of corporate managers who make up the
varsity squad of American CEOs. Though less well known than Coca-Cola's
Robert Goizuetta and GE's Jack Welch, he radiates the same cocksure
attitude, bred from an ability to project a vast strategic vision and
master simultaneously each of its components.
And there was something else: Barksdale had already been to war. He was
a veteran of Federal Express's victory in the great overnight-delivery
battle in the 1980s, and of Craig McCaw's end run around AT&T and the
regional Bells in the cellular wars in the early 1990s. He moved to AT&T
after the long-distance company bought out McCaw. Barksdale made a
fortune on the FedEx and McCaw successes, but both experiences netted
him something more valuable: the confidence of a winner. "UPS had more
money than God, certainly more money than Microsoft," he says. "When
they got into our business, we were scared to death. Well, today FedEx
is a $10 billion company."
Barksdale brings that same damn-the-torpedoes sensibility to his fight
with Microsoft, where he has embraced a simple strategy: Get out, get
known, get in. "We're a little company. We can't afford a big television
advertising campaign," he says, pointedly gazing north toward the
Colossus of Redmond's $100 million ad budget. Instead Barksdale is
betting the farm on Netscape's continued domination of the browser
business. "Is it a sure success?" he says. "Hell, no. We work constantly
at it. But this idea that somehow or other Microsoft says, 'Thank you,
boys, for thinking this up. Now we'll come take it over,' is way
The strategy has its risks: in a business where a six-month delay
threatens obsolescence, any slip in Netscape's warp-speed
browser-development cycle could prove fatal. So Barksdale's first
priority is making sure Netscape's programmers, who still report to
Andreessen, have everything they need to stay on top. This means rooms
of their own, all the caffeine they can absorb and hours of fatherly
advice about working better, not more.
Barksdale knows that long-term success lies in turning Navigator into a
viable alternative to Windows. Andreessen, Barksdale and Clark (a
triumvirate insiders refer to as "Marc, Bark and Clark") envision a
future Netscape product that will assume many of the computer's
operating-system functions, browsing local files as seamlessly as it
browses today's Web.
Of course, for a Web-based OS to have any real value to consumers, it
has to have programs to run. To fill that hole, Netscape has entered
into a tight alliance with Sun Microsystems, a high-end hardware and
software company that has developed a Net-based programming language
called Java. What makes Java special (besides its name, which comes from
the take-no-prisoners, drink-no-decaf corporate culture at Sun) is that
it is designed to run across the Internet on any computer. For Web
programmers, this means their pages can do more than just display
pictures. Java-enabled sites will be able to act as word processors,
telephones and even (if you have a TV receiver hooked up to your
computer) vcrs. And although Microsoft has tried to embrace Java--its
new Explorer browser will run programs written in the language--it is
still seen more as a strategic weapon for Netscape, since Java software
could one day compete with Microsoft products such as Word and Excel.
But this will matter only if Net surfers are still using Netscape
software when that day arrives. And while Netscape has a dominant market
share these days, the company has been seeing a little more of
Microsoft's shadow than Bark likes. "We have enormous appreciation,
admiration and fear [of Microsoft]," he says. "But like I tell people: I
love my brothers, but I don't let them eat my supper."
To keep from losing his supper, Barksdale has retained Gary Reback, a
Silicon Valley lawyer who has built a reputation for bashing Microsoft.
In early August, Reback mailed a legal letter bomb to the Justice
Department's Antitrust Division on Netscape's behalf, accusing Microsoft
of every anticompetitive behavior short of kidnapping programmers. The
charges infuriated Gates, who has already battled Justice on antitrust
issues. Worse, Reback's letter played right into the media's general
portrayal of Netscape as a lonely underdog facing off against a cheating
That courthouse seriousness, however, is in stark contrast to the
playful tone that Barksdale has set inside Netscape. Conference rooms
are whimsically named after cities, prisons and characters from Dr.
Seuss (the Cat in the Hat Room). Barksdale regularly works the halls,
passing out praise, spinning yarns and trying to make new
employees--Netscape has 700 of them so far this year--feel welcome. The
company also now encourages employees to take one three-day weekend a
month, and last spring Barksdale shut the whole place down for a
"Netscape Escape Day."
"Work less!" may seem like a strange motto for a company that's
competing with Microsoft, where employees embrace the dramatic
simplicity of "When I'm awake, I'm working." But plenty of others have
tried to outwork Microsoft, and Gates has beaten them all. Barksdale's
approach, at the very least, could someday lead to a kinder and gentler
Valley culture. Whether Netscape's bottom line can hack that remains to
be seen, but Bark believes his company deserves a little breathing room.
"It's not a total win-lose game," he says. "I don't think anybody is
going to have the dominant position in a network-centric world like they
had in a desktop-centric world. I just cannot believe that." He pauses.
"And I will tell you this: it will be a shame if they do."
Keep the forces concentrated in an overpowering mass. --Clausewitz
Bill Gates had watched Netscape's explosive growth with a mixture of
curiosity and concern. He knew that the Net was important, but for most
of the past two years, Microsoft's resources had been strained as
thousands of programmers, marketers and customer-support people slogged
through nearly complete overhauls of Windows and Windows NT, the
company's marquee operating systems. Gates knew he needed to get as many
bodies as possible onto Net projects as fast as possible, a warp-speed
course correction that would require superhuman devotion to the
Microsoft mission. Fortunately, Gates knew that was one thing he could
So beginning last fall he started quietly pulling the levers. Hundreds
of exhausted programmers streaming back from the front lines of the
Windows 95 coding effort found themselves thanked, paid and returned to
the front to battle Netscape. Line managers killed million-dollar
projects and refocused entire divisions in the space of hours. In one
instance, the company decided it needed to jump-start an effort to
develop programs in the Java computer language, a key to creating
Internet applications. So John Ludwig, a rising Microsoft star who runs
the Internet tools group, simply walked into a room of programmers who
were working on something else and told them to stop. Microsoft
appreciated their efforts, he said, but a bigger challenge had emerged.
"We had to get on the stick on Java," he says. "I told them, 'Clear that
source code off your machine, and start working on Java today.'" Four
months later, the complex new coding was done.
The strategy guiding those difficult tactical decisions was something
Gates referred to as "embrace and extend." Rather than invent a whole
new service to compete with the Internet, Microsoft would "embrace"
current Net standards and then "extend" them. In practical terms, that
meant do everything Netscape did and then add the extra functionality
that would give Microsoft a winning edge. If Netscape let Web browsers
look at pages from around the world, Microsoft would let users look at
the same Web pages but from within familiar applications, such as
Microsoft Word. If Navigator could play sound, Explorer would play
CD-quality sound. It was the sort of one-upmanship that Gates had
perfected in dozens of similar software fights. Although frequently
second to market with a product, Microsoft always won by outfeaturing
and outlasting its competitors.
That put extra pressure on Microsoft to deliver a world-class browser.
Explorer 2.0, the browser Microsoft released early this spring, was a
poor second cousin to Navigator 2.0. Gates knew Internet Explorer 3.0
had to be far better. So the company began throwing bodies at the
problem. From August to November 1995, the browser group grew from eight
to 30 employees. By the time Explorer 3.0 was released last month, that
number had risen to 800.
The results were phenomenal. Microsoft critics, who had bet that
Explorer 3.0 would be no more than too-little, too-late Internet
technology, were silenced by the program's sheer undeniable quality. The
browser's slick interface drew on Microsoft's years of consumer-products
research. And though there were flaws--it has several prominent security
holes, and no Macintosh version is in sight--3.0 had brightly colored,
easy-to-use buttons, was cleverly designed and ran smoothly with Windows
95. In short, the thing looked like a high-grade consumer product.
The shift in attitudes was immediate. The day Explorer 3.0 hit the
streets, Netizens began to create an approving buzz. And from around the
Net, where Netscape had long trumpeted its 85% market share, word began
to leak back that Microsoft browsers were accounting for 30%, then 40%
and by last week 60% of the hits on some servers. Though Netscape still
indisputably has the larger proportion of browsers, Microsoft reported
that more than a million people downloaded Explorer 3.0 in its first
week online, overwhelming the company's specially beefed-up servers. And
while Netscape is starting to charge more aggressively for its browser,
Gates insists Explorer will continue to be free or, in his words,
"priced to sell." Don't mistake that for an act of charity. Netscape's
Department of Justice letter charged that a Microsoft executive told a
gathering of developers this spring, "Our intent is to flood the market
with free Internet software and squeeze Netscape until they run out of
And beginning this Christmas, Web surfers will be able to boot up
Explorer 4.0. Though the software for the program is still in its infant
stage in Redmond, TIME got a sneak preview. The new browser is fully
integrated with the computer desktop. Users will turn on their computers
and be presented not with an ungainly collection of files and folders
but with a lush desktop that includes the latest news, instant access to
content from across the Web, and a specialized version of the browser
that looks at both local files and data from around the Web. Explorer
4.0, when it ships, will complete the unification of the computer and
the Web. It will also make Explorer 3.0, the hot technology of the
And that's where the real struggle in this battle lies. Netscape and
Microsoft are competing not against each other so much as against their
own obsolescence. The victor will be not the company with the best
browser but the team that can run the longest on this insanely fast
In fact, the Netscape-Microsoft battle may be our first good look at
information-age corporate warfare. Where industrial-age
triumph was once measured in steamships built or in miles of rail track
laid, victory today means little more than the right to
come back and fight again tomorrow.
Nathan Myhrvold, the physics Ph.D. who is one of Gates' most trusted
deputies, told Time a year ago that "no matter how
good your product, you are only 18 months away from failure." He was
wrong. That span has been cut to six months. And
--Reported by David S. Jackson/Redmond