US Report: Wintel 'Duopoly' still imperial, but no longer impregnable

Microsoft and Intel are probably feeling a bit star-crossed these days, and who can blame them?
Written by ZDNet UK, Contributor

The standard-bearers of the PC industry -- the "Wintel" duopoly -- are under attack on multiple fronts. Federal and local governments are ready to pounce, and many competitors are re-energised by an opportunity to land some punches on their bigger rivals.

It's enough to make one think what a few short years ago would have been unthinkable: The Wintel empire, under the right set of circumstances, could topple.

Of course, the prospects of that happening any time soon are remote. But it's not unprecedented -- after all, no one in the 1960s and '70s thought IBM would fall off its perch atop the computing kingdom, either.

"Microsoft has gotten too big for its britches," said a technology consultant in the Midwest, who requested anonymity. "It has become arrogant and doesn't care much about customer needs. Many compare it to the IBM of old. There is a certain similarity, but IBM was a benevolent dictatorship. Microsoft is just a dictatorship."

The courts, not customers, will likely have the largest say over the future of Wintel. The Federal Trade Commission investigation of Intel is ongoing, and a judge's ruling against the company in its lawsuit with Intergraph could have widespread ramifications over how Intel deals with its business partners.

For Microsoft, lawsuits expected any day now from the state attorneys general and/or the U.S. Department of Justice could have an impact far beyond Windows 98. An antitrust suit would likely take a much broader look at Microsoft's business practices and could impact the release of Windows NT 5.0, a far more strategically important product for Microsoft -- and the industry -- than Windows 98.

In each case, the government is stepping in because it feels both companies, as virtual monopolies in their respective markets, have overstepped their bounds.

But while many customers are unhappy with the tight grip Microsoft and Intel have on the technology market, they have yet to voice their is pleasure with their wallets. For all the complaints about the bullying tactics of the two behemoths, customers continue to buy microsoft- and Intel-based products in droves, and many say they'll continue to do so.

Some Microsoft customers, in fact, want the same thing Bill Gates wants: for the government to butt out. "While some of the previous Justice Department investigations into Microsoft's OEM pricing strategies were justified, this investigation [of Microsoft integrating Internet Explorer into Windows 98] seems ridiculous," said Karl Kay, vice president of workstation architecture for Countrywide Home Loans. "Microsoft is the only company I know of that is being persecuted for adding on to its product."

"Microsoft is beating their competitors in the marketplace, and so now the competitors are turning to the Justice Department to save them," Kay added. "Their efforts and the public interest would be better served if they turned their energy to producing better products."

Any divergence from the Wintel standard could throw the high-tech industry into turmoil. In the short term at least, users would suffer along with Microsoft, Intel and its partners.

"There is a great benefit to the industry, consumers, and software developers to have a common operating platform and set of APIs," said Larry Shaw, PC coordinator for Nordstrom, which uses Internet Explorer and plans to upgrade to NT 5.0. "Being the provider of that platform, however, carries some responsibilities that may be different from a case where there is vibrant competition."

Competition for the two partners is coming from opposite directions. Intel is most vulnerable on the low end of the computing food chain, while Microsoft is susceptible on the high end.

Intel, for example, is still honing a strategy for the sub-$1,000 PC market. Its Celeron chip, announced last month, was met with scepticism as not being powerful or functional enough compared to rival low-end chips from Advanced Micro Devices (AMD) and Cyrix. Last week, Intel redrew its Celeron roadmap to speed up releases of faster versions of the new chip.

"The PC [in the beginning] came in at the low end and moved up," said Glenn Schuster, director of marketing for graphics chip maker S3. "Intel's greatest fear is that a consumer device will do something similar in the PC market."

Microsoft, meanwhile, has a lock on the corporate and consumer desktop. Unless a major hardware OEM breaks ranks and starts bundling another operating system -- an unlikely scenario -- Microsoft will continue to have the lion's share of the client operating system market, even if it is forced by the courts to delay Windows 98.

But Intel's expected release next year of Merced, the 64-bit processor the company is developing with Hewlett-Packard, could level the OS playing field for enterprise sites.

Intel is courting Unix developers just as vigorously as it is courting Microsoft to port their operating systems to the new architecture, which combines CISC and RISC technology. That could make it more difficult for Windows NT to continue its momentum, even with NT 5.0 on the 1999 horizon.

These types of moves, some observers believe, represent a natural evolution of the industry, one in which Microsoft and Intel will expand beyond Wintel on their own terms.

"There's a drive to create more purposeful diversity," said Eric Benhamou, CEO of 3Com. "There was unnecessary diversity in the '80s and '90s, I think."

Other observers agree -- and point to the Internet as a great equalizer.

"The Internet has changed the dynamics," said Rob Glaser, CEO of RealNetworks. "We distributed 35 million software clients last year. A couple of years ago, only one company could do that: Microsoft. The technology of Internet distribution is a dramatic sea change. Now, a dozen companies can ship software in huge volumes like we do, and it takes away some of Microsoft's advantage."

Additional reporting by Scott Berinato and Robert Lemos

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