Analysts Review Microsoft's New Operating System

Windows NT, a basic software for computers, faces stiff competition

NEVER before has a software program generated so much attention and so much hype. The computer industry has waited months for this: a next-generation operating system called Windows NT.

Finally, this week Microsoft Corporation launched it.

"It's probably the most popular operating system that never shipped," says Rikki Kirzner, principal analyst with Dataquest Inc.

Windows NT is an operating system - the basic software that controls the computer. It is considered next-generation because it handles new, more powerful 32-bit application software and allows the computer's microprocessor to handle several operations at once.

In introducing the product on Monday, Microsoft's co-founder and chairman, William Gates, called NT "a fundamental change" in business computing.

Analysts are not quite so confident. They say NT is an important first step toward fundamental change. What is clear is that Microsoft has targeted an extremely strategic market. Whoever hits it just right could send shock waves through the entire industry.

"The threat of NT and the promise of NT has already galvanized the players" in the industry, says John Donovan, director of business groupware services at WorkGroup Technologies Inc., a market-research firm.

The computer industry is unsettled right now. On one side, millions of desktop users are moving up to faster and more powerful machines. On the other side, corporations are downsizing from large mainframe and minicomputers to networks of personal computers.

Where these forces collide is a middle ground called client-server. Under this architecture, desktop machines and high-end computers both play a role. The desktops are clients, linked up via networks. The networks are managed by powerful computers called servers.

If Microsoft can take over the server end as it dominates the client end of the market, it will be superbly positioned for the next generation of computing.

After all, computer users of all stripes eventually will need to move to a new operating system. The current one for desktops - DOS, in most cases - is more than 10 years old and showing its age. Businesses want an operating system software that will allow their servers to connect to various kinds of computers, not just the common personal computer.

"Windows NT does not break any new ground for the industry," says Bruce Lupatkin, managing director of technology research for Hambrecht & Quist. But "it breaks ground for Microsoft. Someone with Microsoft's presence can rally people around."

When Microsoft launched the product, it also announced that 24 personal computer manufacturers planned to ship machines based on Windows NT. These companies are not just traditional PC makers. They are non-PC manufacturers like Digital Equipment Corporation. That is a key advantage for NT: It will run on hardware that is not based on Intel Corporation's microprocessors.

"It's an extremely big deal," Ms. Kirzner says. Windows NT will be able to link up multiple platforms while its main competitor - Unix - has not.

Unix provides the biggest challenge to NT, analysts agree. Since NT is so new, they say, it will take at least 18 months before the product takes off. Corporations may decide instead to go with Unix.

Windows NT "is a bright child of good parents, and it will grow up," says Mr. Donovan of WorkGroup Technologies. "But right now, we are not going to give it a driver's license."

Unix software companies have moved to counter the Microsoft threat. After years of bickering, they announced earlier this year that they would support a common version of the software.

Other operating systems could also pose a threat to NT. IBM has had its competing product, OS/2, on the market for more than a year and just upgraded it last week. But it so far has not set the industry on fire.

Novell Inc., which dominates desktop networking software, has a competing DOS product and is acquiring a Unix company as well.

IBM has also teamed up with Apple Computer Inc. to develop a new operating system built around a technology called object-oriented programming.

It may be that NT flops but that other Microsoft products pick up the slack. Microsoft is developing an object-oriented operating system, code-named Cairo, that could be a winner. Or the already popular graphical user interface, Windows 3.1, could eventually develop into a full-blown operating system.

In any one of these ways, Microsoft has the potential to continue to dominate the market.

"It's a little like Baskin Robbins," Mr. Lupatkin says. "It's all ice cream, but which flavor do you like?"

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