CYBER WARS SEPTEMBER 20, 1996 TRANSCRIPT

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The battle for the key to the door to the Internet is heating up. Computer industry giant Microsoft is aggressively chasing Internet frontrunner Netscape. To get a clearer understanding of the implications of this battle of cyber titans, Tom Bearden talks with the combatants.

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A RealAudio version of this NewsHour segment is available. Participate in an Online NewsHour forum about the browser wars with HotWired's Brock Meeks. November 30, 1995 Bill Gates, Microsoft's chair, discusses his book, The Road Ahead, and the future of computing with David Gergen. Browse the Online NewsHour's cyberspace coverage.

TOM BEARDEN: People play baseball in the office if they like, bring their dogs to work, shoot pool in the middle of the day, player roller hockey in the parking lot, and the company doesn't care. It even sponsors a beer bash every Friday afternoon. It may not sound very productive, but think of it as R&R for soldiers engaged in a desperate struggle for survival, because the fun and games are merely a break for these twenty-something software designers closeted in their cubicles 20 hours a day, writing the software that may once again revolutionize the often revolutionized computer industry. Welcome to the world of Netscape, a two-year-old software company in Mountain View, California. Netscape is engaged in a battle over whose software programs will be used to access the Internet. The programs are called browsers which make it easier to find information in that vast network of computers spread all over the world. Kathy Hale is an analyst with Dataquest, the company that monitors industry trends. She says the battle is taking a toll on software engineers.

KATHY HALE, Dataquest: All they can do is stay up late and write software into the night. So the big gating factor is how fast can they write software? So you'll notice when you talk to Internet software vendors, sometimes they don't what day it is. Sometimes they just put in two twenty-hour days, but they really are fighting a war, and they're not getting very much sleep.

TOM BEARDEN: Analyst Joe Jennings and a lot of other industry watchers say the eventual outcome of this burgeoning browser war will be momentous.

JOE JENNINGS, Computer Industry Analyst: It's the most important invention since the PC, probably since the phone for the telephone industry and probably since we had newsreels for television as a precursor. Internet today is where a number of industries will come together and be transformed. It will cause jobs to change, will add jobs and will lose jobs, and it's America's single, greatest competitive technology advantage in the world today.

TOM BEARDEN: So far, Netscape is winning. Its Netscape Navigator Browser program dominates the market. CEO Jim Barksdale bragged about it at a computer expo earlier this year.

JIM BARKSDALE, CEO , Netscape: First, the Netscape Navigator--can I say it one more time--38 million copies in 18 months and three days. Why? Because it works. Just rated by an independent service at a ninety-nine out of a hundred, they said it was one of the highest, if not the highest customer acceptance of a piece of consumer software they had ever tested.

TOM BEARDEN: But a behemoth named Microsoft is hot on Netscape's tail.

(MUSIC IN BACKGROUND)

TOM BEARDEN: Microsoft dominates the rest of the software industry, a vastly larger market. The company makes DOS and Windows, the basic operating software that most computers run. Microsoft had its own browser called Internet Explorer but hadn't put much time or money into developing it, i.e., until last December when Microsoft founder Bill Gates decided this kind of software is the future of the computer business. He launched a crash program to rewrite Explorer and in near record time introduced a much improved product last August.

BILL GATES, CEO, Microsoft: Well, the product we're introducing tonight is Internet Explorer 3.0, and there's a lot of neat new things on Internet Explorer 3.0. The product is priced to sell.

TOM BEARDEN: The audience was laughing because "priced to sell" means free. Microsoft is giving it away and taking dead aim at Netscape Navigator. Originally, Navigator was free too but is now being sold to business users. In effect, Gates was abandoning his basic business strategy. Microsoft made billions selling programs that run on individual computers like word processors and spreadsheets. Now he was turning to products that run on networked computers that are linked together and can share information.

JOE JENNINGS: Bill Gates is probably the smartest guy in the industry, certainly the richest, he's probably the most aggressive, and last year on December 7th, he did an about face that no one in the industry had ever seen before of turning an entire company on its axis and driving as fast as he could in the opposite direction he's been heading.

TOM BEARDEN: Brad Chase is vice president for marketing at Microsoft.

BRAD CHASE, Microsoft: A year ago we hardly had anybody working on Internet-related technologies. Now every product group in the company has a focus on Internet-related technologies. In this division alone, you know, we have hundreds and hundreds of people working on Internet-related technologies; Internet Explorer, for example, whereas, none of those people were working on it say even a year ago.

TOM BEARDEN: Microsoft publicly calls this a battle for survival. Literally, tens of billions of dollars hang in the balance. Steve Ballmer is executive vice president of worldwide sales of Microsoft.

STEVE BALLMER, Microsoft: Everything that our company is, is at stake to us--plus everything that we might hope for in terms of future growth--because these technologies are at the core of whether what we've done so far moves forward.

TOM BEARDEN: Life or death.

STEVE BALLMER: You've got it.

TOM BEARDEN: What could possibly threaten the survival of the world's largest software company? It's because this is more than just a fight over a single piece of software--this is a standards battle--much like a shootout between VHS and Betamax over control of the format of home videotape. What's at stake is nothing less than control of the computer desktop of the future. It revolves around the part of the Internet called the World Wide Web. Information on the Web is presented on graphical pages which can only be seen with a Web browser like Netscape Navigator or Microsoft Internet Explorer. Browsers are designed so that users can point and click on the text and pictures to delve into more detailed information or explore related topics. This technique requires far less knowledge of how a computer works than the current desktop interface, Microsoft Windows.

JIM BARKSDALE: It's a much more intuitive type of product. You point, you click, you see, you go, just the way you would like to read the newspaper, but you don't. You read all the way down the column like you were taught to do. Well, many times you get halfway down the column and you see a little word or picture or something and you say, gee, I wonder what that's about--wouldn't it be great to point on that and find out more detail to drill down--well, that's what this kind of software does.

TOM BEARDEN: Microsoft's Steve Guggenheimer showed us how the browser technology is being used.

STEVE GUGGENHEIMER: Let me show you a really cool page.

(MUSIC IN BACKGROUND)

STEVE GUGGENHEIMER: If I click on Mary Chapin Carpenter, I start to get images mixed with sound. If I click on the lyrics, I can get the lyrics for this particular song, so it's really a next generation of content, and it's available today.

TOM BEARDEN: And it's something that the record manufacturer can use to sell this product.

STEVE GUGGENHEIMER: Right. Something the record manufacturer could use--and you could think of this across a lot of industries. I could make interactive sales campaigns for a real estate agency or for insurance--all types of things.

TOM BEARDEN: Netscape's David Pann showed us a bookstore in cyberspace using Navigator.

DAVID PANN, Netscape: It has Amazon.com, which basically sells books on the Internet. They offer a really good discount on books, you can look, you know, what's their spotlight for, you know, today, and if I wanted to, I could just add this to my shopping basket, so basically, the ability to load it into my basket, and then at some point actually purchase it from them, and they'll ship it to me, umm, probably get it in a day or two.

TOM BEARDEN: The business applications are obvious. Paul Saffo is the director of the Institute for the Future in Menlo Park, California.

PAUL SAFFO, Institute For The Future: I think in the longer run that the Web for shopping has an impact not unlike the invention of plate glass and elevators at the turn of the century which created an entirely kind of retail experience, that we have now shifted from physical marketplace where we go to the buildings to a market space that includes a physical location, but also a location in cyberspace.

TOM BEARDEN: But the browser approach can do much more than sell CD's and books. It may revolutionize internal corporate computer networks. Today most company networks aren't very easy to use. People must be trained on how to find information. Many companies are now putting Navigator or Explorer on top of their network, giving it a point and click interface, making the network far easier to use. Such a network is called an Intranet, and can be connected to the outside Internet. Shelley Jensen says MCI Corporation's Intranet which can be accessed with either Microsoft or Netscape's browser gives employees quick direct access to company information.

SHELLEY JENSEN: The site is wonderful in that it has everything from 401-K information to how to calculate vacation days. We can go in and check out our financial future and, umm, when our next payday is. We have the policies. We can also access the MCI job postings from here. These are all of our external and internal job postings. If I were a salesperson and I thought, you know, it might be nice to move into a different environment in sales, I can go and, as you can see, we have quite a few of them.

TOM BEARDEN: Microsoft is clearly worried that the browser interface could replace the company's flagship software, Windows, and hence its dominance over computer operating systems.

STEVE BALLMER: The replacement for DOS was Windows. What's going to be the replacement for Windows? We want the answer to be Windows Internet Explorer, but there's some guys at Netscape whom I'm sure would like that answer to be Navigator.

TOM BEARDEN: So who's going to win the battle of the browsers? Netscape is a $220 million company with 1200 employees. Microsoft is a $10 billion company with 20,000 employees. Sound like a mismatch?

KATHY HALE: Netscape is clearly a lot smaller. On the other hand, they've proved pretty wily; it's definitely too early to say that Microsoft is going to win.

TOM BEARDEN: Does it matter which company has more workers and more money to spend on development?

KATHY HALE: No, because you can't put hundreds of people on a software project. It's somewhat art and a little bit science. If you put more people on it, it slows down the project.

STEVE BALLMER: This is a big battle, big opportunity, but sort of every few years, a battle comes along where it's if I could say Windows against the world. I don't want to be over confident, but I sure felt a lot weaker when it Windows versus IBM and OS2. At least, this time we're the biggest--bigger company, and we've got some momentum, so maybe it's a little less tricky than that one.

SPOKESMAN: Well, I don't like that war metaphor at all. We're certainly in a competitive situation in a business that's very competitive. War implies more casualties and wins and losses. I think there's a huge market here, both of us will prosper, I think, greatly.

TOM BEARDEN: It remains to be seen how significant the Netscape-Microsoft battle will turn out to be.

PAUL SAFFO: The battle's not completely joined. There may be somebody hiding in a garage somewhere who comes in with something completely unexpected, and we discover that the battle between Microsoft and Netscape was just the side show, and the main event is yet to come.

TOM BEARDEN: In the meantime, software designers for both Netscape and Microsoft are closeted in their cubicles staring at their monitors far into the night and pounding out the next versions of Navigator and Explorer, both of which are due before the end of this year.

JIM LEHRER: There is a latest turn on this story. Microsoft revealed yesterday that it is the subject of a Justice Department investigation concerning sales of its browser software. The company that asked the Just ice Department to investigate was Netscape.

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