Microsoft Mac unit focuses on profits, not politics

Scott Hillis

REDMOND: Clashes between Microsoft's Bill Gates and Apple's Steve Jobs as

they vied for control of the personal computer industry are the stuff of legend.

Recently the combative stances have relaxed into more amicable postures.

Microsoft's support for Apple is embodied in its Macintosh Business Unit, a team

of 185 Mac users who crank out software that many say is better than the stuff

made for Windows.

"Our relationship with Apple has never been better," "Mac

B" general manager, Kevin Browne said in a recent interview at Microsoft

headquarters in Redmond, Washington. That relationship centers on Office,

Microsoft's popular software package that includes the Word processor, Excel

spreadsheet and PowerPoint presentation software.

In the mid-1990s, the relationship was on the rocks. Mac users were

infuriated with crash-prone Office and the growing gap between releases for

Windows and the Macintosh. Apple itself started struggling, and by 1997,

Microsoft pondered dropping support for the Mac, a move that analysts say would

have killed the pioneering computer maker.

Instead, in a stroke that stunned Apple's fiercely loyal user base, Microsoft

announced at a Mac convention in 1997 that it was investing $150 million in its

beleaguered rival. And rather than have the same programmers write software for

Windows and the Mac, a separate development team was split off in 1997 and given

their own budget and planning freedom.

Recovering their soul



"Our business was down, our customer satisfaction was way down,"
Browne said. "Microsoft took a step back and said, 'What are we going to do

with the Mac?'. Obviously the easy thing to do would be to say we're not going

to do this any more."

"But it's a pretty good business. Compared to Windows it doesn't look

big, but as an independent company it looks alright. We sort of spun it off

internally and said there should be this group of people to cater to this Mac

user," Browne said. The result, as measured by the latest product, Office

2001, has been a resounding success.

Released last October after 30 months of development, the software has sold

half a million copies. Everything from pull-down menus to product packaging

conforms to the hip Mac aesthetic. A new, Mac-only application was included.

Analysts praised the product as better than the Windows version.

"We probably have the ability to take more risks than they do. We are

opinionated, design-oriented people," said Michael Connolly, a group

program manager in the unit. The team also makes Mac versions of the Internet

Explorer Web browser and the Outlook Express e-mail client. Microsoft claims

both are the most popular applications of their type among Mac users.

"In the last four years we've recovered our soul to a large extent. It's

understanding that Mac users are different from Windows users," Browne

said.

OS X and .NET



Now the team has a new, daunting challenge: taking all the features of Office
2001 and rebuilding them on Apple's new operating system, OS X (pronounced OS

Ten). They want to launch the product, code-named Office X, this fall, a

development time of 12 months, less than half that of Office 2001.

Based on the industrial-strength Unix platform, OS X has an entirely new

codebase and user interface. Those are hurdles for programmers who must not only

get the software plumbing right, but also give the product the right look and

feel.

"What we are trying to do now is transition the business over to OS

X," Browne said. "The adjustment has been slow to get back to same

level of productivity as on OS 9 because it's such a new system."

The Mac BU is also trying to figure out how to capitalize on Microsoft's

sweeping .Net strategy to turn software into services delivered over the Web.

The latest version of Office for Windows, due out May 31, takes the first step

toward .Net by sporting new collaborative features and "smart tags"

that can do things like pull stock quotes directly off the Web and plunk them

into a document or spreadsheet.

"On the .Net initiative the watchword for us is to try to ensure that

the Mac customer can get these services. It is a little premature for us to

detail how we go about doing it," Browne said. One analyst said it should

actually be easier to transfer, or "port," those features to the Mac

because OS X and Windows now have much more in common than in the past.

"The Windows 2000 core and (OS X's) Unix core have a lot more similarity

than the old Mac OS did with Windows. The port should go easier going

forward," said Rob Enderle, an analyst with technology consultancy Giga

Information Group.

Profits Vs politics



With the Mac market fairly stable, Microsoft's team doesn't see the need to grow
quickly. Browne says the unit is "highly profitable" and he wants it

to stay that way.

"We'll be steady state for a while. We need to make sure it's profitable

so Microsoft continues to invest," Browne said. He declined to give revenue

or profit details. But some observers and analysts speculate Microsoft still

sells Mac software mainly to defend against the government's charges that it

used its Windows monopoly to harm rivals.

"It is a profitable unit but I think that if it hadn't been for the

trial, given how Microsoft typically approaches a competitive situation, I think

they would have been inclined to let Apple decline," Giga's Enderle said.

Browne maintains financial viability, not political cover, is the reason for

Microsoft's continued support.

"It sounds like a good story somebody made up from the outside, but it

doesn't affect our thinking. You can't run the business thinking about the

courts," Browne said. "Bill Gates, by the way, is a huge Mac fan and

he has a warm spot in his heart for the Mac platform, and it hurt him to see our

customers suffering," Browne said.

Apple fanatics, recalling the ruthless competition of the 1990s, may roll

their eyes at such sentiments. But Microsoft appears eager to put the past

behind it. "A couple of years ago it was a question of how committed is

Microsoft to the Mac," said Mary Rose Becker, a group product manager who

works on marketing. "I think we're past those days."

(C) Reuters Limited 2001.