Wintel avoids government ire

By Network World staff
Network World, 6/8/98

The Department of Justice calls Microsoft Corp. a monopoly that abuses its power. The Federal Trade Commission (FTC), it appears, is about to brand Intel Corp. with the same tag. But neither government agency has uttered a peep about the combination of the two companies' technologies, commonly known as Wintel.

Microsoft and Intel often seem to actas the same company, two monopolies that together dictate PC and thin-client designs, and are starting to put the Wintel stamp on network technology and standards. But so far, neither the Justice Department nor the FTC has taken a good hard look at the Wintel duopoly, insiders say. Maybe it's because they can't.

"I'm not aware of any allegations that [Microsoft and Intel] are in cahoots," said Art Amolsch, publisher of the "FTC Watch" newsletter. And Richard Gray, an antitrust attorney in San Jose, Calif., said he knew of nothing like that coming from the FTC.

In fact, Wintel may be largely immune from government prosecution. Going against Wintel would require the proof of a conspiracy, Gray said. Even if there was proof of a conspiracy, it "would be difficult to go after Wintel conspirators. It is usually done when competitors in the same field work to change market allocation."

The government would only intervene if the Microsoft-Intel relationship was "symbiotic to the point of collusion," said Robert Collins, editor of X86.org Intel Secrets, an online magazine.

The FTC, however, does seem poised to take action against Intel for abusing its monopoly position (see story, page 16).

Whether or not the government ever takes action, it is clear that Wintel has amassed huge power to define the future of computers and networking. And the two companies have done so with extraordinary coordination - all without the benefit of a formal joint development agreement that could dictate how decisions are made and carried out.

Instead, common self-interest has led Microsoft and Intel along a path of closer and closer cooperation, with a healthy increase in market share for both, observers said. Microsoft Chairman Bill Gates, quoted in Fortune, explained the relationship this way: "Given that we agree on goals, shouldn't we share in the development of things?"

In fact, together Microsoft and Intel now essentially tell PC makers how to build their next-generation systems, guidelines that always demand new technologies from each of the Wintel partners.

It is common for companies to work together, but the Wintel relationship is unusual for two reasons: how long it has lasted and its impact on the marketplace. Microsoft and Intel each produce technologies that create demand for the other's product. For instance, Microsoft produces operating systems and applications that grow larger and larger with each revision. The software, in general, requires the latest and greatest Intel processors, sparking demand for Intel gear. On the flip side, Intel often creates special chip features, such as multimedia, producing demand for Microsoft operating systems and applications that support multimedia hardware.

Although the companies do not have formally announced development agreements, they work closely together at every level. In fact, Gates and Intel Chairman Andy Grove have had a close, though at times rocky, working relationship for years. Before Grove stepped down as Intel's president and CEO, he and Gates would meet formally once a quarter, with agendas prepared in advance by lower level executives.

Much of the interaction between Intel and Microsoft also occurs on lower levels, and much of it is a bit informal. "There are hundreds of [Microsoft and Intel] engineers working together," one Microsoft product manager acknowledged, requesting anonymity. "Even if we hated each other, we'd have to work together. It's a very symbiotic relationship."

"We have worked with [Intel] in many different groups and products at many levels: engineers, group managers, product marketing. We'd often work in conjunction on a new chip or a new operating system or a new standard, like plug and play," said Carl Stork, general manager of hardware strategy. "There's no one formula for it. One or the other company has an objective and sometimes it aligns with the other's objectives. Or one company will go in a direction, and the other will support it."

"Today we're more focused on improving the PC. As a result there is more visible time spent together [on this] compared to the 'back room' time," added Marshall Brumer, group manager of the Windows OS Division.

But does close cooperation equal collusion? Intel and Microsoft are careful to keep the two concepts separate.

"If anything, I've seen a 'push back' from both companies to make sure they're not in collusion or give the appearance of that," said a sales executive at one hardware manufacturer that's working closely with Intel and Microsoft. This executive's own company is doing its part: a companywide e-mail directive was issued recently, warning employees not to use the word "Wintel" in public discussions or in writing.

Intel insiders were reluctant to discuss the Microsoft relationship with Network World. One Intel spokesman said "Are you crazy?" when asked to comment.

Network World also tried to interview a number of Microsoft engineers about the Intel relationship. None of them would say much.

One engineer who was involved in the initial work on Zero Administration Kit for Windows, a technology built in response to the network computer threat, explained that "we're strongly encouraged not to talk about that."

Some vendors that compete tooth and nail with Microsoft had nothing bad to say about the Wintel relationship. A spokesman for Sun Microsystems, Inc.'s Solaris unit said: "We in Solaris land have had nothing but a good and cooperative relationship with Intel." However, some competitors seemed gun-shy, in some cases appearing more nervous about discussing Intel than Microsoft.

So what's the harm?

The close Wintel working relationship has a range of effects. For example, companies that clone Intel chips may end up with products that are less compatible with Windows and have more difficulty optimizing new Windows features such as multimedia. In fact, several users interviewed by Network World complained of problems with cloned Intel chips.

Operating systems competitors, such as The Santa Cruz Operation, Inc. with Unix, Sun with Solaris, and IBM with OS/2, may not enjoy the same level of chip optimization as Microsoft. They certainly do not enjoy the same degree of marketing support. In fact, Intel's Grove publicly proclaimed that Intel was switching its desktops whole-hog to NT, citing a lower cost of ownership. There was no mention of other Intel-compatible operating systems.

Of course, NT is the system Microsoft has anointed as the new corporate standard, and it also happens to require a pretty ripping Intel chip to operate.

Relationship changing

But while the two powerhouses have nearly always worked together, the relationship has not always been good.

"In some instances, the companies were not so much at loggerheads but just

very wary of each other. Microsoft announced it was going to port NT to the MIPS [Reduced Instruction Set Computing] architecture, which totally pissed off Intel," said Adrian King, a former high-level Microsoft executive and now an author and software consultant.

King said the nature of the interaction has evolved. "Now the work is more 'uplevel' - on things like the PC specification [for Windows 98-compatible PCs] or the new power management standards," he said.

Asked if the conspiracy theorists were correct in imagining joint Microsoft/Intel meetings as attempts to mastermind collusion, King laughed. "I've never been in any meeting where collusion could ever be construed. In the '80s, things were accelerating so fast, no one had time for conspiring," he said.

Users may have actually helped pushed the two companies closer together. "I believe that a lot of this [cooperation] got started back in the '80s when there were those of us in corporate environments saying, 'You guys have got to start working together or we are never going to get this stuff working well,'" said Cheryl Currid, president of Currid & Co., who was formerly an IS executive at The Coca-Cola Co.

John Cox, Doug Barney, Marc Songini, David Rohde, Chris Nerney and Christine Burns contributed to this report.