Seattle -- Late last December, one of Microsoft's senior managers spotted an article in the computer-trade press and suddenly felt ill.
On the front page of InfoWorld was an article revealing glitches in a new version of Microsoft's word-processing program, Word for Windows. Chris Peters, general manager of the Word business unit, lost his appetite and couldn't sleep for three days. It ruined his Christmas.
"I take this stuff personally. It's my life," Mr. Peters says.
With an attitude like that, it's no wonder Microsoft is succeeding. But it is more than that. Microsoft is becoming for software what Boeing is to aerospace -- the industry's dominant force.
"Microsoft is now on the verge of capturing the leading position in word processing and spreadsheets, the two biggest applications businesses," says Dain Bosworth analyst Glenn Powers.
To examine Microsoft's handling of its word-processing program, Word, is to see how Microsoft succeeds. Microsoft combines astonishing marketing clout with the determination to make its products the best. And perhaps key to it all is the direct involvement of Chairman Bill Gates, who remains involved in all aspects of the 10,000-employee company he co-founded.
At 33, Mr. Peters is almost fanatically dedicated to quality. Like Mr. Gates, Mr. Peters' casual dress, boyish grin and at-ease body posture masks a fiercely competitive personality. Don't be fooled by the squirt gun, cowboy hat and Coke cans that clutter his office. At his relative young age, Mr. Peters is a dedicated executive, leading a group of 160 people assigned to Word.
Sales of Word last year generated $354 million in revenue for the Redmond, Wash.-based company. That figure should hit almost $1 billion by 1995, according to a projection by analyst Michael Kwatinetz of Sanford C. Bernstein & Co. Five years ago, Word was a small player in the word-processing market, ranked fifth in a field dominated by WordPerfect, a product of the WordPerfect Corp. of Orem, Utah.
Today, Microsoft's Word is ranked a distant second in revenue and market share behind WordPerfect.
Bit by bit, Microsoft has gained ground -- largely at the expense of companies other than WordPerfect. Now Microsoft has publicly targeted WordPerfect's customers and the battle is being fought on terms increasingly favorable to Microsoft.
With Microsoft beginning its first national TV ad campaign this month, the battle will be viewed in America's living rooms. Don't be surprised if the ads remind you of the cola wars. Microsoft is already pushing a "Word Challenge" comparison claiming that users allowed to "taste" both programs chose Word over WordPerfect.
Many different word-processing programs are available, but analysts are focusing on those made by Microsoft, WordPerfect and Lotus Development Corp., which officially list at $495 but are deeply discounted at stores. The three industry giants have sharply contrasting personalties:
* Microsoft. The big gorilla. Feared and respected. Big budget for advertising. Led by Mr. Gates, who is legendary for crushing opponents and ousting executives who don't meet his expectations. Difficult place to work for people with families.
* WordPerfect. Strong competitor. Does little advertising. Warm and cuddly. Led by President Alan Ashton, who is described by employees as a grandfather figure. Employees told to spend time with families.
* Lotus. Based in Cambridge, Mass. Less than 3 percent market share but riding a winner called 1-2-3, a pioneering spreadsheet program that now shows its age. Led by Chairman Jim Manzi, an ex-journalist who says he has no personal dislike for Mr. Gates but hasn't spoken to him in three years. Unable to develop internally a dominant product for word-processing, Lotus bought Samna Corp., the Atlanta company that developed the Ami Pro program.
From DOS to Windows
To understand the battlefield and how the advantage may be going to Microsoft, certain computer lingo must be defined.
Without an operating system to control its basic functions, a computer is just a paperweight. An application runs on the operating system and performs specific tasks, such as spreadsheets or word processing.
Virtually all IBM-compatible computers use the MS-DOS operating system, a Microsoft product that is used by 100 million people. Since 1981, MS-DOS and its upgrades have been a cash cow for Microsoft. The money has helped finance development of applications, a huge advertising budget and a successor to MS-DOS called Windows. A best-seller but so far lacking the universal acceptance of MS-DOS, Windows allows a user to control a computer with a mouse pointing device.
Many analysts and software companies share Microsoft's belief that the future of computing is Windows, not competing systems offered by IBM or Apple Computer. Thus the next generation of software, like the first, will be run on an operating system controlled by Mr. Gates, who is using his company wealth and personal influence to push the market toward Windows.