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Sunday, January 3, 1999 < Prev Next >

Internet rewrites software scene

Forecasting an outlook for the personal computer software industry used to be easy.

One tried to estimate the number of personal computers that would ship and whether a new Windows or Macintosh operating system was going to be released that year.

Then along came the Internet, wreaking havoc on that simple forecast model.

"It killed the Windows shrink-wrapped software market," said Jesse Berst, publisher of AnchorDesk, a Redmond-based online daily newsletter.

The market isn't as bad, said Berst, for established products that are constantly upgraded. Take Visio Corp.'s business graphics software, for instance. The Seattle company has been on a tear recently as more and more businesses adopt Visio software and the company's new, lower-priced computer-aided design software hits the market.

Many traditional software companies are quickly adding Internet features or trying to remake themselves into Internet companies.

For instance, Wall Data Inc., the Kirkland connectivity company, is touting its Cyberprise software, which hooks different kinds of computers together within a business through the Internet. Wall Street is just starting to buy into the company's make over, lifting the company's stock up from a narrow range around $14.50 per share to a recent $21 per share.

"They've only sold $8 million of Cyberprise to date," said Rob Owens, a senior analyst with Pacific Crest Securities Inc. in Portland. "This is still a very new area for the company. They are ahead of projections but it's a market they're just establishing."

This past year can be dubbed the year of electronic commerce, with high-flying stocks such as Seattle's Inc. leading the way.

Despite substantial losses, the online bookseller's sales are on track to hit about $545 million this year, not a bad jump from last year's $148 million. And investors have gone gaga over Amazon's potential as one of the Web's best-known brands expands into music CDs and videos.

Amazon executives also are eyeing consumer electronics, games and toys. Founder Jeff Bezos' grand plan is to quickly become a gigantic shopping mall or portal, as mega-Web sites are called in industry jargon.

Berst and Frank Catalano, a new-media analyst based in Sumner, predicted online portals will undergo massive changes in 1999. Berst said portals such as Yahoo, Excite and MSN no longer will want to be a person's doorway to the Internet. Rather, they will seek to function as a home base where users keep coming back for vital information and links.

Catalano expects some portals to collapse, however.

"We've already started to see the canceling of some high-dollar deals with portals, such as has done," he said. "I think we'll start to see other companies canceling their multimillion deals because they're not getting the traffic results they've expected."

Because several of these mega-sites are starting to realize sustaining revenues through selling advertising may not work as well as first planned, many are adding shopping and other services where they can receive a transaction fee. These companies also are looking at the success of Amazon and the huge estimates of online sales coming from research firms.

According to new projections from Forrester Research Inc. worldwide e-commerce sales will reach as high as $3.2 trillion in 2003, representing nearly 5 percent of all global sales. The Cambridge, Mass., company is predicting $145 billion to $175 billion in online sales in 1999. Of those figures, about $109 billion will be conducted in what's known as business-to-business sales. The remaining sales will be from businesses to consumers.

And in the world of business-to-business sales, or even the Internet, one can't forget Microsoft Corp., which is expected to continue to chug along despite the antitrust lawsuit by the U.S. Department of Justice and 20 states.

For its fiscal 1999, which ends in June, Microsoft is looking at a revenue boost from Office 2000, its latest version of Microsoft Office, said Pacific Crest's Owens.

Speculation will continue about just when Windows NT, now renamed Windows 2000, will actually ship. NT is Microsoft's corporate or enterprise operating system, which the Redmond company is targeting to large businesses. It's also the power behind Microsoft's computer servers, which the company is hawking for Internet and e-commerce sites.

"I think it will be another interesting year for Microsoft," Owens said. "You'll continue to see the adoption of Windows NT as a corporate computing platform and see them penetrate the enterprise more. They'll have another solid performance."

Berst of AnchorDesk predicts several interesting struggles involving Microsoft's operating systems.

"We'll continue to see the fight between NT and Unix," he said. "But another interesting struggle will be between embedded NT and Linux."

Linux, which rhymes with cynics, was developed eight years ago by a man who wanted a simpler version of the industrial strength Unix operating system, which runs many corporations. It's difficult for computer novices to install and use, but backers said it is more robust, stable and faster than Windows. And it's free for anyone wishing to download it from the Internet.

With NT, on the other hand, you have to buy 35 million lines of code and pay full price, he said.

"As Microsoft has seen Linux growing, they're looking at offering embedded NT, which lets you pick and choose (functions) and they can price it differently," Berst said.

A third struggle to watch in 1999 will be between NT and Windows CE, a stripped-down version that runs on small devices, Berst said.

"Who's the real successor to Windows 98? Everyone thinks it's NT, but it may be CE," he said. "As the market heads toward appliances versus desktop computers, CE may be the better operating system. And Bill Gates is saying privately to some analysts that he's going to allow CE to compete with NT for lighter weight desktops."

Puget Sound Business Journal

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