Microsoft Pledges Apple Allegiance

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The general manager of Microsoft's Macintosh Business Unit (MacBU), Browne this week squelched industry speculation that Microsoft might soon phase out its Mac software development. In a presentation at Microsoft's Mountain View campus, he said the software giant sees the Mac as a profitable platform going forward and will continue to churn out robust offerings for the Mac OS X operating system--including improved versions of Office productivity suite and Internet Explorer browser plus connectivity to Microsoft .Net Web services.

Browne said he reaffirmed Microsoft's commitment to the Mac because of questions surrounding a five-year software pact with Apple that expires in August. Under the 1997 agreement, unveiled at Macworld Boston by Apple co-founder Steve Jobs and Microsoft co-founder Bill Gates, Microsoft agreed to develop software and tools for the Mac--notably Office and Internet Explorer--plus invest $150 million in non-voting Apple stock. Microsoft no longer holds that investment in Apple.

"The relationship between Microsoft and Apple really has nothing to do with the technology agreement," Browne said in his presentation. "The agreement is ending, [but our business is absolutely continuing."

Though no talks currently are under way to renew or extend the deal, Microsoft has no plans to discontinue its Mac business, Browne said in a phone interview. "People have been associating the technology agreement we signed with Apple with the fact that Microsoft does products for the Mac. And what I wanted to do was to get on the record that we actually do these products because they're good business--not just because we have a technology agreement with Apple," he said. "This August, the technology agreement expires, but I wanted to affirm that we'll continue to support the platform as long as the business is good."

Microsoft would be open to discussing a technology pact with Apple, Browne said. But both he and Apple indicated that a formal agreement isn't necessary.

"Microsoft and Apple have worked together to produce some great products for Macintosh customers, such as the recently released Microsoft Office for Mac OS X, which is getting rave reviews. We don't see this partnership changing," Apple said in a statement. "Apple does not have any agreements with its other developers, and we see no problems working together with Microsoft for the foreseeable future." Apple executives declined to comment.

A key reason Microsoft and Apple aren't anxious to pursue a new technology pact is that the companies now have a cooperative relationship, whereas in 1997 it was still adversarial, according to Browne. "The conditions that prompted the original agreement are no longer present, and our strategic interests are different these days," he said.

Indeed, Microsoft and Apple were staunch rivals up to the signing of the 1997 deal, industry analysts and solution providers said. Microsoft's introduction of Windows 95, with a much-improved graphical user interface (GUI), propelled the company to the top of the software industry and stole the user-friendliness thunder that had been the domain of the Mac OS, they said. Microsoft and Apple also had engaged in legal tussles over the desktop GUI concept popularized by the Mac.

Apple, too, has experienced big changes since that time, industry observers said. A month before the August 1997 Microsoft-Apple agreement, Apple Chairman and CEO Gil Amelio resigned in light of the company's dwindling sales and market share. Steve Jobs, who had rejoined Apple as an adviser several months earlier, became part of a new board of directors formed in August 1997 and, a month later, was named Apple's interim CEO. Under Jobs' watch, Apple underwent a rebirth, led by the 1998 introduction of the iMac, its most popular computer ever. And over the past year or so, Apple has been one of the few positive stories in the hard-hit PC arena, with compelling products such as the Unix-based Mac OS X; multimedia software including iTunes, iMovie, iPhoto and iDVD; the dual 1GHz Power Mac G4 desktop; the iPod MP3 player; and the flat-panel iMac G4, observers said.

"At that point [in 1997, Apple was really at a low point in the viability of their product. Well, they have since made leaps and bounds in their products. Today, the quality of their product is second to none," said Tommy Turner, president of AIS Computers, a Fayetteville, Ga.-based Apple solution provider.

And Microsoft aims to continue building on the Mac's resurgence, Browne said. Last November, Microsoft shipped a Mac OS X version of Office, called Office v. X, which many end users and solution providers hailed as superior to the Windows version of Office and Apple executives called a major boost to the OS X platform. Now Microsoft's 150-person MacBU is working on more than 1,000 bug fixes, performance enhancements and new features for a "service release" update of Office v. X, Browne said. Improved OS X versions of Internet Explorer and MSN Messenger also are on the radar screen, and the MacBU has been working with Apple and Palm to hone its software's Palm Sync conduit for PDAs, he added.

In his presentation, Browne also emphasized that Microsoft's MacBU will focus only on OS X products going forward, except for any fixes, maintenance and security issues that must be addressed with existing Mac OS 9-based software. "Mac OS X is our whole future. We're not going to do another product on Mac OS 9," he said. "Every major release that my business unit does from now on will be based on Mac OS X. If Apple is betting on OS X, it makes sense for us to do so."

On the .Net front, Microsoft plans to build Mac client connectivity to current and upcoming XML-based Web services, such as .Net My Services, into its Mac software. "The way we're looking at the Mac is as a great client platform for connecting to .Net," Browne said. "The MacBU will create connections between our client software, Office, Internet Explorer and other things we might do."

Microsoft doesn't plan to adapt its .Net development tools and framework to enable developers to build .Net client software for the Mac, Browne said. "Apple has its own development proposition," he noted, citing Apple's OS X-native Cocoa development environment. "For us to come in [with .Net and say forget all of that stuff, I think we'd just create more confusion than benefit."

Some Apple VARs said they were encouraged by Microsoft's renewed commitment to the Mac but expressed concern that the lack of an extended or new technology agreement between Microsoft and Apple might make customers reluctant to invest in the Mac platform, given its slim 3 percent to 5 percent desktop market share.

"I always believed that [a formal agreement is the best way to proceed. That gives the user community more stability and confidence in the platform," said David Salav, president of PWR Systems, Bohemia, N.Y.

Though Microsoft and Apple have a cordial relationship nowadays, competition could heat up again on the OS front, Salav said. "Short of having an agreement in place that keeps everybody whole, it could become an ugly environment out there, especially now that Apple has a better OS than Microsoft," he said, referring to Apple's OS X and Microsoft's Windows XP.

AIS Computers' Turner, however, said Microsoft and Apple don't need to have a software pact right now because their relationship is strong and Microsoft's Mac products are profitable. "I don't think a formal agreement is needed. Microsoft's Mac offerings are solid at the moment, and the product is attractive to customers and can stand on its own financially," he said. "[Apple is the only vendor I'm aware of that has such a formalized [software arrangement."

Still, both Turner and Salav admitted that they wouldn't be surprised to see Jobs on stage at Macworld New York this summer announcing a new software agreement with Microsoft. "As the clock is ticking and August is coming up, Macworld in July would be a very nice time to gain some precedent, as they say," Salav said. "It could only benefit both companies."