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`MICROSOFT IS GOOD, BUT IT'S NOT GOD'
Scott Cook was stunned by a phone call in late 1990. It was a senior Microsoft Corp. executive telling Cook, the co-founder and chief executive of tiny Intuit Inc., that the software goliath was about to enter Intuit's market--programs for check writing and household budgeting. Because the two companies had once talked about collaborating on a finance program for Windows, the executive said he felt obliged to let Cook know.
Small consolation. After their talks had broken off, Cook shelved plans for a Windows package, and he thought that Microsoft had abandoned its efforts. Now, Cook had little choice: He had to have a Windows version of Quicken in a hurry. In just 10 months, the Menlo Park (Calif.) company was done, just three weeks after Microsoft launched Money. "The advantage we were counting on was lost," says Bruce Jacobsen, general manager of the Microsoft unit that sells Money.
Then, the real battle began. Both products got good reviews, and both carried a list price of $70. Cook cut wholesale prices so dealers could undercut Microsoft's $45 retail price. He also began advertising on TV. All told, Intuit managed to hold on to its 60% market share. Jacobsen concedes that Microsoft was caught off guard.
The episode illustrates that Microsoft is not invincible. And although Microsoft loses only rarely, its performance with Money is not an isolated case. Says Robertson, Stephens & Co. analyst Peter J. Rogers: "Microsoft is good, but it's not God."
Some software makers have even taken back markets that Microsoft dominated. Until a year ago, Microsoft's Works program had close to 90% of the $50 million market for integrated software for Macintosh computers. Such packages combine basic word processing, spreadsheet, communications, and data-base functions. But Claris Corp., Apple's software subsidiary, figured it could build a better product. Its ClarisWorks arrived in late 1991 and within a year had 77% of the market, leaving Microsoft with 20%.
Sometimes, Microsoft's aggressiveness backfires. When it comes to creating multimedia CD-ROM disks, for instance, Microsoft often insists on buying rights to the content of the disks. That can scare off book publishers who worry about losing control in the new medium. Comptons NewMedia, a San Diego-based unit of Encyclopaedia Britannica Inc., on the other hand, helps publishers create and distribute new works for CD-ROM without buying content rights. Result: Comptons now distributes more than 40% of all retail CD-ROM titles in the U. S., while Microsoft only has five titles on the market. Says Link Resources Inc. analyst Steve Reynolds: "The Comptons approach will be more prevalent."
FOLLOWED HOME. If Microsoft has a consistent weakness, it may be in consumer products. Microsoft dominates the corporate market for PC software, which requires building relationships with computer managers and giving volume discounts. The home market, on the other hand, is based on catchy in-store promotions, direct marketing, and meticulous attention to making software easy to use.
That's where Intuit has excelled. A former Procter & Gamble Co. manager, Cook has built his company from about $6 million in 1988 to $84 million in 1992 by studying how ordinary people manage their finances. He has even had product developers follow customers from the store to their homes to see what difficulties they encounter when loading and using Quicken.
Of course, Microsoft isn't throwing in the towel. To finally win some market share from Intuit, Microsoft now has dealers selling Money for $15, compared to Quicken's typical retail price of $35. "Microsoft is relentless," says Cook. "It never gives up."Evan I. Schwartz in New York