MS, Intel marriage on the rocks?

The Wintel marriage is at its rockiest as miscommunication, wandering eyes, and increasingly loud public spats are straining an already troubled union. But as the duopoly enters 1999 on shaky ground, most industry analysts say it is not divorce lawyers but a marriage counsellor that is called for because mutual self-interest will prevent the Microsoft and Intel union from breaking up any time soon.

The Wintel marriage is at its rockiest as miscommunication, wandering eyes, and increasingly loud public spats are straining an already troubled union.

However, as the duopoly enters 1999 on shaky ground, most industry analysts say it is not divorce lawyers but a marriage counselor that is called for because mutual self-interest will prevent the Microsoft and Intel union from breaking up any time soon.

And for IT managers who have come to count on these two companies to push forward industry standards, the next few years will see fundamental change as both companies look to drive advancements in the age of the Internet.

Much of the emerging Wintel discord can be traced to Santa Clara, California, where Intel has often felt as though it is expected to be at Microsoft's beck and call.

According to a former Intel executive, who requested anonymity, employees are essentially divided into two camps: the Hawks, who want to challenge Microsoft, and the Doves, who want "to throw themselves at the feet of Microsoft and be co-pilots."

The anxiety at Intel increased, the former executive said, when Frank Gill, head of the Intel Products Group, retired last May. Gill was the company's liaison with Microsoft -- particularly with Microsoft Chairman and CEO Bill Gates and President Steve Ballmer -- and acted as a buffer and a level head in managing the relationship.

"There is a lot of bravado on both sides, and the slightest things get misinterpreted by both," the former Intel executive said. "Intel feels severely outmarketed by Microsoft -- as if Microsoft takes credit for everything that's happening in the expansion of the PC. Intel clearly drew up the PCI standard, and felt that Microsoft was more identified with [the standard] in the public's eye."

"[In] all of the areas that Intel wants to [expand] into, Microsoft has a beachhead, including the relationships with the cable and wireless providers," the former executive added. "There is a sense that Microsoft is thwarting Intel's diversification."

The siren song of other potential partners is a loud one, and at times the Wintel union resembles somewhat of an open marriage.

Microsoft, for example, put on a brave face on Sept. 29 when Intel announced, along with Netscape Communications, that it was investing in Red Hat Software, a major distributor of the free Linux operating system that Microsoft views as an increasing threat to its Windows dominance.

At the time, Brad Chase, vice president of developer relations and marketing at Microsoft, said, "This does not impact our relationship with Intel in the least."

But behind the scenes Microsoft's reaction was anything but placid, according to a source close to both Microsoft and Intel.

"It was a surprise [to Microsoft], and the timing was interesting because it was right around the time that Microsoft really started to worry about Linux," the source said. "It was like, 'Oh, here's one more thing to worry about. Our best and most visible partner is reaching over to that side.'"

Intel hedges bets

In general, Intel's growing interest in Unix flavors is due to a sorely lacking presence in the higher segments of the server market, according to Nathan Brookwood, an analyst at Insight64, in Saratoga, California.

And when Intel goes up against the likes of Sun Microsystems running Solaris on Sparc or Digital Equipment running Digital Unix on Alpha, it loses.

"Intel is not losing to the competition because the chip is slower, but because the OS is slower," said a source who asked not to be named. "The customer doesn't just throw out NT, however. They throw out the chip with it."

The growing rift between Microsoft and Intel has been nothing short of a boon to the Linux community. Although Linux is the anything-but-Windows crowd's latest darling, the truth is that in mainstream computing, Linux is constantly playing catch-up with technology that runs immediately on Windows NT -- or, for that matter, on other network OSes.

Whether it is faster a PCI or the next version of the SCSI interface, Linux users often have to wait at least six months before the drivers and hooks are in place for Linux to leverage whichever new technology is offered to the industry.

All that is about to change, with Intel's help. According to sources, the chip giant is making sure it includes Linux distributors, such as Caldera Inc. and Red Hat, on various standards committees. In one case, Intel had to have the committee rules changed to include the distributors -- not an easy task with Microsoft residing on those same standards committees.

Until now, for example, Linux was frozen out of the Intelligent I/O (I2O) standards body, which is currently designing the next generation of high-speed data throughput by off-loading I/O from the main processor onto an auxiliary chip. The standards rules state that committee members cannot release the source code.

But Linux is built on the philosophy of open-source code, which precluded it from membership in that committee. Intel stepped up to the plate and vigorously worked to have the rules of participation changed so the technology would be open, according to a source familiar with the committee.

In another instance, Intel typically collaborates with Microsoft, Sun, Digital, and other OS vendors to ensure that future operating systems will work with future Intel chips and chip sets. Now Linux distributors are stops on Intel's road show.

Some observers said they believe Intel is simply hedging its bets.

"What Intel is up to now is making some investments to make sure they are not completely at the whim of Microsoft, which, frankly, can be a loose cannon at times," said John Dunkle, president of Workgroup Strategic, a consultancy in Portsmouth, New Hampshire. "They are saying that they want to serve more than one master."

Wandering eyes

Intel also teamed up with RealNetworks Inc. on video compression software last September, a time when the Seattle company was at war with Microsoft.

Meanwhile, Microsoft's head has been turned by other chip manufacturers, particularly in the sub-$1,000 PC market, as well as by hardware partner Compaq's stake in Alpha technology, courtesy of Digital.

Six months ago, Microsoft signed with Matsushita Electric Industrial Co. Ltd. to use Windows CE on a multimedia microprocessor chip for the Japanese company's consumer electronics products.

"This marriage will hold firm in desktop PCs and servers," said Dwight Davis, an analyst at Summit Strategies, in Kirkland, Washington. "It's in the new markets -- set-top boxes, personal digital assistants, embedded products, and others -- where you are going to find a looser alliance. They are both going to play the field there, and they will not get the same encouragement they gave one another in the past."

In a December 1997 e-mail to Gates, a top executive suggested that Microsoft take a microprocessor mistress. In order to keep Intel from wading too deep into the software business, Joachim Kempin, senior vice president of OEM sales at Microsoft, suggested that the software giant buy one of Intel's competitors, such as "Nsemi or AMD or both, and own the CPU and the [software] business -- while [Intel's and Microsoft's stock is] taking a dive," the e-mail stated.

"How sure are we of our partnership and how fast could we react if needed?" Kempin pondered. "We could bring compatibility to another platform faster than anybody else ... "

Communication breakdown

The most recent Wintel rub came last fall, when Microsoft quietly and suddenly killed off Chromeffects.

The 3D multimedia Windows technology looked cool, and developers were able to get much wilder with graphics and use much less bandwidth. But Microsoft struggled to outline practical uses for Chromeffects that would justify the expensive and heavy-duty hardware requirements it necessitated.

Nevertheless, Gates pronounced Chromeffects a key for Windows to leverage the power of the Internet and to further the company's Distributed Internet Applications (DNA) architecture, despite the minimum system requirements: a 350-MHz to 400-MHz Pentium II, a 100-MHz bus, 4MB of video memory, and 64MB of RAM.

Intel, which relied on Chromeffects and its beefy requirements to drive sales of its Katmai processor, due for rollout in 1999, was caught unaware when Microsoft dropped the project in November.

"Microsoft may go to war with Intel," said Rob Enderle, a senior analyst at the Giga Information Group Inc., in Santa Clara, California. "Chromeffects was supposed to be released [at the end of 1999], and Microsoft hadn't bothered to tell Intel ahead of time."

Another technology gap between Intel and Microsoft is the wireless specification put forth by the Bluetooth Special Interest Group, which boasts Intel as one of its five members. Microsoft is balking at the proposed specification, and Bluetooth devices could clash with devices that use Microsoft's wireless home network technology.

Without Microsoft's participation, Bluetooth may never get Windows Logo approval, which eventually could prevent it from becoming widely adopted.

Trials and ... more trials

The bubbling Wintel tension boiled over in a very public forum when the U.S. Department of Justice sought Intel's help to bolster its antitrust case against Microsoft, and put a high-ranking Intel executive on the witness stand.

U.S. Justice Department lawyers point to an August 1995 meeting between Gates and Intel Chairman Andy Grove during which Gates allegedly made "vague threats" that Microsoft would work more closely with Intel's competitors unless Intel shelved its plans to invest in Internet-related technologies and businesses.

The fact that Microsoft would exert this kind of pressure on one of its closest partners only served to bolster the government's case against the software behemoth. Government lawyers in the antitrust case subpoenaed Intel documents detailing the conversations, and Intel executives gave depositions on the matter.

During the 1995 meeting, Gates reportedly called for Intel to stop development of native signal processing (NSP) software for multimedia applications. Microsoft executives were concerned about Intel's interest in including Internet features, and, in particular, support for Java, which can run on any operating system. Java support was seen by Microsoft as a threat to the continued dominance of Wintel and a boon to Sun's Java.

Steve McGeady, vice president of Intel and head of Intel's content group, took the stand in November, testifying that Microsoft made "credible and fairly terrifying" threats to drop support for Intel's chips unless Intel dropped software development, particularly NSP technology designed to improve PC multimedia capabilities.

At one point, McGeady quoted Grove as saying, "We caved ... under pressure from Microsoft" on NSP. He also bolstered the Justice Department's argument that Microsoft tried to scare Intel away from Java, saying such pressure came "repeatedly and on multiple occasions" from Redmond, Washington.

"[Microsoft] felt that they had control of all the software above the hardware," said McGeady, described by the former Intel executive as a leading Hawk.

But Intel is feeling the strain of its own legal woes, too. The company is due in court on Jan. 12 concerning antitrust charges filed against it by the Federal Trade Commission (FTC). In the suit filed by the FTC in June, Intel was accused of using the same kinds of tactics as Microsoft to illegally pressure Intergraph Corp., Compaq, and Digital into using Intel chips.

Solid foundations

Most industry observers said they believe the Wintel marriage, which is almost two decades old, is unshakable -- at least as far as PC-based technologies ranging from lower-end portables to higher-end departmental servers are concerned. They see it as the technology relationship of the 1990s across the industry, which figures to be the engine driving hundreds of billions of dollars worth of business well into the next decade.

On the desktop, at least, two things remain clear. When Intel and Microsoft agree on a technology, IT managers tend to benefit.

"I don't love the standards fostered by Wintel," said Brian Jaffe, a New York-based IT specialist. "However, as an IT manager I do like that they have delivered a significant amount of standardization to the corporate PC environment, in terms of operating systems, applications, etc."

For example, acceptance by system vendors of Universal Serial Bus (USB) illustrates what can happen when the technology is supported simultaneously by the operating system and the processor's chip set. Users then reap USB's plug-and-play benefits.

The reverse is equally true, as evidenced by Intel's on-again, off-again endorsement of the IEEE 1394 specification, which now seems destined for serious use only by semi-pro digital video editors and consumers with digital cameras, at least in the short term. The benefits of the IEEE 1394's high speed I/O, currently at 50MBps transfer rate, awaits incorporation into systems.

Intel's Accelerated Graphics Port technology vs. Microsoft's similar Talisman technology is another case in point. Neither seemed ready for the desktop until Microsoft quietly dropped its aggressive Talisman push.

Currently, Intel and Microsoft support a digital connector for flat-panel displays that may be at odds with the Video Electronics Standards Association version. Most industry observers believe that what Wintel wants, Wintel will get.

"There is no standard connector for digital boards. The Digital Flat Panel Connector hasn't been defined yet, but Microsoft and Intel are together on this one," said Cathy Baran, a North American product marketing manager at Hewlett-Packard Co., in Palo Alto, California.

And the lack of a standard is to the detriment of users.

"When converting an analog signal, typically in that translation you will get some distortion and an image will shake and wave. Users will need to manually adjust the LCD to get it right," Baran said.

Planning ahead

While political intrigue and industry brawling -- both public and covert -- impact the decisions that IT managers are making, most IT managers seem to be hoping that the feud between these two industry giants does not escalate.

"The partnership between Intel and Microsoft ... is the single greatest factor in making computing as ubiquitous and productive as it is today. If I were a true anarchy-loving techie, I would see a Microsoft-Intel split as a huge opportunity for money to be directed to the `next great technology,' which I would look forward to spending days and days fooling around with to get running," said John Carpenter, IT manager at the Georgetown University School of Business, in Washington. "As a stodgy old computer manager, however, I look with trepidation on any modification that is gong to bring with it additional time consuming and expensive information management problems."

Other IT managers concurred.

"I am all for standardization," said Greg Kinman, enterprise information manager at the John Deere Insurance Group, in Moline, Illinois, and a member of InfoWorld's Corporate Advisory Board. "The goal is to integrate software products and minimize development, licensing, and support costs. A solid Wintel has played a key role in Deere's standardization efforts."

"Competition is really what the next century is about. For the benefit of every industry, Microsoft and Intel have to get along, and it doesn't apply to them alone. Whenever the service you provide is complimentary, it benefits everybody," said Alan Boehme, director of business planning at DHL Worldwide Express, in Redwood City, California, and also a member of InfoWorld's Corporate Advisory Board.

Nevertheless, the former Intel insider said the Wintel teamwork could end if the issue is big enough.

"The relationship is deteriorating steadily -- the thing that hasn't happened is it hasn't been tested by a crisis," the former executive said. "That's when you'll know. It could be Merced."

But at the end of the day, the two companies are likely to stay together, at least for the time being, and for the sake of the customers.

"It's now a marriage being held together by the kids," Enderle said. "But the kids go to college by 2002 when thin clients become viable, and it doesn't matter about the hardware or software. It's going to be all about back-end services."

(Bob Trott covers Microsoft and Ephraim Schwartz covers PC hardware at InfoWorld. Ed Scannell and Dan Briody contributed to this report.)

SIDEBAR: Over the years, the Wintel relationship has seen its share of ups and downs

Microsoft and Intel have had a complicated and uneasy relationship based on mutual self-interest.

1984 - August

IBM chooses Microsoft XENIX and DOS, which support Intel's APX-286, for IBM's new generation of PCs, the IBM PC AT.

1989 - November

Microsoft and IBM Corp. agree to jointly develop OS/2 and other systems software to run on Intel's 386 and 486 processors.

1995 - August

Bill Gates allegedly makes "vague threats" against Intel if the company persists in software endeavors.

1996 - June

Intel joins others in supporting Microsoft's call for a common Internet file system.


Microsoft and Intel sign broad cross-licensing agreement to further multimedia voice-, video-, and dataconferencing calls over the Internet.


Microsoft ships Direct 3D API for MMX.


Intel introduces Wired for Management and Microsoft introduces Zero Administration Windows. Both companies promise to support each other's total cost of ownership initiatives.

Wintel announces that NT will support the IA-64 architecture.


Microsoft and Intel jointly publish specifications for the NetPC.

1997 - September

Microsoft announces support for Katmai in Windows 98.


The U.S. Department of Justice levels antitrust charges against Microsoft.


A Microsoft executive suggests buying an Intel competitor.

1998 - May

The U.S. Department of Justice and 20 states sue Microsoft on antitrust grounds.


The Federal Trade Commission (FTC) files an antitrust suit against Intel.

Intel and Microsoft announce that their separate AutoPC initiatives will interoperate with one another.


Along with Netscape, Intel invests in Linux distributor Red Hat.

Intel licenses RealNetworks video compression technology.

1999 - January

Intel begins a court battle with the FTC over antitrust charges.

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