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Barksdale knew better: more was at stake than merely the market for browsers. Netscape's Navigator had the potential to be the next Windows: a method for launching programs and calling up information not only from the Internet but also from corporate networks and even from the user's own PC. In short, it could supplant the operating system and finally break Microsoft's hammerlock on the PC industry. Barksdale knew Microsoft wouldn't--couldn't--ignore the challenge. "It was such an obvious opportunity," he says. "They weren't going to miss it. We had always expected Microsoft to get hard core about the Internet."
And so it did. That morning in Seattle, addressing hundreds of analysts and media, Gates hit a rare rhetorical high, offering up what amounted to his new digital gospel. To hammer the message home, he reached back into history, recalling the words of Admiral Yamamoto on the day the Japanese attacked the U.S.: "I fear we have awakened a sleeping giant." The crowd chuckled its recognition: it was Dec. 7, 1995, and Bill Gates was taking Microsoft to war.
The conventional army loses if it does not win. The guerrilla wins if he does not lose. --Henry Kissinger
Since his December announcement, Gates has backed up his martial rhetoric with action. Over the past three months, Microsoft programmers have released a stream of new products designed to seduce Net users away from Netscape. With everything from software giveaways to massive developer conferences (Microsoft rented 40 movie theaters on July 16 for a programmers' gathering), the gang from Redmond, Washington, has pressed home one message: Microsoft is playing for keeps.
Proof of that came on Aug. 13, when Microsoft unveiled Explorer 3.0, the newest version of its Web-browsing software. The 8-megabyte behemoth matched Netscape's franchise browser, Navigator, feature for feature, and at a much better price--free. Available over the Web, the browser notched a million downloads in its first week. Netscape stockholders voted with their feet: by late August, Netscape stock had shed half its value from a December high, while Microsoft shares approached record levels. And Gates swore the best was yet to come.
Netscape wasted little time in counterattacking. Two weeks later, on Aug. 26, company founder Jim Clark unveiled blueprints for a new software firm called Navio that will try to outflank Microsoft by putting browser software on pretty much anything with a screen and a modem. The first stop is likely to be an Internet TV, followed by a $500 network computer, online video gaming machines and Net-surfing cell phones. Organized around a powerhouse electronics alliance that includes just about everyone but Microsoft (Sony, NEC, Nintendo and IBM are supporting the venture), the company has one aim: to use the Internet to make Microsoft Windows irrelevant.
That sort of direct challenge to their business is the stimulus Microsoft employees love best. In just six months, Gates has refocused the work force onto Net-related projects, mercilessly eliminated a dozen others that were Holy Grails a year ago, and geared up an Internet-content group that will spend tens of millions of dollars this year. He has even withdrawn $1.5 billion in R.-and-D. money from a $6 billion cash stockpile Microsoft has tucked away against the sort of rainy business days they aren't used to seeing in Redmond.