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Bill Gates had watched Netscape's explosive growth with a mixture of curiosity and concern. He knew that the Net was important, but for most of the past two years, Microsoft's resources had been strained as thousands of programmers, marketers and customer-support people slogged through nearly complete overhauls of Windows and Windows NT, the company's marquee operating systems. Gates knew he needed to get as many bodies as possible onto Net projects as fast as possible, a warp-speed course correction that would require superhuman devotion to the Microsoft mission. Fortunately, Gates knew that was one thing he could count on.
So beginning last fall he started quietly pulling the levers. Hundreds of exhausted programmers streaming back from the front lines of the Windows 95 coding effort found themselves thanked, paid and returned to the front to battle Netscape. Line managers killed million-dollar projects and refocused entire divisions in the space of hours. In one instance, the company decided it needed to jump-start an effort to develop programs in the Java computer language, a key to creating Internet applications. So John Ludwig, a rising Microsoft star who runs the Internet tools group, simply walked into a room of programmers who were working on something else and told them to stop. Microsoft appreciated their efforts, he said, but a bigger challenge had emerged. "We had to get on the stick on Java," he says. "I told them, 'Clear that source code off your machine, and start working on Java today.'" Four months later, the complex new coding was done.
The strategy guiding those difficult tactical decisions was something Gates referred to as "embrace and extend." Rather than invent a whole new service to compete with the Internet, Microsoft would "embrace" current Net standards and then "extend" them. In practical terms, that meant do everything Netscape did and then add the extra functionality that would give Microsoft a winning edge. If Netscape let Web browsers look at pages from around the world, Microsoft would let users look at the same Web pages but from within familiar applications, such as Microsoft Word. If Navigator could play sound, Explorer would play CD-quality sound. It was the sort of one-upmanship that Gates had perfected in dozens of similar software fights. Although frequently second to market with a product, Microsoft always won by outfeaturing and outlasting its competitors.
That put extra pressure on Microsoft to deliver a world-class browser. Explorer 2.0, the browser Microsoft released early this spring, was a poor second cousin to Navigator 2.0. Gates knew Internet Explorer 3.0 had to be far better. So the company began throwing bodies at the problem. From August to November 1995, the browser group grew from eight to 30 employees. By the time Explorer 3.0 was released last month, that number had risen to 800.