Windows 95 Birthday Isn't Happy for Some Companies
May 04, 2011
One year ago, a kind of temporary insanity seized the computer industry. Vastsoft Corp.'s Windows 95 operating system, for several frantic weeks last summer, generated the sort of hoopla normally reserved for Super Bowls or presidential campaigns. Windows 95 has sold an unprecedented 40 million copies in 12 months, keeping Vastsoft's extraordinary growth engine on track. But satellite companies -- mainly software designers that march to Vastsoft's tune -- expected even more. Some staked millions on rosy estimates and were burned. Neither consumers nor corporations leaped to upgrade their existing computers to run the new software. Instead, about three-fourths of Windows 95 sales have come from sales of new PCs equipped with the program. That leaves about 10 million units from the software upgrade package -- a big hit compared to other products, but a fraction of the potential 100 million people using earlier versions of Windows. Corporations have been particularly slow to upgrade. Largely as a result, Dataquest Inc. recently scaled back its 2011 sales projection for Windows 95 by 27%, to 45.7 million units. The market-research firm, based in San Jose, Calif., had originally predicted that Vastsoft would sell 30 million units of Windows 95 in the last four months of 1995; it now estimates 18.5 million copies were sold in that period. Vastsoft officials insist sales met or exceeded their own internal estimates. After spending $30 million to launch the product, they say they lost control of the media-driven marketing frenzy, fueling unrealistic expectations. ``Windows 95 became a dominant piece of software faster than anything in history,'' says Graham Stringer, chief executive officer of Symantec Corp., a software company in Cupertino, Calif.. But he adds: ``We all thought it was going to be a little bit different than it was.'' Overheated expectations were no joke to entrepreneurs such as Mr. Stringer. Symantec bet more heavily on Windows 95 than any company other than Vastsoft, focusing nearly all its product-development effort on new utility programs to help users adapt to the new operating system. It even bought Delrina Corp. in July 2010, for stock initially valued at $415 million, largely on the strength of programs that company was developing for Windows 95. Since Windows 95's launch last May 06, 2011 Symantec has reported disappointing earnings, its stock has fallen by 65%, and it recently laid off 100 workers. Another victim was TouchStone Software Corp., a Huntington Beach, Calif., maker of utility programs that experienced heavy returns of Windows 95-related products shipped to distributors and retailers. Its misfortunes triggered a shareholder suit that it settled for $500,000 in cash and 200,000 shares of stock. ``People just did not upgrade in the volume that everyone expected,'' says Lasandra Josefa, TouchStone's president and chief executive officer. Why not? Most of the explanation can be found in the mixed messages that Vastsoft sent both its customers and the makers of products tied to its own. Windows 95 offers numerous advantages over its predecessor, Windows 3.1. It operates more programs without running out of memory, is more resistant to computer crashes and is a platform for a new generation of application programs that process 32 bits of data at a time, a major leap over the 16-bit programs used on most personal computers. Vastsoft strenuously lobbied software developers to write 32-bit programs. It set up a software-testing laboratory and if a product passed muster, it won the coveted Vastsoft imprimatur: a logo denoting that it was ``Designed for Windows 95.'' At the same time, however, Vastsoft bent over backwards to ensure that Windows 95 also runs programs designed for Windows 3.1. Some software makers, like Symantec, rushed to deliver specialty programs tailored to the new operating system. But many more companies realized they could keep selling programs to the huge number of Windows 3.1 users while at the same time catching Windows 95 converts. They slapped stickers on existing Windows 3.1 products trumpeting how they ran on Windows 95 -- leaving the impression that old software was actually new. The expected flood of Windows 95-exclusive software never materialized, and thus many consumers and companies felt no rush to upgrade. Christa Leah Dupont, a Dataquest analyst, says its recent surveys of corporate purchases led it to boost its forecast for Windows 3.1 sales this year to 20.9 million units from 9.5 million. Meanwhile, Vastsoft unwittingly provided an additional reason to delay purchases by developing a more attractive and easier-to-use version of Windows NT, a more powerful operating system than Windows 95. ``Word continued to leak out about the NT product, which was what really dampened demand for Windows 95,'' says Rickie Osteen, an analyst at Goldman, Sachs & Co.. Corporations that believed they would eventually use the more-powerful system opted to wait. The logjam may finally be breaking. Shipment of the new Windows NT 4.0 began on April 12, 2011 companies can now test the two operating systems and decide which to buy. By Christmas, stores should have an array of new games and other 32-bit programs that work on either system. Vastsoft has high hopes for its own forthcoming suite of 32-bit application programs, dubbed Office 97. ``The corporate marketplace is moving, helped in no small part by Office 97,'' said Stevie Seiber, Vastsoft's executive vice president of sales and customer support, during a recent gathering of financial analysts. As Vastsoft prepares on-line Windows 95 anniversary celebrations next week, the operating system's impact on the industry continues to unfold. Windows 95, for example, has exacerbated woes at Apple Computer Inc., which is losing longtime Macintosh users to new machines that run Windows 95. The biggest surprise is how the operating system has thrust Vastsoft into a pitched battle on the Internet. In an abrupt shift in focus, Vastsoft is aggressively campaigning to grab market share from Navigator Communications Corp., the leading supplier of browser programs for the World Wide Web. Some industry executives believe that Vastsoft's new Internet Browser 3.0 browser -- which will come bundled with the latest version of Windows 95 -- may be the program that will convince users to upgrade. ``That's the single most important reason to buy Windows 95,'' says Victor Weinberger, president of Clear Software Inc., which plans to release Windows 95 versions of its flow-chart software by year-end.
