But PC s are inescapably becoming a commodity business. Unless Dell and its peers can emulate Compaq's move up the food-chain into the business of providing computer services, they may find themselves flogging low-margin boxes to a saturated market. For Dell, whose revolutionary built-to-order manufacturing and distribution process Compaq has copied, there is the added worry that its partner for consulting and customer maintenance is DEC.
If Dell wants to compete on services it is going to have to move smartly. A bid for Unisys would surprise nobody. Compaq's partners also need to think carefully about how to handle the new Goliath. Unquestionably, Compaq's triumph is also a triumph for the Wintel standard which it has always supported. But while Compaq almost certainly needs Microsoft's operating systems and Intel's chips more than they need it, the relationship is rather less unequal than before.
Intel already treats Compaq with respect, while Microsoft now appears to regret sending Compaq bullying letters at the height of the browser war. Mr Pfeiffer is not flashy, but he has the quality of relentlessness that gets people's attention. Not Karel Van Miert.
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In the past two weeks he has given no fewer than four press conferences. He has roundly attacked the European airlines that accused him of obstructing their planned alliances and not doing enough to deregulate the industry, and has picked no fewer than three fights with Germany. This comes on top of last year's battle of nerves, when he went to the brink of a trade war with the United States and forced Boeing to abandon its long-term exclusive contracts with three large American airlines in order to win the EU 's approval for its merger with McDonnell Douglas.
A short, stocky Flemish socialist fighting a losing battle against baldness, Mr Van Miert can see off aggressive interviewers in four languages. In he left Belgian politics just in time to avoid a bribery scandal that later ended the careers of several of his contemporaries—and at one time threatened his own. At the commission he was greeted as an interventionist, and spent his first period in office as transport commissioner waving through state aids to airlines that all but sank the deregulation of European aviation and infuriated the previous competition commissioner, Sir Leon Brittan.
His star rose under Jacques Delors, a fellow socialist, who persuaded him to draft ambitious plans for European transport networks. The maps were lovely, but the networks never materialised. Since becoming competition commissioner, however, Mr Van Miert seems to have become a free-market zealot; or perhaps he just hates big companies. Either way, he has snapped at the heels of the dominant firms in European industry more pugnaciously than his smoother predecessors, Peter Sutherland and Sir Leon, and has consequently acquired many more enemies.
After blocking subsidies to a Belgian steelmaker last year, he needed police protection. Yet hubris comes before nemesis: could the Belgian commissioner be heading for a fall? His biggest arguments have been with the Germans. Last week the German government said it wanted to exclude sport, especially professional football, from its antitrust laws. Mr Van Miert promptly made clear that sport would not be exempt from European law; indeed, he is already probing the practices of both FIFA and the FIA , the bodies responsible for international football and motor racing respectively.
A day later he called in for detailed antitrust scrutiny a plan by Kirch and Bertelsmann, two big German media firms, to set up a digital pay- TV venture with Deutsche Telekom. And this week's punishment of VW is the biggest fine that the commission has ever imposed on a single company see table. The car company furiously accused Mr Van Miert of waging a political campaign against it.
It is upset because the commission recently forced it to repay an illegal subsidy granted by the German state of Lower Saxony, a big shareholder in the company. The firm, which is appealing against the latest fine, will summon the might of German politicians. Yet VW has clearly behaved badly. The commission found evidence going back over ten years that it had intimidated as many as 50 of its Italian distributors, cancelling the contracts of 12 because they had sold cheaper cars. VW admitted in correspondence with dealers that it ran the risk of being fined for blocking cross-border sales.
The commissioner may shortly go further: he is also investigating Mercedes and GM -Opel for similar behaviour. The car companies had been allowed to maintain this system only on condition that they allow customers to shop across borders. But there are other enemies too. Mr Van Miert is insisting that British Airways and American Airlines yield landing slots at London's crowded Heathrow airport before he will allow them to merge their operations. In a demonstration of his power in Brussels, Mr Van Miert is also obstructing the commissioner for transport, Neil Kinnock, a former leader of Britain's Labour Party, who is charged with opening Europe's skies and wants to allow airlines to be able to sell slots rather than having simply to give them up.
Mr Van Miert's confrontational style irritates the EU 's governments, particularly the ones with inefficient industries that depend upon the state's largesse. Last year, he began a crusade against state aid that governments—particularly those of France and Germany—are still in the habit of distributing.
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He also fended off German attempts to take competition policy away from the commission in Brussels and give it to an independent European cartel office. Such bloody-mindedness is not always borne easily, but it is an important qualification for Mr Van Miert's job. This has put skiing on the front pages of the newspapers, and generated a farcical debate about whether authorities should introduce speed limits, make helmets compulsory or otherwise take the fun out of a sport that thrives on thrills.
But anyone who turns to the business pages will notice skiing cropping up there too.
Business in America, it seems, has belatedly discovered the slopes, and is schussing ahead in an effort to overhaul the industry. Although skiers themselves live for excitement, the business of running resorts has been dull for decades. The baby boomers who helped the industry take off in the s are now older, and the number of young adults, who provide most new recruits, has declined. Add to this an ownership structure so fragmented that nobody can afford fancy advertising or first-class management, and you have a formula for stagnation.
All that is now changing. America's biggest ski-resort chains have been buying many smaller resorts, and investing in new hotels, ski-lifts and snow-making equipment. Three chains have even listed themselves on stockmarkets in the past couple of years—something previously unheard of. These consolidators hope to transform America's most popular mountain tops from a collection of isolated peaks into sprawling winter Disneylands. Intrawest, a Canadian company, owns resorts spanning the continent's mountain ranges, from the Laurentians in Quebec to the Sierras in California.
The big resort chains have several advantages. The first is comfort. Pain used to be the price of admission into the skiing fraternity, but the new American resorts try to protect their skiers from all that nasty wind and snow. The gondolas are warm and capacious. The snow is neatly groomed. Beginners can hop on moving walkways when they tire of taking tumbles. The idea is to turn the big resorts into full-fledged winter theme parks, attracting more beginners and families to the slopes. By broadening into accommodation, skiing lessons and other activities, the big chains also hope to capture more of the industry's profits.
Historically, ski companies have been content to be little more than lift operators as they still are in Europe , allowing local businesses to cream off most of their potential income. Vail, by contrast, earns so much money from other activities that it stops charging for its gondolas in the evening.
It manages six hotels, 72 restaurants, 40 shops and over 13, condominiums. Money is also bringing marketing flair. The three publicly quoted chains have introduced loyalty programmes and flexible pricing. Investing in an industry that is so vulnerable to both divine and human intervention is not without its risks.
Expensive ski holidays are one of the first things to go when the economy sours. Then there is the weather. Artificial snow can make up for a thin snowfall, but it is expensive. And bad storms can still leave resorts inaccessible: last year, floods and mudslides closed one of the main highways to Lake Tahoe. Even when nature co-operates, her protectors may not.
Environmental regulators often impose fines on resorts, and sometimes close them down.
Even the father of theme parks proved no match for the earth's self-appointed guardians. In the early s Walt Disney conceived a grand project for a giant ski resort between Los Angeles and San Francisco, complete with a fake Alpine village, but a blizzard of environmental lawsuits snowed him under. That said, the outlook is still good.
This is partly due to the snowboarding craze. Snowboarders and skiers are mortal enemies—but the resorts are happy to take money from both. These make it easier to learn how to ski, and easier to keep skiing later in life. Critics complain that smaller resorts are being driven out of business, taking their quirky ways with them. The Disneyfication of America's winter sports looks unstoppable. JUST when it seemed safe to put your money in the Channel Tunnel, another financial disaster has struck. The problem, according to the company, is that passenger numbers on the Eurostar trains which run between London and Paris and Brussels are falling well short of its forecasts.
There are currently only 6m passengers a year, whereas four years ago the figure was projected to be around 12m by now. But, as every transport analyst in London and Paris knows, a high-speed rail link between London and the south coast was never going to be a viable business proposition: there are too many expensive houses and beauty spots to be bought or avoided. LCR 's forecasts were dictated less by realistic expectations than by the need to clinch the deal. It won by asking for a smaller subsidy than its competitors sought, knowing that it could always ask for more once the project was under way.
Now the deputy prime minister and transport minister, John Prescott, has called the consortium's bluff.
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Mr Prescott angrily rejected the request for cash and gave LCR 30 days to come up with a more acceptable plan. Meanwhile, he said he was making preparations for an orderly transfer of the project into state hands. That will now almost certainly happen; but the line may not spend long in public ownership. Railtrack, the privatised company that owns every other line in Britain, will probably be urged to rescue the Channel link.
Given its monopoly income from the train operating companies, its strong balance sheet and its ability to spin endless property development out of its stations, Railtrack is probably robust enough to shoulder the project. If Railtrack ends up taking on the project, it is likely to ask for a looser regulatory rein. Others suspect that the government will simply park the project in some obscure ministerial committee—as it has done with other ambitious rail projects in London—and sit on its hands.
Meanwhile the high-speed trains from France and Belgium will continue to slam on their brakes as they emerge from the English end of the tunnel. FOR a firm that has doubled in size every two years, Microsoft has demonstrated a remarkable fixation with one goal: to propagate its Windows operating system across the entire range of modern computing, from powerful servers to set-top boxes.
Yet, as the firm's power grows, so do doubts about whether this combination of strategy and culture can be sustained. Squeezed between market dominance and America's antitrust authorities, is it possible for Microsoft's corporate culture to remain as uncompromising as it is today? Last week there were the first signs that the firm is adapting. Microsoft agreed to be bound by a court's rules on the relationship between its Web browser software and the Windows operating system—admittedly with all the enthusiasm of a claustrophobe shutting the cubicle door.
Having thus escaped being found in contempt of court, the firm's executives have also been trying to promote a kinder, gentler Microsoft. Industry insiders, however, believe that this is merely a change in tactics, not a change of heart. The idea that Microsoft might curb its ultra-competitiveness, or the snarling aggression with which it meets any challenge to its Windows monopoly, is regarded as ridiculous by people who know Bill Gates.
And, for all practical purposes, Microsoft is Bill Gates. A sense of grievance and insecurity hangs in the air at Microsoft's Redmond headquarters. Despite the relaxed campus layout—low-rise buildings, plush lawns, shaded copses—and strictly casual dress code, there is a Moonie-like intensity about the place. Microserfs feel abused and misunderstood by the outside world and cannot understand why their unceasing efforts to improve Windows are seen as anti-competitive. They are all personable, articulate, gigawatt-bright and relentlessly on-message.
And there is fear, too. The nature of its technology-driven business means that Microsoft's franchise is never secure.
Meticulous recruitment and the ability to attract some of the smartest people on the planet help make Microsoft a marvellous intellectual machine. In most companies, the strategy is devised at the top and loses coherence as it passes down each tier of management.
At Microsoft, strategy starts with Mr Gates, but loses nothing as it is taken up by the people who run different parts of the business. If anything, it is burnished until it glistens, harder and more perfect than ever. As a result, no company has a stronger sense of where it is going and how it intends to get there. Extending the Windows franchise beyond the PC market is essential if Microsoft is to sustain its blistering rate of growth.
But the precondition for Windows Everywhere is that Microsoft's stronghold on the PC desktop should be absolutely secure. That is why Netscape seemed such a threat. Microsoft did undoubtedly believe that the firm was out to marginalise Windows with its Navigator browser. Among the exhibits gathered by the Justice Department in its case against Microsoft are a number of internal memos and presentations dating from Our competitors are trying to make an alternative platform to Windows. They are smart, aggressive and have a big lead. This is not Novell or IBM we are competing with.
Windows will become devalued, eventually replaceable. Sworn statements from computer manufacturers, extracted by the Justice Department, show exactly how Microsoft ruthlessly used its control over what appears on the PC desktop as the means to displace Netscape's Navigator with its own Internet Explorer browser. Faced with the threat—explicit in the case of Compaq—that they would lose their Windows licence and thus their business if they removed the Internet Explorer icon, PC makers all meekly fell into line.
Whether Microsoft stopped to wonder whether its actions in meeting the Netscape threat were legal is not known.
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But Microsoft's strategy and culture propelled the company to deploy every means at its disposal to resist the threat. That is why the fight will continue and why Microsoft is prepared to risk so much. In this sense, the company's recent conciliatory gestures are probably only a clearing of the decks before the real legal battle resumes in April.
If Microsoft loses the right to define what Windows is by adding new capabilities, it believes its business will be hobbled. What is more, the company fears that the narrow case of linking the browser to Windows is only the first round: if the government wins, it will push ahead with a far more comprehensive antitrust investigation. Was Windows really in such peril? Netscape might have believed its own publicity, but would a less edgy company than Microsoft not have been more confident of its own deep strengths?
It is also at least possible that Netscape, financially much weaker than Microsoft, could have been seen off simply by the distribution of a decent free browser. As it is, the company's tactics are making competitors, partners and regulators uneasy. When you are already as big as Microsoft, warp-speed growth means eating quite a lot of other people's lunches. Microsoft's brutal treatment of the computer makers—long-standing technology partners who have been essential to Microsoft's own success—could hurt Windows Everywhere.
Although Microsoft was recently able to announce a deal to supply Windows CE operating systems for several million new digital set-top boxes that TCI , America's biggest cable operator, will issue to its customers, it is rumoured to have paid heavily for the privilege. The cable companies, including TCI , have also been careful to insist upon open standards for their boxes to prevent any one software company becoming dominant.
Small companies that have a technology which could be subsumed into Windows are also wary. Too often they just get the ideas sucked out of them without getting anything in return. This is Microsoft's contradiction. The firm is under pressure to fight on. It is propelled by the need to grow, by its culture—even by Mr Gates's belief that he is right in principle as an entrepreneur to resist the bureaucrats' attempts to stifle him. But as Microsoft grows, its dominance unites competitors against it, makes potential partners think twice and even worries allies.
And, inevitably, it draws the unwelcome eye of the antitrust authorities. Yet if Microsoft were to adapt its culture to its market dominance, what then? But could Microsoft do so? Could it settle for a slower rate of growth and look benignly on the efforts of its competitors? You can imagine a company that might. But that company would not be Microsoft.
But these days he hardly gives them a second glance. A small fraction of its value of just a few months ago, he is told. He laughs and waves his hand, dismissively. At levels of 10,, rupiahs to the dollar, Indonesia's economy, and the companies in it, have entered the twilight zone.
The normal rules no longer apply. As Indonesia's crisis deepened last year its creditors put on the heat, pressuring Mr Rathod to keep up payments. I'm clearly helpless. But now it, like virtually all other big Indonesian firms, has simply stopped paying. On January 27th the government made it official, declaring what amounts to a moratorium on all Indonesian corporate debt.
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It is a reflection of how bad things are in the troubled nation that the markets shrugged off such an astonishing admission of failure: it had already been assumed. Mr Rathod is right to look past his Bloomberg terminals. Their screens display an extraordinary picture, with virtually all companies technically bankrupt and markets in meltdown.
But outside, in the real world, life and business somehow continue, albeit in muted fashion. Shoppers still shop, factory workers still work, even builders still labour on the skeletons of skyscrapers that may never be completed. Partly this is because the bad news has not yet got around. Many Indonesian firms, which closed this week for the Lunar New Year celebrations, will simply not reopen: employers tend to save such announcements for after the holiday. But plenty of other firms, like Bakrie, will soldier on.
They will have to cope with a financial climate the like of which none of them has ever seen before. I was out of money at the supermarket and I could not pay for my groceries. Everybody in our class contributed some money for the New Year's party. You can often buy used pocket books for a very cheap price. I was without money many times when I first started working. My neighbor seems to be short of money at the moment. Our company has been losing money for over three years now. My friend made a lot of money when he was working in the oil industry.
We were able to buy the house very cheaply so we decided to try to buy it immediately. My sister went to Las Vegas and won a lot of money at the casino. That man is very rich but he never likes to spend his money. The woman with the three children is having a difficult time to pay her bills. The company president received some illegal money from the contractor who wanted to get the building contract. My father lost most of his money on the stock market. The family has more money than they need so they often go on a nice holiday.
The drinks were paid for by the owner as it was the tenth anniversary of the restaurant.