Goldmine faces daunting competition in Microsoft.

Can David and Goliath live in harmony?

That's a question being played out in the obscure but growing segment of software known as "sales force automation."

It's a category that 80-employee GoldMine Software Corp. in Pacific Palisades has spent seven years cultivating with its namesake product. And it's one that software giant Microsoft Corp. has just entered with the release last month of its own stand-alone package called Outlook.

The Microsoft product has far fewer bells and whistles than GoldMine, which reviewers consider the top program in its category. But Outlook incorporates many of the same basic features that allow salespeople to keep track of actual and prospective clients.

With the sales force automation (SFA) market burgeoning, analysts say, it wouldn't take much for Microsoft to upgrade Outlook and vie for a share of what is expected to be a $1.4 billion market by 2000.

So far, GoldMine appears unfazed.

"I've had people tell me, 'You're the only company that's not afraid,'" said GoldMine spokeswoman Brenda Christensen.

That's because GoldMine so outpaces Outlook that the two exist on different planes. according to GoldMine co-founder and Vice President Jun Ferrara.

"We definitely were concerned until we got educated" about Outlook, Ferrara said. "Now we don't see (Microsoft) as competitors, but more as partners."

Microsoft, too, says Outlook poses no threat to GoldMine.

"We mean Outlook to be somewhat ubiquitous, but we're not zeroing in on one specific application," said Matthew Ragen, head of marketing for Microsoft's sales force automation division.

Indeed, for more than a year, Microsoft has helped fund GoldMine marketing efforts as a way to build demand for its own systems.

Others, however, warn that, given the segment's rapid growth. Microsoft's entry into the market can't be taken lightly by GoldMine.

"Any time a company like Microsoft jumps into a new area would be of concern to me," said Judy Hodges, research manager at International Data Corp., which tracks software sales.

Northern California's Symantec Corp., which makes ACT! - the dominant SFA product and GoldMine's main competitor - says it is monitoring Outlook closely. "We see (Microsoft) as a threat," Symantec spokeswoman Diane Carlini said.

While still relatively small, with around $550 million in 1995 international sales, the SFA market is growing at about 22 percent a year, according to consultants Frost & Sullivan.

Last year, GoldMine posted revenues of $13 million, according to Ferrara, and more than 500,000 copies of GoldMine have been licensed so far.

With such growth potential, the market may be too attractive for Microsoft to pass up. "With the growing number of Microsoft products, the one end that's missing is a database of contacts and clients. And Microsoft has a tendency to fill its voids," said Larry Twersky, president of Los Angeles-based SFA retailer Corporate Computer Center.

"With Outlook as it is, GoldMine is much more full-featured, but you never know down the road what might happen," said John Fratangelo, an analyst at Dataquest, which tracks the computer market.

Twersky and others point to Microsoft's history of running roughshod over smaller companies once it sets its eyes on a market. A case in point is Citrix Systems Inc. of Fort Lauderdale, Fla.

Until February, Microsoft had endorsed Citrix technology that allowed dozens of computers to share Windows applications running on a central network computer. That endorsement was key to Citrix's success.

And largely due to that endorsement, Citrix sales tripled from $15 million in 1995 to $45 million last year.

Citrix is headed by a longtime friend of Microsoft Chairman Bill Gates, Edward Iacobucci. Gates even wrote the introduction to a book Iacobucci authored on programming.

Then in February Microsoft announced it would essentially take over the Citrix job itself, adding many of the software-sharing features in future versions of Windows. Citrix shares plummeted in value on the news and its revenues are expected to drop sharply once the new Windows versions come out.

What incidents like that demonstrate is that "Uncle Bill will do whatever he damn well pleases," said Twersky. "Any company like GoldMine has to be worried about what avenue Microsoft chooses to take."

Another possibility is a buyout.

"Microsoft tends to purchase a lot of companies, as opposed to developing software from the ground up," said John Girton, an analyst at investment banking firm Van Kasper & Co. "These days it's a good thing to work with Microsoft if, you can because you're either with them against them. If Microsoft came calling for GoldMine, they might want to sell."