Software firms to cash in on Windows 95.

They rush to get products out by Aug. 24 release

Southland software companies are scrambling to get new products on retailers' shelves in time for the scheduled Aug. 24 release of Microsoft Corp.'s Windows 95. But simultaneously, stock analysts and software testers are beginning to deflate some of the hype surrounding the release of Microsoft's highly anticipated operating system.

Windows 95, touted as a revolutionary advance in personal computing, is an update of the popular Windows 3.x operating system pioneered by Microsoft, which allows users to point and click through files on IBM-compatible PCs.

Windows 95 offers several new features and manages memory better than the old system, enabling users to open a large number of programs at once. The new system also includes many applications in networking and remote access connectivity that users previously had to buy separately.

Software retailers and distributors are bracing for a flood of new products timed to be released simultaneous with Windows 95; nearly every company that currently manufactures products for Windows 3.x is planning upgrades and new titles made for the new system. Most software designed to run on previous versions of Windows will still work on Windows 95, but older programs will be unable to access and utilize the new features offered in the upgrade.

Early spurt 

"I think the companies that come out with Windows 95 products in the initial 90-day period (following its release) will benefit from the early interest and attention from users and the press," predicted Jon Ferrara, executive vice president of ELAN Software Corp. in Pacific Palisades.

ELAN is a rapidly expanding, 6-year-old company whose growth has been primarily due to a program called Goldmine, a networking tool aimed at business users. The Upgrade, Goldmine for Windows 95, is scheduled to be in stores by late August, Ferrara said. While Ferrara declined to reveal how many units of Goldmine 95 ELAN plans to ship, he said he expects sales to double this fall over the previous quarter.

Likewise, Cupertino, Calif.-based Symantec Corp. has apparently accepted that Windows 95 will become a standard platform in personal computing. The company plans to release three new versions of its popular Norton line of anti-virus and utilities software for Windows 95 in mid-August; versions of these programs made for Windows 3.x will not function on the new operating system.

"Even the lowest (estimates from computer industry analysts) are in the tens of millions of people who will be using this operating system in the next 12 months," said David Oldfield, director of product management for the Santa Monica-based Peter Norton Group, a division of Symantec. "That makes it the new standard real fast."

Computer game designers are also jumping on the Windows 95 bandwagon, with Los Angeles-based Activision Inc. planning to ship four new titles made for the system by the end of August and four more by the end of the year. Activision officials said the new platform allows for faster, enhanced graphics and better sound.

Reality vs. hype

But does the reality of Windows 95 really justify the hype? The reaction of software critics who were given advance copies of the program was relatively cool, although most agree that the new system is a major improvement over previous versions of Windows.

Wall Street investors have been bullish on personal computer stocks ever since Microsoft announced the upcoming release of its new operating system last year. Microsoft's stock price has nearly doubled in the past year, trading at around $96 a share in late July on Nasdaq. And companies making Windows 95-compatible software, such as Symantec, are also seeing healthy stock price increases.

But some stock analysts said personal computer stocks are overvalued, and they predicted the stock prices will decline once Windows 95 turns out to be less popular than expected. Michael Murphy, a short trader who runs a financial advisory firm in Half Moon Bay, Calif., called Negative Beta Associates and who publishes the California Technology Stock Letter, said software manufacturers are overstocking their inventories of Windows 95 product to meet a demand that is unlikely to materialize.

"For some reason, Wall Street and a lot of software companies think there's going to be a very fast transition to Windows 95," Murphy said. "There has never been a fast transition to a new operating system, and there's no reason to believe there will be one now."

Hardware upgrades

Most personal computers used by businesses and consumers have only 4 megabytes of random access memory, according to Murphy. Although Microsoft specifies that Windows 95 requires a minimum of 4 megabytes of RAM and a 386 microprocessor to operate, the system runs extremely slowly with that kind of hardware, he said. Realistically, users will need at least 8 megabytes of RAM and a 486 processor for the system to work properly, he said, and most people will want 16 megabytes of RAM and a Pentium processor.

In short, a great deal of hardware is required to take full advantage of Windows 95, and Murphy said he believes consumers and businesses are not going to be willing to make that kind of investment overnight.

"It's an expensive transition, and a difficult transition, and that means it's not going to happen fast," Murphy said.

Murphy, whose company advises a mutual fund and runs a private investment partnership, said Negative Beta has sold all its personal computer-related stocks over the past nine weeks. He expects a short-term dip in stock value for many software companies once the demand for their new Windows 95 products fails to meet expectations.

Nonetheless, even pessimists such as Murphy conceded that Windows 95 probably will be a very successful product in the long run. Analysts agreed that the only thing currently threatening Microsoft's dominance of the personal computer software business is the federal government.

Microsoft intends to bundle software for its new online service, called Microsoft Network, with Windows 95. The U.S. Justice Department is currently investigating whether that plan constitutes an antitrust violation; it's possible that federal officials might place an injunction on Microsoft to prevent the bundling.

Such an injunction would not only damage the company's marketing efforts for its new online service, but it would also likely delay the operating system's release date, because Windows 95 and the Microsoft Network are already being packaged together.