Lotus Development Corp. is late. President Jim P. Manzi's troops in Cambridge, Mass., have been working up a hot new version of their 1-2-3 spreadsheet software for more than a year, but it won't be on the market until summer. Meanwhile, customers are fidgeting, rivals are turning up the heat, and Lotus is straining to defend its turf. Sound familiar? Welcome to the latest episode of the Spreadsheet Wars saga.
This time, Lotus faces the toughest challenges yet to its position as king of the spreadsheet hill. Although it retains an awesome 64% of the $660 million market for spreadsheet programs that run on IBM PCs and clones, that's down seven percentage points since 1987. Microsoft Corp. has doubled its market share to 20% (chart), and Borland International Inc. has aggressively pushed its Quattro Pro package to capture 9%.
SWITCHING OVER. At one time, Lotus was practically untouchable. In the four years following the 1983 debut of 1-2-3, it sold a remarkable 3 million packages. But in 1988, Lotus developers fell badly behind in finishing 1-2-3 Release 3. It was an important upgrade, and Lotus customers were miffed. A few, but not many, grew tired of waiting and switched to other spreadsheets before Release 3 was shipped in June, 1989.
Now, Lotus is lagging behind in what could be a far more crucial endeavor: creating a package for Windows 3.0, Microsoft's hot-selling graphics software that gives PCs the "look and feel" of Apple Computer Inc.'s Macintosh. Lotus grossly underestimated how quickly Windows would catch on. Microsoft, of course, had no such doubts, and has already finished a new version of its Excel spreadsheet for Windows 3.0. Analysts expect Microsoft to introduce it the week of Jan. 7.
If Lotus delivers a solid Windows product this summer, it may not lose customers to Excel. Indeed, loyalty to 1-2-3 remains high. A December survey of 50 large corporations by Robertson, Stephens & Co. found that 76% planned to buy copies of 1-2-3 in 1991. That, however, is down from 83% last year. One reason is the rapid shift to Windows. Customers buying new PCs or upgrading old ones to run Windows want a Windows spreadsheet. "Until 1-2-3 for Windows comes out, there will be an important opening for Microsoft," says Morton H. Rosenthal, chairman of distributor Corporate Software Inc.
Meanwhile, Lotus is also losing ground in regular MS-DOS spreadsheets. Through a hard-hitting direct-mail campaign, Borland, in Scotts Valley, Calif., has built a strong franchise for its highly rated Quattro Pro package among smaller businesses. Such customers "aren't afraid to look at something other than Lotus," says Paul Jones, second vice-president at Acacia Group, a Washington (D. C.) insurance company that discovered Quattro Pro while waiting for 1-2-3 Release 3. Borland has been able to win such converts by selling its product for $99--the same price Lotus charges 1-2-3 customers for the Release 3 upgrade.
Lotus is fighting back. Last July, it filed suit against Borland, claiming that an option that makes Quattro look like 1-2-3 infringes on its copyrights. And Senior Vice-President W. Frank King III says Lotus will keep adding new features to 1-2-3 while customers wait for the Windows version. King says he has no plans to lower 1-2-3's basic price but probably would slash upgrade fees to match Microsoft if it offers a low-cost trade-in for Lotus customers.
The battle could escalate if Microsoft includes copies of Word, its Windows word-processing package, with Excel, as many observers expect. Lotus, in turn, could bundle copies of its Freelance graphics program or Ami Professional, the Windows word processing package from Samna Corp., which Lotus acquired last month.
WIDER SPREAD. For Microsoft, the new Excel is not just another spreadsheet. It is key to the company's plan to tie different programs together. Microsoft Chairman William H. Gates III has been zealously promoting the idea of programs that automatically work together. That way, for example, a computer user could transfer a section of a spreadsheet into a word processing program. Then, if numbers change in the spreadsheet, the update would automatically show up in the word processing file.
Lotus is also working on programs that would have the same type of automatic links. Such advanced interprogram linking isn't that important now--but it will be within a few years. "Now most people just add up rows and columns," says Jeffrey Tarter, editor of Soft-letter, an industry newsletter. A slow move to the new technology would help Lotus, which now has 6 million more-or-less loyal customers. Many have invested millions of dollars in writing 1-2-3 programs for everything from figuring expense reports to preparing corporate balance sheets. Because of that loyalty and investment, "1-2-3 for Windows will have a significant base of people predisposed to use it." says Daniel J. Willis, a senior analyst at 3M Co.
But Windows is the biggest news in PCs today, and it's Microsoft's baby. For now, Excel is the only spreadsheet in town for Windows users. "I'm as excited about this as I have been about anything," says Gates. Lotus must hope his excitement isn't contagious.