December 15, 1998 Web posted at: 10:00 AM EST by Elizabeth Heichler

From...

(IDG) -- Will 1998 be remembered as the year the balance of power shifted in the IT industry?

What was once an upstart PC clone maker bought out one of the most august computer pioneers. The alliance that was once the dominant duopoly in PCs began to fracture under competitive and regulatory pressures. Also, an unassuming Finnish programmer became the standard bearer for a grass-roots revolution called open-source software that threatens to give more power to the people.

Here are 10 stories that made big headlines in 1998:

• Compaq buys Digital. Having risen from a startup making IBM-compatible PCs to conquer the PC industry, Compaq heralded that this was the year for a new IT industry order when in January it acquired Digital. The one-time jewel in the now-tarnished crown of Massachusetts' Route 128 high-tech belt, venerable Digital had fallen far from its leadership position despite solid technology. Compaq was seen as buying the company mostly for its strong worldwide services network and for its expertise serving the enterprise customer. And while pundits predicted the impending death of the 64-bit Alpha microprocessor architecture on which Digital had placed its bets, Compaq has surprised some by taking (perhaps a second) look at the technology and incorporating it into its high-end server offerings.

• Antitrust guns go after Microsoft. The Department of Justice -- and 20 U.S. states -- decided to formally bring antitrust charges against Microsoft in May, starting a process that may drag through the courts for years. The case centers on Microsoft's alleged attempts to crush competition in the Internet browser arena by using its operating systems hegemony to extend domination into this new applications area. The European Union, which has its own concerns about alleged anticompetitive behavior by the purported operating systems monopolist, has elected to wait and see what remedies the resolution of the U.S. case may bring. But the Japan Fair Trade Commission last month closed its investigation into Microsoft, declining to pursue any charges. The government is still making its case in a Washington, D.C. courtroom and among the juicy details to emerge are tales alleging the bullying of Intel. The chip giant is facing its own antitrust investigation in the U.S., and the Wintel pair is no longer quite as thick as thieves are.

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• Linux becomes a household name. Well, at least in the kinds of households where people partition their hard drives and run multiple operating systems just for fun, a Finnish programmer named Linus Torvalds, who wrote the first kernel for the Linux OS in 1991 when he was still a student, was already an underground hero. The grass-roots buzz about Linux took off into mainstream hype early in the year, with industry notables like Netscape co-founder Marc Andreessen touting it as the next big thing. No less a vendor than Oracle, Linux has joined other well-known software companies saying it will develop applications for the OS. And the open source software movement that has refined and enhanced Linux under Torvalds' watchful eye is now being seen as a model for software development that gives the developer community at large a say in shaping platforms that seek de-facto standard status.

• European telcos dragged into liberalization. The European Union officially opened its telecom markets on Jan. 1 -- albeit with a host of exceptions for countries that managed to plead that they weren't ready -- but the monopoly telcos that are now having to share their markets with new entrants haven't made it easy. A progress report issued by the European Commission last month noted those interconnection agreements -- the fees paid by new entrants to use the incumbents' infrastructure -- have been a thorny issue, with some interconnection fees near exorbitant. But the report also pointed to 218 new licenses issued for voice carriers and 67 new licenses for mobile operators, and was upbeat about the long-term prospects for more competitive telecommunications services and lower prices.

• AOL buys Netscape. The $4 billion price tag America Online paid for Netscape led Microsoft attorneys to argue that the antitrust case, based on Microsoft's allegedly having crushed tender young shoot Netscape, should be dropped. While that's unlikely, the result of last month's deal is expected to be a new Internet powerhouse that will truly challenge Microsoft. AOL boss Steve Case is said to have a professional, consensus-driven management style vastly different from the "masters of the universe" bravado of Bill Gates' other rivals, such as Oracle's Larry Ellison and Sun's Scott McNealy. The new AOL will make industry-watching interesting in 1999.

• Telco titans team & scheme. Last year's mega-merger, the $40 billion acquisition of MCI by WorldCom, finally closed in September after jumping its last regulatory hurdle by selling off MCI's wholesale Internet business and backbone to Cable & Wireless PLC. Next up for a pas de deux in the land of the giants were British Telecom PLC (once MCI's spurned suitor) and AT&T, which formed a global telecom alliance that's still under scrutiny by regulators. AT&T kept busy on other fronts though, striking a deal to buy cable provider Tele-Communications in a $48 billion stock swap, and this month picking up IBM's Global Network business for $5 billion. Who's next?

• U.S. kicks the Internet out of the nest. Since the transformation of the Internet from a loose academic and defense network sponsored by the government into a global commercial and cultural phenomenon, the question of how this chaotic beast should be administered and governed has been pressing. The debate has been charged, with European, Asian and Latin American interests criticizing proposals put forth by the government for being too, well, U.S.-centric. In September, a proposal for creating a nonprofit called the Internet Corporation for Assigned Names and Numbers was made public, and ICANN is poised to succeed Internet Assigned Numbers Authority in handling Internet protocols, domain names and IP addresses. But there are still many vocal dissidents and competing interests, so the birth of ICANN is likely to be a long and painful labor.

• Microsoft launches Windows 98. With quite a bit less hype than surrounded the release of Windows 95, Microsoft brought out its next generation desktop operating system in June. The release underwhelmed some reviewers who found the controversial inclusion of the Internet Explorer browser too little to justify an upgrade. But some users think it's more stable than -- oh darn, I've got to re-boot again! -- Windows 95. Still, Microsoft reported in October that more than 10 million customers have bought either a retail upgrade or a new Windows 98-based PC.

• Apple's iMac makes a splash. Apple may not be wholly out of the woods yet, but under the leadership of returned founder and CEO Steve Jobs it's confounded skeptics who wrote it off prematurely. The iMac, a high-design consumer-oriented Macintosh it announced in May, did well out of the gate with Apple reporting 150,000 orders just before it went on sale in retail stories in August. And in October, the company announced a $106 million profit on $1.6 billion revenue, leading at least one analyst, Tim Bajarin, president of Creative Strategies in San Jose, Calif., to proclaim, "There's no way you can deny that Apple is back and fully turned around."

• Asian economic woes hit IT companies. The currency crisis that took the Asian tigers by the tail and landed them flat on their backs has also been blamed for hurting earnings of many IT vendors who were used to the go-go growth of Asian markets. Some cautious optimists (such as IDC Asia-Pacific in Singapore) see some degree of stability returning to regional markets, such as the PC market, which has been hard hit. But stock markets continue to react unfavorably to the ongoing turmoil and IT vendors are citing the crisis when they announce cutbacks and layoffs. Year 2000 issues are also looming, and some pessimists expect that fixing those pesky two-digit date fields has taken a back seat for companies facing daily fights for survival. It seems likely that the Asian crisis could become a repeat top 10-list entry for '99.

Elizabeth Heichler is Managing Editor for the IDG News Service in Boston.