Network: Can the Warp factor break Windows?: Tomorrow IBM attacks Microsoft's dominance with a new operating system. Kim Wilson and Tim Jackson look at the latest battle in the PC wars

WAR IS breaking out again in the personal computer market. Not between makers of PCs themselves, though there have been deep price cuts this summer. Nor among software houses, though the rivalry between different word processors and spreadsheets continues unabated. This autumn, the battleground is moving to operating systems. The contenders will be three industry giants: Microsoft, Apple and IBM.

Many computer users take their operating system for granted. After the first few weeks of using a new machine they cease to notice the program that handles disk operations and keeps the screen and memory working properly. Yet there are huge differences between systems, and a change in consumer preference between one operating system and another is a momentous event in the industry.

In the past the quality of the product itself has not been the factor that determines which operating system becomes dominant. Far more machines ran Microsoft's MS-DOS than ran the operating system of the Apple Macintosh, despite the Mac's manifest superiority. Microsoft's offering had in fact been cobbled on top of an existing program called QDOS (Quick and Dirty Operating System) which the firm bought in from outside for dollars 20,000.

The reason for Microsoft's dominance was more to do with marketing. In 1981 the company struck a deal with IBM to place MS-DOS in every IBM PC - and never looked back. Other companies began to make IBM clones and Microsoft willingly licensed MS- DOS to them. Soon, both computer makers and software houses standardised around Microsoft's operating system.

Until this autumn, Microsoft seemed unshakable. The Windows operating system that had succeeded MS-DOS, and brought Microsoft into the world of icons and mice, had 60 million users and ran on more than 80 per cent of all the desktop computers sold last year. And Microsoft was working on a new version of Windows, code-named Chicago, that would make good the original's deficiencies. A small and recalcitrant minority of users would stay loyal to the Mac - but because few software houses would wish to develop programs for only 10 per cent of the market when they could serve the other 90 per cent for the same effort, Apple would be locked into a ghetto.

In fact the road to Chicago has proved less smooth than Bill Gates, Microsoft's president, had hoped. The product has been repeatedly delayed and is now due to be launched next year under the name Windows 95.

'To sell Windows 95, Microsoft has to persuade buyers that there's something wrong with their current set-up,' says Andrew Baul-Lewis, senior European software analyst at Dataquest. 'This will create uncertainty, and an opportunity for rival operating systems.'

Apple hit back earlier this year with a new microprocessor, developed jointly with IBM, called the PowerPC - and a new operating system, Mac OS, to go with it. The two together claim comfortably to outpace Windows running on the Pentium, the fastest chip from the Intel stable, with which Microsoft's programs are associated. More important, the new Mac system can run programs written for Windows, so new customers no longer have to throw away their existing software. This innovation could give Apple the break into the corporate market that has eluded it for so long.

A further change in strategy may help its chances with small businesses and home users. For years, Apple has refused to allow others to license its operating system - with higher prices the result, since there has been no competition between computer manufacturers to produce the cheapest Apple machines. Now the firm has changed its mind and is ready for the first time to tolerate a market in Apple 'clones'. Analysts have been more optimistic about the firm's prospects over recent weeks than for years.

Tomorrow IBM is hoping to trump Apple with an announcement of its own. Its OS/2 operating system, a dull competitor to Windows which was so unpopular that many computer owners have never even heard of it, is to be spectacularly upgraded. This system, Warp, takes its name from the catch-phrase used by Captain Kirk in Star Trek to order a dramatic increase in speed.

Like the new Apple offering, Warp promises to run Windows products as well as its own; but unlike Mac OS, Warp claims to do so significantly faster than Windows itself. As a bonus, the system gives easy telephone access to the Internet.

Whether IBM will come back from the dead or not remains to be seen. In its favour is Warp's moderate price ( pounds 70) and the attraction to users of seeing an improvement in their computer's performance previously achievable only by installing a new microprocessor. Julian Evans, laboratories editor at VNU Publications, the company behind Personal Computer World and other magazines, says Warp 'definitely out-Windows Windows. It may be better to switch to Warp than to upgrade to a faster computer.'

Against it is the preference of corporate customers to stay with what they know. 'It's like steering an ocean liner,' says Lewis Schrock, product marketing group manager at Compaq Computer. 'You don't make sharp turns.' There is therefore a risk that big companies will prefer to wait for Windows 95 than opt now for its Mac or IBM rivals.

But the introduction of Warp highlights an odd change in the industry. In the past IBM was the stuffed shirt and Microsoft the flexible young innovator. When MS-DOS was being developed, Microsoft executives joked that they had fewer staff working on the program than the more bureaucratic IBM had checking up on them. When the two firms were working together on Windows, it was at IBM's insistence that the system used official-sounding words like 'maximise' and 'minimise' rather than the less formal 'grow' and 'shrink'.

Now the tables seem to be turning. With Microsoft's dominance has come overconfidence and authoritarianism: for instance, the firm is threatening not to allow software houses to use Windows logos to promote their products unless they rewrite their programs for Windows 95.

Meanwhile a humbled IBM has become more agile. Warp looks more stylish than Windows; even its name signals a change in thinking. More striking still is the fact that IBM is backing both horses in the battle over microprocessors. Warp works happily with the Intel microprocessors inside the world's PCs. But IBM is also using its co- operation with Apple on the PowerPC chip to launch a range of Apple clone computers.

Some watchers of the industry, for whom IBM is the equivalent of the Fifties Kremlin, believe this reflects a power struggle inside different divisions of the company. Others see it as evidence of a new entrepreneurial drive in a company that had been pronounced moribund long ago.

Those who have IBM shares may well lie awake at night wondering which is right. Computer owners need not do so. Even if neither Warp nor the PowerPC catch on, they will increase the pressure on Microsoft not to become complacent, which is good news for its customers.