Subject: OS/2 Issues Update

 Following is a list of current issues surrounding OS/2 in the market
 today, and attached below are comments about those issues.
 ____________________________________________________________________


 1.   OS/2 Quality
 2.   OEM
 3.   Performance
 4.   1992 Product Plans
 5.   Response to MS Win 3.1 vs OS/2 Document
 6.   Preload

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 OS/2 QUALITY

 OS/2 -- A QUALITY SUCCESS STORY

      To produce the best possible quality product, a new development
 process was instituted  for OS/2 2.0.  This new process included
 small, empowered development teams and an unprecedented beta test
 program involving 30,000 users.

      Our objective was a 5 times quality improvement over our
 previous best version, OS/2 1.3  We're proud to say that we have met
 those objectives.

 BUGS

      OS/2 2.0 consists of about 3.5 million lines of code.   Since
 we began shipping, fewer than 10% of our users have called the OS/2
 Support Line.  More than 75% of these calls are usage, installation,
 and setup questions.  Only about 7% have turned out to be related to
 substantive product problems.  We have identified approximately 50
 issues that are causing these calls.  (Not all are bugs.  Some are
 for specific device support that we did not intend to include until
 later releases, but we're now working due to customer interest.)

      Of these, 5 are significant impact problems --  such as failure
 to install on a certain configuration or intermittent traps on
 certain systems.  These are associated with specific configurations
 that affect a small percentage of our users.  Two of these five have
 been fixed, and there are temporary workarounds for the other three.

      About 20 can cause a major function to be impacted, but the
 system continues to work, albeit with an inconvenient workaround.

      The remaining 25 or so are inconveniences which affect enough
 customers that we have made them a priority.   An example is failing
 to recognize that a window has been closed prior to Shutdown.  Upon
 reboot, the window is open and the user would have to click the
 mouse button twice to close it again.

 SERVICE STRATEGY

      We are continuing to work these problems in priority sequence
 and have posted a number of fixes on COMPUSERVE, OS/2 BBS,  and
 Internet.  Users who have a problem not yet fixed can call the OS/2
 Support Line to get registered for future fixes.  We will notify
 them when it is available.

      In the fall there will be a Performance and Service Pack which
 will include all available fixes plus some performance enhancements.
 The Pack will be available either electronically or on diskettes for
 a nominal charge (materials and handling).


 ADDITIONAL INFORMATION

 FIXES CURRENTLY ON COMPUSERVE

 o    Can't install MFM/RLL (older family 1) disk drives
 o    If the swapper file expands to a partition boundary, it won't
      shrink again until system reboot
 o    Some Western Digital chip sets can hang during system install
 o    Some Tseng chip sets in SVGA mode experience display
      corruption going to and from a full screen Virtual DOS Machine
 o    Intermittent trap in the Win OS/2 session after exiting
      WIN-OS/2 on 4MB systems.

 TIPS AND TECHNIQUES

      Now available on the bulletin boards: a new version of the OS/2
 Tips and Techniques document.  It includes answers to the most
 commonly asked questions on the support line.

 SUPPORT LINE CALLS

      The great majority (maybe as much as 80%) are from home users.
 This percentage is no doubt skewed by the fact that home users don't
 have IBM SEs or corporate help desks.  However, we view this as a
 positive indication of OS/2's acceptance in  a market segment not
 commonly associated with OS/2.

  OTHER ITEMS

      In addition to the 50 substantive issues previousely mentioned,
 there are a number of other items reported on the Support Line that
 we have logged for consideration for future OS/2 releases.  These
 items, which account for the remaining 18% of the Support Line
 calls, fall into two categories.

      The first category consists of relatively innocuous bugs that
 have an easy workaround.  For example, icons in the Minimized Window
 Viewer are not lined up.  (The user can always handle this by
 selecting Arrange from the popoup menu.)  The second category items
 are not bugs at all, but are product suggestions or requirements --
 for example, an alternate method of performing a function.

      There are also some reported problems that we have decided not
 include as priority items for fixing.  These involve very unique
 configurations, often of multiple devices of uncommon brands doing
 strange things like daisy-chaining a tape drive onto a diskette
 controller.

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 OEM STATUS

      We are committed to ensuring OS/2's widest possible acceptance
 in the industry, across all computer manufacturers.  To that end, we
 have been testing OEM machines to verify compatibility with OS/2.
 To date, more than 222 OEM machines have passed compatibility
 testing on OS/2.

      In addition, we are aggressively pursuing a program to sign
 contract with OEM vendors to preload and/or resell OS/2 with their
 equipment.  Larry Rojas, the director of OEM business development in
 Boca Raton, has a group of field marketing reps calling on OEMs for the
 purpose of gaining these commitments.  To date, they have signed
 contracts with  Scandic Products in Sweden and Reply in the U.S.
 Negotiations are in progress with  Olivetti, Dell, Compaq, ICL, AST,
 NEC, CompuAdd, and Northgate.

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 PERFORMANCE

 1992 OS/2 PRODUCT PLANS

      There will be a lot happening in the OS/2 product line through
 the remainder of 1992.

 ENHANCEMENTS TO THE BASE PRODUCT
      In the fall:   32-bit graphics engine; Windows 3.1; device
 drivers to support XGA, SVGA, and 8514 displays in seamless mode.

 PERFORMANCE IMPROVEMENTS

      We're continually working to improve performance.  In the fall,
 we're planning to improve performance for all systems, but
 especially those with the minimum configuration of 4MB RAM.

 NEW PACKAGING
      In the fall, OS/2 will be available in a package containing 2
 diskettes and a CD.

 EXTENSIONS
      Available in June, the Multimedia Presentation Manager/2
 extensions and a toolkit.  IBM OS/2 Pen Extensions and a toolkit are
 planned for availability in late '92 or early '93.

 DISTRIBUTED SYSTEMS ANNOUNCEMENTS
      OS/2 is already the Integrating Platform on the desktop.  These
 new announcements will build upon OS/2's networking capability to
 extend that integration to another dimension -- the Integrated
 Enterprise Network.

 FOR DEVELOPERS
      Device Adaptation Kits to aid in the development of device
 drivers for SCSI devices (June), displays (in the fall), and
 printers (fall).  A Developers Migration Kit for migrating Windows
 3.0 applications to OS/2 will be available this summer.

 PERFORMANCE AND SERVICE PACK
      We'll package up the available fixes to known OS/2 problems
 together with the performance improvements and make them available
 in the fall in a Performance and Service Pack.

 APPLETS PACK
      In the fall, we plan to offer a package of approximately 200
 productivity applications, tools, utilities, games, and bitmaps.


 ADDITIONAL INFORMATION

 ENHANCEMENTS TO THE BASE PRODUCT
      Available to installed customers for a nominal fee (media and
 handling).  Free (except for connect time) via electronic download.

 PERFORMANCE IMPROVEMENTS
      The focus will be on improving performance in those tasks and
 functions in which the user interacts with the screen (as opposed to
 background processing).

 NEW PACKAGING
   Expect to see us continue to make use of CD packaging in the
 future.  The added capacity of the CD makes it easy to bundle other
 programs with OS/2, allowing us to get creative in promotions with
 application software vendors, as well as in bundling our own
 offerings.

 MULTIMEDIA
      MMPM/2 adds audio and limited image capabilities to the
 OS/2 2.0 32-bit base.  It exploits the features required to make
 multimedia effective that OS/2 delivers.  This includes multitasking
 and the flat memory model -- required for handling data objects many
 megabytes in size.

      The MMPM/2 architecture enables new functions, devices, and
 multimedia data types and formats to be added as technology
 advances.

 PEN
      The IBM OS/2 Pen Extensions provides OS/2 2.0 support with
 special features for pen-based personal systems.  The software
 allows the user to annotate images online, use gesture commands to
 invoke fastpath operations, soft keyboards for quick updates to
 spreadsheets and notes, as well as use of freehand drawing,
 handwriting/ink capture, and character recognition for limited data
 entry.  Included are utilities for a pop-up keyboard which allows
 customization of the soft keyboard.

 LAN SYSTEMS ANNOUNCEMENTS
      Coming this fall are a new release of LAN Server, enhancements
 to Communications Manager, a Developers Toolkit for Distributed
 System Services, Lotus Notes, and LAN Enabler 2.1.  The CID
 (Configuration/Installation/Distribution) product will greatly enhance
 the ease of installation of OS/2 and other products across networks,
 by offering automated and unattended configuring, distribution and
 installation.

 DEVELOPERS' MIGRATION KIT
      This kit will make it possible to port applications and drivers
 with little or no code changes.  The developer can generate
 applications and drivers for Windows 3.0 and OS/2 2.0 from a single
 source.  The kit includes
      -  Conversion utilities for resource files, definition files,
           icons, cursors.  Bitmaps and help files.
      -  MIRRORS.DLL (debug)
      -  Headers, libraries, samples
      -  Documentation

 SERVICE AND PERFORMANCE PACK
      Available to installed customers for a nominal fee (media and
 handling).  Free (except for connect time) via electronic download.

 APPLETS PACK
      We're currently in the process of selecting these applets from
 the many submitted by software vendors and IBMers, so we can't
 mention any specifics, but stay tuned to this space.  We'll probably
 offer a CD version of this also.

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  RESPONSE TO MS DOCUMENT ON WINDOWS 3.1 VS OS/2

           There is so much misleading information in this document
 that it is hard to know where to start.  Following are some brief
 responses to individual items.

 RELIABILITY

 -  Microsoft claims that Windows 3.1 eliminates UAEs (Unrecoverable
      Application Errors).  It doesn't eliminate them, it renames
      them to GPFs (General Protection Faults).  When a GPF occurs
      it still recommends that you reboot your system.
 -  Win 3.1 still does not make use full use of the 386 hardware
      protection as OS/2 does.

 MINIMUM CONFIGURATION COMPARISONS

 -  MS's tables are apples to oranges comparisons
 -  The tables quote system requirements for the most basic,
    limited-function mode of Windows' three modes.  Then, when
    functions are compared, MS quotes the function of the mode with
    the largest system requirements.

      The Microsoft advertisement on Windows 3.1 vs OS/2 performance
 is misleading.
      The scenarios in the ad are a narrow subset of the kinds of
 work that a user might perform.  It is true that when running
 Windows applications one at a time with nothing else on the system,
 OS/2 will run about 20 to 25% slower.

       However, DOS apps run faster on OS/2.

      And when more than one task is being done, OS/2's performance
 advantage becomes evident.  Because of OS/2's superior multitasking,
 it can run background tasks --  such as file copying, communications,
 or spreadsheet recalculation --  with no visible impact on foreground
 work.  With Windows, the cursor movement can lag behind the mouse
 movement, and displaying of characters can lag behind keyboarding to
 the point where system becomes almost unusable until the background
 job is done.

      An illustrative scenario from National Software Testing
 Laboratories (NSTL):  To load MS Word for Windows on a Mod 57 with
 nothing else running takes 7.2 seconds with Windows 3.1 and 9.3
 seconds with OS/2 2.0.   If you do the same load with an XCOPY in
 the background, Windows load time jumps to 41.1 seconds, compared
 with 15.3 seconds for OS/2.

      In addition, we're continually working to improve performance.
 In the fall, we're planning to improve performance for all systems,
 but especially those with the minimum configuration of 4MB RAM.


 ADDITIONAL INFORMATION

 MS TESTING METHODOLOGY

 -    An objective performance tester would question the methodology.
 -    The results published are for very small subtasks
 -    The test scenarios appear to be Microsoft's own, not that of
      an objective third party.  They say the scenarios are "like
      PC World's", but what does that mean?
 -    They have not identified the vendor performing the test
 -    They did not indicate the specific configuration.  This makes
      it difficult for another party to replicate and validate the
      tests.

 OS/2 APPLICATIONS

      As applications become available that take advantage of OS/2's
 capabilities, e.g. multithreading and 32 bit, OS/2 performance can
 be expected to get even better.

 THE NUMBER OF OS/2-CAPABLE MACHINES
 -  MS quotes Infocorp as a source.  Infocorp says they do not
    recognize the number attributed to them.
 -  Infocorp says 28% of the install base is OS/2-capable
 -  The majority of machines shipped today are OS/2-capable
    This percentage will grow very rapidly in the next few years.
 -  Microsoft's numbers for Windows-capable machines include 286s,
      which don't support the full Windows capability

 OS/2's OBJECT-ORIENTED WORKPLACE SHELL

 -  MS says the OS/2 Workplace Shell requires a learning curve.
 -  This depends on where you're coming from.  MAC users are
    usually instantly productive, new users likewise learn quickly.
 -  Much as DOS users had a short learning period to move to the
    next generation interface -- Windows,  Windows users will
    have a short (a few hours) learning period to become familiar
    with the next generation object-oriented Workplace Shell.
 -  Windows users who have become familiar with the WPS find the old
    Windows GUI to be primitive by comparison.
 -  Users can always choose to have it the old Windows way and
    operate with menus instead of objects.  They can even choose an
    option which gives the screen the look and feel of Windows.

 CONNECTIVITY

 - MS says OS/2 has limited host connectivity.  Unsaid is the fact
   that they're talking about the OS/2 base product only.
 - The connectivity is delivered in OS/2 Communications manager, the
   most comprehensive host connectivity tool available
 - All the DOS/Windows asynch emulation packages work on OS/2 as well

 NETWORK CLIENT

 -  No company has more experience and capability in networking than
    IBM.
 -  OS/2 is the industry's best desktop client for connecting to
    complex enterprise networks.

 APPLICATIONS

 -  MS shows tables comparing the number of OS/2 graphical apps with
    Windows graphical apps
 -  Since OS/2 runs DOS, Windows and OS/2 graphical apps, OS/2 will
    always have the most applications

 INSTALLING DOS-BASED APPS

 -  MS makes a point of the difficulty of installing DOS apps on OS/2
    -- configuring settings, etc.
 -  Very misleading.  We ship a default setting that will run most
    DOS apps just fine.
 -  OS/2's settings capability gives you flexibility if you want it
 -  In our opinion, OS/2's DOS settings dialog is easier to use than
    Windows' PIF editor.

 FLEXIBILITY

 -  MS tries to turn a virtue into a vice by decrying the fact that
    OS/2 offers the user choices in interfaces: command lines, menus,
    or object-oriented.
 -  We believe in letting the user have it their way.

 WIN 3.1 ON OS/2

 -  MS says OS/2 runs a modified version of 3.0.  One of the key
    modifications IBM made is the kind of parameter validation MS
    touts as a reliability improvementin 3.1.
 -  Win 3.1 on OS/2 will be available in the fall.


 INSTALLATION

 -  It takes longer to install OS/2's 20 diskettes than Windows' 6.
      True.  That's because you get so more with OS/2:
           - Three operating environments
           - The Workplace shell
           - Pre-emptive multitasking,  Adobe Type Manager, etc.
 -  In the fall, OS/2 will be available on 2 diskettes and a CD-ROM
 -  In the fall, automatic, unattended installation over a network
    will be enabled with the CID product

 WINDOWS HAS MORE DEVELOPMENT TOOLS

 -  OS/2 has a full complement of development tools.
 -  Many of the leading edge tools originated on OS/2
 -  OS/2 is the preferred development environment -- even for
    Microsoft.

 WINDOWS SCALABILITY

 -  Pen Windows appls don't exist.  NT doesn't exist. Their
    scalability is not proven.
 -  The Microsoft portability guide clearly indicates problems
    running DOS/ Windows apps directly on NT.

 DEVICE DRIVERS

 -  OS/2 print drivers support 205 printers, which address the vast
    majority.  More are coming later this year.
 -  SCSI drivers are coming in June
 -  More display drivers are coming in the fall.

 FONTS

 -  Windows uses the proprietary TrueType fonts
 -  OS/2 includes Adobe Type Manager, the universally accepted
    industry standard.

 ____________________________________________________________________

 PRELOAD

 o    OS/2 2.0 at no additional charge

 o    IBM Mouse at no additional charge

 o    System is ready to use right out of the box
           No installation required

 o    The preload version of OS/2 has some additional
      features:

 o    Additional pre-installed information aids to help
        users get productive quickly

      -  Welcome and Quick Tour
      -  "For the DOS User" tutorial
      -  Application install tutorial
      -  Hardware system overview for hardware
      -  Service and support information

 o    Additional useful utilities

      - Uninstall utility  for easy pruning of unrequired
           features
      - Bootable diskette and System Backup Utilities to easily allow
           you to backup and protect your system.

 o    Additional Workplace Shell folders to better organize the
           additional features on your desktop
      -  Welcome and Quick Tour Folder
      -  Additional Tutorials Folder
      -  Features Folder
           -  Service and Support Folder
           -  About Your System Folder
      -  Applications Folder
      -  Configurations Tools Folder