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Science & Technology
Microsoft vs The World

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Science &
Microsoft vs The World
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By Diana J. Choyce
Nov 15 - 21, 1999

Microsofts mammoth court case will have long lasting effects on computer industry

The Department of Justice has finally handed down a finding on Microsofts mammoth court case. In no uncertain terms the DOJ has found that Microsoft may indeed intend on taking over the world. Well maybe not the world but a large part of the computer industry. The evidence appears to be overwhelming but Microsoft vows to fight of course. No matter which way it goes, this landmark case will have long lasting effects on the computer industry.

This past Friday JudgeThomas Penfield Jackson found that MS was indeed involved in "monopolist" practices. In his finding, Penfield said, "Most harmful of all is the message that Microsoft's actions have conveyed to every enterprise with the potential to innovate in the computer industry. Through its conduct toward Netscape, IBM, Compaq, Intel, and others, Microsoft has demonstrated it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products. The ultimate result is some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self interest," he said. Judge Jackson's findings concluded that Microsoft illegally tied Internet Explorer to Windows, attached illegal conditions in its OEM contracts to lock up a monopoly with the Windows desktop, employed anticompetitive tactics to crush Netscape Navigator in the browser market and Sun Microsystems' Java programming language in the development tools market, stymied Intel's innovations in the Native Signal processing (NSP) software efforts, and tried to kill Apple QuickTime.

According to early 1999 estimates provided by San Jose, Calif.-based Dataquest this week, Microsoft now owns more than 96 per cent of new OS shipments on the desktop and 62 per cent share of new server OS shipments. MS also owns a 64 per cent share in the browser market. "Microsoft enjoys so much power in the market for Intel-compatible PC operating systems that if it wished to exercise this power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market," Jackson wrote. "In other words, Microsoft enjoys monopoly power in the relevant market."

The case began in mid 1998 when the DOJ and 19 US states charged that MS was using its popular Windows operating system to crowd out competition and render its browser rival Netscape useless. In 1997 the DOJ ordered MS to separate its browser from its operating system. Microsoft responded by offering computer manufacturers three alternatives: They could take the entirety of Windows 95 as is; license a 2-year-old version of Windows 95 without the browser and many improvements made since then; or license a version of Windows 95 that, in Microsoft's own words, would not work. The case for the DOJ was built on damaging information from MS competitors and from inside MS through its company emails, company memos and from the mouths of its own executives. The next step for the DOJ is to hand down a finding of law in early 2000. But Judge Jackson sent a clear signal to MS to settle or he will the settle the case himself at their great expense.

Chairman and CEO Bill Gates has vowed to continue to defend and fight for the right of his company to continue making profits. He has also vowed not to settle with the DOJ and seems content to let the judicial system run its course. ''We respectfully disagree with a number of the court's findings. We believe the American legal system will ultimately affirm that Microsoft's actions were fair and legal and have brought tremendous benefit to millions of consumers,'' said Gates, "Microsoft competes vigorously and fairly and is committed to resolving this issue in a fair and responsible manner."

In the last 5 days since the ruling, MS stock has dropped from 93 to 86. However most analysts expect their stock to continue to be driven by earnings. No majors drops are expected unless the final rulings in the case cause an undercut in its present earning models. Since mid 1998 MS stock is up over 110 per cent and its performance has doubled the Nasdaq index. It has preformed twice as well as any average Nasdaq stock, and consistently beats its quarterly estimated earnings.

MS has spent a lot of time in US courts throughout its history. Presently there are several cases pending with Sun Microsystems, Caldera, and Blue Mountain. Caldera, the makers of DR-DOS charge that MS committed several illegal acts to push them out of the market place including illegal product tying, making intentional vaporware announcements, blacklisting developers, and exclusionary licensing. That case goes to court in January of 2000. Sun Microsystems, owners of JAVA, alleges that MS violated a licensing agreement by designing a "windows only" version of its Java programming. And Blue Mountain greeting cards charges that MS placed filters on its browser email that auto-files its cards into a junk mail folder.

Competition has been, and will continue to be fierce with anything internet related. Computer companies and internet access providers are already crossing lines to vie for a piece of the internet pie. The question is whether any government has the right to interfere with the competition. And does any one company have the right to capture the lions share of the market just because they can? Is the idealism that everyone should get a fair chance to compete finally dead? This case will lay the grounds for the answers to these questions. And given the aggressiveness of the market, more questions will likely arise. Many more companies will probably end up in court trying to justify their bottom line...profits. Let's just hope that the consumer will end up winning in the end since, after all, its their money that the market is fighting over.