Article 116 of 200
ANALYSIS; Microsoft ruling could result in missed deals
Boston Herald
Page 031
(Copyright 2000)


Yesterday's federal ruling against Microsoft Corp. won't necessarily hurt the company's corporate wallet. But it could hurt Microsoft's chances to do the next big thing.

While the software giant from Redmond, Wash., appeals U.S. District Judge Thomas Penfield Jackson's decision and battles dozens of pending class-action lawsuits, Microsoft could miss out on making a major deal during the next 18 months. This is important because major players in the technology industry continue to strike deals to gain a foothold in the next generation of the Internet economy.

"The cost to Microsoft is not being able to do something it wants to do in the next year-and-a-half because it will be under constant scrutiny by the Department of Justice," said Nicholas Economides , an economics professor at New York University's Stern School of Business. "The second cost is the avalanche of civil suits. . . . Every lawyer who is unemployed is going to start a suit against Microsoft. Everybody will want their $30 or $40 dollars back that they claim they were overcharged."

Steve Ballmer, president of Microsoft, said class-action lawsuits are misguided and won't distract the company from its goal of making great software. Ballmer and Microsoft chairman Bill Gates asked investors to view the company in the long term.

In a press briefing yesterday, Ballmer brushed aside a question about the company's ability to retain employees if their stock options aren't as valuable as in the past.

"We're going to make sure we have good financial stability," Ballmer said. "There's no Microsoft employee who's been sad to have our stock options."

Jackson's verdict opens the door for the federal government to seek drastic penalties against Microsoft. And the Justice Department vowed to press the case until consumers are rewarded.

The possible legal remedies range from breaking up the company that made Gates a billionaire to forcing it to share its proprietary software code with competitors. Jackson also paved the way for states to seek penalties under their own anticompetition laws.

Joe Alsop, president of Bedford's Progress Software Inc., said despite what he described as Microsoft's predatory and paranoid actions, he doesn't think breaking up the company is what's needed.

"We need to put conditions on (Microsoft's) future behavior," Alsop said.

Alsop also called for opening up the source code to Microsoft's Windows operating system so other companies can add value and make it more compatible with their products.

"Otherwise, it's too easy for Microsoft too jigger with its technology so others can't compete and add value," Alsop said.

Economides said auctioning the Windows source code, as some have suggested, would be impossible to do because it may be worth as much as $200 billion.

"This implies that the source code of Windows will be sold forcibly at a small fraction of its worth," Economides said. "Thus, auctioning the Windows code is a severe remedy that takes away the intellectual property of Microsoft. It will severely reduce the incentive for innovation, since dominant firms will no longer be guaranteed with certainty the value of their intellectual property."


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