Article 32 of 54
Microsoft Ruling May Open Door for Software Competitors
Rob Kaiser
KRTBN Knight-Ridder Tribune Business News: Chicago Tribune - Illinois
Copyright (C) 2000 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM)


While Monday's ruling that Microsoft Corp. broke U.S. antitrust law is expected to take a lengthy trip through appellate courts, changes are in store that will likely give the software giant's competitors more ways to reach consumers.

For computer users, this shift in power will likely become apparent in subtle ways. For example, the first screen that pops up when a computer is turned on may display a wider range of offerings.

Previously, Microsoft leveraged the dominance of its Windows operating system to discourage computer manufacturers from providing quick links to competitor's products, such as the Netscape Internet browser.

"Part of what this anti-trust case does is take away some of the tactics that [Microsoft] previously used," said Shane Greenstein, a professor at Northwestern University's J.L. Kellogg Graduate School of Management who researches the commercialization of technology. "It's going to make it easier for users to migrate out of the Microsoft family of products."

U.S. District Judge Thomas Penfield Jackson issued his 43-page ruling Monday, finding that Microsoft had abused its monopoly in the computer operating system market. The judge will now hold additional hearings to decide how to penalize the company, which includes considering whether the software giant should be broken up.

The Justice Department, 19 states and Microsoft had been engaged in negotiations to settle the case out of court for the past four months. Those talks, which were mediated by Richard Posner, chief judge of the Chicago-based 7th Circuit Court of Appeals, broke down this past weekend.

If those negotiations had yielded a settlement, changes in the software and hardware industries would likely have been more immediate. Now, industry officials and observers expect Microsoft will gradually start using less aggressive tactics against competitors during the penalty phase of the trial and the appeals process.

"Microsoft is already backing off saying `no' to the hardware guys that want to customize their desktops," said Bill Campbell, chairman of Intuit Inc., a Mountain View, Calif.-based software maker.

But, Campbell added, "I think this is going to have to run its course before Microsoft is going to make major changes in the way it does business."

During the negotiations, Microsoft reportedly offered to give competitors deeper access to the inner workings of Windows, allowing the other software companies to make their products more compatible with the operating system.

"It's unclear how much of this would have been realized," said Nicholas Economides , an economics professor at New York University. "Potentially, it's a benefit to consumers. I thought this was a significant concession by Microsoft, which said for a long time they would not open anything."

Besides dealing with the trail, Microsoft has to contend with a range of new gadgets, including cell phones, hand-held devices and Internet appliances, that are increasingly being used to perform the functions done by personal computers. These data-retrieving devices have the potential to eclipse some of the power Microsoft has in the personal computer market.

The company has started making operating systems for these other products, though its dominance in these markets doesn't come close to the power of Windows.

"They're not a company that always wins immediately, but they're often a company that sticks around for many years and waits for an opening," Greenstein said.

The ability of software companies to deliver their products electronically over the Internet is another threat to Microsoft, which can better control traditional channels of software distribution.

Most observers, though, don't question Microsoft's ability to overcome these issues.

"I don't think you can ever dismiss how relevant Microsoft is going to be," Campbell said.


Copyright © 2000 Dow Jones & Company, Inc. All Rights Reserved.