Article 31 of 200
Microsoft has years to fight ruling if it chooses
The Star-Ledger Newark, NJ
(c) 1999. The Star-Ledger. All rights reserved.
In declaring Microsoft Corp. a monopoly that harms consumers, Judge
Thomas Penfield Jackson sent a powerful message to the strongest engine
of the American economic miracle: Settle with the government now or
face possible derailment later.
But while Bill Gates hinted he might be willing to talk, on Friday the
federal judge slammed Microsoft so hard that the software titan may have
no choice but to keep pressing appeals that could last years, legal
experts said yesterday.
Meanwhile, as rival businesses cheered and analysts debated whether
Microsoft's lawyers fumbled or if the judge's ruling went too far, stock
analysts said Americans whose nest eggs begin with the letters "MSFT"
should not panic.
The final outcome of the historic antitrust case remains a long way
off, and Microsoft's "fundamentals" remain strong, predicted Michael
Kwatinetz of Credit Suisse First Boston.
''This is an event that may cause the stock to ratchet down in one
day, but then it will reverse itself," Kwatinetz said of Friday's
Jackson's 207-page "findings of fact" stunned many observers by siding
with the Justice Department and 19 state attorneys general on virtually
every argument leveled against Microsoft in the antitrust trial that
began 13 months ago.
The judge concluded Microsoft strong-armed rivals, stifled competition
and harmed consumers in a no-holds-barred quest to preserve the
dominance of its Windows operating system, which runs more than 90
percent of the world's personal computers.
Microsoft's actions "harmed consumers in ways that are immediate and
easily discernible," Jackson wrote.
His next ruling, expected within two months, will determine if those
actions violated the Sherman Antitrust Act. Then Jackson could impose
penalties ranging from breaking Microsoft into separate companies to
forcing Microsoft to license Windows to competitors, or otherwise
altering its dealings with computer makers.
Those remedies would be so severe, and Jackson's findings appear to
leave so little room for compromise with the Justice Department, that
Gates may take his chances in appellate court - where he has won before
- and possibly, in the Supreme Court.
Though difficult and costly, the appeals process might buy Microsoft
time to see whether a Republican wins the White House and the Justice
Department softens its stance, said Nicholas Economides , an economics
professor at New York University's Stern School of Business.
Prior settlement attempts have stumbled. After Jackson's findings,
Gates left the door open, saying, "Microsoft is committed to resolving
this matter in a fair and responsible manner."
But the world's richest man added he "respectfully" disagreed with the
findings, and felt the courts ultimate would vindicate Microsoft's
practices in innovating and competing.
Assistant U.S. Attorney General Joel Klein said any settlement would
have to fully "address our competitive concerns." Browsing battle The
case began in October 1997 with charges that Microsoft combined its Web
browser, Internet Explorer, with Windows, violating an earlier consent
decree. Microsoft said the combination was an improvement to make
Windows more useful to customers. The government said Microsoft was
using its Windows monopoly to kill the Netscape Corp., producer of a
competing Web browser.
Jackson agreed, and went further. Microsoft, he said, bullied IBM,
Compaq Computer, Apple Computer, Intel Corp. and anyone else who
disagreed with dictates from Microsoft's campus in Redmond, Wash.
''Through its conduct toward Netscape, IBM, Compaq, Intel and others,
Microsoft has demonstrated that 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," Jackson wrote.
''Microsoft's past success in hurting such companies and stifling
innovation deter investment in technologies and businesses that exhibit
the potential to threaten Microsoft," he added. "The ultimate result is
that some innovations that would truly benefit consumers never occur for
the sole reason that they do not coincide with Microsoft's
Microsoft competitors were thrilled by the findings. They showed that
the firm used underhanded tactics to "steamroller companies and force
unwanted business deals on most, crushing the few who would not bend to
their will," said Ed Black of the Computer & Communications Industry
Association, an industry trade group.
But a taxpayers group condemned the government's $7 million case as
unjustified, and said the judge failed to suggest what prices Microsoft
should charge for its products.
''Judge Jackson bought the government's side of the case, hook, line
and sinker," said Thomas Schatz, president of Citizens Against
Government Waste. "He went out of his way to berate the world's most
successful and innovative company simply for being a tough competitor."
Microsoft's handling of the case will be studied for years. Jonathan
Zittrain, director of Harvard's Berkman Center for Internet and Society,
said Microsoft's key mistakes "have been to engage in the behavior the
government is now coming to prove happened."
But NYU's Economides said it was Microsoft's lawyers who blew it - and
Gates was his own worst enemy.
Gates not only avoided live testimony, he gave a videotaped deposition
so evasive and uncooperative that it provoked laughter from the judge.
''He took a long time to answer some questions and, being on
videotape, it showed. People don't like that. People think if you're as
smart as Bill Gates, you should answer immediately," said Economides .
Economides argued that Microsoft lawyers should have coached Gates
better, lined up stronger witnesses, and hammered home a few themes,
such as the benefit to consumers of Microsoft's free Internet browser,
its decision to price Windows reasonably when it could have charged much
more, and the thousands of programs written for Windows.
''These are simple points, but they were not really made effectively
by Microsoft witnesses," said Economides .
Microsoft also was haunted by a mountain of its own internal e-mail.
If the government prevails and the final penalty is a breakup of
Microsoft, the personal computing world could be Balkanized into a
confusing welter of incompatible systems, said Economides . Unlike AT&T,
he added, Microsoft has few top managers and might not weather a breakup
''I'm not so sure consumers won," Economides said. "If there's a
settlement breaking Microsoft into pieces and there are three different
versions of Windows, consumers lose."
An antitrust defeat also could embolden other companies to sue
Microsoft, and affect ongoing cases by Caldera and Blue Mountain Arts.
Caldera contends Microsoft illegally crushed the competing DR-DOS
operating system in the early 1990s. Blue Mountain claims Microsoft
programs sabotaged its electronic greeting cards to boost the company's
own e-card business. Shifting landscape Whatever the outcome of the
antitrust case, there are signs that the computing landscape already is
shifting in ways that clearly concern Microsoft.
Since the government prosecution began, America Online and Netscape
Communications have teamed to become an Internet colossus.
The iMac has breathed new life into Apple Computer, and the free Linux
operating system is making gains. Computer makers once cowed by
Microsoft now offer Linux as a substitute for Windows, and Netscape's
browser along with Microsoft's.
The hegemony of desktop PCs, Microsoft's bread and butter, eventually
may be eroded by TV set-top boxes and Web-centric hand-held devices like
the Palm Pilot and advanced cell phones.
Cisco Systems and Motorola are leading a push for new wireless Web
devices, and Sun Microsystems is using the Web to offer the type of
business software that has been a pillar of Microsoft's sales.