A blow to Microsoft's system

Bill Gates has lost his anti-trust case, but the decision may be too late to matter
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The Independent Online

The critics of Bill Gates' Microsoft - and there are a few - accuse it of being the biggest monopoly since John D Rockefeller's Standard Oil carved up 90 per cent of America's oil refining industry in the late 1800s. The night before last, US District Judge Thomas Penfield Jackson agreed. He found Microsoft did, as its competitors have claimed for years, abuse its position as the world's leading software firm, supplying the software for 95 per cent of the world's computers.

The critics of Bill Gates' Microsoft - and there are a few - accuse it of being the biggest monopoly since John D Rockefeller's Standard Oil carved up 90 per cent of America's oil refining industry in the late 1800s. The night before last, US District Judge Thomas Penfield Jackson agreed. He found Microsoft did, as its competitors have claimed for years, abuse its position as the world's leading software firm, supplying the software for 95 per cent of the world's computers.

But can the Justice Department, the Federal anti-trust authority, move fast enough in the ever-changing internet economy, and has its court victory come too late to be relevant?

The financial markets expected a negative outcome, but not one as bad as it turned out. Microsoft's share price has almost doubled in six months, and it has just joined the prestigious Dow Jones index. But once Judge Jackson's comments were released, Microsoft shares fell over 5 per cent in after-hours trading.

The case highlights the dilemma faced by anti-trust authorities on both sides of the Atlantic as they try to regulate the new technology industries using laws passed, in the US case at least, almost 100 years ago. IT markets move so fast they're likely to change completely by the time the final decisions are made.

"I assume the decision will be appealed endlessly, by which time it won't matter. In fact it already doesn't matter," says Roger McNamee, a venture capitalist with Silicon Valley investment firm Integral Capital. No one expects the final decision and Judge Jackson's remedies - which could be fines or even an order to break up Microsoft - to come for many months, even years. "Microsoft's anti-trust case is a sideshow that distracts from the more fundamental issue of who can own what in a world where intellectual property has become the new worldwide gold standard," argues Robert Spiegel, a columnist with E-Commerce Times.

"The frontier is now the internet," says Mr McNamee. "Microsoft has attempted to leverage its success in personal computers to gain advantage in the internet, but it's had only mixed success. So I increasingly be-lieve Microsoft's ability to control the web through the PC market doesn't seem quite as likely as before."

Another Wall Street analyst , who didn't want to be named, agrees: "There are other competing software systems that are coming up in terms of usage for computing hand-held devices that would give Intel and Microsoft challenges. [But] both can reinvent themselves quite readily".

And, says Mr McNamee, whatever remedies the court imposes, "companies aren't going to take Windows off their machines."

For Robert Levy, an analyst with the Cato Institute, the technology research body, Microsoft has found itself the victim of over-enthusiastic regulators who go by the premise "if it's big, it's bad". "Microsoft has zero leverage in a world where applications are written so that any browser can run them and any operating system can access them." he says. "Whether a user has MacOS, Unix, Linux or any other system, as long as he is running a web browser he has much the same capabilities as a Windows user." Indeed, there are now only a few rivals clamouring to compete against Microsoft in the PC OS market, as it is no longer growing.

Even so, say some observers, the anti-trust suit filed against Microsoft two years ago has had an impact on the Washington-based company. "[It is] more reluctant to attempt to dominate the new internet market," says Berge Ayvazian, chief executive of the Yankee Group strategy consultancy. With the trial looming, Microsoft dropped a proposal to sign up buyers of Windows 98 automatically to its Hotmail e-mail, and ditched contracts with internet service providers dissuading them from promoting Netscape's web browser.

When the European Commission threatened its own inquiry into Microsoft in 1997, the company moved quickly to amend offending agreements. But the Justice Department's victory could encourage other disgruntled rivals to take out cases. Caldera, a Utah-based software firm, is taking Microsoft before a jury on 17 January for alleged anti-competitive practices in the late 1980s.

And Microsoft staff are leaving in droves. Among the latest are Eric Engstrom, general manager of MSN internet access; Brad Silverberg, who led development of Windows 95 and Internet Explorer; and Rob Bennet, MSN's marketing director. Around a dozen senior managers have left or taken sabbaticals this year.

But, says Marc Andreesen, co-founder of Netscape: "Nothing's changed. Microsoft is just as powerful as it ever was. If not more so."

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