Microsoft loses Web battle but may yet win the war

The software giant Microsoft finally caved in yesterday and admitted, minutes before it might have been fined millions of dollars, that PC manufacturers need not buy its Internet browser to get the Windows95 operating system. Charles Arthur, Science Editor, reports on a day of victory for the US Department of Justice - or is it?

The hearing was very brief. Soon after 10am in Washington DC, Richard Urowsky, attorney for Microsoft, and Joel Klein for the US Department of Justice, announced that the company had, in effect, sidestepped a contempt of court judgment that would have cost it $1m for every day since early October.

It has agreed not to "bundle" its present Internet browser and its current operating system, Windows95. The Internet is safe for competition - briefly. But the wider world of computing still sleeps uneasily.

The announcement yesterday was that PC manufacturers may delete the icon and program for Microsoft's Internet Explorer (IE) browser from their computer screens. Earlier, in the court hearings, computer manufacturers had testified how in 1995 Microsoft began to make them offers they could not refuse: include the relatively untried IE product in your systems, or you don't get Windows95.

The move by Microsoft has gouged profits at Netscape, which since 1994 has offered the Navigator browser, and until mid-1996 had had an overwhelming share of the market. Earlier this month Netscape announced that it was laying off staff, after losing money steadily in the past financial quarter, to the tune, in fact, of $1m per day since about mid-October. Today's announcement could give Netscape the chance to make itself visible again on PCs: manufacturers can choose or reject it on the basis of quality or price, rather than coercion.

Coincidentally, it was October when the Department of Justice sued the cyber-giant, claiming a breach of a "consent decree", essentially part of a promise to not to bully its commercial rivals, that the two sides first signed in 1994, and then updated in 1995.

Yesterday's announcement sounds like a ringing success for the Department of Justice in reining in the vaunting ambition of Microsoft and its chief, Bill Gates. The software company wants its products to run on any and every computer; the US government has drawn a line in the sand, saying what it may and may not do. And forcing manufacturers to take a relatively unsuccessful package, as IE was, as a condition of getting the Windows95 operating system is what Microsoft may not do.

However, the sand is exactly where such a decision might as well be written, for the tide of the software world moves so fast that the Redmond-based company is effectively the winner from this suit. Later this year it plans to launch "Windows98", which will incorporate the IE browser so tightly into the operating system that the two will be impossible to separate.