PC Makers No Longer Fear Microsoft
LOS ANGELES -- Even as Microsoft Corp. faces a U.S. court mandated breakup into two companies, the immediate impact of the ruling may be surprisingly slight.
Although the company's power has already declined in a technology world shifting rapidly to Internet-based products, experts believe Microsoft's monopoly power over PC software may ensure its preeminence while years of likely legal appeals are played out.
"The [immediate] effects on everybody will be so negligible that it will be hard to see any difference," said Jeffrey Tarter, editor of the industry newsletter Soft-Letter. "The Sun will rise in the east, people will continue to buy Microsoft products, and money will keep flowing into Redmond."
U.S. District Court Judge Thomas Penfield Jackson ordered Microsoft to be broken up into two companies f a computer operating systems business, which would include its Windows operating system, and another company with its applications businesses, including the Internet Explorer web browser.
Jackson also ordered "behavioral remedies" on Microsoft that would begin in 90 days.
Those provisions would bar Microsoft from threatening or intimidating PC makers to deter them from supporting competing products. This could create wider options for PC customers, including a range of choices for operating systems and business productivity applications.
PC makers would also be allowed to customize Windows, and Microsoft would be prohibited from using preferential pricing to reward allies or punish more independent companies.
The judge's ruling would further require Microsoft to give competitors the same data about the Windows operating system used by Microsoft's personnel. This move may help other software makers enhance products for optimum effectiveness in a Windows-based PC.
The order would prevent Microsoft from binding new "middleware" products f such as e-mail programs, web browsers and multimedia viewers f to a Windows operating system.
The incorporation of its web browser was a key element of the government's case.
The judgment could also be interpreted to prohibit Microsoft from investing in a company on the condition that it uses Microsoft products.
Last year, Microsoft invested $5 billion in AT&T in order to get its Windows CE operating system installed on millions of cable boxes deployed by the telecom giant. If Wednesday's judgment stands, that agreement would be unenforceable, according to Chris LeTocq of GartnerGroup in San Jose, California.
Microsoft invested $150 million in Apple on the condition that its longtime rival sell Macintosh computers with Microsoft's Internet Explorer browser. Apple would no longer be required to ship iMacs with Explorer, said LeTocq.
Microsoft said it will appeal those remedies and ask the higher court to forestall Jackson's order until its arguments are heard.
Even if the sanctions are stayed during appeal, antitrust problems have altered the software giant's trajectory.
While Microsoft has struggled to build effective Internet appliances based on Windows, top PC makers have shown increasing independence. Most now offer the Linux operating system, a direct competitor, as a Windows alternative.
Computer maker Gateway recently formed an alliance with Microsoft rival America Online to produce Internet appliances based on Linux.
But such moves fall short of revolt.
PC makers have "always been of two minds," said Roger Kay, an analyst with International Data Corp. in Framingham, Massachusetts. "They love the status quo and hate the fact that Microsoft has the franchise. It's a humiliating relationship."
Still, the industry's ground is shifting underfoot f and shifting alliances once considered solid.
This week, Apple chief executive Steve Jobs said his company would for the first time include in its operating system a piece of software to make programs written in Sun Microsystem's Java computer language run better on iMacs.
That move was a thumb in the eye of Microsoft, which creates crucial versions of Microsoft Office software for Apple's computers. Java is designed so its programs can run on any operating system, an assault on Microsoft's dominance.
"Scrutiny is good," said Scott McNealy, chief executive of Sun. "Scrutiny might have helped the Apple deal," by convincing Apple that it would not face retaliation from Microsoft.
"I've seen grown men, men in their 50s, shake in their boots about the thought of making [Bill] Gates cross with them," said Jean-Louis Gassee, a former Apple executive. "This is how tyrannies end: when people stop fearing the tyrant."