June 10

No Mercy for Microsoft
Sun Review June 10, 2000

On Wednesday June 7, Judge Penfield Jackson surprised no one by ordering the breakup of computer giant Microsoft. Microsoft's Windows operating system runs on more than 80% of PC's worldwide, making the term monopoly seem somehow inadequate. Walk by any watercooler and you'll find that even the office technophobe has an opinion on the ramifications of this decision.

How will Judge Penfield Jackson's order to split Microsoft into two companies benefit consumers? Does this case set a precedent for intellectual property cases worldwide? If any company becomes too successful, will it be forced to give up the secret recipe? Will it impact Microsoft's stock prices?

U.S. Consumer Advocate Ralph Nader feels the breakup of Microsoft will "benefit consumers by promoting competition and speeding innovation, and will lead to the development of a more robust computer industry". Others argue that the entire range of Microsoft products have been vital to the growth of America's tech revolution. I think the truth lies somewhere in between. Certainly the ease of integration between Microsoft products such as Office, Internet Explorer and the Windows operating system has made our lives easier. However, some healthy competition might have encouraged the design of slimmer and more intuitive applications. I don’t think I'm the only person who thought that Microsoft Word Version 5 was already complicated enough. Did we really need to install a 100MB+ applications suite just to type a letter?

Before we get too far, let's take a closer look at Judge Jackson's breakup plan. Microsoft would be split into a Windows company and an applications company, the latter of which would own every application Microsoft makes except for its operating system. Such a split would make for a very powerful application company, one well positioned to monopolize the next generation of computing devices. Has Judge Jackson missed the boat? Has he intended to dismantle one monopoly, only to set the stage for the formation of two others?

By the time Microsoft's appeals are exhausted, both Windows and Internet Explorer may have ceased to exist as we know them. Microsoft is already moving towards browser-based rather than GUI-based (graphical user interface) applications. Recent trends show that Internet-capable appliances such as cell phones and even fridges are the wave of the future. And what software will power these applicances? It's not Windows, it's the browser. And if Microsoft has its way, it will be Internet Explorer, a product which is already installed on your Windows computer.

So in my opinion, this two-way breakup plan may not solve much. It may prevent Microsoft from signing exclusive deals with PC manufacturers which force consumers to purchase Windows with their new computer. But it will not prevent the continued dominance of Internet Explorer in the browser market. The three-way breakup plan presented by the Computer and Communications Association (CCIA) and Software and Information Industry Association (SIIA) might have made more sense. Simply requiring Microsoft to make the source code for Internet Explorer publicly available, another option put forth by CCIA/SIIA, also potentially could have resulted in a more level playing field.

But there's good news for investors: Microsoft's stock prices were not impacted by the decision. Microsoft shares moved up to 71 3/8 in after-hours trading after closing up 7/8 to 70 1/2 ahead of the announcement.

In the meantime, I'm waiting for the part where Bill Gates speeds away in a white Ford Bronco and then returns to court to proclaim his innocence.