Silicon Valley Cheers Microsoft Ruling
By Duncan Martell
PALO ALTO, Calif. (Reuters) - Entrepreneurs, start-ups and high-technology veterans in
Silicon Valley cheered a federal judge's ruling Friday that software juggernaut Microsoft
Corp (Nasdaq:MSFT - news). wields monopoly power and used it to cripple competing
firms.
''It's a big day for the whole industry,'' said James Barksdale, the former chief executive of
Netscape Communications Corp., the pioneer of the Web browser and one of Microsoft's
biggest Internet rivals that was later bought by America Online Inc (NYSE:AOL - news).
Now that the U.S. Justice Department and the 19 states that brought the epic antitrust case
against the world's most valuable company have won the first round in a long legal battle,
employees of Silicon Valley stalwarts such as Oracle Corp (Nasdaq:ORCL - news)., Sun
Microsystems Inc (Nasdaq:SUNW - news). and companies throughout the United States
not only feel vindicated, they're elated.
''The fact that Microsoft holds a monopoly for desktop operating systems is painfully
obvious to anyone in this industry,'' said Bob Young, chief executive of Durham,
N.C.-based Red Hat Inc (Nasdaq:RHAT - news)., the largest distributor of the Linux
operating system --an upstart rival to Microsoft's Windows.
Among those in Silicon Valley most interested in the outcome of the case were current and
former employees of Netscape. The news prompted Netscape employees to throw a party
at their headquarters in Mountain View, California.
Netscape developed the first commercial Internet browser, and has long claimed that
Microsoft's decision to give away its own browser for free sparked a massive slide in its
shares of the market The so-called browser wars were a central issue in the Department of
Justice case.
Diminishing Aura
U.S. District Judge Thomas Penfield Jackson's ruling is but the first of a three-act legal play.
As such, Jackson's 207-page finding of facts in the trial that began just over a year ago, will
embolden potential rivals to develop and sell products that are best for their customers
rather than those that are least likely to raise the ire of Microsoft, industry executives said.
''The aura that surrounded Microsoft as this all powerful, inexorable force that always won
has now been significantly diminished,'' said Michael Morris, chief lawyer for Microsoft
archrival Sun Microsystems, in an interview.
''To the degree that people in this business take heart in that ... I think they will be more
likely to make their business decisions, investment decisions and innovation decisions more
on what's best for their customers and the consumers and less with respect to what will
Microsoft will say or do in response.''
If Jackson finds Microsoft liable for breaking the law, he could then move to apply remedies
ranging from restrictions on the way it does business to breaking up the Redmond,
Washington-based company, which boasts a stock market value of more than $400 billion.
''The critical issue now is how to structure the speedy and effective remedy that protects
consumers, increases competition and innovation, and importantly, prevents Microsoft from
maintaining or using its monopoly power in the future,'' said George Vradenburg, senior vice
president for global and strategic policy at AOL, the No. 1 Internet service provider.
For its part, Microsoft said it disagreed with many of the findings and vowed to continue to
fight the case.
Suit Good For Business, Analyst Says
Microsoft now faces competition that ''hasn't ever existed before'' in the form of Linux, the
emergence of non-PC devices that don't use the Windows operating system, and chip giant
Intel Corp (Nasdaq:INTC - news).'s move away from its dependence on Windows, said
Rob Enderle, a long-time Microsoft and technology analyst based in Silicon Valley.
On top of that, PC maker Gateway Inc (NYSE:GTW - news). is working with AOL to
develop an Internet device that doesn't use Windows and companies such as International
Business Machines Corp (NYSE:IBM - news). and its Chairman Louis Gerstner are
declaring the PC era over.
What's more, Red Hat's Young said the Justice Department's investigation of Microsoft
allowed it to sign deals with Dell Computer Corp (Nasdaq:DELL - news)., IBM and others
that it might not have been able to before because of fears of potential Microsoft reprisals.
''Scrutiny counts and we have sensed it,'' Sun's Morris said. Yet even as venture capitalists,
entrepreneurs and Microsoft rivals lauded Jackson's ruling as a ''great thing for Silicon
Valley,'' George Zachary, a partner at venture capital firm Mohr Davidow Ventures, issued
a final cautionary note.
''At the same time, this is a scary reminder that if you make it to the top, someone will try to
pull you down,'' Zachary said. ''It's also a reminder that the government is more involved in
technology and the notion of a free market is not entirely free.''
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