I'm going to propose a [loong] scenario for settlement of the antitrust case that seems to solve most of the issues raised in it, but also gives MSFT shareholders a pleasant result. I offer it under the meaning of the futurist's notion of scenario, that is, not as a prediction of what will happen but as an analysis of what could happen.
The memo leaked a month ago by the state attorneys general concerning proposed remedies showed that the AGs were aiming for two broad goals in the remedies: 1.) structural changes at Microsoft that would blunt its monopoly power in consumer Windows, and 2.) maintenance of shareholder equity in the company. Their preferred alternative at the time -- an auction of Win95/98 code base -- was roundly criticized for several good reasons, but I think there's another way to meet both of those goals -- a way that could be either good or at least acceptable to nearly everyone involved. It's a remedy that t2 and other have mentioned in prior posts.
Split off only the consumer Windows division into a new company.
Equity in the new company: Current non-insider holders of MSFT would get a fractional ownership in the new company based on its projected value. It might mean 1 share of common stock with voting rights in the new company for every 5, 8, or 10 shares of MSFT held at the time of the divestiture. Microsoft itself and its insider shareholder would get a different non-voting, but dividend-yielding class of stock. This would give the new company independence from Microsoft but would give the company an interest in its financial well-being. Microsoft (and, of course, its shareholders) would directly benefit via the dividends from the new company's profits.
"Property" divested to the new company: The new company would get the code base, patents, and technologies currently maintained by the Consumer Windows division. Exactly what that means would be open to considerable negotiation. Because it's been tied so tightly into the OS code, the new company would probably get IE code. Who would get things like ActiveX, DirectX, or other shared-code products? The two companies would have to negotiate -- probably under some court direction -- to figure that out, along with licensing agreements for other technologies.
Taking a lesson from Judge Greene's Solomonic decision on the "Bell" trademark, the new company would also get exclusive right to the "Windows" trademark. (Which means Microsoft would either have to come up with a new moniker for NT and CE or pay the new company for using "Windows".)
The new company would also be given short-term broad latitude in hiring current Microsoft employees for their team.
Business goals of the new company: With one significant exception, the new company (call it Windows, Inc.) would have long-term freedom to enter into any business they wished, but in the short term, it would be set up mainly as a licensing and certification business.
Among the licenses it would sell would be development licenses. Like the AG's auction notion, this would give any company willing to pay for it the right to see, use, and develop Windows. But there'd be one big difference: Windows, Inc. would retain copyright and control of the code and any changes based on the code. That would give WInc. final say in any changes made to the code. "Windows" would be controlled by a central authority.
They'd use a "commuity development" model in which changes made by any licensee would be available to all. Changes would be subject to an approval process in which development licensees participated. A financial model would also give developers a negotiated return for each copy of Windows sold, based on their contribution to the code base.
WInc. would also issue sales licenses, giving the licensee the right to sell WInc.-approved versions of "Windows" under the company's name. A company with such a license could make OEM contracts, direct-sale contracts, and other arrangements. WInc. would have access to all such contracts and would receive a return each copy sold.
The restriction on Windows, Inc. is that they would not be able to enter into sales agreements except through that process. This would be a complicated part of it, since I'm not sure how a "sales license" would be different from an "OEM license", but the notion is that other organizations would be responsible for sales and marketing of the product.
As long as what they sold under the "Windows" name met the certification requirements of Windows, Inc., licensees would be able to offer any kind of bundle they wanted -- including products in their package that were not part of the OS itself.
WInc. would become mostly a build & test organization with a highly bureaucratic front office to handle all the contracts and distributions (but it would presumably be a highly-automated bureau). They'd do limited development themselves, but would be responsible for making sure that all copies of Windows sold met certain defined compatibility requirements.
Additional restrictions on Microsoft: I suspect the plaintiff lawyers would ask for one additional remedy: For a period of time based on its total OS market share for desktop computers and servers Microsoft would be required to make its OEM and direct-sales contracts for both NT and Windows public. (This is similar to a restriction placed on AT&T after its divestiture of the monopoly local businesses. Even though AT&T was in a competitive market in long-distance, they were required to file tariffs that announced their pricing plans. The requirement was dropped only after their market share dropped below either 60 or 65%.)
Advantage to Microsoft: Microsoft could still sell consumer Windows and would probably retain considerable brand loyalty in that business. Through its non-controlling ownership of Windows, Inc., it would gain additional returns even on sales by other licensees. Microsoft could still develop consumer Windows. They would offer changes to the system through the development license process.
Advantage to MSFT shareholders: Since current holders of MSFT would become owners of Windows, Inc. as well, they'd benefit from the profits of both companies.
Advantage to competition: Even though they would still be a single "Windows" standard, it would be sold in different configurations by different companies. An OEM would be able to choose among those competing suppliers. Development would also favor increased competition. Caldera -- which owns DR-DOS -- might buy development rights and suggest changes that would make Windows fully compatible with their underlying system. AOL/Netscape might be interested in making changes that would pull IE out of the OS code so that Navigator could more easily be offered as part of a bundle that did not include IE. |
