Commentary: One Year Later, It's the Same Old Microsoft
Business Week Online
A year ago, when the Justice Dept. sued Microsoft Corp. and accused it of smothering competition, the company fired back that the software industry was as vibrant as ever--and in no need of government policing.
Microsoft MSFT has even more of that ammo today. America Online Inc.'s AOL acquisition of Netscape Communications Corp. NSCP gives it a huge lead in the Web-portal business. Linux, a freebie operating system, is rapidly gaining popularity. And Windows 2000, an update for corporations, is two years late--providing openings for Sun Microsystems Inc. SUNW and Novell Inc. NOVL. ''You look at what's happened over the past 12 months and wonder if this case is even relevant anymore,'' says a Microsoft spokesman.
HIGH GLOSS. That's good spin. But it conveniently glosses over the essential fact: Microsoft still dominates the biggest chunks of the PC-software business--and that's where the government's case is focused. The company has an 87% share of PC operating systems and more than 90% of the market for productivity applications such as word processors and spreadsheets. While some big PC makers have started shipping Linux as an alternative to Windows, Microsoft still
enjoys a virtual lock on the market. That's why PC prices have dropped by nearly 50% in the past two years while the price for Windows has held firm.
At the same time, Microsoft is gaining in the Web-browser market. It now has 43.8% of the U.S. market to Netscape's 41.5%--vs. 38.9% to Netscape's 50.5% at the end of 1997, according to market researcher International Data Corp. Most observers say Microsoft's gains come from building the browser into Windows 98 and restrictive distribution deals Microsoft wrote with Internet service providers--actions that got it into trouble in the first place.
James L. Barksdale, former CEO of Netscape, says he agreed to merge with AOL to save his company and that his deal and other changes in the industry have no bearing on misdeeds for which Microsoft should still pay. ''I don't have to die for them to be guilty of attempted murder,'' he says.
Microsoft doesn't seem to have mellowed much since the trial began. On May 10, the company invested $600 million in Nextel Communications Inc. NXTL in exchange for links from Nextel's wireless data customers to a version of
Microsoft's MSN Web portal. Nextel had a deal with Netscape's Netcenter portal--but dropped out when Microsoft bought in. The Nextel deal came just one week after Microsoft agreed to invest $5 billion of its $22 billion cash hoard in AT&T, partly to convince AT&T to use its software in TV set-top boxes. ''In the new markets, they're buying extra seats at the table,'' notes James Balderston, director of Zona Research Inc.
As if Microsoft needed an extra seat anywhere. With its WebTV Networks Inc. unit, it's the early leader in providing Internet via TV. Its Windows CE operating system for handheld computing devices is catching up with 3Com's Palm Pilot. IDC expects Win CE to take the lead in 2000, with a 34.6% market share vs. Palm's 28.5%.
It all adds up to a more formidable Microsoft--ready to take full advantage of its cash and PC-software clout to gain a foothold in promising new markets. The government's case is as relevant today as ever.
By Steve Hamm |
