Philosophical gap puts Microsoft
settlement in doubt
by Paul Andrews
Special to The Seattle Times
Despite a reported 10-day reprieve granted by U.S. District
Judge Thomas Penfield Jackson, seasoned observers of the
government's antitrust suit against Microsoft hold little hope for an
out-of-court settlement.
Jackson yesterday held off on issuing "conclusions of law" - a
ruling on whether Microsoft violated antitrust laws - for up to 10
days while negotiations continued. The judge had told lawyers
from both sides he was prepared to issue his ruling yesterday if
the talks did not progress.
But the extension may mean little unless a vast philosophical gulf
separating the sides is bridged, analysts say. Microsoft's offers of
technical changes to Windows and contractual arrangements with
computer makers, while addressing issues raised in last year's
trial, fall short of the kind of remedies sought by the government,
they say.
By the same token, the fundamental changes sought by the
government in the Microsoft psyche and way of doing business
represent "the exact thing Microsoft does not want to surrender,"
said Ed Black, president of the Computer & Communications
Industry Association in Washington, D.C.
"Even at this point, if Microsoft said we will fundamentally change,
it would have a credibility problem," said Black, who supports
dividing Microsoft into multiple competing operating-systems
companies. "Microsoft has said for too long, 'We don't want to
change the way we do business.' "
Even pressure from the stock market may not be enough to turn
Microsoft's head. Microsoft shares jumped 7 percent last week
on news of progress in negotiations and dropped 6.7 percent
when a proposal it submitted was characterized as having fallen
short.
"Microsoft does not want to settle if it means making the company
less competitive," said Scott McAdams, a stock analyst for
McAdams Wright Ragen in Seattle. McAdams said he was
surprised by the market's reaction "because any settlement is
going to take a pint of blood out of the company competitively."
In an e-mail obtained by The Washington Post, company
President Steve Ballmer told employees Monday that Microsoft's
legal team, working closely with top executives including
Chairman Bill Gates, has made substantial concessions in
negotiations that go beyond what it thinks the company would
face in a "remedies" phase of the trial.
"While we're very sure of our legal position and we're prepared to
take it all the way on appeal, we've learned that discretion is the
better part of valor, so we are working very hard to resolve the
case through settlement," Ballmer said.
He added, "We believe we've put more on the table than the
judicial process would ultimately provide, even if we lost the
case."
Microsoft is thought to have offered to make the pricing of
Windows uniform for all computer makers, rather than offering
selective discounts. The company also has indicated it would
"open up" Windows' source code, including applications
programming interfaces, needed by developers to compete with
Microsoft's own applications. And the company has said it would
permit its Internet Explorer browser to be split from Windows, a
move it previously said would render Windows inoperable.
But the company has refused to budge on other government
proposals, including a breakup into separate entities and a ban on
future integration of new products or services into Windows. In
fact, Microsoft is moving ahead on initiatives to integrate Web
services into Windows, a project it calls Next Generation
Windows Services.
This week it unveiled a new Windows Media Player that will
compete with crosstown rival Real Networks' jukebox and media
players, software that enables users to play audio and video
downloaded from the Web.
"It's highly doubtful Microsoft will support a conduct remedy that
would impede development of Next Generation Windows
Services," Black said.
"Given what the (government) is asking for, Microsoft doesn't
have a lot of incentive to settle," said Jeff Eisenach, president of
the Progress and Freedom Foundation in Washington, D.C., who
has called for Microsoft to be broken into three competing
operating-system companies.
"It undoubtedly thinks it would be better off trying to challenge the
whole kit and caboodle" through an appeal of Jackson's
anticipated ruling.
Another possible option is an oversight committee, perhaps made
up of industry leaders as well as legal experts and government
officials, to monitor Microsoft behavior. If the committee stuck to
black-and-white issues such as contract language and licensing
practices, the idea might find support from Microsoft, observers
say.
But on broader issues of how software is designed, "Microsoft is
likely to draw the line," McAdams said. "It turns software design
into a political game."
If current negotiations follow the pattern of two previous jousts
between Microsoft and government attorneys, the 48 hours
before Jackson's deadline will produce an intense flurry of faxes,
telephone calls and consultations. In 1994, talks produced a
consent decree. Four years later, however, they broke down over
Microsoft's integration of the browser into Windows 98, which
resulted in the present lawsuit.
This time "the participants are so far apart, I'm not convinced they
can get close in a last-minute flurry," said Rob Enderle, a longtime
industry analyst for the Giga Group in San Jose. Anonymous
statements from attorneys general on the progress of negotiations,
many of them casting doubt on Microsoft's credibility, are not
helping negotiations, Enderle added.
Ultimately, Microsoft thinks it can do better by resisting a breakup
or structural remedy and taking its chances with an appeal, said
Mark Anderson, head of Strategic News Service, a widely read
industry electronic newsletter based in Friday Harbor, San Juan
County.
"I have long believed that Microsoft will lose (in Jackson's
decision), will appeal and will achieve most of its goals in the
appeals court - at the very least getting beyond the remedy of a
breakup," Anderson said.
Information from The Washington Post is included in this
report.
Paul Andrews is a technology correspondent for The Seattle
Times.
Copyright ¸ 2000 The Seattle Times Company |
