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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: abbigail who wrote (41726)	4/10/2000 8:24:00 PM
From: rudedog	Read Replies (1) \| Respond to of 74651

abbigail - re: do you have a remedy? Wow - "you be the judge"!! I was pretty heavily involved with several deals in the mid-90s. Attitudes about MSFT among my clients went from moderately paranoid to extremely paranoid - and with some justification. When it came to cutting a sharp deal, there seemed to be few who could "dance with the bear" and come out ahead. But MSFT business practices began to change after the first DOJ action and changed even more during the last few years. I believe that MSFT regards the developer community as their real franchise, and the advent of the web and the ability to develop applications written above the base OS APIs has meant that MSFT has had to work hard to retain developer mindshare. The notion that contract practices with OEMs, or even technology acquisitions and heavy-handed product counterstrikes, represent the class of conduct that needs to be corrected is, in my opinion, just wrong. The big OEMs have always had the ability to do pretty much what they wanted, and the whining that IBM and a few others did was just show, to get even more favorable terms from MSFT. After all, that market represents the bulk of MSFT sales, and even for MSFT, the customer is always right. And in terms of application penetration, with a few exceptions I believe that MSFT just out-marketed the competition in the areas where they won. People tend to forget that MSFT made a lot of products which failed to wipe out the competition, and quite a few which bombed more or less out the door. Money has never been a challenge to Quicken, for example, and MSN has never challenged AOL. So the main thrust of the remedies that have been discussed, at least publicly, addresses a problem which does not exist, or which does not exist any more. What, then, is the real issue which needs to be addressed? I think it actually revolves around innovation... probably by accident, the DOJ is using the right words there, although it's obvious from the case they prosecuted that they have no idea of what it would take to stimulate innovation, and what innovation would be needed to benefit the consumer. The internet itself resulted from government support for research into network technology, and I could point to a number of important technical pillars that might not exist if it were not for government research spending. But that spending has been flat to declining over the last 10 years. If the real goal is to stimulate broad-based innovation in the industry, why not propose that MSFT fund basic research in several key categories, that would be open to the industry in the same way that government-sponsored research has been in the past? There is plenty of money for near term development but almost none for basic research... that would provide some payback to the industry in general for the success that MSFT has enjoyed, would clearly benefit all of us at some point in the future, and would not set an ugly precedent for how government interacts with technology businesses. As far as "reining in" MSFT, as I have said, I think that most of the behaviors that I found objectionable in MSFT's behavior were completely missed by the DOJ and the press, who honed in on the things that the primary MSFT competitors cared about. And in any event, a lot of what MSFT did, they did because they were an extremely aggressive upstart company who initially survived by thinking one step ahead of the big boys, and then carried those attitudes into their dealings with almost everyone else. None of those practices would have been a problem if MSFT had not had the dominant position in desktop OS deployment. As a result, they are to some extent self-regulating. In order for MSFT to regain and maintain developer mindshare, they actually have to develop and deploy better tools and provide more compelling environments to target. In order to maintain the good will of the OEMs, they need to provide something close to a level playing field. Some minimal constraints on volume pricing and "special deals" and a mechanism to do high level monitoring of compliance ought to do that. Intel also has a tendency to want to own the world, but careful attention to detail in how they actually set pricing, do allocations and give access to technology has kept them pretty clean as far as any anti-trust allegations. MSFT needs to understand that it is not in their interest to "push the envelope" in that area, but I doubt that there is a legal remedy which would enforce that anywhere near as effectively as market forces will do.