Is Gates right in fighting the almighty government?
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A Miss on Microsoft
Why the Antitrust Ruling Is a Lost Opportunity
B U R L I N G A M E, Calif., April 11 - In high tech, justice delayed is justice denied.
So now that the roar over last week's Microsoft ruling has calmed to a rumble, ask yourself a simple question: If it wasn't for the government antitrust suit, how often these days would you even think about Microsoft?
In the late '90s, it was a different story. So dominant were Gates & Co. at the time that Microsoft seemed to pop up in every Valley conversation.
I remember four years ago going out to dinner with Marc Andreesen, then the wunderkind of Silicon Valley's hottest company, Netscape. No matter what we started to talk about, the conversation always came back to Microsoft.
Andreesen, like Apple's Steve Jobs, Oracle's Larry Ellison, and Novell's Ray Noorda before him, was obsessed with the boys from Redmond, Wash.
But with good reason. Netscape had created the browser industry, and in the process kicked off the Internet boom. The company was growing as fast as any in business history. But now Microsoft had noticed Netscape and was coming on fast.
Caught in Bill Gates' reticle, Andreesen could only squirm with dread. As the myth went, no company ever took on Microsoft and lived to tell about it.
As we all know, Netscape succumbed as well. Less well known is that most of the company's shareholders are far better off now at America Online. And in those two facts lie the paradox of the Microsoft case.
Microsoft Played Dirty, But Who Didn't?
The rest of the world now appreciates what we Valleyites knew when the Justice Department investigation began: Microsoft played dirty. It sealed off markets by linking its secondary products to its all-powerful operating system. It crushed competitors through predatory pricing, recruiting and selective deliveries.
And most damaging of all, Microsoft stifled a generation of entrepreneurs who couldn?t find venture funding for any business with even the remotest chance of competing with it.
OK, so Microsoft hit below the belt. But so did Intel during the same period. So did Texas Instruments and DEC and IBM and every other dominant player in high tech in the last 40 years.
But when the Feds came calling, sly old Andy Grove at Intel was ready. Having survived both the Nazis and the Communists, he understood that this had less to do with illegality than fealty by one monopoly to a much larger one.
And, proving that the wisdom of age still has a place in high-tech management, Grove knew what to do: bow, apologize, pay the shakedown, and publicly promise never to do it again.
Fighting the Almighty Government
Bill Gates, arrogant as always, refused. A few campaign contributions and retainers to the right pols and lobbyists and Microsoft might have slipped away with a small fine and a public caning.
But in a paradoxical move that will occupy case study writers and armchair psychologists for years to come, Gates decided to take the offensive against the almighty government of the United States of America. He even insulted the most powerful mortal figure in the known universe - a federal judge. One hundred billion dollars in net worth isn't enough to take on an institution with its own aircraft carriers, prisons and IRS agents.
Everybody but the lawyers at Microsoft could predict the result. With the ruling last week that Microsoft was indeed a monopoly, the whole farce has come to an end. Now the tragedy, which is likely to last far longer, begins.
The irony is that, in the most important way, Gates was right.
No Longer the Juggernaut
Because of the pace of technological change, there really are no pure monopolies in the digital realm. Even as Joel Klein was presenting his case, it was already becoming obsolete. The unstoppable corporate juggernaut of 1997 is looking very vulnerable these days.
Even on Microsoft's home turf, personal computer operating systems, the company is under assault. Apple, resurgent under Jobs, is regaining market share. Linux, the freeware anti-Windows, has gained millions of adherents sick of Redmond's domination.
And all of that is becoming just a side skirmish as PCs themselves slowly fade into history. The hardware devices replacing PCs, from home controllers to engine computers to PDAs, don't need the complexity of Windows. And Microsoft's attempt to conquer this market with a stripped-down version, Windows CE, has been a disappointment.
In this new world, the dominant interface belongs to the PalmPilot. It will only get worse for Gates & Co. as more semiconductor companies develop new, non-Intel processors for these devices.
That leaves the Internet, the battle for which led to this case. Microsoft may have crushed Netscape, but Netscape won the war. Nobody cares who makes browsers anymore: the most popular path to the Net these days is through AOL.
In other words, in the market where Microsoft is being ruled a monopoly, it is seen by other players as a failure.
Aiding and Abetting the Competition
The Microsoft ruling is a tragedy not because Microsoft didn't deserve punishment, but because the penalty will land harder on everybody else. Had the Feds, through the SEC, hit the company with a $50 billion fine and an ordered unbundling of the Explorer browser, it would have had an honest legal victory.
Instead, the Justice Department, using the courts, aided and abetted Microsoft's competitors. In the process, it underscored the American public's growing belief that government is capricious, glacial, and a tool of the highest contributor.
Judge Jackson took aim at Microsoft, fired and hit millions of American shareholders, many of them pensioners. He almost killed the entire economy in the process. All in the name of a ruling that will inevitably be appealed and drag through the courts for years to come.
Meanwhile, the erstwhile target of all this, Bill Gates, happily removed the bullseye from his chest three months ago, stepping down as CEO.
When I talked with him a few days later after his job switch, he seemed a different man: funny, nostalgic, almost autumnal. The scary young land-shark had become a middle-aged father, weary from 20 years of battle, dispirited from watching his own government turn against him, and anxious to finally get back to the lab.
If this was the real goal of Janet Reno and her J-Men, they got it in January without firing a shot.
So, when it is all over, in 2005 or so, what will have been gained? Three more microprocessor generations will have passed, the last PCs will be headed for museums and the penalty will land on a Microsoft that looks nothing like the company we know today.
On the other hand, we can now sleep soundly knowing that the world has been made safe for Sun Microsystems.
By Michael S. Malone
Editor, Forbes ASAP
Special to ABCNEWS.com
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