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

To: Harry Sharp who wrote (44463)	5/7/2000 8:57:00 PM
From: Proud_Infidel	Respond to of 74651

From the Wash Post: Microsoft Drafts Breakup Reply By James V. Grimaldi 05/07/00 Microsoft Corp. is drafting a counterproposal to the government's breakup plan that involves limits on its business practices, such as giving computer makers more flexibility to alter Windows software and offering versions of Windows without access to the company's Internet browser, people familiar with the plan said yesterday. The company's proposal is meant to show U.S. District Judge Thomas Penfield Jackson that there is a remedy directly addressing the court's verdict ? that Microsoft broke federal antitrust law ? without going to the "radical" extent of breaking the company in two, sources close to the company said. The Justice Department and 17 states last month urged the judge to break Microsoft into two companies: one that would sell personal computer operating systems, the brains that run PCs; and another company that would focus on selling software applications, Internet services and other Microsoft products. Two other states are seeking tough limits on Microsoft's conduct, but for now oppose a breakup. Microsoft's response to the government breakup plan is due Wednesday. The company's lawyers also are set to seek more time to respond to the proposal, permission to question government experts and access to government records used to justify the breakup plan. The remedy plan, which is being drafted by Microsoft attorneys, appears to fall somewhat short of what the company offered the government in out-of-court settlement talks before Jackson's verdict. Under the proposal, Microsoft would be required to provide open, timely and complete access to the parts of the Windows operating system code used by independent software companies to design their software applications to run on Windows. This is meant to address the judge's findings that Microsoft used access to the applications programming interfaces in a discriminatory fashion. To address the judge's finding that Microsoft broke the law by tying the Internet browser to the Windows operating system, Microsoft intends to propose offering a version of Windows that "hides" access to the browser in the operating system. Microsoft contends that the two products now are fully integrated and cannot be separated. And under the proposal, computer makers would be permitted to make alterations to the Windows operating system's "desktop," the area of the computer screen that is seen when programs are not running. This is meant to address the judge's findings that contracts with computer makers prevented certain modifications that would have allowed companies such as International Business Machines Corp. and Compaq Computer Corp. to feature and promote software products that competed with Windows on their personal computers. Microsoft also would be prohibited from engaging in certain deals with computer makers that promote Microsoft products over rivals' offerings. This is to address the judge's finding that Microsoft maintained its Windows monopoly in part by limiting the channels of distribution for rival software. Offering its own conduct-limiting remedy, something that was requested last month by Jackson in a scheduling order, presents Microsoft with a tricky task because the company continues to argue that no laws were broken, and it intends to vigorously challenge the judge's ruling on appeal. It puts Microsoft in the delicate position of defending its innocence while meeting the judge's request that the company find a remedy to a verdict it plans to legally dispute. In the request for more time, Microsoft will propose options on a sliding scale ? months to scrutinize a breakup and far less time for a conduct-limiting remedy. Last week Microsoft lobbyists met with members of Congress and their staffs and detailed a response to the government's breakup plan. Microsoft told lawmakers the U.S. plan will place bans on innovation, force the two competing companies to make products that are incompatible, deprive consumers of the benefits of basic Microsoft research and innovations, and prohibit the development of "exciting new products now under development at Microsoft." "The DOJ plan bans the addition of any significant new end user features to Windows for up to 10 years," one of the Microsoft lobbying documents states. "The DOJ plan would effectively reduce Windows to a small core of low-level functionality that performs only the most basic operations." Asked about the documents, Justice Department spokeswoman Gina Talamona said they were "filled with false statements and inaccuracies." The previous settlement talks between the company and the government failed April 1 after four months when mediator Richard Posner said differences between the parties were too deep to be bridged. Afterward, Microsoft executives said their offers went further than any remedy the courts would order, given the findings of facts. Two days after talks collapsed, Jackson issued his conclusions of law, finding that Microsoft had used its monopoly power to crush rivals to protect its monopoly in personal computer operating systems. He also found that Microsoft had attempted to monopolize the market for Internet browsers, which is software used to access the World Wide Web. Jackson's verdict, while far-reaching, nevertheless gave Microsoft a minor victory. He said Microsoft's deals with various Internet companies and computer makers did not violate the Sherman Antitrust Act because the deals were not so exclusive as to shut out rival Netscape Communications Corp. That is one of many reasons Microsoft apparently isn't going as far as it did in settlement negotiations, which company lawyers see as a fundamentally different process from a court-ordered remedy. Out-of-court settlement talks often result in defendants making concessions beyond what they believe necessary in exchange for limiting legal costs and gaining certainty and predictability about the future.