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

To: djia101362 who wrote (46615)	6/14/2000 1:20:00 AM
From: TTOSBT	Respond to of 74651

Re: "Those greedy AGs will end up with just what they deserve, nothing." Boy that will be real justice! TTOSBT

To: djia101362 who wrote (46615)	6/14/2000 2:14:00 AM
From: XiaoYao	Read Replies (1) \| Respond to of 74651

news.morningstar.com Microsoft, Microsoft, and Boxes by Todd Porter \| 06-09-2000 \| E-mail Article to a Friend Breaking Up Is Hard To Do With the final smack of his gavel, Judge Thomas (Penny) Jackson split Microsoft MSFT into two pieces, at least in his fantasy world. Reading his 14-page order is like descending into economics never-never land. The weirdness started when the Justice Department accused Microsoft of being the trickiest type of monopoly--one that didn?t charge high prices. The judge agrees with this charge and found that "Microsoft paid vast sums of money and renounced many millions more in lost revenue in order to?enhance Internet Explorer?s share of browser usage at [Netscape] Navigator?s expense." Fortunately, the judge spares us from the terrible truth of where Microsoft?s dirty millions ended up--in our very own pockets. Thanks to the Justice Department?s vigilance, this nightmare of free software is now over. Under Justice's oversight, you can be sure that Microsoft will act like a proper monopolist by charging us all high prices. In fact, we can expect to pay two sets of monopoly prices--one for Windows and another for all the other applications that we?re locked into. My favorite part of Penny?s Folly, though, is Section 3.g.ii) Restriction on Binding Middleware Products to Operating System Products Without Properly Kissing Janet Reno?s Feet. This section mandates that anytime Microsoft wants to integrate a program like Outlook with Windows, it must also offer a version of Windows without Outlook. The wacky part is the percentage discount that Microsoft must give to the buyers of the inferior version of Windows: it?s the ratio of the number of bytes in Outlook to the bytes in Windows. The single molecule of economic wisdom embedded in this part of the order is this: If Outlook takes a lot of code, it must be good; so if you don?t get it, you should get a big discount. Using the court?s pricing formula, however, Microsoft can actually continue to give away add-ons almost for free. All Microsoft must do is add a few million lines of worthless code to Windows every time it wants to add a valuable feature. The bigger Windows gets, the smaller the discount for giving up the added feature. The Justice Department?s legal genius has simply given Microsoft an incentive to be highly inefficient in programming Windows. In addition to creating perverse incentives, the judge has given Justice the right to be in Bill Gate's face for the next 10 years. They are free to seize any document or e-mail; Microsoft must appoint an internal antitrust rat squad; and Bill Gates must weekly confess all his predatory thoughts in a notarized affidavit. This vigilance is necessary because Microsoft is still guilty of bad thoughts. Judge Jackson, a noted scholar in the Spanish Inquisition School of Antitrust, essentially said that if Microsoft had only confessed their heresy, he could have spared them dismemberment. In his order, he observes, "A structural remedy has become imperative: Microsoft as it is presently organized and led is unwilling to accept the notion that it broke the law." The reason that Microsoft has the temerity to maintain its innocence in the face of Penny?s Final Judgment is that his judgment has proven to be only temporary in the past. In 1998, the D.C. Court of Appeals overruled the judge and said Microsoft could tie its browser to its operating system. Needless to say, Judge Penny is trying to avoid the same Appeals Court by sending the case straight to the Supreme Court. This will help him avoid the monumental humiliation of being overturned twice on the same issue by the same judges. The final Kafkaesque turn for Microsoft is that Judge Jackson has punished them more severely because they disagree with his rulings. Of course, the judge is free to disagree with the rulings of a higher court without fear of punishment. One justification for this double standard is also in the judge's order. He states that "senior antitrust law enforcement officers of the U.S. Department of Justice and the attorneys general of 19 states?are by reason of office obliged and expected to consider--and to act in--the public interest; Microsoft is not." (I?m sure the judge was being modest when he failed to include himself among the other noble creatures.) If you strip away their grandiose titles, though, their virtue is not so clear. If Jackson had said, "A group of politicians who managed to graduate from law school in order to experience the thrill of exercising power over the rest of us went after Microsoft and won," we would be less likely to accept their purported purity.