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To: The Duke of URL© who wrote (138536)	7/2/2001 2:07:11 PM
From: Road Walker	Respond to of 186894

Duke, And here is the other side, from this morning's WSJ. Ruling Puts Windows XP Under Greater Scrutiny By John R. Wilke and Rebecca Buckman Staff Reporters of The Wall Street Journal WASHINGTON -- Microsoft Corp.'s Windows XP software and Web-based business strategy will face new legal scrutiny as the government antitrust case against the company moves to its next phase. Government antitrust enforcers or Microsoft's competitors could even seek a delay of the new Windows version while a new judge weighs remedies to be imposed on Microsoft, analysts say. Unless Microsoft and the government can forge a settlement sooner, the case is scheduled to be reassigned to a U.S. District Court judge here next month. In a sweeping ruling last week, the federal appeals court here unanimously rejected a breakup of the company and ordered new remedy hearings. But it also upheld the linchpin of the government's case: that Microsoft is a monopolist that illegally used its power to thwart competition. State and federal officials say the ruling strengthens their hand, either in settlement talks or in proceedings before a new judge. Richard Blumenthal, the Connecticut attorney general, said any remedy must "fundamentally change the way Microsoft uses its monopoly power in the market, and restore competition." A Microsoft spokesman Sunday said that the ruling is under review and that the company hasn't decided its next legal move; it has 90 days to appeal to the Supreme Court, if it chooses to do so. But Microsoft continues to maintain that Windows XP and its other new product initiatives aren't at risk. 'Continue to Innovate' In an e-mail sent to Microsoft employees Friday morning, Chief Executive Steve Ballmer said: "The court was clear that we have the right to continue to innovate and improve our operating systems. Obviously, we have just received this ruling … but our legal and executive team does not believe there is anything in this ruling that will prevent us from delivering Windows XP on schedule and with all of the great features and innovations we have planned." Mr. Ballmer told employees the court decision was "largely positive," though he cautioned that "this is not the end of the legal process." He also reminded employees that "it's important to recognize that there is nothing illegal about being a monopoly. Many companies have continued to thrive after a court finding that they had monopoly status in one market or another." The appeals court, in rejecting the breakup ordered last year by Judge Thomas Penfield Jackson, said that "this court has drastically altered the District Court's conclusion on liability" and that the new judge "should consider which of [Judge Jackson's] conduct restrictions remain viable in light of our modification." In Judge Jackson's order, beyond the breakup Microsoft was subject for 10 years to conduct restraints. Among them were provisions that would give personal-computer makers greater freedom to add rival software to new computers, limit the kinds of "middleware" software such as Internet browsers or music software that could be bolted into Windows, give other companies greater access to the inner workings of Windows and ban exclusionary contracts. Potential for Delays Members of the former team that filed the government's case in 1998 said over the weekend that the ruling could force Microsoft to justify design decisions it has made in Windows, balancing claimed consumer benefit against harm to competition. That is because with the court's affirmation of the monopoly power of Windows, almost any competitive feature Microsoft adds may be subject to review. Every time software code underlying a competitive new feature is commingled with Windows code, rather than added in a removable, modular fashion, "they're going to have to justify it," said Doug Melamed, former Justice Department antitrust chief. Jeffrey Blattner, another architect of the government case now in private practice, said that "there are important applications such as the media player, instant messaging and e-commerce services that Microsoft may not be able to force on unwilling PC makers and consumers." Steven Salop, a Georgetown University law professor who has also worked for Microsoft rivals, charges that Microsoft's true strategy may be one of delay. "The real question is whether the government will act to stop the release of Windows XP. And if it doesn't, then why should Microsoft come to the table in a serious way? It can just outwait the judicial process, as it has so far," and be rewarded with an even stronger market position. Emboldened Competitor Rick Sherlund, an analyst at Goldman Sachs, says that an emboldened competitor or the state attorneys general could seek an injunction to stop the planned Oct. 25 rollout of Windows XP, but that a judge may be reluctant to do so because it would hurt too many companies, such as PC makers whose plans depend on the new Windows arriving before the crucial year-end holiday-sales sales season. David Readerman, of Thomas Weisel Partners in San Francisco, adds that "the real question here is what legal roadblocks, hurdles or delay tactics … could possibly delay Windows XP." Opponents will have to move fast, though: Even though Windows XP is slated for release in stores in October, Microsoft must ship final "gold" code for the product to its computer-maker partners by late August, analysts say. Still, some features in Windows XP -- such as the requirement that people who use the new instant-messaging system also sign up for a Microsoft "Passport" identification service -- could probably be altered fairly quickly, analysts say. Write to John R. Wilke at john.wilke@wsj.com and Rebecca Buckman at rebecca.buckman@wsj.com