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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Franco Battista who wrote (8529)	12/17/1997 5:13:00 PM
From: Franco Battista	Read Replies (1) \| Respond to of 9285

To all. Here is the MSFT article. New contempt charge U.S. lawyers file new charge as Microsoft warns of impact By Tom Murphy, CBS MarketWatch Wed Dec 17 17:12:43 1997 SAN FRANCISCO (CBS.MW) -- The U.S. Justice Department on Wednesday charged Microsoft Corp. with violating a court order that barred the software giant from muscling computer makers to use its Internet Explorer browser when they buy Windows 95. Meanwhile, Microsoft told a federal appeals court the nation's economy might suffer the consequences if the order is allowed to stand. And nine state attorneys general were reportedly conducting their own investigation into possible antitrust violations by the world's largest independent software maker. The latest developments reflect the gathering storm around Microsoft's interpretation of a 1995 consent decree that ended an earlier Justice Department probe of possible antitrust violations. Legal and financial experts said the current fight could have far-reaching effects on the software industry. On Wall Street, shares of Microsoft closed down 3 7/16 at 135 5/8, off about 4.7 percent from the day before last week's ruling by U.S. District Court Judge Thomas Penfield Jackson. That was before the Justice Department filed its latest charges. Jackson order required Microsoft to offer computer makers the browser and its Window operating system separately. Instead, Justice Department said late Wednesday that Microsoft has offered an inferior version of Windows 95 to computer vendors who wish to use a different browser. "Microsoft has gone from tying its products to tying the hands of its vendors," said Joel I. Klein, assistant attorney general for antitrust. "The more Microsoft continues this practice, the more consumers are harmed." Klein renewed calls for a $1 million-a-day fine if a violation is found. Microsoft, meanwhile, appealed Jackson's ruling, saying it has already rocked financial markets with speculation that the next version of its market-dominating Windows operating system may be delayed. Microsoft plans to build the browser into Windows 98. "Indeed, significant segments of the United States economy may be affected by doubt surrounding the release of Windows 98," the company said in the appeal filed Tuesday with the U.S. Court of Appeal in Washington. Separately, attorneys general from nine states -- including New York, Illinois and Florida -- said they're considering their own antitrust action against the company. The multistate effort may be comparable to the state-led fight against tobacco companies during the past few years. Microsoft said it would be interested in meeting with each of the attorneys. Gathering clouds Some financial and legal experts believe the legal winds now swirling around Microsoft could turn into a tornado with a far-reaching impact on the economics of the software industry. "It is no exaggeration to say that the public generally has a significant interest in the prompt disposition of this appeal," Microsoft said in its appeal. It said Jackson's order "radically altered the status quo." The case involves Microsoft's efforts to require computer makers to install its Internet browser on new computers when they install the Windows operating system. The government lawyers asked Jackson to find Microsoft in contempt, saying its practice of bundling the browser with Windows violated a 2-year-old consent decree. 'Should have ended' "The court denied the Justice Department's petition for contempt. The case should have ended there," said Microsoft lawyer William Neukom. "But on its own initiative ... without giving Microsoft notice or an opportunity to defend itself ... (Jackson) issued a preliminary injunction." An injunction is typically issued by a judge when he believes there is a need to block some action until a trial can decide the issue permanently. In this case, Jackson appointed a "special master" to study the issue, and said the question of whether Microsoft is violating the agreement "remains to be decided." "Without the benefit of further evidence in the record, an attempt to answer that questions would be premature," he said. He set another hearing for May 31, suggesting the case will continue at least until then. The remaining questions may seem arcane to the average bystander, but they're critical to the evolution of the software industry which, thus far, has grown with remarkably little interference by the government. Now that the Internet is becoming a mass medium that rivals radio or TV, that may change. A 'specter' raised "This is a contract interpretation lawsuit that the judge has turned into something more," said Goldman Sachs software analyst Rick Sherlund. "It raises the specter of tie-in sales and broader antitrust issues." Indeed, Jackson said the possibility of Microsoft using its clout to dominate the browser market "is simply too great to tolerate indefinitely until the issues are finally resolved." MSFT More than 90 percent of the world's personal computers already use Microsoft's operating systems. If the same number used its Internet Explorer browser, the Redmond, Wash.-based software giant would have enormous control over the Internet, including which advertisers would reach the greatest number of consumers. To further explore the issues, Jackson appointed Lawrence Lessig, a 36-year-old Harvard professor who previously advised the Supreme Court before it struck down efforts to control pornography on the Internet. He argued the Internet could be zoned into adult areas and non-adult areas to protect children. Cyber-law More telling about Lessig was his comment in a Harvard magazine article: "The claim that cyberspace is unregulatable is profoundly mistaken." Sherlund believes the question of bundling the browser and operating system is relatively minor compared to the bigger questions now being raised, and he thinks Justice Department lawyers will be quick to seize on the opportunity. "This may not be the end of the Department of Justice efforts," he said. "I think maybe they'll carry on an ongoing investigation of Microsoft." Tom Murphy is managing editor of CBS MarketWatch. The Associated Press contributed to this report.