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To: Gerald R. Lampton who wrote (18586)	4/18/1998 2:20:00 AM
From: Gerald R. Lampton	Read Replies (1) \| Respond to of 24154

This article raises some interesting questions when read from the perspective of someone trying to prove an antitrust case based on the theory that Microsoft has an OS monopoly. I'd Bet on Microsoft Dvorak, John C. 05/05/98 PC Magazine Page 87 (COPYRIGHT 1998 Ziff-Davis Publishing Company) The last industry battle looms as Intel and Microsoft have mostly vanquished their competition but still fear each other. Intel is afraid that Microsoft will do something to move the platform off the Intel architecture. This is a paranoid thought and based solely on the fact that at one point Microsoft was going to port Windows NT to everything! Microsoft fears Intel is eventually going to create its own operating system and optimize its chips for its own OS, cutting Microsoft out of the picture. Kind of like what Microsoft allegedly does to people who write applications for Windows. "DOS isn't done until Lotus won't run." With both companies surviving in a heightened state fueled by intense paranoia and a siege mentality, something has to give, someday. What's interesting is that each company works from a staggeringly different philosophy. In fact, Microsoft's basic thinking is much more contemporary and seems to me to be the thinking that will win any mano a mano struggle. Let's examine the differences. In a nutshell, Microsoft does not suffer from the NIH (not invented here) syndrome common to Intel and some other companies. You run into this mentality mostly in industries that are engineering- top-heavy. The attitude is, "We know the right way to do something. Everyone else is wrong." This kind of thinking flows into standards committees, causing infinite delays as two arrogant know-it-all engineers start butting heads, each claiming infinite wisdom and righteousness. The possibility that they can both be right or wrong never enters the debate. This syndrome dominates Intel's thinking: Intel does not buy technology, it develops technology. Intel licenses nothing except patents for technologies it believes it has simultaneously developed. Intel will use outside technologies when necessary to enhance its direction. Common belief says that Intel invests in companies more to get them on the Intel bandwagon than to incorporate their technology. I'm sure an Intel engineer (who will always be right) will cite numerous examples (all minor) of where I'm wrong in these assumptions, but this is the general thinking. Let me quote from a recent Microprocessor Report: "Intel has never in its history produced a part that it did not develop. . . . The company's history and its mind-set -- some would call it NIH--discourage such a move." I bring this up because of the fabulous StrongARM chip and its technology, which Digital handed to Intel on a silver platter. Many consider this chip one of the finest low-power chips ever developed, and it looks as if Intel, because of its corporate nature, might simply let the chip die. I recommend you read Jim Turley's excellent editorial in Microprocessor Report (February 16, 1998; www.MDRonline.com). Microsoft is just the opposite. As a development house, it has no NIH-based pride. It prefers to buy technology from someone else. Remember that Microsoft bought DOS from Seattle Computer Products for $50,000 and turned DOS into the cash cow that made the company what it is today. Original DOS code is still in products being sold to this day. Why reinvent the wheel? This is the kind of smart thinking that makes Microsoft so hot. "We didn't think of that idea. We bought it from someone else. So?" If Microsoft's philosophy were used at Intel, you could be certain that the ARM chip would be high on the agenda and turned into a serious profit center. The Alpha chip would be given an Intel part number and pushed into the high end like nothing you've ever seen. I'm convinced that Compaq and Intel are on a collision course to a merger, and Compaq needs those Alpha chips to run the powerful Digital servers. But with or without the merger, Intel engineers and their NIH problem will dominate the thinking in the company. The result will be the end of the Alpha and the end of the ARM. It's like throwing money away, something Microsoft would never do. This attitude will eventually haunt Intel. Microsoft is seen as dangerous, because it can gobble up any company or compete on similar products. This is much more frightening than Intel's old-fashioned NIH approach to business, which works only because Intel got a hot hand with its x86 architecture and things fell into place quickly. But many of us recall the days of the 8080, when the sudden emergence of the Z-80 chip put Intel into a catch-up mode. And the company has not made flawless decisions. Intel should loosen up a bit. If Microsoft ever got into the chip business, Intel would be doomed. Leaving aside his comments about NIH and who would win, I think it raises the following questions which need answers: To what extent is Intel already an actual or potential competitor of Microsoft in the OS space? If Intel is an actual or potential competitor to Microsoft in the OS space, what does that do to DOJ's argument that Microsoft has an OS monopoly that it can abuse? Depending on how persuasive the answers are, they may or may not change my views on breaking up the company.

To: Gerald R. Lampton who wrote (18586)	4/18/1998 4:40:00 AM
From: Charles Hughes	Respond to of 24154

>> We'll never know, though because the government taxed the money away and spent it according to its priorities.<< If it hadn't been spent on technical education there would have been nobody to invent all this electronic stuff you are arguing about. Period. >>And I'm saying that poor education may be as much a product of the essentially monopolistic structure of the public school system as it is of a decline in federal spending on science education.<< When science education was best in this country we had far more public schools than now, and the government ran them from Washington, dictating both standards and materials. Fact. >>breakup will not result in the development of proprietary products.<<< They'll be broke by then. >>>So giving them each one product to call proprietary means you are telling the others they do not have the right to use the intellectual property associated with that product, even though they already know everything that went into it.<<< You think this because you don't know anything about how software is developed and maintained. You don't know who you are talking about when you say 'they' already know 'everything that went into it.' All companies try to keep documentation on their product development. Nevertheless, when a company loses the developer or development team that developed a product, they have lost 90% of their understanding. That's why smart VCs check out the engineering teams before they buy a company. They see who is being retained. They interview the team members to make sure they are staying, and they figure out which ones know what. If you break up the team, or perhaps if you lose one very key individual, that product line is then normally dead. That's why Borland redid the C++ compiler when they lost their main guy to another company. That's why MSFT redid their compiler when they hired a new designer. That's why MSFT hires away the engineering team sometimes, rather than paying off the original investors in some software they are trying to sell to MSFT. Because it's far more important to have the designers than have the code, for a variety or reasons. Break up the development teams and you will lose the capability to further develop the existing products. Because the real understanding depends on having been involved in the details. That's why the non-compete agreements and suits, that's why companies sabotage each other by hiring away key people. Each company needs to retain some key products, free and clear, and the development teams that go with them. To make sure that happens they will probably need to further incent the core development teams. Even if it wasn't illegal to do what you are suggesting, even if they wouldn't get caught right away, it would not be effective to steal each others products without the experienced teams. >>>Let Microsoft and the people whose careers are at stake decide. Any company that has holes to fill can hire from the open market.<<< You really are unclear on the concept of software development if you can say that. You have to have most of the original team to train the new person. You don't just 'fill holes.' Whenever possible, the departing engineer trains his/her replacement, which would not usually be possible under your scenario. Lawyers, cops, and soldiers are pretty interchangeable. Engineers, artists and scientists are not. >>>Now, I really would like to hear what your original proposal about breaking up the company was and what advantages it offers.:)<<< I think we are doing pretty well here. I think you will understand the original proposal (OK, the rolling accumulating snowball that is now the current idea) after a few dozen more technology business reality infusions. Most telling counterargument: Can you tell me why you didn't address those objections of mine which anyone should have been able to understand? For instance, that if every company had the same number of products as the original company, requiring the same size staff for each products maintenance and further development, the same variety of QA and phone tech support, the same volume of technical information to be managed on the web site, the same level of expenditure on marketing all those products (and trying to get any shelf space, because Egghead is going to have to cut some of them off)... You have to be not paying attention to think that they can live for even six months. It often escapes folks attention that Microsoft does not actually have a huge gross profit. These little companies could lose a few billion and go under very quickly. You have some objection to the government making some decision about product distribution. Well, they don't have to do much of that. But a few such decisions are central to what is happening here. You are quite correct that any outcome that would leave MSFT pretty much as it is now would be a sham. They have already been told not to do these things, they have already agreed, and they have already broken that trust. That's how we got to here. No threat of consequences, and no real action. Think about this: Dan is always going on about those employee options, quite rightly as far as I can tell. A government 'forced' breakup could give MSFT and their employees a way out of that jam. Their vesting could be reincarnated into a fully funded ownership, a percentage of stock in the new companies that the employees would own outright. Summary: 1. You can't preserve the most useful knowledge about products without the people. 2. If you spread the products around equally you multiply the costs. 3. Without unique products or brands, without guaranteed shelf space, without huge amounts of cash to carry them through the transition they are not going to last long enough to develop those new products you are talking about. To do that, they first of all need to revolutionize their corporate culture. And a question: Have you ever worked in any detailed way in the software industry? Because you talk as though this were telephone companies we were creating, each with a region to call it's own but identical services. Or banks, each with a sufficient amount of branches and capital to guarantee survival after a breakup. That ain't it. This is about products and marketing and engineers and most especially, differentiation, creation and control of market segments and positions. Cheers, Chaz