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

To: Carlos Blanco who wrote (7979)	5/25/1998 4:59:00 PM
From: John F. Dowd	Respond to of 74651

Dear Carlos: The parallels regarding the Borders/Barnes and Noble case are striking indeed. Our country has gone mad. If you can fit diversity into the equation and the fact that you are a victim of anything it seems you have elevated your status under the laws of the land. Your post about OS/2 and Windows goes right along with a reply I just sent off to Robert Bork's whatever in the WSJ, a copy of which is included below: Mr. Bork may be a "brilliant" jurist but he's woefully misinformed in the area of software and hardware and how it forges the computer industry. A little history first. When MSFT started their climb to OS preeminence vis a vis market share it was the very junior ally of IBM. IBM thinking it was taking advantage of this group of "geeks" put their wing tips to work for MSFT by distributing DOS provided at just about cost by MSFT under the name of PC DOS. IBM as might be expected attempted to subvert the arrangement by developing their own OS and to woo the owners of their PC's over to their OS/2. The gambit failed and IBM, along with Digital Research, surrendered the PC compatible market to MSFT. Why wasn't the tocsin of anti-trust being sounded then? That is effectively the moment that MSFT seized the great advantage. Well perhaps there is a magic number and since AAPL was still holding nearly 15% of the market the advantage didn't appear so glaring. But seeing that AAPL was winning people over to the GUI (graphic user interface which AAPL had licensed from that resource-less company Xerox) MSFT developed Windows and after beating off a court challenge from AAPL started to win AAPL users over to the Windows/MSFT world. Now, why would an AAPL user switch to an inferior copy of the Mac system? Well the reason is, and this goes to the heart of MSFT's success, is that there was much greater value and extensibility in owning a Wintel system. AAPL trying to maximize the bottom line early on refused to broaden the hardware vendor base of its system by licensing their system to other "box" makers. Jobs elected to be the sole hardware and software purveyor of the Mac OS and its plug and play simplicity charging about a 25% premium for the ease of use. Additionally, he did not cultivate a third party developer following except for MSFT who produces some of the best applications available for AAPL. In time the high margin low volume strategy of AAPL gave way to the MSFT high volume, low price, high - perceived value strategy and eventually MSFT climbed higher in the market share numbers. Should MSFT apologize for this persistent long range, high value approach that won them their preeminent position and give the market back to the losers just because the IBMs, AAPLs and Xerox's of the world saw no future in the PC or wanted to grab as much bottom line in the present rather than building for the future? Certainly not, since they have at all times been the consumers friend and the third part developer's greatest benefactor. Bork drones on with the usual drivel of: "The two greatest threats to Microsoft's chokehold on operating systems are Netscape's Web browser and Sun Microsystems' Java, a language that works on any operating system." Well this "mother lode" of the computer Esperanto is "fools gold" because Java doesn't work without an OS and it needs an OS specific client to work on a given platform. I know because as a Mac owner I find that there are 100 Windows/Unix applets for every Mac applet available. Should I sue somebody or buy another platform? Bork then proposes a possible marketplace remedy: " "An even worse nightmare for Mr. Gates is the possible cooperation of Netscape and Sun to create a product that would bypass Windows altogether, making his company a mere competitor rather than a monopolist." Interesting! Yes why doesn't one or the other buy out the other or why don't they merge? I guess they are afraid of finding themselves as the new target of hate and DOJ jihad or perhaps they are too altruistic to attempt this power grab. I have often wondered myself why in this age of globalization and consolidation that such a move hasn't been effected if MSFT is such a threat. It makes more sense than the present course of calling out the dogs of DOJ. Bork plods on with more "damning evidence": A key Microsoft executive stated: "It seems clear that it will be very hard to increase browser market share on the merits of IE 4 [Internet Explorer version 4.0] alone. It will be more important to leverage [Windows] to make people use IE instead of Navigator." Microsoft's internal communications are replete with evidence of that sort." As a shareholder and thinking person I applaud such humble and clear thinking. MSFT admits that they have a worthy competitor and needs to seek an advantage in doing battle with their opponent and they seized upon the idea of integration as the best way to gain market share. Where is the crime here? The consumer gets a better OS because it now does more things. Where once a computer would just read a disk and out put to a printer, it is now able to talk over phone wires, act like a fax, scan documents like a copier, play synthesized music and CD's; all because of advancements in the OS. So why not add talking to the Internet as another function of the OS/computer bag of tricks? Bork cries foul citing MSFT's tactic to "give away" its browser as a function of the OS. He says, " True, the company makes no additional monopoly profit; in fact, the tactic costs money because Microsoft prices its browser at zero". Again his pen betrays his lack of knowledge of what is going on in computerdom. From the get-go NSCP has been giving away their browser/client to the consumer via download from the net in order to broaden the appeal for their more lucrative server products. That was their unfair advantage and MSFT didn't take them to court when they owned 80+% of the browser market. No they just put up signs in the MSFT offices announcing that a war was on and they had to bury NSCP. Knute Rockne would have been proud of Bill. In fact MSFT, in the person of Mr. Gates and in attempt to buy time, publicly pooh-poohed the Internet while privately rolling up their sleeves to turn all of their attention and resources to the very task of catching up. Our Dept. of Defense should be run so well. Ironically, many at this point were scoffing at MSFT as a doomed dinosaur because of this publicly revealed shortsightedness. Bork decries MSFT's unfair advantage of enormous resources and complains:" But that is a rational investment given Microsoft's enormously disproportionate resources and the fact that costs do not rise commensurately with output". Yes MSFT has $10-13 billion in cash representing the bulk of its current assets ($20 billion Total) but that is dwarfed by the size of IBM's $40 billion in current assets ($80 billion Total). If resources and size are so important why then did IBM throw in the towel? Simple, they couldn't cut it! So having quit the field should they be invited back with their OS/2 for a rematch in the interests of fair play and diversity? Then Bork really gets going with this horrible bit of chicanery on the part of MSFT. " Microsoft licenses required computer makers to make no alterations in the first screen the user sees when he "boots up," forbade others from even mentioning to consumers the existence of competitive products, and content providers to deal with no one else if they wanted to deal with Microsoft. No monopolist insists on such restrictions on a whim, or imagines that consumers will thereby benefit." What is he saying here? Perhaps Ford should have a sticker on their dashboards suggesting that the driver might consider a Chrysler or maybe GM should offer a choice of the hood ornaments and grills made by competing manufacturers. In all Bork sounds like the maitre'd at the Mad Hatters Tea Party. It is no wonder that the conservative element can't stand up to the liberals, they have lost their minds. Bush with his New World Order and Bork acting as rent-a -conservative for Netscape. As a long time conservative and free market advocate I can only stand and scratch my head when I see the leaders of our cause selling out or getting mushy in the brain. The supreme irony of this thing is that Gates is a political liberal yet liberals and liberals in conservative clothing alike are attacking him. My hope was that Gates would come out of this politically wiser and see where his real support lies and where his allegiance should fall. But alas, fellows like Bork and Hatch really cloud the issue and Gates is probably as politically confused as the rest of us in this matter. And yes I do carry water for MSFT as an owner it represents 50% of my net worth.

To: Carlos Blanco who wrote (7979)	5/25/1998 7:58:00 PM
From: Dwight E. Karlsen	Read Replies (1) \| Respond to of 74651

Good articles, Carlos, both the booksellers one and the OS/2 article. The booksellers article reminds me: Haven't Compaq, Dell, HP and IBM been increasing market share at the expense of smaller PC OEMs? Does this smell of a cartel? Consumers must be being harmed. It's ironic that Compaq, the world's largest seller of PCs is getting a larger market share each quarter, yet they were one of the first to cry of unfair contracts. Perhaps this is one of the reasons the Texas state AG suddenly backed down on suing Microsoft? Perhaps he saw that it would be possible in the not-so-distant future that Compaq and Dell would be themselves being sued by disgruntled competitors. The OS/2 article: I remember when OS/2 was "THE" next big thing. It was practically a given. Leading edge IT career people were diligently reading up on the Presentation Manager manuals in their spare time, like while their clothes were tumbling in the apartment complex dryers. I wonder where the oppressed Mark Andreesens and Scott McNealies were then? James Barksdale? Larry Ellison? Where was their interest in operating systems then? Where were these people, back when software utility companies were happily running full-page glossy magazine ads that said "Man has hair fall out waiting for DOS". Evidently Mssrs. Andreesen, McNealy, Barksdale and Ellison weren't very interested in PC OSes back then. DOS was scorned. But now, now when Microsoft has seen the fruits of its labor return many-fold, NOW the Andreeson's of the world are suddenly interested in the PC OS. And they're wimpering that they don't have a chance to fairly compete because of that big bad bully Microsoft. Correction: You had a chance to compete, but you weren't interested. Tough.