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

To: d[-_-]b who wrote (11594)	10/21/1998 3:01:00 PM
From: Daniel Schuh	Read Replies (2) \| Respond to of 74651

I don't know, what's "client software" supposed to mean here? What's the browser if it's not "client software"? Netscape was planning to cede it all to Microsoft all along? Ok. The thing about that meeting, the Netscape story is pretty much in character with many similar stories about meeting with Microsoft. Here's one I happen to have at hand: Feeding the lion" is how Max Metral describes his visits to Microsoft headquarters. Metral is the 24-year-old chief of technology at Firefly Network, a small Internet software company based in Cambridge, Mass. One evening in February, he and his partners flew to Seattle to spend the next day showing off Firefly's software, which has aroused a good deal of investor interest. One of the Microsoft engineers, who have elevated the techno-put-down to high art, glanced at Firefly's software and concluded, "We could do that in a week." But they did seem interested in Firefly's business plan, Metral recalls. When the meetings were over and the Firefly team drove back to Sea-Tac International Airport, they had not only fed the lion but also felt the fear. "The reality of the software business today is that if you find something that can make you ridiculously rich, then that's something Microsoft is going to want to take from you," Metral says. "All we can do is meet with them and try to see what they're going to do to us when they feel like doing it. If they want to kill you, they'll kill you." (from nytimes.com ) At the time, I mostly laughed at the part about Microsoft "doing that in a week". Turns out that a Microsoft week in this sense was worth $40m or so, the techno-put-down guy didn't say how many programmers "we" included. The Firefly offer was pretty good compared to what Steve Chase got for AOL in a circa '93 meeting with Bill & Co. "We'll buy you or kill you", and the offer was $50m. Pretty fortuitous for AOL that Netscape came along, requiring Bill to put a bullet through MSN's head, and pay (in kind, of course) AOL to take a bunch of Microsoft software, while scrupulously denying the existence of any alternative. I don't know if figures ever came up, I imagine the offer would have been in a similar range, something in 8 figures for 20% of Netscape and a board seat, along with unlimited code rights. Normal kind of strings for a Microsoft "investment". Funny kind of "free market" at work here, but anything else would be "communist", I guess. Cheers, Dan.

To: d[-_-]b who wrote (11594)	10/21/1998 3:09:00 PM
From: ToySoldier	Respond to of 74651

Like I said earlier, CISCO will soon have to capitulate and agree to integrate NDS along side of Active Directory (when it ever shows its face). This article was on the front page of todays PCWeek... Cisco takes heat for shunning NDS By Scott Berinato, PC Week Online October 9, 1998 5:09 PM ET Networking leader Cisco Systems Inc. is being called on the carpet by many customers for ignoring their calls to integrate Novell Inc.'s Novell Directory Services with its networking hardware. Though Cisco and Microsoft Corp. inked just such an agreement this spring for work with Microsoft's as-yet-unreleased Active Directory, Novell and Cisco will not commit to a such a partnership, or even a definitive statement of direction, for NDS. "They're alienating a huge installed base," said a network administrator at a major Washington financial institution running both NDS and hundreds of Cisco switches and routers. "Basically, if I see competing offers in 1999, I'll start to look elsewhere for infrastructure." By tying the directory to the networking hardware, administrators are able to do such things as configure routers on the fly and manage policies by user instead of IP address. The difficulty for Cisco started earlier this year when it licensed Microsoft's Active Directory technology -- due with Windows NT 5.0 next year -- to support its forthcoming CNS (Cisco Networking Services) software. The resulting CNS/Active Directory, which will run on both Windows NT and Solaris, will provide directory-based management of Cisco hardware. Though no agreement was made at that time, users of Cisco hardware and NDS expected a similar licensing deal that would yield a CNS for NDS. However, this never happened. In fact, in a recent memo to its sales force, Cisco reiterated its support for Active Directory and offered no plan to support NDS. Those who have made the investment in NDS feel that Cisco is in essence choosing the directory for them. "I want to call a meeting between Cisco and Novell and say, 'That's enough 'marketecture.' What are you going to do about this?'" said Jim Price, manager of enterprise network services for the Arizona Telecommunications System, in Phoenix, which has Cisco equipment and 1,000 clients managed by NDS. In users' minds, Cisco's relationship with Microsoft, of Redmond, Wash., is deepening the freeze between Cisco and Novell. "I feel like [Cisco is] making contradictory statements; it sounds like they've tied their wagon to Active Directory," said the network administrator at the major Washington financial institution. "I might get some interoperability from standards, but I'll have to go with Active Directory for the value-add." While Cisco officials defend their Microsoft alliance, Kurt Dahm, senior product manager at Cisco, said: "We have every intention of working with all of our directory friends through the standards process. In no way are we trying to limit or segment the directory market." Novell officials in Provo, Utah, said that's not enough. "We are committed to the standards process, but we believe that specific vendors working together can realize greater use of the directory sooner," said Ron Palmeri, vice president of strategic relations at Novell. The decision to go with Microsoft, according to Cisco officials in San Jose, Calif., was predicated on the belief that Active Directory will provide technological advantages, specifically in replication schemes. That optimization is a primary source of contention for enterprise managers such as Juan Mata of Excell Agent Services Inc., a call center in Phoenix. "It doesn't leave me with a good feeling," Mata said. "Our key application runs on NetWare, but we also have some running on NT. It was a nightmare to maintain both." Mata said that until the companies join CNS and NDS, he will manage Cisco hardware separately. If, in the long run, Cisco and Novell choose not to work together to link CNS and NDS, management of Cisco hardware and policy allocation on that hardware via NDS will be, at best, complicated. The long-term ray of hope for users is a nascent body of standards. Both DEN (Directory Enabled Networking) and LDAP (Lightweight Directory Access Protocol) Version 3 will provide baseline interoperability between directories. But even though DEN and LDAPv3 will eventually bring base interoperability, vendor-specific extensions for differentiation will negate the management simplicity promised by directories.

To: d[-_-]b who wrote (11594)	10/21/1998 3:35:00 PM
From: ToySoldier	Read Replies (1) \| Respond to of 74651

Yesterday there was a crying session on this board that only the industry players are complaining about MSFT and its practices but the consumer is not. Well, that isnt exactly true now is it? Consumer groups bash Microsoft A number of consumer advocacy groups last week submitted a 115-page report to the Senate Judiciary Committee that harshly criticizes Microsoft and its impact on the computer software industry. The report, released by the Consumer Federation of America and the Media Access Project, claims that Microsoft has hidden the costs of its software by bundling the technology into computers and that it doubled the price of its operating system after it secured a monopoly. Looks like even the Consumer groups are after MSFT... Toy

To: d[-_-]b who wrote (11594)	10/21/1998 3:37:00 PM
From: XiaoYao	Respond to of 74651

Microsoft Tries To Undermine Netscape Testimony >MSFT 10/21/98 Dow Jones News Service (Copyright (c) 1998, Dow Jones & Company, Inc.) By Mark Boslet WASHINGTON (Dow Jones)--In a thrust at one of the central charges in its antitrust trial, Microsoft Corp. (MSFT) sought to undermine Netscape Communications Corp.'s (NSCP) expectations it could charge for its Navigator browser. Relying on a deposition from former Netscape Chief Executive and founder Jim Clark, Microsoft lead attorney John Warden pointed out that Clark knew in 1994 of Microsoft's plans to give its browser away for free. That was before Netscape brought its first browser to market, a product it originally gave away for free but later began selling. Justice Department officials need to establish that Netscape and potentially other companies were harmed by what they claim to be a pattern of predatory behavior from Microsoft. One indication of harm would be Netscape's loss of browser sales. In arguments Wednesday morning before District Judge Thomas Penfield Jackson, Warden quoted from a July 1998 deposition from Clark: "I decided to give it away free because (Microsoft Chairman) Bill Gates had told me he was going to give (his browser) away free," Clark said. Also, Clark said in the deposition: "Bill Gates specifically told me he was going to give away the Web browser in the operating system...I felt like we would have to (distribute free) in order to survive against Microsoft." Clark went on to say the company never considerd the client, or browser, to be its business, but planned to provide application programs to run on back-room servers. From the witness stand, however, current Netscape Chief Executive James Barksdale disputed Clark's implication that Netscape's business plan didn't rely on revenue from its browser. "If it was in Jim Clark's mind we weren't going to sell the browser, he was just wrong," Barksdale said. In another revelation from Clark, Warden produced a Dec. 29, 1995 e-mail from Clark to Microsoft's Dan Rosen and Brad Silverberg. The memo urges Microsoft to take a greater interest in Netscape, suggesting Microsoft reconsider licensing its browser and consider an equity investment in the smaller company. The memo was written about a month after Netscape rejected a browser licensing proposal from Microsoft. Netscape rejected the proposal because Microsoft offered in exchange a one-time fee of a "couple million dollars" with no royalties that was too little, Barksdale said. The memo illustrates that the two companies were talking with one another - and even tossing about suggestions of an equity investment - prior to a crucial June 25, 1995 meeting, at which Barksdale and Netscape's Marc Andreessen claim Microsoft proposed illegally dividing the browser market. During the Jume meeting, Microsoft also offered an equity investment. But the memo also likely reflects fear at Netscape, as the young company struggled to turn a profit and Microsoft was moving forward with a browser licensing agreement with rival Spyglass Inc. (SPYG). -By Mark Boslet; 202-862-1285 (END) DOW JONES NEWS 10-21-98 02:29 PM

To: d[-_-]b who wrote (11594)	10/21/1998 3:52:00 PM
From: XiaoYao	Respond to of 74651

Is Microsoft A Predator Or Prey? 10/21/98 Investor's Business Daily Page A24 (Copyright Investor's Business Daily, Inc. 1998. To Subscribe Call (800) 733-8900.) By JOHN R. LOTT JR. Microsoft Corp.'s antitrust trial finally got underway Monday. The federal government charges the firm with predation and exclusionary practices that harm rivals and consumers alike. So where are the higher prices? The lower quality? The stalled innovations? These things exist in the imaginations of zealous Justice Department lawyers and smarting competitors. Actual evidence of antitrust violations is much less than meets the eye. Take Microsoft's dominance over word processing and spreadsheet software. Microsoft Word has been the top selling word processor program since '92. Yet the average price of word processing software has fallen by almost 70%, reversing an upward trend. And since Microsoft's Excel displaced Lotus as the top spreadsheet in '93, prices have dropped nearly 60%. Coincidence? Hardly. But these steep price drops do explain the hostility of Microsoft's competitors. A number of notable high-tech firms are lined up to testify against Microsoft: Apple Computer Inc., Sun Microsystems Inc., IBM, Netscape Communications Corp., Intel Corp., Intuit Inc. and America Online Inc. But are customers better served if competitors are on friendly terms rather than in fierce competition? It's an old question. George Stigler, the late Nobel Prize-winning economist, once showed that politicians who supported the Sherman Antitrust Act also backed protectionist tariffs. Stigler argued that both types of laws were passed at consumers' expense to protect inefficient firms from lower-cost competitors. Despite popular myths about robber barrons and capitalism run amok, corporate "predation" is quite rare. Economists point to only three likely "predators" in U.S. history: Standard Oil, the Tobacco Trust and Southern Bell Telephone Company - companies that peaked almost 100 years ago. Were they illegal monopolies? Maybe. Then again, the data have never ruled out the possibility that they were simply superior competitors. Take the Tobacco Trust. Some historians argue that when its members merged with independent tobacco firms at the turn of the century, causing stock prices of other tobacco companies to fall, that was predation. Lacking hard evidence, academics point to internal corporate memos that boast of driving competitors out of business. Here's another possibility: Mergers lower production costs, helping customers while hurting competitors. That isn't predation. In fact, the law's standard of evidence has changed over the years. Intent alone isn't enough for liability in a predatory pricing case. In other words, what might look like predatory pricing may be nothing more than vigorous, above-marginal cost competition. Recently, I looked at all 21 publicly traded firms accused or convicted of predation between '63 and '88. These companies hardly fit into the textbook definition of "predatory behavior." All of these companies were boosting output when the government alleged they were engaging in predatory practices. But their profits were also rising - hardly a sign of below-cost pricing. In fact, every case suggests the law was used to punish relatively efficient firms for driving out less efficient competitors. Less evident is any effort on the part of accused or convicted companies encouraging managers to break the law. Say a company wanted its managers to expand production and sell its wares below cost. The last thing we'd see is that same company tying managerial compensation more closely to short-run profits. That would punish managers who actually engaged in predation. Yet this is exactly what we see: Firms accused or convicted of predation were more likely to have compensation tied closely to short-run profits. So, has the Justice Department finally nailed a truly predatory firm with Microsoft? That's doubtful. Even if Justice successfully uses the testimony of competitors to paint a picture of a company intent on depriving the public of competition, it's going to have trouble proving any damages done to consumers. It may be too much to hope, but the Microsoft case could cause us to rethink the big question of whom antitrust laws really protect: the consumer or the weak competitor? John R. Lott Jr. is the John M. Olin Law and Economics fellow at the University of Chicago School of Law and author of "Are Predatory Commitments Credible? Who Should the Courts Believe?" (University of Chicago Press, forthcoming in '99).