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To: Charles Hughes who wrote (22902)	3/5/1999 1:45:00 AM
From: Gerald R. Lampton	Read Replies (4) \| Respond to of 24154

Overall, a good post. :) The one bit I find humorous in this summary is where the competitors calling for a breakup say there is no difference in attractiveness between the 'baby bills' proposal and a breakup into focused companies. Actually, I do not see that much difference between the two proposals, as long as focused companies have the right to break out into any markets they want, including those of the others (they will need to have that right if they are to survive). I speculate, based on their indifference as between the two proposals, that the trade group does not see much difference either. If the Baby Bills proposal is Microsoft's death warrant, then the focused companies proposal is, too. It will just take longer. Here's why: Let's suppose that Microsoft's different divisions have split up the chore of creating the generic components that go into all of Microsoft's various products. I am only guessing this is the case, but it makes sense. Why should the Windows group make its own routine that does X, and the Office group make its own, different routine that does the same thing? Why not just use one routine that does X across the whole organization? So I would assume the different divisions of Microsoft use the same basic components across the whole company, albeit in different combinations, to make each of Microsoft's various products. Now, if you break up the company, each separate company will have available to sell to the others the generic components it used to make for the whole organization. And, it will need to either build itself or buy from the others the generic components it needs for its finished products that it used to get from them as part of Microsoft. So, they will either build these components themselves or buy and sell them to each other, depending on which is cheaper. Furthermore, each company will have every incentive to open up for bid from third party, non-Microsoft companies the tasks of building the various components and other inputs it has to buy from the other former Microsoft entities anyway, and perhaps even those it builds itself, to see if it can get them more cheaply. On the output side, given the high sunk costs and low marginal cost of each additional unit of software, each company will have every incentive to expand as much as possible the market, not just for its finished products it sells to consumers, but for all of the various components that it makes that go into those products and can be used elsewhere. They can do that either by expanding their product offerings in the consumer sphere or by offering their components to a wider range of end product manufacturers who need those components. In either case, prices go down. And those end product manufacturers are going to have to keep their own product prices down to keep their own suppliers of components from moving up the food chain to become their competitors. The easier it is to combine the basic generic components into present Microsoft's various finished products, the lower the finished product prices of the broken up companies are going to have to be. So, this is all very speculative, but, if Microsoft's various products are really just different combinations of the same generic components, I really don't see how it makes that much difference whether Microsoft is broken up into undifferentiated or focused companies. BTW, I don't think either proposal would be their death warrant; I think the various entities would perhaps try to collude at first (as explained by Hovenkamp -- which raises the question of whether the breakup proposal would really lead to less government oversight in the short run), then specialize into their own proprietary niches, and you'd eventually end up with three monopolies instead of one (as was pointed out by Liebowitz in one of the articles linked to on this thread -- which raises the question of how effective the breakup proposal would be in addressing the monopoly concerns that lead to the suit in the first place ;)). And BTW, one reason I wish they'd release that report is so I can read the "Hobson's Choice" quote in context. It must be a doosey. ;)

To: Charles Hughes who wrote (22902)	3/5/1999 5:25:00 PM
From: Lizzie Tudor	Read Replies (3) \| Respond to of 24154

Chaz, is there a document online somewhere that synopsizes the entire case that you know of? Because today on NPR there was a discussion on the case and I was surprised to hear a general "understanding" that an environment where the platform vendor must cooperate with the apps vendors and at the same time compete with them, is anticompetitive. I am only familiar with the OEM techniques of msft which I do feel are anticompetitive. However as you know we just had a scenario in enterprise software very similar to the msft vs. app vendor situation where Oracle was the platform and Oracle apps did not win. I'm trying to find out if Boies successfully argued that msft as a platform and apps vendor by definition is unfair. Sheesh is that offbase. I can't seem to get my hands around the thrust of the entire case since there is so much material. Michelle