________________________________________________________________________________ -- Judge's Conclusion: MS Guilty -- MS: What The Fringe is Thinking -- Stock Price? Try Microsofter -- MS Experts Agree on Nothing -- Redmond's Response: Appeal -- Microsoft: Business as Usual -------------------------------------------------------------------------------- Wired News Judge's Conclusion: MS Guilty by Declan McCullagh 3:45 p.m. Apr. 3, 2000 PDT Microsoft repeatedly violated U.S. antitrust laws, a federal judge ruled in a far-reaching decision that promises to reshape the computer industry and weaken the software company's dominance in the personal computer field. U.S. District Judge Thomas Penfield Jackson said in his decision released Monday that by using "technological shackles" to keep rival products from effectively competing with its Internet Explorer browser, Microsoft (MSFT) ran afoul of the Sherman Act's restrictions on anti-competitive conduct. Jackson's stinging 102KB denunciation of Microsoft's conduct during the late 1990s presages a potentially severe punishment during the next phase of the trial, which could range from restrictions on contracts Microsoft signs to a breakup of the world's largest software company. Calling Microsoft's activities repeatedly "predacious," Jackson said it "paid vast sums of money, and renounced many millions more in lost revenue every year, in order to induce firms to take actions that would help enhance Internet Explorer's share of browser usage at Navigator's expense." The ruling surprised few observers, least of all Microsoft, which promised to appeal Jackson's decision. "Today's ruling was not unexpected ... but there are several steps ahead in this case," Microsoft chairman Bill Gates said during a news conference. "We believe we have a strong case on appeal," Gates said. During a news conference in Washington, Attorney General Janet Reno said "we are pleased that the court agreed with the Department of Justice." "It will benefit America's consumers by opening the door to competition," added Assistant Attorney General Joel Klein. Klein said the Justice Department had not yet reached a decision on what punishment to ask the judge to levy. Jackson's order was silent on the issue, saying that he will "enter an order with respect to appropriate relief ... following proceedings to be established by further Order of the Court." Jackson handed a copy of his ruling to both sides on Monday before he gave it to the general public at 5 p.m. EDT, and Microsoft provided details to its allies during a conference call earlier in the day. During that call, Microsoft representatives asked conservative and free-market groups for their help in rallying support against the ruling. Just minutes after the decision's release, one Republican legislator found something to complain about. "Microsoft is right to appeal this ruling. The government's case stands on the shifting sands of a rapidly changing marketplace," said House Majority Leader Dick Armey. "Dwelling on the past only prevents the development of new technologies that bring benefits to consumers." Liberal activist Ralph Nader saw it differently. "Microsoft has illegally crushed innovative competitors and harmed consumers. The company has shown its contempt for any court-imposed changes in its conduct," Nader said. "The court must break up this monopoly corporation." Microsoft's loss during this key round likely will embolden competitors and foreshadow a new wave of private antitrust suits that promise to distract the company's management for years to come. At the end of the trading day, Microsoft shares were at 90-7/8, down 15-3/8. The Nasdaq index was down a record 349 points. http://www.wired.com/news/politics/0,1283,35378,00.html -------------------------------------------------------------------------------- Wired News MS: What The Fringe is Thinking by Leander Kahney 6:00 p.m. Apr. 3, 2000 PDT While most of Microsoft's outspoken critics in the Macintosh and Linux camps are eagerly anticipating the penalty phase of the historic antitrust trial, there isn't much consensus about what penalties should be imposed. "The first inclination is to go 'Yipee,'" said Shawn King, host of the Mac Show, a pro-Macintosh Internet radio show. "The bully of the schoolyard has been sent to the principal's office. We don't know yet what the principal is going to do, but all the other kids are breathing a sigh of relief." King said he didn't advocate breaking up Microsoft (MSFT) because the smaller companies would probably dominate its niche markets the way the Baby Bells dominate local phone markets. Instead, King said he'd like the company to come under closer government scrutiny. "I want the principal to look over their shoulder a bit more," he said. "To let them know there's an eye being kept on them." Bruce Perens, co-founder of the open source movement and president of Linux Capital Group, also praised the judge's finding -- with reservations. "I think it's nice to see," he said. "But it's 10 years too late." Perens said so far the Department of Justice had done little for the open source movement, which in stark contrast to companies like Microsoft believes software should be freely copied, distributed and modified. At best, the trial had prevented Microsoft from launching an all-out attack on Linux, he said. "I think it's kept them off our back a little but the real contribution is they've made us look good by being so bad," he said. Perens said ideally he'd like to see the Windows source code opened, which he believes is possible if the company changes tack and negotiates with the government during the penalty phase of the case. Perens said he'd also like to see the company broken up to split the operating system from applications. "I'd like to see several smaller companies. They might target Linux and would compete with each other a bit more," he said. Phil Greenspun, CEO of ArsDigita and creator of the Bill Gates personal wealth clock, said he'd rather see the government, the largest buyer of computer technology in the world, invest resources in the development of Linux. "I would much rather see the government put resources into improving Linux so that it serves all their needs than [go] after Microsoft," he said. "It wouldn't take that many resources to bring Linux and Star Office up to the point where people wouldn't need to use Microsoft products." Greenspun created the wealth clock as a tutorial for students at MIT and as a perverse illustration of the maxim that for every rule there's an exception -- in this case, that wealth is a function of creativity and innovation. "Bill Gates is interesting because MIT people think you have to be an innovator to be successful," Greenspun said. "He turns MIT wisdom on its head because he's never contributed anything to technology or to life and has become rich by making bad, copycat products." Mitch Stone, a technical writer who maintains the Boycott Microsoft site, said he had mixed feelings about the verdict. On the one hand, it vindicates what consumer advocates have been saying for years: that Microsoft has been using its power in the operating systems market to muscle into other markets, such as Web browsers. On the other hand, it's been four years and the trial hasn't done anything to stop Microsoft from wielding its monopoly power. "It'll drag on for another couple of years and meanwhile Microsoft will continue to do what they do," Stone said. "I'd rather see an effective settlement in the short term than a long, protracted battle that would end in an indelicate solution [like breaking it up]. It's like cutting up an earthworm. You'll get nothing but smaller earthworms out of it." Instead, Stone said he would like to see greater government oversight and an end to monopolistic business practices like discriminatory pricing of the Windows operating system and the bundling practices that tied the browser into the operating system. Robert Tracinski, chairman of the pro-Microsoft Center for the Moral Defense of Capitalism, a nonprofit that supports "laissez-faire capitalism," said the dice were loaded against Microsoft from the very beginning. "We regard it as an injustice against Microsoft," he said. "They are being punished because they are successful and not any other reason. We will continue to fight this to the very end." Tracinski hoped the judge would simply impose a modest fine on the company. "The least punishment the better," he said. Tracinski finds an unlikely ally in Jesse Brown, publisher of the fanatically pro-Macintosh site, the Mac Marines. "I'm in the minority but I'm a free-market capitalist and I believe the market should make the decisions about Microsoft and not the government," Brown said. "No one is holding a gun to anyone's head forcing them to buy Windows," he said. "I don't use Micrsoft products and I don't like them but the market should make the ultimate decision." http://www.wired.com/news/politics/0,1283,35380,00.html -------------------------------------------------------------------------------- Wired News Stock Price? Try Microsofter by Joanna Glasner 3:05 p.m. Apr. 3, 2000 PDT Being a loser is always a bad thing. But on Wall Street, often the anticipation of defeat is worse than defeat itself. That's the investor logic that analysts expect will apply to Microsoft (MSFT), whose shares took a painful dive Monday on expectations of a decidedly negative antitrust ruling from U.S. Judge Thomas Penfield Jackson. Shares of the software company plummeted 15 percent -- the largest single-day drop in recent months -- following news of a collapse in settlement talks. Now that Jackson has actually ruled -- and his conclusions are as anti-Microsoft as everyone expected -- MS fans predict things will start looking up. "I think it was pretty much a foregone conclusion that the judge would say they're guilty," said Brian Goodstadt, an analyst at S&P Equity Group who follows Microsoft. Although the stock shot up over the last couple weeks in hopes of a settlement, Monday's plunge cancels out most of the gain, Goodstadt said. He said it's unlikely shares will drop sharply Tuesday. In the final analysis, investors will judge Microsoft by its earnings, said Drew Brosseau, analyst at SG Cowen, who reiterated a strong buy rating on Microsoft Monday. "In the long run, the stock will be based on the fundamentals, not the legal issues, and in the course of the next year to two years, the company is going to see an acceleration in its growth rate due to the Windows 2000 cycle," he said. Not all of Wall Street was quite so confident, however. Analysts at CIBC World Markets downgraded their rating on Microsoft from buy to hold, indicating that the stock has further room to fall. Trading in Microsoft stock was halted just before to the release of the findings. Shares resumed trading at 5:44 EDT and were trading at $90.88, down $15.75 from the morning's opening price. Microsoft's slump contributed to a much broader downturn in technology stocks Monday. The technology-heavy Nasdaq Composite index fell 7.6 percent -- its fifth-largest percentage drop in history -- dragged down by the MS sell-off. Monday's losses were liberally spread among software and Internet stocks, with such industry bellweathers as Yahoo, eBay, and Amazon.com taking a hit. Linux software and services firms -- some of the companies that would seemingly stand gain the most from Microsoft's travails -- also didn't get much of a boost on Wall Street. Shares of Red Hat Software (RHAT) dropped a quarter of a point, while VA Linux (LNUX)stock rose about 3 percent. Even Oracle (ORCL) and Sun Microsystems (SUNW), both long-standing Microsoft critics, saw stock prices skid. Sun fell 4 percent to $89.81, while Oracle slipped 1.5 percent to $76.88. All in all, it was a pretty miserable day for the majority of tech stocks. The best investors can hope for now is that the reality of Microsoft's defeat is less brutal than its anticipation. What's more, this was just round one of the antitrust trial. Microsoft could potentially drag the case through the appeals process for years. "We're still not near the end of this," Goodstadt said. http://www.wired.com/news/business/0,1367,35392,00.html -------------------------------------------------------------------------------- Wired News MS Experts Agree on Nothing by Craig Bicknell 4:45 p.m. Apr. 3, 2000 PDT Well, that's that -- Microsoft broke the law, case closed. Ha! With Microsoft planning to appeal, nothing's closed here, especially not the mouths of government enforcers, Microsoft moguls, market seers, politicians, think-tank wonks, business friends, foes, and investors (7.5 percent drop in the Nasdaq? Yow). Everyone, it seems, has something to say about Microsoft. The GOVERNMENT is evil! Long live unchecked capitalism and the American Way! Microsoft is evil! Long live the white-hatted lawyers of the DOJ! Between those poles, themes and variations ad infinitum. And then there's the dizzying array of responses to the question: What next? Yup, Pandora's box of punditry is now officially open for business. A sampling: "Microsoft maintained its monopoly power by anti-competitive means and attempted to monopolize the Web browser market. Microsoft also violated the Sherman Act by unlawfully tying its Web browser to its operating system ... Predatory behavior is patently anticompetitive." -- U.S District Judge Thomas Penfield Jackson in his finding of law "We believe we have a strong case on appeal. The Appeals Court already has affirmed Microsoft's right to build Internet capabilities into the Windows operating system to benefit consumers." -- Bill Gates, Microsoft CEO "Microsoft is right to appeal this ruling. The government's case stands on the shifting sands of a rapidly changing marketplace. Their premise is quickly becoming antiquated." -- U.S. House of Representatives Majority Leader Dick Armey (R), Texas "The question now is what remedy should be imposed on Microsoft for engaging in predatory behavior and breaking the law. As I have testified, the most effective way to restore competition is through a structural remedy or 'breakup' of Microsoft. A structural remedy ensures that Microsoft's illegal and monopolistic practices will not continue in the future." -- Jim Barksdale, general partner at The Barksdale Group and former CEO of Netscape Communications "Not surprisingly, the conclusions made by Judge Jackson reveal a fundamental lack of understanding of the IT industry. At a time when everyone outside the courtroom is experiencing a period of unprecedented growth and innovation in information technology, Judge Jackson describes a world of limited competition and hampered innovation. Ironically, Judge Jackson is painting a vivid picture of an industry run by lawyers and judges." -- Jonathan Zuck, President of the Association for Competitive Technology "Microsoft has been held accountable for its illegal conduct. Consumers that have been harmed can now look forward to benefits." -- U.S. Attorney General Janet Reno "In reality, everybody ... is harmed by this lengthy and expensive process initiated by the U.S. Department of Justice. As high-tech competition continues to thrive, the case against Microsoft is obsolete and a waste of the taxpayers' hard-earned dollars." -- U.S. Representative Jennifer Dunn (R), Washington "The guilty verdict today leaves no question that the only appropriate remedy in this case is structural. Only a structural remedy will effectively do what the law requires -- end the monopoly and restore competition to the high-tech market. Microsoft has already demonstrated its ability and its willingness to ignore conduct remedies, as evidenced by its refusal to adhere to the 1995 Consent Decree." -- Ed Black, President of the Computer & Communication Industry Association "No company, no matter how big, no matter how successful, can refuse to play by the rules. This landmark opinion will also set the ground rules for enforcement in the information age." -- Joel Klein, deputy attorney general, Justice Department antitrust chief "THIS DOJ ANNOUNCEMENT SOUNDS LIKE THE ACADEMY AWARDS CEREMONY" -- post on the Ragingbull.com investor message boards "The real battle now comes in figuring out what the remedy is. The states want money, and that's gonna complicate things." -- antitrust attorney speaking on CNBC "PEOPLE i have one thing to say to everyone......PHILLIP MORRIS....does civil penalties ring a bell here?? Look at the charts of Phillip Morris and lay the % drop next to MSFT and you are talking one in the same. Ouch." -- post on the Ragingbull.com investor message boards "Given Microsoft's track record, I don't think the government will propose a go-forth-and-sin-no-more decree. I think they'll ask for something that takes Microsoft's power away, and I think that's what they'll get." -- Donald Falk, partner at Mayer Brown & Platt, a Washington D.C. law firm "The only sure way to curtail Microsoft's monopoly in the PC operating systems market is with a structural approach in [which Microsoft] is divided into three distinct and competing companies [also] Microsoft must be forbidden from using its massive cash hoard to kill competition through minority, majority, and IP technology investments. The company must be prohibited from using its ill-gotten gains to buy its way into new markets and lock in new customers." -- Scott McNealy, CEO, Sun Microsystems "The Nasdaq is off $350 billion today. That's what's in store for us as this case spins out of control." -- Jonathan Zuck, executive director of the Association for Competitive Technology, a Washington D.C. based lobby group "I did not buy this stock to see it run up and up, but I was hoping to achieve an investment that would at least triple itself in 10 years. Now I am worried I might lose on my investment. Who is looking out for the investor in this thing? Is MSFT? Is the government?" -- post on the Motley Fool investor message boards http://www.wired.com/news/politics/0,1283,35379,00.html -------------------------------------------------------------------------------- Wired News Redmond's Response: Appeal by Jordan Lite 4:45 p.m. Apr. 3, 2000 PDT Microsoft Chairman Bill Gates says his company will appeal a federal judge's ruling that the software giant violated antitrust laws and consistently acted to hold onto its power over industry competitors. Microsoft (MSFT) will request an expedited review by the U.S. Court of Appeals, Gates said Monday. He said the appeal will emphasize a 1998 court decision affirming Microsoft's right to support the Internet in its Windows operating system. "We did everything we could to settle this case and continue to look for new opportunities to solve it," Gates said. "We believe we have a strong case on appeal. "Our future success depends on our ability to keep innovating in the fastest-moving marketplace on earth," he added during an afternoon press conference. "Microsoft and every company must compete and innovate in order to survive and prosper." U.S. District Judge Thomas Penfield Jackson found Monday that Microsoft violated the federal Sherman Antitrust Act "by unlawfully tying its Web browser to its operating system" and "maintained its monopoly power by anticompetitive means." He also said the company attempted to monopolize the Web browser market. The company will argue in its appeal that both the trial process and the laws cited in the government's allegations were inappropriate, said Microsoft attorney Bill Neukom. "Until the appeal is over, nothing is settled," said Microsoft CEO Steve Ballmer. While acknowledging that he anticipated such a ruling, Gates said Jackson's decision "turns on its head the reality consumers know: that our software has helped make PCs more accessible and more affordable to millions." Microsoft officials said they were not concerned by Jackson's conclusion that the company also could be found liable under state antitrust laws. "The class-action lawsuits will not distract at all from our appeal. We think they're misguided," Ballmer said. "Consumers haven't been harmed. We're a company that's created consumer benefits. "We’re a company of incredible integrity," he added. "We’re a company that’s competed hard and that’s what were supposed to do. I don’t think the law, nor consumers, nor the industry would be better served if we didn’t do that." Gates said he was heartened that Jackson found Microsoft's marketing arrangements with other companies to be lawful, adding that "nothing along those lines prevented [browser competitor] Netscape from getting onto anyone's computer." Jackson said in the ruling that "Microsoft's multiple agreements with distributors did not ultimately deprive Netscape of the ability to have access to every PC user worldwide to offer an opportunity to install Navigator. Netscape was able to distribute 160 million copies of Navigator, contributing to an increase in its installed base from 15 million in 1996 to 33 million in December 1998." Gates said in an interview in Monday's Wall Street Journal that the company will continue to integrate its Internet browser into Windows software -- the major bone of contention in the government's lawsuit. Jackson's ruling came after settlement talks between Microsoft and the government broke down Saturday after four months of mediation. "We really put our heart, our souls, our time" into settlement talks, Ballmer said. "While we remain very open ... we would like to see an appropriate openness" on the part of the government in any future discussions, he said. http://www.wired.com/news/politics/0,1283,35393,00.html -------------------------------------------------------------------------------- Wired News Microsoft: Business as Usual by Michelle Finley 4:35 p.m. Apr. 3, 2000 PDT Despite Monday's ruling that Microsoft violated U.S. antitrust laws, industry watchers said it is likely to be business as usual in Redmond, Washington, for a long time to come. Because Microsoft plans to appeal the ruling, the software giant and the government are likely to be locked in a legal battle that could last several years. "Microsoft has said they will be bringing the case to the Supreme Court. We're looking at [at] least two years worth of legal battles here," said Dr. Wise Young, head of Rutgers' Collaborative Neuroscience lab. "By the time the case is decided, the way we use computers will be totally different. Today's ruling doesn't mean much in the real world." David Anderson of Anderson Associates agreed. He said the software market is changing so rapidly that any ruling based on this decision will have no basis in reality when Microsoft reaches the end of its legal road. Anderson said that operating systems may not even be an issue soon, since there is an increasing movement toward everything being stored on the Net rather than on users' desktops. "Soon enough, all of our applications will be delivered through the Web, and the browser will be the operating system," said Anderson. "Microsoft knows this and they are making strong movements into the managed-application or rental-application market. They are prepared for the future, but the wheels of justice grind slowly. By the time the court gets around to swatting the fly that is Microsoft, that fly will have landed elsewhere." Harvey Jacobs of Jacobs and Associates, a law firm specializing in Internet law, has argued motions before Judge Jackson in Federal District Court and found him to be "quite a good and thorough jurist, very even tempered and careful." Jacobs said that for those reasons it is difficult to say with certainly that Microsoft's appeal will be completely or even partially successful. Jacobs also believes that by the time this case reaches final adjudication, Internet browsers and Internet connectivity will be a very different animal. "In the long run, depending on the fines and/or remedies meted out, Microsoft may have lost the battle, but may well win the war. Remember, 'That which doesn't kill you will make you stronger," Jacobs said. And Anderson said that future technology will enable Microsoft to do exactly what they got slammed for doing in the past. For example, he said that in a browser-based application delivery market "deeplinking" would allow Microsoft to tie together the applications they choose to connect. The deeplinking technique recently received judicial approval. Anderson also noted that Microsoft is investing heavily in alternative delivery systems such as wireless and cable access to the Net and hardware that turns TVs and game-playing machines into Internet access devices. Dan Gorski, a senior analyst with Anthony Pagano Associates also said the ruling is a classic example of how antiquated the justice system is. He disagreed with Assistant Attorney General Joe Klein's statement that the decision will benefit consumers and stimulate competition and innovation in the high-tech industry. "Look at what's happened to Netscape in the two years since the justice department brought this latest case," said Gorski. "Microsoft has pulled well ahead of Netscape, it now has two-thirds of the browser market share, and only part of that can be ascribed to AOL compromising Netscape's competitive ability by pulling back on upgrades. "Microsoft has done much of the damage that it set out to do. It's hard to see what penalizing them now can achieve." http://www.wired.com/news/politics/0,1283,35381,00.html ________________________________________________________________________________ no copyright 2000 rolux.org - no commercial use without permission. is a moderated mailing list for the advancement of minor criticism. more information: mail to: majordomo@rolux.org, subject line: , message body: info. further questions: mail to: rolux-owner@rolux.org. archive: http://www.rolux.org