Why Microsoft is on the dock
By R.Ramasubramoni | 11 Nov 1999
The recent anti-trust litigation and trial of Microsoft has thrown up the kind of blatant arm twisting which one would like to think lurks in the background of big companies but never finds enough evidence of.
The anti-trust case has found that (in the words of the US district judge Thomas Penfield Jackson) "Microsoft consistently pressured IBM to reduce its support for software products that competed with Microsoft's offerings, and it used its monopoly power in the market for ... operating systems to punish IBM for its refusal to cooperate." The trial has thrown up several instances in support of this.
One such instance is when IBM Corp. acquired Lotus Development Corp. in 1995, which had some top drawer products like Lotus Notes software (a groupware product) and Lotus SmartSuite, an office suite product, lined up against Microsoft's Office.
Call it double trouble. Microsoft was already eyeing the groupware market, and Lotus Notes in the hands of IBM looked formidable. Add to that Lotus's SmartSuite. Both were top products in the hands of another giant, IBM, which looked awesome if you consider the number of IBM PCs sold each year with these two bundles of software sitting in them. It would seem that this got Microsoft to turn the steam on IBM -- and it wasn't for the first time either.
Lotus chief executive Jeff Papows had testified before the senate judiciary committee last year that Microsoft was trying to stifle Lotus SmartSuite by threatening to raise the price of Windows to computer firms that included SmartSuite on their machines and that Microsoft's inclusion of its Outlook Express e-mail program with the Windows 98 operating system gives Microsoft an unfair advantage over Lotus's messaging program, Notes.
Lotus officials feel that these dealings affected the company's dominance in the market for spreadsheet software (through its Lotus 1-2-3) and for office suite software.
It also comes to light that Microsoft had sent a written note asking IBM to reduce shipments of its own OS/2 operating software along with a verbal note to eliminate it. This was in return for Microsoft offering discounts to IBM for its software products. Non-compliance was threatened with "repercussions".
It was found that Microsoft withheld its new Windows 95 software from IBM until 15 minutes before the product's official release while other, compliant manufacturers got the software weeks earlier. This allowed those companies to begin building computers around Windows while the delay meant a loss of millions of dollars for IBM. Besides, Microsoft charged IBM a higher price for its Windows software it charged others.
As part of the anti-trust litigation against Microsoft, an IBM employee testified that Microsoft had made a demand in March 1997 that IBM should drop Netscape from the software offered on its PCs. Microsoft had wanted IBM to drop non-Microsoft software and instead offer Microsoft products for web browsers, word processors and financial applications. (Browsers are software used for connecting to and accessing the Internet. Microsoft's Internet Explorer has faced competition from Netscape's Navigator).
The anti-trust case grew out of claims that Microsoft gave away its Internet Explorer browser, and later incorporated it into the Windows 98 operating system, in order to crush rival Netscape. This created problems since Microsoft was pushing its product unfairly with something as important as the operating system software in a computer. Ultimately Microsoft had to bend and make a few modifications.
The initial rounds of the browser battle were in favour of Netscape when the earlier versions of the product were released. But subsequently Netscape lost a bit of steam and was bought over by America OnLine.
US justice department lawyers revealed that Microsoft threatened to stop making Microsoft Office for Apple's Macintosh range of computers unless Apple made the Internet Explorer its preferred browser.
They say the company persuaded Intel Corp., the world's largest maker of computer chips, to give up on a new chip design that might have affected Windows. The lawyers also revealed that Microsoft threatened to withhold access to Windows 95 from Compaq Computer Corp.unless Compaq configured the desktop screen of its computers in accordance with Microsoft's specifications.
Meanwhile, the ongoing litigation has triggered a flurry of fresh lawsuits from Microsoft opponents. A small New York-based advertising company, Seastrom Associates Ltd, has legally accused Microsoft of abusing its software monopoly to overcharge for a computer upgrade to Windows 98.
District judge Mr Jackson has referred to Microsoft's own study and said that "... the company could have charged $49 for an upgrade to Windows 98" from Windows 95 but instead charged $89 because it was the "revenue-maximizing price".
Microsoft also faces ongoing lawsuits from software rival Caldera Inc., computer maker Sun Microsystems Inc., and the Blue Mountain e-greetings company.
Caldera alleges that Microsoft built technical glitches into its Windows software to prevent it from being compatible with Caldera's DR-DOS operating system. This trial is due in January 2000. Microsoft denies the charges.
Blue Mountain has alleged that Microsoft's beta version of Outlook Express 5.0 had filters that stopped its cards from reaching Outlook Express users. The company alleged that Microsoft took the action to stop anyone from competing with a similar service Microsoft offers on its MSN portal.
Sun Microsystems, the developer and licensor of Java technology, has alleged that Microsoft has violated its Java licensing agreement with Sun.
More litigation is likely since US laws allow for plaintiffs to sue for up to three times in damages per litigant. Lawsuits on behalf of thousands of people could seek millions or even billions of dollars in damages.
