Analyst: MS 'Cloning' Could Damage Industry

FLORENCE, ITALY (04/04/2000) - Although the initial reaction from the European IT industry on the U.S. district court ruling on Microsoft Corp. antitrust violations has essentially been enthusiastic, a Gartner Group Inc. analyst warned today that a forced "cloning" of Microsoft could damage the industry.

"There is a huge industry out there that depends on Windows, and if Microsoft will have to clone the company, that will hurt the industry," Gartner analyst Tom Bittman said today at the market research company's Spring Symposium here.

One possible remedy that may be imposed on Microsoft is a forced cloning, which is different than a breakup of the company, Bittman noted. While a breakup would divide Microsoft into separate, different companies, a cloning would force the company to split into at least three identical companies, he said.

A breakup would be relatively straightforward, Bittman said. Microsoft has already divided the company into three very distinct groups, which makes a potential breakup relatively easy, Bittman said. A few months ago, Microsoft had a "confusing organization," he said. But now, facing a possible forced breakup of the company as a result of the U.S. antitrust case, they have cleaned up the organization and created three very different groups.

First, there is the platforms and developers group, consisting of the Windows platforms and the SQL Server database. Then there is the business productivity group, which includes the Office andBack Office packages, and lastly there is the consumer group, including all the Internet-related businesses.

"We believe that if Microsoft will be forced to break up the company, it will do it in these three groups, and this won't hurt them at all," Bittman said.

But a cloning would hurt both Microsoft and the industry, according to Bittman.

"A potential cloning would cripple all three of the clones," he said, stressing that there simply isn't enough intellectual capital in the company to be shared equally by three or more competing companies. To build up three new Microsofts, each competing with similar intellectual property, would take a long time, he said. In the meantime, all those companies that are dependent on Microsoft's products would be hurt, he said.

"Just look at what happened when Windows 2000 was delayed," he said. It hurt a lot of OEMs, resellers, retailers, vendors such as Compaq Computer Corp. and Dell Computer Corp., just to name a few.

When asked how a possible breakup of Microsoft would affect the Internet services industry, Bittman said Microsoft would probably create its own "dot-com" startup company, which would be very competitive right from the start.

"It would be logical for Microsoft to spin off the consumer group into a dot-com company," Bittman said. This new company would have an extremely advantageous position from the beginning, since Microsoft now has US$21 billion in equity investments.

The GartnerGroup Spring Symposium continues through Wednesday here in Florence, Italy.

GartnerGroup, in Stamford, Connecticut, can be reached at +1-203-316-1244 or on the Web on http://www.gartner.com/.

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