Observers: DOJ should focus on business tactics, not browser-OS integration

The US Department of Justice's court case against Microsoft would be bolstered by focusing on Microsoft's alleged bullying tactics and not the integration of Windows 95 with Internet Explorer, observers say. Analysts regard Microsoft's response to the DOJ's petition on the browser issue as robust, but some say the company may have more trouble fending off an examination of its business practices. One says he even regards 'hardball tactics' as 'a Microsoft core competence.'

The US Department of Justice's court case against Microsoft would be bolstered by focusing on Microsoft's alleged bullying tactics and not the integration of Windows 95 with Internet Explorer, observers say.

Microsoft filed its initial response today to the DOJ's petition seeking to hold Microsoft in contempt for violating a 1995 antitrust consent decree barring Microsoft from engaging in anticompetitive licensing practices. The DOJ asked the U.S. District Court for the District of Columbia last week to charge Microsoft US$1 million daily for requiring PC manufacturers to license and distribute Internet Explorer as a condition of licensing Windows 95.

In its response, Microsoft said that not only did the DOJ know at the time it signed the consent decree that the company was integrating browser functionality with its operating system, but a provision in their agreement gives Microsoft explicit permission to do so. Offering Internet Explorer with Windows 95 is akin to adding new features and functionality to the operating system, Microsoft claimed in its court documents. "The inclusion of Internet-related technologies in Windows 95 is simply a step in the process of rapid innovation that has characterised the software industry since its inception," the documents said.

And some analysts seem to agree.

"It looks like a solid response," says Rob Enderle of Giga Information Group. "The difficulty DOJ had in rushing this through, as clearly was done, was they didn't have a strong enough foundation over their action. Microsoft is, in their response, pointing out those weaknesses."

Dwight Davis, editorial director of Windows Watcher newsletter in Redmond, Washington, says he feels the DOJ has a case, but doesn't think Microsoft should be prevented from integrating its operating system and browser.

"My take on it is that, as of today, the browser is a separate product from Windows and I think Microsoft was wrong to force OEMs (original equipment manufacturers) to include the browser with their Windows 95 products," he says. "On the other hand, I don't think the DOJ should attempt to prevent Microsoft from integrating IE with Windows 98 as Microsoft intends to do.

"In a way, I think the DOJ has a good case in the very narrow confines of the suit that they brought, which is to say that as the world stands today, Microsoft probably stepped over the line," Davis says.

However, Jerry Michalski, managing editor of Release 1.0 newsletter in New York, says the DOJ's footing is shaky with regard to whether a court will find that technically Windows 95 and Internet Explorer are separate products. But the court could more easily judge whether Microsoft was violating the consent decree with regard to its alleged pressure tactics, he says.

"I've heard many, many second-hand reports of extreme hardball tactics that have knocked competitors out of markets, stalled products and forced vendors to buy Microsoft products even when they weren't shipping Microsoft products," Michalski says. "I think this is a Microsoft core competence and there's likely some fire here."

Michalski acknowledges that the reports of Microsoft bullying were second-hand, but adds, "I've heard too many of these kinds of stories for them not to be true."

Details of Microsoft's tactics, including allegedly coercing OEMs to remove competing browser icons in lieu of Internet Explorer, were publicly revealed in documents the DOJ filed as part of its petition last week. The documents contain texts of depositions given by employees at Compaq, Micron and Gateway 2000.

In addition, a Wall Street Journal article details specific conversations Microsoft officials allegedly had with companies who chose to use or market competing technology.

For instance, Steve Ballmer, Microsoft's executive vice president of sales and service, reportedly told former Pacific Bell CEO David Dorman: "You're either a friend or a foe, and you're an enemy now," for choosing Netscape's Web software over Microsoft's for a new PacBell Internet Service, the article said.

Mitchell Kertzman, CEO of Sybase, compared a call he got from a Microsoft official over Sybase marketing of a competing technology to a threat from the mafia, according to the WSJ.

And a consultant for Thailand's National Science and Development Agency said he received at least 10 e-mails from Microsoft people complaining about his choosing Netscape software over Microsoft software, the report said.

"We, unfortunately, have been told many things in confidence" about Microsoft pressuring other companies, says Ed Black, president and CEO of the Computer and Communications Industry Association (CCIA), a lobbying group that represents a cross-section of software and hardware firms, of which Microsoft is not a member.

"But those reports clearly confirm the sense we have of the kind of heavy handed and even abusive practices that Microsoft has used," Black says.

Microsoft can get away with things other companies can't because it's a monopoly, he says. Companies don't publicly complain about Microsoft out of fear of retribution, Black adds.

For example, after details of a Micron official's deposition were reported publicly last week, the chairman and CEO of Micron released a statement saying that the company had no complaints with Microsoft and preferred its browser to all others.

"Both Micron and Compaq have backpedaled heavily," says Giga's Enderle. "You can be put at a big competitive disadvantage if you go to war with Microsoft."

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