Helping Microsoft may not be an easy undertaking

Despite Microsoft Corp.’s recent warning of bad financial times ahead, the company’s market share in PC operating systems and servers may be expanding, according to new research data from IDC.

The data may be used by the U.S. government to underscore its point that Microsoft – despite whatever financial problems it now faces – continues to be a monopoly, said legal experts.

“Microsoft is not losing ground,” said Dan Kusnetzky, an analyst at IDC in Framingham, Mass.

Microsoft recently warned that profits wouldn’t meet expectations for the year-end quarter because of an economic slowdown. But market data due to be released later this month will show a slight increase in the company’s 87 per cent market share in operating systems, reported in 2000, as well as an increase over its 38 per cent of the server market, said Kusnetzky. He credited the success of Microsoft applications for the increase.

The falloff in PC sales “may reduce the value of Microsoft’s monopoly but not the monopoly itself,” said Stephen D. Houck, former lead trial counsel for the 19 states involved in the case against Microsoft and now an attorney at Reboul, MacMurray, Hewitt, Maynard & Kristol in New York.

At press time, the government was scheduled, during the week of January 3, to file its brief asking the U.S. District Court of Appeals not to overturn trial Judge Thomas Penfield Jackson’s ruling last year that the company broke antitrust laws. The ruling called for a breakup of the company, separating its operating systems business from its other lines of business.

Microsoft disputes the government’s claim that it is a monopoly and says Windows is being challenged by a variety of operating systems, such as thin clients and Internet appliances. In its brief to the appeals court in November, the company also denied any wrongdoing.

A potential wild card for this case is the impact of the incoming Bush administration. Through appointments at the U.S. Department of Justice (DOJ), particularly in its antitrust division, the new administration could ease the hard-line tactics against the company and be more open to settlement, say legal experts. But some end users hope that doesn’t become the case.

Tim Fake, IT director at Lancaster Newspapers Inc. in Lancaster, Pa., said he doesn’t believe Microsoft has done much wrong and that he is supportive of the company. But the Bush administration “should let the legal system run its course. I’m not sure it’s that important, where the presidency has to be involved.”

Ron Wells, information systems director at Carolina Turkeys Inc. in Mount Olive, N.C., said he doubts that the new administration will intervene. “I just think they have bigger priorities,” he said.

In any event, it won’t be easy for the Bush administration to influence this case. First, the pace of the appeals case is moving faster than any new DOJ appointments. Second, the Bush DOJ appointments have to be confirmed, and that would mean testifying before Senate Judiciary Committee Chairman Orrin Hatch (R-Utah), who has expressed repeated concern about Microsoft’s practices. Third, the case also involves 19 states that may continue to pursue it, no matter what the White House does.

Helping out Microsoft at this point may carry with it “a heavy political cost,” said William Kovacic, a law professor at George Washington University in Washington. He said he believes George W. Bush’s best course would be to “stand behind the principal of the rule of law” and let the appeals process proceed.