FTC Has Widened Its Probe, Microsoft Says

TIMES STAFF WRITER

Microsoft Corp., the world's largest publisher of personal computer software, said Friday that the Federal Trade Commission has broadened the scope of its nearly year-long investigation into the company's business practices.

The newly expanded investigation covers virtually every aspect of the Redmond, Wash.-based company's operations. In a letter received Thursday by Microsoft, the FTC said its investigation is aimed at determining whether Microsoft has monopolized, or has attempted to monopolize, the markets for personal computer operating systems, software and peripherals.

The FTC declined to comment Friday. But Microsoft President Michael Hallman said he was "totally disappointed, but not totally surprised," that the FTC had widened its probe.

"We're doing the right thing for our customers and for the industry, and we're doing it legally," Hallman said. "There is nothing bad about being big and successful unless you don't act legally and ethically. We think we do."

Investors responded to the news by sending Microsoft stock down $3.75 per share to close at $107.25 in over-the-counter trading.

The FTC investigation, first revealed last month, has sparked wide-ranging reaction within the personal computer industry.

Several competitors, who have chafed under Microsoft's repeated successes and rapid growth, were openly pleased, claiming that the company has unfairly taken advantage of its size and stomped on smaller rivals. But others in the industry have said Microsoft is the victim of "sour grapes" complaints from competitors that can't keep pace with the aggressive giant.

Industry sources said Borland International, a Silicon Valley software publisher, and Lotus Development Corp., the nation's second-largest software publisher, may have sparked the FTC probe.

Particularly upsetting to many smaller software publishers is Microsoft's strategy of providing both the operating system software, which controls the computer's basic operations, as well as application programs, such as word processing and spreadsheet packages. Critics argue that because Microsoft controls the operating system software, it has an unfair advantage in developing application programs that must work with the operating system.

Last month, Microsoft acknowledged that the FTC had begun investigating complaints. However, at that time, Microsoft said the FTC was investigating a joint software strategy with International Business Machines announced at a computer trade show in Las Vegas in November, 1989.

Friday's announcement confirms widespread rumors throughout the personal computer industry that the investigation was broader than Microsoft had initially revealed. However, Microsoft said Friday that it was only notified of the enlarged scope of the probe Thursday.

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