Lazy Justice, Lotus No Match for Microsoft's Aggressive Tactics

STEWART ALSOP, a long-time observer of the personal computer industry, is editor-in-chief of San Mateo-based InfoWorld magazine and the founder and publisher of P.C. Letter

Doesn't it strike you as odd that the Justice Department and Microsoft Corp. are both appealing U.S. District Judge Stanley Sporkin's decision to set aside their consent decree?

I'm not talking about whether you believe that Microsoft is a rapacious, monopolistic marauder that uses unfair and anti-competitive tactics. I'm asking whether your image of the role of the federal government includes having the Justice Department standing next to a large, extremely profitable corporation in an appeal to a federal judge. It's been years since I lived in Washington, but I recall that there's a statue in front of the Justice Department building of a blind lady holding a set of scales.

It's almost as though Microsoft has managed to do to the Justice Department precisely what it did to Lotus Development Corp. Let me explain.

Lotus used to be the king of the spreadsheet business. It got that way because it introduced a first-class product called 1-2-3 in 1983 that defined the essence of spreadsheets for users of DOS-based computers and became the preferred and predominant product for people who used spreadsheets. The year before, Microsoft had introduced a spreadsheet called Multiplan, but its product failed to be competitive with Lotus 1-2-3.

Microsoft doesn't like to be beaten. So the Redmond, Wash.-based company launched a plan to develop a different spreadsheet--one that was better designed than Multiplan. At the same time, Microsoft devised a strategy for getting people to buy this new spreadsheet, called Excel, which involved introducing it first on the Macintosh (for which Lotus had not designed a version of 1-2-3) in 1986 and a year later on its own Windows operating system, which was not even an announced product when the plan was devised.

Microsoft's plan worked. In fact, it worked far better than you could have imagined, even if you were at Microsoft.

Lotus proceeded to do all the wrong things in the spreadsheet business. It did not make a version of 1-2-3 for the Macintosh. Instead it tried to create a different product, which wasn't what Macintosh users wanted. Then it ignored Windows, because it wanted to be nice to IBM and support its competing OS/2 operating system. Amazing as it might sound today, IBM was more important in 1987 than Microsoft. And even when Lotus did introduce a spreadsheet for Windows--more than four years after Microsoft's Windows version of Excel--the product was poorly designed and needed to be fixed.

Most important, the guy who runs Lotus, Jim Manzi, must have decided he was smarter than the guy who runs Microsoft, Bill Gates. Manzi set out to focus his company's resources not on the spreadsheets he was selling hundreds of millions of dollars' worth, but on a new business that ultimately became known as "groupware" and is centered around a product called Lotus Notes.

The result is that Microsoft now sells about $1 billion worth of spreadsheets a year and Cambridge, Mass.-based Lotus sells about $600 million worth. Microsoft is a $5-billion company and growing rapidly; Lotus is a $900-million company--and has been one for three years. Sales of Lotus Notes are rising fast, but the product still has not produced a profit after more than five years on the market.

You could say that Microsoft was so focused and such a challenge to Lotus that Lotus missed the boat by trying to prove it was smarter than Microsoft, rather than focusing on the customer. And that's what the Justice Department's reaction reminds me of.

The message I get from the reaction of Assistant Atty. Gen. Anne K. Bingaman and Atty. Gen. Janet Reno to Judge Sporkin's decision setting aside the consent decree is that they are angry at the judge and aren't about to let him get away with his antics. I don't hear that the Justice Department is concerned with justice (the product) or what is best for the American people (the customers). In fact, I even get the sense that Microsoft has been so aggressive in holding the Justice Department's feet to the fire that the people at Justice would rather stand up to a federal judge than to Microsoft.


When I look at the case from this point of view, I start to ask different questions. Why did the Justice Department conduct its initial review of Microsoft in secret? Indeed, why did it take government lawyers more than three years to conduct this secret investigation? Why was the Justice Department reluctant to fully disclose the details of its investigation to the judge when he was evaluating the decree? Now that the judge has taken what is widely recognized as an unprecedented action in setting aside the decree, why is the Justice Department acting defensively about its actions rather than putting its case forth aggressively?

I get the sense that the people at Justice and the people at Lotus are soul mates. Neither of them seem to understand who their customers are. Both of them seem as motivated by their public image as by their actual job performance. Personally, I don't think the Justice Department has been doing its job, whether that is to aggressively seek out and challenge instances of anti-competitive behavior or to protect the rights and interests of the country's major corporations.

If Justice doesn't do its job, Microsoft will win the same way it beat Lotus--by default.

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