Microsoft Faces New Allegation as It Battles Back
Microsoft Corp. began to fight back Monday against a Justice Department proposal to split it in two, only to face a potentially explosive new allegation that the software giant continues to use its Windows monopoly to muscle into new markets.
The federal government and 17 states accused Microsoft of doctoring the Windows 2000 operating system, which is aimed at large corporate servers and Internet sites, to prevent competitors from taking advantage of some new functions.
Documents released late Friday include reference to an e-mail from Microsoft co-founder and Chairman Bill Gates that allegedly directs employees to redesign software to harm competitors who make the Palm hand-held computing devices.
Angry Microsoft executives dismissed the filing as the latest example of the overzealous tactics used by government enforcers. Company spokesman Jim Cullinan called the government’s latest evidence “random and lame support for its overreaching remedy proposal.”
Referring to the Gates e-mail, Cullinan said: “Once again, the government is trying to take one line out of an e-mail on a separate subject and twist it around like a pretzel to make it sound different. They are wrong and have mischaracterized this completely.”
Microsoft launched its own counterattack, running full-page ads in newspapers across the country and posting a letter to customers, partners and shareholders on its Web site, saying that the government’s plan is a signal that companies that are too successful will be punished harshly.
Microsoft’s reactions followed a government proposal Friday to split the software maker into two competing companies: one for Microsoft’s Windows operating-system software and the other for its Office software and other applications as well as consumer and Internet businesses.
U.S. District Judge Thomas Penfield Jackson, who ruled April 3 that Microsoft violated antitrust laws, must consider whether to accept the government’s new evidence as part of its reasoning for breaking up the company. Microsoft plans to submit its proposed remedy May 10.
In its recommendations to Jackson, the government cited evidence that Microsoft is creating Windows software that works well only with Windows 2000, its new server software, which was released Feb. 17. Windows 2000 faces stiff competition from Sun Microsystems, IBM and Linux operating systems, among others.
Rebecca Henderson, a Massachusetts Institute of Technology professor and one of the government’s expert witnesses against Microsoft, said that Windows 2000 “offers a significant number of functions that can only be implemented if the consumer is using a server running [Windows 2000].”
Without the Microsoft server, she said, users would be unable to access such features as security, the ability to retain user-specific settings, some applications and a set of network resources.
“Microsoft has the incentive and the ability to take anti-competitive actions now or in the future that would greatly reduce the possibility that new technologies will develop into potential platform threats,” Henderson said.
Microsoft’s Cullinan said Windows 2000 has been on the marketplace for nearly three months and the company has received no complaints about the operability between it and other software.
“It’s not in Microsoft’s best interest nor our customers’ to have anything other than a seamless interoperability between Windows 2000 and any software product, competing or otherwise,” Cullinan said.
The government accuses Microsoft of flexing its monopoly muscle in new markets such as hand-held devices, where its Pocket PC software competes with the popular Palm.
The government cited a July 11, 1999, e-mail from Gates that “indicated a willingness to change the details of its Office applications to favor devices that run Windows operating systems, even if doing so disadvantages its customers who now rely on the Palm Pilot.”
The e-mail was placed under court seal at Microsoft’s request, but the government made two references to it in paperwork filed late Friday. Company officials dismiss the government’s characterization of the e-mail as “completely inaccurate.” They note that the company has received no complaints about Palm products not working smoothly with Windows or its Office applications.
