Microsoft Loosens Grip on Desktops
Microsoft Corp. said it will make concessions and change its new Windows XP operating system to more easily accommodate services from technology rivals, bowing to an appeals court ruling that the company violated antitrust laws.
Microsoft also said computer makers may remove shortcuts to the company’s Internet Explorer Web browser.
The dominant maker of software for controlling personal computers had planned to require Compaq, Dell, Gateway and other PC makers to leave the opening desktop screens empty on Windows XP. The first menu of options that users would see also was restricted, favoring Microsoft’s Internet browser and other programs.
But Microsoft said Wednesday that the computer manufacturers could put icons of other technology companies on the opening screen and the menu, potentially making it easier for consumers to find non-Microsoft music and video players, messaging services and the No. 2 Web browser, Netscape.
“This is a proactive step by us to address specific violations found by the court,” said Microsoft spokesman Jim Cullinan.
Separately on Wednesday, Microsoft said results for its fourth quarter, which ended last month, will include an investment loss of $2.6 billion, mainly because of a $3.9-billion pretax charge related to losses on telecommunications and cable securities.
Last month the U.S. Court of Appeals for the District of Columbia Circuit overturned a lower court’s order to break up Microsoft. But the court also affirmed that Microsoft acted illegally to maintain its monopoly by forbidding computer makers from removing Internet Explorer from Windows. The court directed a new judge to decide how Microsoft should be punished.
Without a settlement among Microsoft, the Justice Department and the 18 states suing the software giant, some antitrust officials and competitors planned to seek a court ruling to block or modify Windows XP before its scheduled release Oct. 25.
Iowa Atty. Gen. Tom Miller said Microsoft’s concession is a small step without much practical significance. “It’s too little, too late,” Miller said. “The browser wars are over.”
And he challenged Microsoft’s claims that computer manufacturers will have flexibility about which icons to place on the desktop, saying he wanted to see the fine print in the Windows licensing agreements.
“If they were to take the products and throw it open and let everyone pick what kind of access provider they wanted, that would be important,” Miller said. “I don’t think that they’re doing that here.”
Legal experts also were skeptical. “I don’t know how that addressed the problem” of Microsoft’s misuse of its monopoly, said Herbert Hovenkamp, an antitrust expert at the University of Iowa law school. “The remedy is not just supposed to look back and say, ‘Don’t do this again.’ [It must] solve the problem of the monopolistic structure of the Windows market.”
Windows XP was not part of the antitrust lawsuit. The new operating system will include features offering instant messaging, a music and video player and software designed to ease Internet commerce.
Some Microsoft competitors pointed out that though new icons can be added, no Microsoft programs can be removed except the browser.
“In the wake of the court ruling, Microsoft is clearly scrambling,” said AOL Time Warner Inc. spokeswoman Kathy McKiernan. “But they still have a long way to go to address the anti-consumer, anti-competitive elements of Windows XP.”
Mike Pettit of ProComp, an alliance of Microsoft rivals, said it still is likely that a rival or the government will try for a court injunction against Windows XP.
“Somebody has to go back and fix the problems with the company’s products and not just do these cosmetic things,” Pettit said.
Analysts said Microsoft’s announcement is designed to increase the odds that the new operating system won’t be blocked by a court from shipping on time.
And industry executives said it was a signal of goodwill toward a possible settlement. “It’s a good-faith gesture,” said one computer-maker executive. “They’re not making any huge concessions in terms of the percentage of users who will see changes in their operating system.”
“We recognize that some provisions in our existing Windows licenses have been ruled improper by the court, so we are providing computer manufacturers greater flexibility,” Microsoft Chief Executive Steve Ballmer said.
Compaq said it was evaluating its options. Compaq could put symbols on the desktop for America Online, the most popular provider of access to the Internet, and for RealNetworks, which offers an audio and video player.
Ballmer said the company hopes to work with the government to resolve remaining issues.
While all sides have indicated a willingness to negotiate a settlement, Connecticut Atty. Gen. Dick Blumenthal said, “There are currently no formal settlement negotiations.”
And the Justice Department wouldn’t speak about negotiations or Microsoft’s changes to Windows XP.
The state attorneys general said the new changes fell well short of the remedies they will seek in court or in talks. They want a new breakup order or fundamentally different rules for the way Microsoft does business. Analyst Rob Enderle of Giga Information Group said the changes increase the chance that Windows XP will ship on time to about 70% from less than 50%.
Cullinan said no more major changes to Windows are planned as a result of the appeals court ruling, although he said some could emerge in a settlement.
News of Microsoft’s strong fourth-quarter sales also helped boost its shares $2.02 to $66.50 on Wednesday in Nasdaq trading.
In the quarter, Microsoft’s sales were $6.5 billion to $6.6 billion, beating forecasts, while profit from operations was in line with expectations, the company said.
In April, Microsoft predicted quarterly profit from operations of 41 cents or 42 cents a share. Including the charge, profit will be 1 cent per share for the quarter, Microsoft said.
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Times wire services were used in compiling this report.
