Decision May Aid Microsoft's Rivals

TIMES STAFF WRITERS

Microsoft Corp. competitors and industry experts said Thursday's antitrust court ruling will have little immediate impact on the technology industry's competitive landscape.

But it opens the door to stiff controls that may stifle moves by Microsoft to extend its Windows operating system monopoly to the Internet, they said. And that could boost the prospects of key competitors, such as AOL Time Warner Inc., computer workstation giant Sun Microsystems Inc. and software database leader Oracle Systems Corp.

Few competitors expected the appeals court to reaffirm the lower court's order that Microsoft be broken up. But they did find solace in some key findings in Thursday's ruling.

"This is the second court that has ruled that Microsoft has a monopoly in desktop [computer] operating systems and that they have used that monopoly illegally," said Mitchell Kertzman, chief executive of Liberate Technologies and a vocal critic of Microsoft. The ruling could lead to curbs on the software giant's "aggressive [efforts] to extend their desktop monopoly to the Internet," he said.

"Microsoft's monopoly has increased," said Jonathan Schwartz, the top corporate strategist at rival Sun Microsystems Inc. Netscape Communications, formerly an independent company and now a division of AOL Time Warner, played a major role in the antitrust drama, and its former CEO said he hopes the government keeps the heat on Microsoft.

"I hope that the government and the judge to which this case was remanded will keep [Microsoft's illegal actions] foremost in their minds when deciding how Microsoft's pattern of anti-competitive behavior and abuse of monopoly power will affect the future of technology and innovation," said James Barksdale, Netscape's former chief executive and a witness in the original antitrust trial.

Eventual court-imposed restrictions could benefit companies that have accused Microsoft of introducing changes in its software products in order to render them incompatible with competing products.

"If anything like anti-competitive behavior or predatory pricing [comes to light], Microsoft will be guilty until proven innocent," said Rob Enderle, an analyst with Giga Information Group.

Sun issued a statement urging strong action when the lower court reconsiders the case.

"Sun supports measures that will. . . protect Internet technologies from becoming the proprietary preserve of any one company--up to and including structural remedies, which the Appellate Court has not ruled out," the company said in a statement.

Oracle declined to comment.

RealNetworks Inc., producer of popular media player software that competes with a similar Microsoft product, viewed Thursday's decision with optimism.

By substantially upholding the lower court's findings of fact, the appeals court "lays down some clear rules of the road," company Vice President Eric Liu said. "While we've never built our strategy around expectations of any legal action . . . today's ruling [is] a positive development for consumers and the industry."

One threat to Microsoft in recent years has been the rise of the Linux operating system. Linux has had little impact on personal computers but has made serious inroads against Windows in the market for powerful server computers.

Eric Raymond, a spokesman for the Linux community and its "open source software"--created by a multitude of volunteer programmers and made available free over the Internet--reacted to the court ruling with a yawn. "We didn't have a whole lot of confidence in the government's intentions or ability to break up Microsoft in the first place," he said.

Still, the ruling will lead to or benefit many private antitrust cases, Raymond said. "One of the reasons you don't see Microsoft executives cheering is they're looking down the barrel of a gun of one or two dozen lawsuits," he said.

Charles King, an analyst with Zona Research, said regardless of Thursday's ruling, Linux will rise or fall on its merits.

That sentiment reflects a widely shared belief that whatever the final outcome of the protracted antitrust battle, Microsoft will remain a ferocious competitor.

"I don't think any of us were waiting for the court to make us more competitive--anybody who does that is dead meat," said Kertzman, whose company competes with Microsoft selling software for interactive TV.

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Microsoft's Cash Hoard

Microsoft has accumulated an enormous amount of cash it can draw on for acquisitions or research, especially compared with some of its main rivals:

*

Cash, cash equivalents and short-term investments as of the most recent quarter reported, in billions

*

Microsoft: $30.01

Oracle: $4.99

EMC: $2.41

Sun Microsystems: $2.23

AOL Time Warner: $1.27

Source: Company financial reports

Researched by NONA YATES/Los Angeles Times

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