Competitors shake heads at Microsoft

The Associated Press
Friday June 29, 2001

SAN JOSE — Three years after the government brought antitrust charges against Microsoft Corp., the competitors with the most to gain from the case find themselves shaking their fists at the software titan more than ever. 

The federal appeals court decision Microsoft cheered Thursday was largely expected by rivals – some already had been pushing for a second antitrust lawsuit being considered by state attorneys general. 

The more immediate issue for the high-tech world is the power Microsoft is wielding as it includes, or “bundles,” an increasing amount of software with its new operating system, Windows XP, and links more Web applications through its .NET and Hailstorm initiatives. 

“I think we’re dealing with the most vicious competitor of the last 30 years in technology, and they’re only getting stronger,” said Matthew Szulik, chief executive of Red Hat Inc., a North Carolina-based seller of software for open-source computing systems. “All the industry has ever wanted is a level playing field.” 

Two of Microsoft’s biggest competitors, Yahoo! Inc. and America Online Inc., had no comment. Sun Microsystems Inc. also did not immediately respond to the ruling. 

The decision is not expected to have any immediate affect on most rivals, since none has operated under the assumption that the breakup would be carried out. 

“We’ve been competing with Microsoft for five years and winning,” said Eric Liu, a spokesman for RealNetworks Inc., which makes Internet audio- and video-playing software.  

“We’ve never built our strategy around any legal or regulatory action.” 

Redmond, Wash.-based Microsoft says its strategies are aimed at making life easier for consumers and speeding up the development of the Web. But other companies say Microsoft’s real agenda is to insinuate itself into nearly everything on personal computers and the Internet. 

“Microsoft is always in a position to copy what you got, bundle it with Windows and give it away for nothing,” Oracle Corp. chief executive Larry Ellison said this week.  

“You have got to give them credit. They’ll keep bundling things with Windows and driving people out of business.” 

When U.S. District Judge Thomas Penfield Jackson ordered Microsoft to split into an operating system company and a separate software seller, some of the biggest winners figured to be AOL, Sun and Oracle, which have Internet-services plans of their own.  

It also appeared to be a victory for the Linux open-source operating system for PCs. 

Though the breakup was reversed and punishment of Microsoft was turned over to a different judge, competitors were pleased that the court confirmed an essential element of the case: that Microsoft illegally used its monopoly to gain an unfair advantage. 

Among the features being rolled into XP are “firewalls” and other anti-hacker programs.  

That puts the software giant in more direct competition with a whole new field of companies, including makers of Internet security hardware like SonicWALL Inc. of Sunnyvale. 

Raj Dhingra, SonicWALL’s senior vice president of worldwide marketing, doesn’t sound too scared. He said most businesses realize they need hardware like SonicWALL’s plugged into their networks to ensure security. 

However, he said many consumers might get a false sense of security from having firewall software in XP. If anything, the well-known and widely distributed Windows systems make fat targets for hackers, Dhingra said. Having security features in an operating system “does not equate to having full-fledged protection,” he said. 

RealNetworks has made similar claims that the individual features thrown in with Windows are not the best in their classes. 

Red Hat’s Szulik worries more about the products and ideas that he says may never come to fruition.  

Fewer and fewer people, he says, are willing to start a software company that can’t win distribution through Microsoft’s platforms. 

“I hear about this kind of stuff all the time,” said Mike Pettit, president of ProComp, a coalition of Microsoft opponents. “A company can’t get the first round of financing from anyone other than their relatives once they run into that roadblock. That’s frightening. ... (Microsoft has) just sucked all of the innovation from the industry.” 

Some venture capitalists, however, say Microsoft’s Internet initiatives are creating new opportunities for developers. 

“If there are people in the valley telling you that Microsoft has such a heavy hand that nothing can get out the door that’s competitive, that’s ludicrous,” said Chuck Hirsch, who once sold a startup he founded to Microsoft and now is a managing director at Madrona Venture Group in Seattle. 

“Microsoft is clearly a very strong and smart competitor,” he said. “However, even they, as great as they are across the board, can’t do everything. So there are opportunities.” 


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