William Neukom, the head of Microsoft's legal team, put a brave face on the company's court-room woes yesterday. "This is an especially busy, especially stimulating time for us on the campus," he said. "These couldn't be more exciting times in terms of development."
In calls to analysts and journalists, senior executives stressed that yesterday's judgment was just one more step in a long and painful legal road while the rest of the business was on the fast track to success. Company president Bill Gates urged investors to look to the spring conference in which the world's biggest software company intends to announce a new five-year plan to bring Windows, its dominant software programme, closer to the internet. "For us, the big thing is going to be Forum 2000," he said. By looking to the future, however, the company confirmed the impression that the next few months will not be very exciting at all.
Investors were more than conscious of the fact that by the time Forum 2000 opens, possibly at the end of May, the company may be facing a legal decision that it should be broken up, on top of private lawsuits threatening to cost hundreds of billions dollars.
Microsoft believes that the future shape of the software industry will make the bundling of its internet browser to Win dows look like old hat. Most of the excitement seen among campus techies by Mr Neukom is partly generated by them trying to add more services and functions to Windows, the software used on more than 90% of the world's computers.
Government forces saw the use of the "software is different" argument as just an updated way for a company to abuse its stranglehold over a market. They see Microsoft's threats to computer manufacturers and rivals alike as the same as any other traditional company breaking anti-monopolies laws designed to protect consumers.
In spite of this gulf between the two sides, they had worked on about 20 drafts of a possible consent decree. Yet they failed to agree on an effective remedy notwithstanding signs that the government was willing to accept something short of a break-up of the company.
Microsoft blamed divisions between the justice department and the 19 US states party to the anti-Microsoft action for the failure to bring about an agreement. The states are widely believed to have pushed for a break-up.
Mr Neukom said yesterday that such a remedy "makes no sense whatsoever as a way of dealing with the harm, even if you find that there is such a harm".
Government lawyers are understood to have wanted an effective ban on tying new products as well as uniform pricing for Windows. They did not trust Micro soft, which has previously broken consent decrees. Richard Blumenthal, one of the most vociferous attorneys general on the states' side, said yesterday that the government forces were united and that they would use yesterday's conclusions of law to guide their calls for an effective remedy.
"We have always said that remedies have to be fundamental and far-reaching in order to prevent this kind of behaviour happening again," he said.
Joel Klein, head of the justice department's anti-trust division, has said that the courts rather than government agencies should define the law on monopolies.
Such definitions take time, however. Yesterday's ruling will be followed by a decision on an effective punishment in the next couple of months, An appeal could take nine to 12 months, according to Mr Neukom. The company is to rest part of its case on an earlier court of appeals decision which upheld its ability to tie its internet browser to Windows 95. It is to criticise Judge Jackson's handling of the case and use of inadmissible evidence, a position which has won the support of few legal experts.
Several analysts, worried about the effect on share prices of continued legal shenanigans, yesterday followed Microsoft in advising investors to look to the future yesterday. Andrew Roskill, industry analyst at Warburg Dillon Read, believes that the changing nature of the software sector, with everyone supplying internet-dependent products, will make today's arguments about remedies look obsolete. "In another year, this whole case will seem even more ridiculously moot," he said.
Analyst Henry Blodget, of Merill Lynch, said that a break-up would make the company more effective. He believes that Microsoft's consumer-oriented internet services should be separated from its corporate software group. A web-focused division could then merge with a pure internet company to create a competitor to America Online Time Warner. "They are fighting a war on two fronts," he said.
1993 Justice Department begins anti-trust inquiry into whether Windows has monopoly in PC market.
1994 Microsoft agrees to stop punishing PC makers using rival software. 1997 Microsoft launches Internet Explorer to compete with rivals such as Netscape . It is sued for allegedly violating 1994 agreement by forcing manufacturers to promote Explorer. Judge Jackson issues preliminary injunction to stop bundling of Explorer with Windows. Overruled on appeal.
1998 Department of Justice and 20 US states sue for breach of anti-trust law. Texas later drops out. Trial begins on October 19. In November America Online buys Netscape for $10bn.
1999 Judge Jackson's findings of fact are sharply critical of Microsoft. He appoints an independent mediator.
2000 Settlement talks fail on April 1.
