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The Pulpit
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Weekly Column

Justice is Blind: Why Microsoft Might Actually Be Relieved (Even Thrilled) With Judge Jackson's Order to Split the Company in Two

Status: [CLOSED]
By Robert X. Cringely

I'm in London this week shooting interviews for my next show on PBS, but that didn't stop CNBC from tracking me down when Judge Jackson ruled that Microsoft should be cut in two. Shortly after midnight my time, I found myself facing by satellite the disembodied voice of Geraldo Rivera mispronouncing my name. In this version of the simplified world of television, it was my job to represent Joe computer user. How does the order affect those of us who are just users of computers?

The simple answer is that it won't affect us much at all, given Microsoft's expected appeal and the likelihood that most maybe all of Judge Jackson's order will be stayed for a year or two. But this is the answer I've written time and time again, and the same answer you'd get from all the other techno gadflies. Competitive to the core, I wracked my brain for some new way to add value to this old and stale discussion. Then it came to me. In a flash, I came to have a whole new understanding of the case and its implications as lots of little pieces of information began to fall into place.

I'm no conspiracy theorist, and I'm not offering a conspiracy theory here. I'm not one of those kooks who sees Bill Gates trying to control the world (OWN the world, yes, but not control it). But I DO see a pattern of behavior here that, while probably accidental, is still very interesting and insidious. It begins with Microsoft's behavior in the trial, which was sophomoric and stupid. Microsoft's lawyers were incredibly dopey and were humiliated consistently by the Department of Justice. At the time, I chalked this up to typical Microsoft arrogance and immaturity. The kids in Redmond live in a twisted fantasy world, so why couldn't their lawyers live there, too?

Not that the Department of Justice lawyers were that great, either. They were certainly better arguers than Microsoft's team, but they sure didn't understand much about how the software business works. Just look at how they tried to build a business case for their proposed remedy in this case that splitting Microsoft in two would make Microsoft products more innovative, etc. It sounded like a pre-IPO road show. This was supposed to be punishment, remember. Where's the part where Bill Gates is given a wedgie in public?

Then in the course of doing interviews for my next show, I stumbled across a consultant to Microsoft's legal team. Our interview had nothing at all to do with Microsoft, but the subject came up as we waited for airplanes to fly over, jack hammers to stop hammering, and producers to return from the bathroom. This guy had been hired to help prepare Microsoft's appeal and he was absolutely certain that Judge Jackson's decision would be overturned. And it wasn't just a matter of the Court of Appeals being more conservative than Judge Jackson or of that court's having already overturned two of Jackson's previous orders. This guy felt Microsoft could actually win on the facts of the case.

Keep in mind here that the way such appeals are handled is by the appeals court, which works from the written record of the original trial and from new briefs filed by both sides. This isn't a new trial, but a reexamination of the old trial. And Microsoft's expert, who I found to be a very sharp and credible guy, swore up and down that Judge Jackson had made many legal mistakes that would lead to the judgement being easily overturned.

Whether this is true or not, my reading of the case doesn't show much of an effort on Microsoft's part to elucidate these errors to Judge Jackson. Maybe it was a matter of Microsoft believing that an adverse ruling from Jackson was inevitable. Maybe, given an inevitable adverse ruling, Microsoft didn't want to tip its hand concerning its appeal brief by using those arguments too early. Who knows? For whatever reason, Microsoft evidently thinks it has a trump card or two to play, and has been keeping those cards hidden awaiting the appeal.

Why? This is what didn't make sense to me. Why was Microsoft so willing to look stupid that it almost didn't defend itself? Remember, this outfit is run by the poker-playing son of a corporate lawyer. Why didn't Microsoft do a better job of defending itself?

Which brings me back to Geraldo and the question of how consumers were hurt by Microsoft. David Boyes did a good job of showing how Netscape was hurt by Microsoft, but not how you and I were hurt by Microsoft. And this is essential to the case, since monopolies, themselves, aren't illegal, just monopolies that abuse consumers. Microsoft could point to lower prices, more features, higher performance, etc., etc., and the government didn't do a very good job of refuting these claims. They made us feel sorry for Jim Barksdale of Netscape, but not for ourselves as Microsoft customers. Barksdale can take care of himself; it's the job of the government to take care of the rest of us.

So what could I say to Geraldo? How did Microsoft harm consumers, if at all?

Of course, Microsoft has done things to harm consumers. I've written about many of these in the past, but in a moment I'll single-out the one I explained to Geraldo. My sudden insight was that Microsoft just might be grateful for the Department of Justice's case and maybe even for Judge Jackson's ruling. This is based on the simple idea that in choosing to argue the case as it did, the DoJ may have missed even worse behavior on Microsoft's part. It's like being pulled over for speeding and the cop never finding the dead body in your trunk.

If Microsoft's expert is correct and Judge Jackson's order is likely to fall, that also means the DoJ will go away for a few years to lick its wounds and pout. This would give Microsoft a clear field to "innovate" a few tens of billions more out of the public and its competitors. But in order for this to happen with the greatest impact, Microsoft first has to lose the case then crush the DoJ on appeal. That has far more impact on the Feds than pointing out the legal errors earlier in the case. Such behavior might have sent the DoJ back in to find all the real smoking guns they missed. (Trust me, there are plenty.) The bit of theater we are currently experiencing makes Microsoft appear the underdog, which is the way Bill wants it.

The irony here is that Microsoft can say things like, "We expect to win on appeal," and "We will abide by any final decision of the court," and really mean them. He DOES feel wronged, though I am sure he also feels relieved. And so does the market, which has started sending Microsoft's stock back up. In fact, there is little downside of this case for Microsoft. Cheap stock means Microsoft can use some cash to buy back shares cheaply to fund its stock option program.

So how has Microsoft abused consumers in a way that is blatant, yet was somehow missed by the Department of Justice? The example I gave Geraldo was the technical precision with which Microsoft has taken control of the PC hardware standard. Yes, hardware. IBM used to control it, then Intel, but now it's all Microsoft. Here's how they do it, and why.

Microsoft has a testing program for hardware called the Windows Hardware Quality Lab (WHQL). The lab tests hardware and passing the test allows vendors to put on their boxes a sticker that says "Designed for Windows 98," or Windows 2000. Why would a hardware peripheral company care about having a Windows logo on their sound card or CD-ROM drive? Because system OEMs get a discount and other sweetners from Microsoft if their PCs pass the logo certification. And the best way to certify a whole system is to build it from parts that are already certified. So any peripheral manufacturer who wants to sell parts for Windows PCs has to design their hardware according to Microsoft's latest Hardware Design Guide, which you can find for sale at the better specialty computer booksellers.

According to hardware developers who want to keep their jobs and businesses, and who therefore choose to keep their names the heck out of this column, Microsoft uses hardware certification as a part of their marketing strategy. Redmond deliberately sets unreasonable standards for new hardware that has the result of requiring customers to purchase new Windows operating system versions where they might otherwise not have had to.

Have you noticed how each version of Windows seems to require more memory to do essentially the same functions as the previous version? In part, this is because the Microsoft Hardware Design Guide says that's the way it has to be. So we add more DRAM or, more likely, we buy a new computer that much sooner than we really need to. Microsoft makes most of its profits from OEM sales, so forcing us to buy a new PC every two years instead of every three costs us all money without giving us much in return. Now that's "innovation," and it's just one example of what the Department of Justice missed in its case.

No wonder Microsoft's stock price went up.

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