Ruling gives green light to MS, say analysts

Scott Hillis

SEATTLE: Full speed ahead! So analysts said of Microsoft Corp. after the US

appeals court on Thursday put aside an earlier ruling that could have blocked

the software giant's rollout of key upcoming products. "It's generally

positive, in the short term because it lets the company proceed, for the moment,

with its product strategies, which is pretty important," said Scott

McAdams, president of Seattle brokerage McAdams Wright Ragen.

Though the software giant won a reprieve from the US Appeals Court it upheld

a finding that it broke antitrust laws to keep a grip on its Windows operating

system monopoly. This means the Washington-based firm could face a tortuous

legal future, though it is free for the moment to stuff its products with new

features that are will turn up the heat on its rivals.

‘Moving ahead’



Microsoft, the world's top software maker, plans to launch in October a
radical redesign of the operating system called Windows XP. It is also steaming

ahead with a new lineup of Web-based subscription services called HailStorm, the

first part of its sweeping .NET strategy to weave the Internet into all of its

products.

Windows XP is packed with controversial features that turn the software into

a multimedia platform combining music, video, the Internet and instant messaging

- a far cry from its original role to manage the internal workings of a PC.

"We are moving ahead with Windows XP as a product that has the features

that consumers want," Microsoft Chairman Bill Gates said. "There's

nothing in today's ruling that changes our plan for our future products,

including Windows XP.

Had the appeals decision gone against it, Microsoft would have been broken

into two companies and its ability to offer an all-in-one product, assuredly

crushed. "Microsoft will move forward with the bundling of these new

products," said Neil MacDonald, director of research for technology

consulting firm Gartner Group. Bundling refers to the inclusion of features

previously offered separately.

"I think Microsoft can proceed ahead with renewed vigor," MacDonald

said. It was the alleged bundling of Microsoft's Web browser into Windows, which

runs more than 90 per cent of PCs that was at the heart of the US government's

antitrust case.

"Windows XP is going to be more interesting because one of the things

the court does say is that the bundling of a product isn't, by its nature, a bad

thing," said Carl Howe, analyst at Forrester Research. Gates said he was

pleased with the appeals ruling, which he said would give Microsoft good

standing in any retrial. He also said Microsoft was ready to try to negotiate a

settlement.

Counting on web services



As the breakneck pace of PC sales grinds to a halt, thus limiting sales of
software like Windows, Microsoft has stepped up its campaign to transform itself

into a Web-based company capable of dominating the next generation of the

Internet.

The .NET strategy aims to turn Windows into a launching pad for myriad

Internet services. The first .NET project, HailStorm, will incorporate instant

messaging, Web-based e-mail, and a virtual wallet with credit card and password

data - all of which are tied somehow to Windows XP.

"With HailStorm and .NET it is using the same business model it used to

establish Windows to establish .NET as Microsoft's vision of the Internet,"

said Chris Le Tocq, a software industry analyst with Guernsey Research. With

Microsoft seemingly temporarily set free of its legal chains, analysts said

competitors - which range from Internet giant AOL Time Warner to IBM to audio

and video software supplier RealNetworks Inc. - must join forces.

"If they (Microsoft) are not constrained somehow, it'll be very

difficult for competitors in the next phase of computing," said Tom Lenard,

vice president of research of the Progress & Freedom Foundation, a

Washington, D.C. think tank on technology and the economy.

Still, legal experts said Microsoft could yet be forced to separate key

features if a lower court rules against it in a new trial over claims that the

tying is illegal. "The door remains open on a tying claim and frankly the

door remains open on a break-up," said Andy Gavil, professor of antitrust

law at Howard University in Washington DC.

(C) Reuters Limited 2001.