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New woes for Microsoft?
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April 6, 1998: 8:14 a.m. ET
Regulators may be ready to press broader, stronger antitrust charges
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NEW YORK (CNNfn) - Justice Department officials have apparently obtained sensitive internal Microsoft Corp. documents they think would support a new antitrust case against the Redmond, Wash.-based software leviathan, the Wall Street Journal reported Monday.
A new case could come before the end of the month, the Wall Street Journal reported Monday. Investigators are reportedly rushing to complete their work before the mid-May launch of Microsoft's new operating system.
Specifically, the Journal said, the memos give regulators the ammunition they think they need to charge Microsoft with "illegal maintenance and extension" of a monopoly on personal-computer operating software.
The documents, copies of which were obtained from investigators by the Journal, include memos outlining a 1996 strategic plan by Microsoft to wage what amounts to a six-month marketing war of attrition against rival Netscape Communications Corp.
The Microsoft plan called Netscape's lead in the Internet software market "scary." It ordered managers to use whatever strategic cudgels they could to wrest the first-place ranking from Netscape.
"You should be able to break most of Netscape's licensing deals and return them to our advantage because our browsers are free," read the memo cited by the Journal.
"We should have absolutely dominant browser share in the corporate space," the document continued. It directed salesmen pitching Microsoft's product to "make it clear that it does not make any sense to buy Netscape Navigator."
Last week, investigators issued new civil subpoenas to major PC makers, including Microsoft rival Compaq Computer Corp. Regulators are trying to determine the scope and breadth of Microsoft's private licensing agreements with the other companies.
The Journal said that antitrust chief Joel Klein was still weighing the new evidence and has not yet signed off on whether to file new charges.
Should a new case be brought, however, it would significantly worsen Microsoft's legal headaches at time when the software maker has been engaged in a delicate balancing act to placate investigators while defending its corporate practices.
Justice Department officials have already charged Microsoft with violating a 1995 antitrust settlement by forcing vendors to sell personal computers with its browser software "bundled" with the Microsoft Windows 95 operating system. The new case, if made, would extend to the software maker's forthcoming Windows 1998 product, due to hit the store shelves on May 15.
Justice officials are reportedly reluctant to thwart the release of Windows 98 outright. But they are said to be mulling other options, including having to offer the new product in a version without Internet software.
A Microsoft spokesman quoted by the Journal said he wasn't surprised by the new subpoenas. Echoing the stance Microsoft has taken since the scrutiny began, he said that he believed Microsoft would be fully vindicated once all the information had been reviewed by investigators and the full facts of the case known.
The Journal said regulators' probe explored a host of licensing contracts Microsoft made with competitors. It reported that investigators examined allegations Microsoft had offered discounts for its Windows software if companies scrapped Netscape and bought the Explorer browser.
Survey shows a decline in popularity
News of the probe's latest turn came as a California-based research company released a survey showing that positive opinions about Microsoft among general business users fell 10 percent in 1997.
The survey, reported by The New York Times, was conducted by Techtel, a research company that has canvassed industry opinion about high-technology brand names since 1992.
Techtel found that by the end of last year, only 70 percent of respondents on a 900-person panel questioned on a quarterly basis held a positive opinion of Microsoft.
At the same time, positive opinion among consumers declined 5 percent in the last quarter of 1997 - when the Justice Department filed its antitrust suit - to 67 percent.
The survey also indicated a doubling in the numbers of panelists who held a negative opinion of Microsoft, to eight percent.
Microsoft's stock, however, has managed to weather the slew of allegations, helped in part by a stunningly optimistic earnings outlook that took Wall Street off guard last month. Shares of Microsoft (MSFT) ended up 1-11/16 Friday, at 93.
Microsoft has also sought to soften what many saw as an overly combative stance in the initial phases of the inquiry. In recent weeks, the company's maverick chairman, Bill Gates, has gone out of his way, in the view of many analysts, to persuade critics on the Senate Judiciary panel that his company is not out to obliterate the market.
But despite Gates' overtures, investigators have continued to assert that Microsoft is more insidious than its external face would lead one to believe.
The new charges would mark an extension of investigators' basic argument that Microsoft has used its dominance in desktop software to exclude rivals from emerging markets. This, they say, is tantamount to a breach of the antitrust act as originally conceived at the turn of the century.
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Microsoft Corp.
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