Ass the Federal Trade Commission investigates Microsoft, others open fire


April 15, 1991|By O. Casey Corr | O. Casey Corr,Seattle Times

REDMOND, Wash. -- A giant company, driven by an ultra-competitive businessman, frightens an entire industry. Can

anyone stop him, asks a national magazine.

A scene from "Dallas"?

No, a scene from Redmond, where Microsoft Corp. and Chairman Bill Gates are not just winning but massacring competitors, as Forbes magazine recently proclaimed.

As Microsoft has strengthened its grip on the personal-computing industry, competitors have groused privately about its aggressiveness.

Now a Federal Trade Commission investigation is focused, at least in part, on allegations that Microsoft may have teamed up with another giant, IBM, to control the market for systems software.

Mr. Gates predicts a resolution of the case without any problems. Meanwhile, it's open season on Microsoft, the world's No. 1 PC software company. Many software developers refuse to talk publicly, fearing retaliation. But some are coming forward with a host of complaints. They accuse Microsoft of using confidential information about competitors, strong-arming companies into deals favorable to Microsoft and punishing anyone who complains or shows independence.

All this, they say, from a company so dominant it cannot be ignored.

"It's scary," said Robert Kleiber, a computer-industry analyst with Piper Jaffray & Hopwood. "There's a knock at the door, and it's Attila the Hun and he wants to have dinner with you. You have to let himin but, at the same time, he can pillage your house."

Microsoft supporters, on the other hand, say the company is aggressive, but fair and ethical. Microsoft has built a market for thousands of companies in the industry whose products go hand in hand with Microsoft's products, they say.

Stewart Alsop, editor and publisher of P.C. Letter, says the complaints should be viewed in the context of an industry where Microsoft has triumphed over others.

"There's a lot of sour grapes," he said.

Microsoft itself denies any wrongdoing.

But on Friday, it acknowledged that the FTC was broadening its investigation to determine whether it has monopolized -- or has sought to monopolize -- the market for several key products. That news battered Microsoft's stock, which tumbled $2.75 to $108.25 in heavy over-the-counter trading Friday.

Microsoft said the FTC is examining competitive practices related to the company's three operating systems. The antitrust probe also includes Microsoft's "mouse" pointing device, the company said.

Concerned that its credibility has been damaged, the company seems willing to eat a slice of humble pie.

"There's a greater sensitivity around here," said Marty Taucher, Microsoft's director of public relations. "Some of our most important customers [outside software developers] are upset with us. We've heard them loud and clear."

Mr. Taucher said Microsoft wants to improve relations with outside developers. The group assigned to assist developers will be doubled, to 40 people, and the company will try to contact people and listen to their concerns. Mr. Taucher said the company has not intentionally been rude to anyone.

"We approach our business with a zeal and a passion," he said. "That sometimes puts people off. I wouldn't characterize it as rude."

To understand the complaints, one must first understand Microsoft's unrivaled power in personal computing.

Microsoft sells both operating systems -- the basic control software for computers -- and applications such as the Excel spreadsheet and the Word word-processing program.

With certain exceptions, such as the Apple Macintosh, the bulk of the nation's personal computers run on the Microsoft operating system, MS-DOS. A graphical enhancement to DOS, Windows, has been a runaway hit, further cementing Microsoft's position. The operating systems are cash cows to finance development of new products.

People writing programs for DOS computers often must deal with Microsoft. Those writing programs for the complex Windows program say they often need technical assistance from Microsoft so their products work smoothly. These conversations, say competitors, give Microsoft a peephole into competing companies and their planning.

Concerns about Microsoft fall into four categories:

* The IBM-Microsoft deal. The FTC will not say why it is investigating Microsoft, but Microsoft says the agency's questions have focused on an agreement it made with IBM in 1989 regarding OS/2, a systems software being jointly developed.

According to Microsoft, the issue is whether Microsoft and IBM were, together, limiting the competitiveness of Windows in order to spur acceptance of OS/2.

To many observers, it's ridiculous today to think that Microsoft restrained Windows. But the FTC is likely examining what the companies' intentions were at the time, their ability to influence the market and what they actually did.

Some who have been contacted by the FTC say the investigation is broader.

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