What makes Gates run? Maybe fear He's driven to survive high-tech downdrafts, unrelenting rivals

His was a friendly monopoly

But feds got alarmed when Microsoft made a play for the Internet

Software

May 18, 1998|By Mark Guidera | Mark Guidera,SUN STAFF

It is the quintessential American dream: High school pals start a company on a prayer and a penny, develop pioneering products and build customers with bootstrap enthusiasm, and wind up a world market leader -- and billionaires.

In a nutshell, that is the story of Bill Gates and Paul Allen and the company they founded in 1975 in an Albuquerque, N.M., motel room, Microsoft Corp.

It is a story of entrepreneurial spirit that has had a profound

effect on shaping the information age and the mass appeal of what promises to be one of the most powerful and pervasive technologies of the late 20th and early 21st centuries, the Internet.

Why then would an alliance of state and federal government lawyers want to challenge such an inspiring American success story and stymie its expansion into new products and services, as is clear in their threat of a huge antitrust action against the behemoth from Redmond, Wash.

"It is a strange turn of events. Gates starts out as the boy wonder of the American dream, but it's a dream that is now shading out into a nightmare," said Ron Chernow, author of the recently released "Titan: The Life of John D. Rockefeller Sr."

The threat of that nightmare prompted Microsoft to agree late Thursday to delay the release of its Windows 98 software program to computer makers until today so negotiations with the Justice Department could continue.

American business historians like Chernow and students of the company say the key to how Gates and Co. came to be vilified may have a lot to do with the entrepreneurial drive that made it such a success in the first place.

"It's my sense that Gates has never shifted [from] thinking like an entrepreneur. He is always looking for market opportunities and ways to get an edge on the competition," Chernow said.

And that, of course, said Chernow, is the calling card of most titans of industry. For example, Rockefeller parlayed Standard Oil Co.'s dominance in the late 1800s as a kerosene supplier into a market leader in the gasoline, lubricants and related industries.

Said Chernow, "The problem for Gates is that it's a double-edged sword for business in America. Once you become a monopoly, the rules change."

Nathan Newman, project director for NetAction, a San Francisco-based consumers group that has tracked the Justice Department investigation, is among those who argue that Microsoft uses its billions in profits from its core technology -- the operating systems used in 94 percent of the world's personal computers -- to extend its dominance to related industries.

Through a series of acquisitions in the last four years, Microsoft has greatly broadened its reach beyond its enormously popular Windows operating systems.

Some industry experts argue that the company is now involved in almost every aspect of the computer industry, from desktops and other computer hardware to software for recognizing speech and handwriting.

But it is a recent strategy that has really caught the eye of Justice Department lawyers and others: Microsoft's efforts to emerge as a major player in Internet commerce and online media ventures, such as travel bookings, real estate transactions and classified advertising, through its Internet browser, Microsoft Explorer.

Most recently, Microsoft bought WebTV for $425 million and invested $1 billion in cable TV giant Comcast Corp. in a bid to broaden the delivery of its online products and services to living rooms around the world.

The company, which netted more than $3 billion in profit last year, is also angling to establish a leading position as the middleman for financial transactions over the Internet.

Newman said it is this aggressive expansion into Internet-related businesses that has Gates and Microsoft under such intense government scrutiny. Also driving the government's zeal in getting a leash on Microsoft: the emergence of the Internet as a far more pervasive and powerful technology than envisioned just a few years ago.

"The scary thing here is that once they begin to dominate more and more of these markets, they not only can control price and availability, but also they don't have to improve the quality of their core technology," Newman said.

Newman and other critics argue that Microsoft's total dominance over the operating system market gives it the power to make harsh demands on PC makers and software developers, such as requiring that they include other Microsoft features as part of pre-installed packages.

"Without healthy competition we aren't going to see the significant advancements in technology, and consumers won't have the chance to decide which they think is best," said Todd Paglia, a staff attorney and antitrust expert with Ralph Nader's Consumer Project on Technology in Washington.

"That's really what this antitrust investigation is all about -- ensuring there's competition and innovation."

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