Microsoft Office has iron grip on market Antitrust: Some experts say the part of the lawsuit by the states that focuses on the software suite may already be a lost cause.


When employees of the New York state attorney general's office prepared the final draft of the multistate lawsuit accusing Microsoft Corp. of monopolistic behavior, they typed the document using Microsoft Word, the word processor installed on the office's computers as part of a group of business programs known as Office.

"We have Windows 95 and the Microsoft Office suite," Attorney General Dennis Vacco acknowledged with a rueful chuckle.

So does virtually every other office in the U.S., which is one of the reasons that Vacco and 19 other state attorneys general have targeted Office in their lawsuit.

Dataquest, a market research firm, said Microsoft Office now has 93 percent of the world market for the collections of business software known as suites. The other 7 percent is divided between two other suites built around former industry heavyweights. Lotus SmartSuite has 4 percent of the market, and Corel WordPerfect Suite has 3 percent.

In addition to Word, Microsoft Office includes the Excel spreadsheet program and Outlook, an e-mail program and personal information manager for keeping schedules and contact directories.

Various versions also include PowerPoint presentation software, the company's Access database manager, or Streets, a mapping and directions program.

The part of the states' lawsuit dealing with Office accuses Microsoft of using predatory pricing strategies to gain dominance in the market for office suites.

The Justice Department argues that Microsoft's pricing policy for Office leaves computer manufacturers the practical choice of installing Microsoft's suite on all their computers or none The result, the suit says, is that competition curtailed or foreclosed

But some industry experts argue that battle may already be lost, because Microsoft Office enjoys the same level of dominance held by the Windows operating system.

Just three years ago, WordPerfect was the world's best-selling word processor, with more than half the market. Lotus 1-2-3, the venerable spreadsheet program, had a similar market share.

No one argues that Microsoft's pricing strategies alone are responsible for the sharp decline of these competing suites.

Most analysts say Microsoft gained its monopoly position in part by figuring out that most people want programs bundled in a suite and designed to work with one another. The company also produced updates with technical advances far more quickly than the competition.

Corel blames WordPerfect's decline largely on its previous owner, Novell Inc. And a senior Lotus Development Corp. executive, who, under company policy, declined to be identified, said many shifts in the industry brought the downfall of Lotus 1-2-3. Neither placed primary emphasis on pricing policy.

Whatever happened in the past, said Chris Le Tocq, an analyst for Dataquest who follows this industry, "it's very tough to see a way anyone could come in with a word processor or a spreadsheet and turn this around" in the future.

Still, Don Sylvester, a senior vice president at Corel, argued that Microsoft's pricing "absolutely harms everyone in the market, and nobody wants to wake up six months from now and find that Microsoft is the only one standing in the word processing and suite market."

As it is, Corel has changed its marketing strategy. "It's clear to us that Microsoft isn't our competition anymore," he said. "They are our environment, and we need to deal with that fact by making our product completely compatible with Microsoft Office users can move files back and forth between their programs and ours."

The Lotus executive agreed that compatibility was essential for survival. And both companies are now selling their products at a fraction of the cost of Microsoft Office. Corel sells WordPerfect Suite to manufacturers for about $15 and to the public for only $99. Lotus is owned by IBM, and its suite is bundled free on most IBM personal computers. The retail price of Microsoft Office is $399.

Pub Date: 6/01/98

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