Microsoft has options available beyond judge's antitrust ruling

Microsoft set with options beyond antitrust ruling

April 04, 2000|By Mark Guidera | Mark Guidera,SUN STAFF

Don't expect Microsoft Corp. to slink off into a corner, licking its wounds now that U.S. District Judge Thomas Penfield Jackson has ruled that the company violated federal antitrust laws.

The Redmond, Wash.-based company, with its $21 billion in annual revenue and $22 billion in cash, continues to possess enormous financial and technological resources, industry experts said yesterday.

In short, the courts won't squelch innovation at Microsoft's sprawling 26-acre campus.

Indeed, Microsoft has a number of product development and service initiatives under way in a quest to diversify well beyond its operating system for personal computers, which dominates the PC market, and its Internet Explorer browser. The close marketing ties between those two products got the company into antitrust trouble with the U.S. Justice Department in the first place.

"This is a company that is working very hard to diversify away from the browser market," said Patrick Dorsey, director for analysis at Chicago-based Morningstar.com, an investments rating service. "They have come to the realization that they cannot be so heavily tied to that in the future."

While the Justice Department's antitrust case against Microsoft is in some ways responsible for the company moving aggressively to develop new strategies for revenue, the force that really seems to have kicked Microsoft into action is the exploding popularity of the Internet and the competition it's creating, industry experts said.

Microsoft, they added, has come late to these opportunities and those that the wireless phone market have opened up. Now, it's catch-up time no matter what the courts decide.

Company Chairman Bill Gates has sounded the rallying cry -- once "a PC on every desktop" -- changing it to the mantra, "Give people the power to do anything they want, anywhere they want, and on any device."

He wants the company to create software that can run devices far afield from PCs -- grocery scanners, milk purity analyzers, gas pumps, traffic signals -- as outlined in a Gates manifesto, "The Era Ahead."

Such "embedded" software might not sound glamorous, but it could yield big profits, analysts pointed out.

Still, industry experts said if Gates hopes to keep Microsoft a commanding force in the global economy, it will have to move nimbly to structure the company around the dizzying array of opportunities the Internet is offering. Not to mention warding off a host of competitors biting at Microsoft's feet.

"The power structure is shifting rapidly away from PCs and other hardware to Internet services," said Rob Enderle, an analyst at Giga Information Group in Cambridge, Mass. "The market is moving extremely aggressively. The danger for Microsoft is that rather than being a key driver of technology and where it's going, they end up standing by and are impacted by it."

John Robb, director of Internet consulting company Gomez Advisors Inc. in Lincoln, Mass., believes that Microsoft has outlined a potentially successful strategy for remaining competitive in the future.

This includes the launch of its new Windows 2000 operating system geared to the business market, and eight Web-based businesses the company believes could be profitable.

`The whole antitrust issue has been overblown," said Robb. "They have a lineup of next-generation products that look like real winners."

Among the new business initiatives Microsoft is staking out: video gaming software, electronic billing and payment services, advertiser-sponsored online buying guides, European cable television and cordless telephones, to name a few.

Analysts said three Microsoft initiatives in particular could dramatically reshape the company before the courtroom drama is played out, and help end its dependency on Internet Explorer and its operating systems.

These include Microsoft's plans to roll out a home video gaming console to compete with Sega's Dreamcast and Sony's PlayStation. Code-named X-Box, the device is expected out on the market by next year and would establish Microsoft's presence in an industry that generates $7 billion a year in sales.

Analysts also are intrigued by Microsoft's expected foray into the wireless personal computer-telephone market with the release soon of a $199 Microsoft pocket PC telephone.

The hand-size device will connect wirelessly to a PC for managing e-mail messages, an electronic address book and other features and is aimed at snaring a share of the growing market for handheld "smart appliances."

Dorsey said another business strategy that has been overlooked in the United States has been Microsoft's efforts to take stakes in European-based cable companies. If successful, the strategy could lead to Microsoft acting as a leading household portal to the Internet in Europe -- far from the prying eyes of Justice Department lawyers.

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