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Major setback for Microsoft

A US federal judge has ruled that Microsoft Corp wields monopoly power in personal computer operating systems, a major setback for the world's largest software company in one of the biggest antitrust cases of the century.

In a long-awaited decision, District Judge Thomas Penfield Jackson said yesterday Microsoft's actions had done consumers harm and the company had used its power to punish competing firms.

''Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products,'' Jackson said.

He found that the company had succeeded in ''stifling innovations'' that would benefit consumers, ''for the sole reason that they do not coincide with Microsoft's self-interest''.

The 207-page finding, which sets the stage for a later ruling on whether Microsoft's actions broke the law, largely sided with the US justice department and 19 states that brought the case against the high-technology powerhouse.

If Jackson finds Microsoft liable for breaking the law, he could then move to apply sanctions ranging from restrictions on the way it does business to breaking up the company.

He said the firm used that power against the makers of personal computers in a way that harmed consumers.

He said the company ''foreclosed an opportunity for (PC makers) to make Windows PC systems less confusing and more user-friendly, as consumers desired''.

The case is a classic confrontation between one of the most dynamic American companies of the computer age and US government trustbusters who believe Microsoft has become a schoolyard bully.

It has been compared to some of the epic antitrust battles of American history including a 13-year struggle with computer-maker IBM ending in 1982, and the breakup of John D Rockefeller's Standard Oil monopoly in 1911.

The government charges that Microsoft used its power to illegally crush rival Internet browser-maker Netscape and muscle other firms. Microsoft argued it had no monopoly in operating systems and always acted within the law.

Netscape was acquired by Internet powerhouse America Online Inc in March 1999, a deal which Microsoft said repeatedly made the case irrelevant.

But the judge saw things differently. He noted that Microsoft gave away its browser for free and that Netscape was forced to follow suit, which it ''could ill afford.''

After that, the judge said, Netscape ''surrendered itself to acquisition by another company''.

The justice department hailed the ruling as a ''tremendous victory'' for US consumers.

Assistant Attorney General Joel Klein told a news conference that Microsoft's abuse of monopoly power had caused ''substantial harm to consumers and innovation'' and should result in ''serious remedial redress''. But Klein said it was premature to say exactly what sanctions Microsoft should face.

Spokesman for the 19 states who joined the action, Connecticut Attorney General Richard Blumenthal, was even bolder in calling for action against Microsoft.

''These are serious and far-reaching violations that should lead to serious and far-reaching remedies,'' he said.

Straining to put the best face on the outcome, Microsoft founder and chief executive Bill Gates said at a news conference that the company disagreed with the findings of the judge.

''The American legal system ultimately will affirm that Microsoft's actions in innovations were fair and legal and have brought tremendous benefits to millions of consumers,'' Gates told reporters from the company's Redmond campus.

Microsoft won a ruling last year in an appellate court on an earlier antitrust action by the government.

However, both Gates and Klein left the door open to a negotiated settlement of the case.

''Microsoft is committed to resolving this case in a fair and responsible manner while ensuring that the principles of consumer benefit and innovation are protected,'' Gates said.

The White House, which has been careful not to take a position in the case, said President Bill Clinton had no comment on the ruling.

Microsoft's share price fell after news of the judge's ruling to 87-1/16 on the after-market trading system Instinet compared with a closing price on the Nasdaq market of 91-9/16 during the regular session.

Some Wall Street analysts said the ruling could have a negative impact on the stock market when it resumes official trading on Monday. But they cautioned that this was just the first ruling of several expected in the case.

''This is the first act of a three-act play, or rather the first inning in a nine-inning baseball game,'' said Jim Lucier, an analyst for Prudential Securities in New York.

Art Hogan, chief market analyst at Jefferies Co said, ''Clearly, this is a severe blow to Microsoft... I think upon appeal it may not be as harmful to Microsoft at the end of day as it appears, but it's clearly disappointing and it will set a negative tone to the market.''

Reuters

EXTERNAL LINKS

U.S. Judge Declares Microsoft a Monopoly That Stifles Industry
MSFT ruled a monopoly

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