Microsoft Agrees to End Monopolistic Licensing Practices

Strategic Insights -

Under threat of legal action by the US Justice Department, Microsoft has agreed to change the way it licenses its operating system, which runs more than 120 million computers worldwide. The settlement, to be drawn up in association with the Justice Department, effectively ends Microsoft's monopolistic licensing practices. Industry experts say the agreement will open the way for DOS alternatives and OS/2, while also making prices more competitive for consumers.

Key Takeaways:

  • Microsoft has agreed to end its "per processor" licenses, which require PC makers to pay a fee to Microsoft for each computer shipped, regardless of whether it contains Microsoft's operating systems software.
  • The company will also prohibit "unreasonably" long licensing agreements, allowing PC makers to negotiate their own terms.
  • Microsoft will end "restrictive non-disclosure agreements" with application software developers, allowing them to work with other operating system technologies.
  • The agreement will not reverse Microsoft's dominance in the operating system market but will give room for alternative software developers.
  • OEM agreements made up only about 8-9% of Microsoft's total revenue, with Chris Kelliher, managing director of Microsoft Australia, stating that changes to licensing will have virtually no impact on local revenues.
  • PC manufacturers like Total Peripherals will benefit from shorter term licensing arrangements, reducing upfront fees and making pricing more competitive.
  • The agreement is a result of a four-year investigation by the US Justice Department into Microsoft's alleged dominance of the software market.

Statistics:

  • Over 120 million computers worldwide run Microsoft's operating system.
  • OEM agreements account for only 8-9% of Microsoft's total revenue.
  • Microsoft's changes to licensing will have virtually no impact on local revenues, according to Chris Kelliher.
  • Total Peripherals, a PC manufacturer, will benefit from shorter term licensing arrangements, reducing upfront fees.
  • The US Justice Department investigate Microsoft for four years over alleged dominance of the software market.

Sources:

  • United States Department of Justice, "Press Statement on Microsoft Antitrust Settlement"
  • Microsoft, "Chris Kelliher, Managing Director of Microsoft Australia"
  • International Data Corp Australia, "Industry Expert, Graham Penn"
  • Total Peripherals, "George Karabassis, General Manager"