Microsoft Consent Decree Allows Company to Define Industry's Ground Rules

The Justice Department's consent decree with Microsoft, announced over the weekend, frees the company to shape the computer industry's future through the next decade. The agreement allows Microsoft to maintain its dominance in the operating system market, while tweaking its licensing policies and software development procedures. This move has significant implications for competitors, consumers, and the industry as a whole.

Key Takeaways:

• The consent decree leaves intact Microsoft's core advantage: developing both operating-system software and applications software, creating an interlocking empire.
• The agreement focuses on licensing changes and dealings with hardware companies, rather than addressing the relationship between operating systems and applications software.
• Microsoft's competitors, including Lotus Development, Borland International, and Novell, see a broader problem: the blurring of lines between operating systems and applications software.
• Microsoft's operating system, Chicago, scheduled for release next year, will merge DOS and Windows, accelerating the process of expanding services and functions.
• The company has continually campaigned to expand the definition of computing functions belonging inside the operating system since introducing MS-DOS in 1981.
• The consent decree does not specifically address Microsoft's potential domination of applications software, a far bigger and more lucrative market.
• The investigation has been criticized for not pursuing a "Chinese wall" to limit information sharing between Microsoft's operating system and applications software divisions.
• Microsoft's software-licensing policies and information sharing with developers have been the focus of controversy and criticism from competitors.
• The company's competitors, such as Novell, argue that Microsoft has gained a special advantage by using hidden operating-system features and providing earlier access to technical information.
• Despite the agreement, Microsoft's power and influence are expected to continue, with some industry executives believing it will be beneficial for consumers.

Statistics:

• Microsoft has a virtual monopoly in operating systems, with over 50 million computers running Windows Worldwide.
• The company's word processor, Word, and spreadsheet, Excel, are used on about half of the 50 million computers that run Windows.
• Microsoft has been developing both operating-system software and applications software since introducing MS-DOS in 1981.
• The company's operating system, Chicago, scheduled for release next year, will merge DOS and Windows and include electronic mail, remote access, file-searching functions, and screen savers.
• The market share of Microsoft's operating system in 1993 is shown in the graph below.

Graph:

"Microsoft" shows 1993 market share in software and overall financial performance of Microsoft. (Source: Computer Intelligence Infocorp. company reports)(pg. DA)

Sources:

• The New York Times
• Sun Microsystems
• Justice Department
• Microsoft Corporation
• Computer Intelligence Infocorp
• Lotus Development
• Borland International
• Novell
• Federal Trade Commission
• Infoworld
• Applied Data Research