Microsoft's Competitive Zeal Tamed: A Critical Agreement Reached with the US Department of Justice and EU Officials

Strategic Insights -

A significant agreement has been reached between Microsoft, the US Department of Justice, and European Union officials, aimed at addressing the company's competitive methods in the personal computer industry. The pact, welcomed by IBM and Lotus Development Corp., will not dethrone Microsoft as the king of personal computer software but will alter the way it operates in the market. Microsoft has agreed to change its tactics, including stopping the practice of enticing computer makers to buy Windows for all computers, regardless of the operating system used. This move aims to level the playing field for competitors like Lotus and IBM, which have long been critical of Microsoft's aggressive business practices.

Key Takeaways:

  • Microsoft has agreed to abandon the practice of omnibus pricing, where computer makers are required to buy Windows for all computers, even if they use a different operating system.
  • The company has also promised to stop tying up computer makers with long-term licenses, which can last for many years, and to allow firms writing applications programs to create versions that work on competitors' operating systems.
  • The agreement will last for 4-1/2 years in Europe and 6-1/2 years in the United States and Canada, during which time Microsoft will be subject to strict guidelines.
  • Compaq Canada Inc.'s director of marketing, John Boyle, has stated that the agreement will not impact Compaq significantly, as Windows is an accepted standard and Microsoft operating systems dominate the market.
  • IBM Canada Ltd.'s manager of personal software marketing, Harvey Lewi, has criticized Microsoft's marketing methods, saying that they have clobbered IBM's superior software, OS/2.
  • The agreement will have "no material effect" on Microsoft, according to William Neukom, the company's senior vice-president of law and corporate affairs.

Statistics:

*Microsoft operating systems are installed on 85% of all PCs worldwide.

  • The agreement will last for 4-1/2 years in Europe and 6-1/2 years in the United States and Canada.
  • Microsoft's estimated personal fortune is $8.2-billion (U.S.).

Sources:

  • The Globe and Mail
  • The New York Times
  • The Wall Street Journal
  • IBM Canada Ltd.
  • Compaq Canada Inc.
  • Microsoft Corp.