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Double
Jeopardy?
Fool on the Hill NETSCAPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> received a boost today after the Department of Justice went after MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>. The federal law enforcement agency accused Microsoft of violating its 1995 settlement of federal antitrust charges by requiring personal computer manufacturers to license and distribute the company's Web browser as a condition of licensing the Windows 95 operating system. "Microsoft is unlawfully taking advantage of its Windows monopoly to protect and extend that monopoly and undermine consumer choice," said Attorney General Janet Reno in a statement today. The 1995 settlement specifically restricted Microsoft from compelling personal computer manufacturers to license any other product as a condition of getting the operating system. Microsoft had skirted the issue by claiming that its Internet Explorer browser was part of the operating system, but with today's announcement it appears that the Department of Justice is unwilling to accept this argument. The Justice Department is now asking Microsoft to take a number of actions or a face fines of up to $1 million a day as a consequence. First and foremost, the Redmond, Washington-based software juggernaut can no longer require PC makers take Internet Explorer as a condition of getting Windows 95. PC makers also get to remove whole sections from the non-disclosure agreements they have already signed with Microsoft regarding licensing Windows 95. Finally, Microsoft has to notify consumers that they don't have to use the browser if they don't want to, a somewhat ambiguous proposition. The current legal battle only increases the amount of time Microsoft will have to spend in court over the next few months. On October 7, SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> filed a lawsuit in U.S. District Court that charged Microsoft with violating its licensing agreement for Java technology. Sun alleges that Microsoft failed to deliver a "compatible implementation" of the computer language, stating that Microsoft's changes do not conform with the specifications for the Internet programming language. Microsoft apparently has changed Java in such a way that applets written with Microsoft's Java tools may not work on non-Windows platforms. That same day, Sun Microsystems Chief Executive Scott McNealy went as far as to urge participants at Gartner's Information Technology Conference to buy Netscape's Navigator and send Microsoft a message. "The first thing you ought to do is you ought to go find [Netscape Chief Executive Jim] Barksdale and buy Navigator and put it on your computer in a hurry," quipped McNealy. Although McNealy has made a career of coining witticisms at Microsoft's expense, these legal issues raise questions as to how easily Microsoft will extend its dominance in operating systems and applications onto the Internet. Activist Ralph Nader is even planning a two-day conference on Microsoft's business practices that has garnered quite a bit of attention, although there has been no official reaction from Redmond. After today's move by the Justice Department, the November 13th and 14th event at Washington DC's Omni Shoreham hotel should draw a pretty good crowd. The conference information and agenda promises a Microsoft hatefest on the scale few prior events can claim. While the effects of a Department of Justice intervention are difficult to quantify at this time, it seems pretty much a no-brainer that any action in this sphere can only benefit Netscape. Netscape sprang into being in 1995 with a tremendous lead in the browser area and was selling product before Microsoft even had a browser to hawk. Lately Netscape's market share in the browser market has been under siege by Microsoft. Microsoft's recently released Internet Explorer 4.0 had more than a million downloads on its first day. More than 200,000 pre-ordered the $4.95 CDs to avoid the one to three hours of download time required over a 28.8 connection. The popularity of Microsoft's new release ahead of Netscape's next version of the browser code-named "Aurora" comes at an already bad time for Netscape. Websites are reporting that the number of people coming to them using Internet Explorer has skyrocketed over the past few months. Netscape has also been partnering with companies like AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> to add features to the browser to give it some kind of competitive edge, but Microsoft's domination of the desktop has allowed it to gain market share when few other companies could have managed the same. With the possibility of cutting deals with various PC makers to get Netscape alone on the desktop, it might be able to turn around the loss in market share. However, should Microsoft turn its notification of PC users into an exercise in brand-building and simply make Explorer part of the Microsoft Office package, it could turn this sow's ear into a purse. Investors are cautioned not to make decisions based on this one event. Microsoft is set to release earnings after the close today.
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