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November 9, 1999

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Apple Computer

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Subject:  Fall of the Evil Empire
Author:  Standabove

First off, let me say that many of the analyses of the MS decision on this board have been well written and thought provoking. Leave it to the AAPL board to state with greater clarity than the Wintel crowd what is truly important and worth considering. Excellent job.

Ten years ago the Berlin Wall fell. It was the culmination of 40+ years of a Cold War fought all over the globe at great expense of life and money, mostly through third world stand-ins. The end of the Evil Soviet Empire was supposed to bring general world peace and a new peace dividend. But most importantly, it was supposed to eliminate the greatest threat, that of global nuclear destruction. None of these things have come to pass as envisioned. The world is not at peace, the dividend is non-existent, and nuclear weapons still proliferate, now in the hands of many madmen instead of one.

Those who do not learn from the past, etc.

Now, to a few issues I've not seen addressed (here).

"Do we really believe this decision sounds a death knell for the REDmond Menace?"

Do we really believe this decision sounds a death knell for the REDmond Menace? First off, the reaction to the judge's verdict should have come as a collective "DUH" since anyone who's ever paid attention to the issues at hand could have told you that MS was a Monopoly. Boardwalk and Park Place w/ too many hotels to count. Leave it to the Gub'ment to send in the peace keepers after the village has been burned and the women raped- MS has wreaked its havoc. What possible retribution could the DOJ seek that is "fair"?

So the issue will become, "What now?" This is more complicated than it may seem.

I have said before that I believe the PC as we know it is dying, and the Wintel duopoly that fed it passing into increasing irrelevance. Not an original position by any means. My strong support in AAPL has been based, in part, on my perception of Steve's awareness of this and his masterful marshaling of the ipieces that will herald the new consumer ieconomy- Quicktime, OS X, AKAM, and the newly focused Mac line to name a few. In light of this, it seems that Windoze, IE, etc. are already irrelevant if one is focused on riding the new wave. As GFPE pointed out, MS makes far more money on apps than on windoze, and of coarse they give IE away, so its pretty apparent that both are a means to an end (BTW, kudos for whoever pointed out that IE was an initiative to "proprietarize" HTML, an observation that I wouldn't have made otherwise).

Bill knows all of this. That is why he has put his capital to work outside these domains (money goes where future opportunity lies). MS is invested in just about every aspect of the new economy, from hardware to software to my sister's lemonade stand so that they can lay claim to whatever is the next big thing.

I don't quite understand why MS generates the animosity it does concerning its lack of creativity, ie. buying ideas rather than having them. That is the most American of ideals, to buy what you'd rather not do for yourself. Not very sexy, to be sure, but plenty of successful companies do it including CSCO, LU and AOL- all of which I own.

"Are we really vindicated by this decision?"

The real problem, the criminal problem, lies in MS using its market position to force the world to accept its newly acquired serfdoms as world powers. Which is precisely what the decision accuses them of doing.

But, and here's the big payoff, What will the DOJ do to destroy MS's market position? Nothing else matters. So what if MS "open sources" Windoze or for that matter IE? Those two products are old news and MS is already turning its market position ($$$$$$) into future opportunity, and it will be these resources which will allow Bill to dominate future markets just as he has past ones.

Are we really vindicated by this decision? Sure, like POLAND was vindicated with the collapse of the USSR. I've read commentary that goes "Now Bill's on the hot seat." Um, yeah right. Only if that seat is stuffed with 80 Billion George washingtons ready to buy the legs out from any springy entrepreneur wishing to travel the road less taken.

I would be extremely cynical of any deal, or Compromise$e Bill makes with the DOJ.

Most importantly for our dreams of retiring early, how will this effect AAPL. In a strange way, and in light of the questions I've posted, I think it makes things a bit less certain. MS was a bit like a 1K ton ship with a 5 inch keel. If they can "divest" themselves of the albatross that Windoze would have become in the new economy, it will make them more maneuverable and far less predictable. And still with all that cash. Some have even suggested that a "forced" break-up is what Bill wanted all along. Will MS baby bells be any less likely to weld the greater MS power?

Make no mistake, this is not about one monopolistic product (or two or three). Its about one man with the resources to subjugate the entire market. Any solution resulting from the trial that does not address this disproportionate allocation of market influence and seek to eliminate it misses the point, and leaves the BIG ONE to be fought another day.

Standabove