GAITHERSBURG, MD (December 2, 1999) -- I've never tried to hide my bias against Microsoft (Nasdaq: MSFT), but I'm also highly informed about the company. I spent a large chunk of last week beating up on Microsoft in response to a pair of articles that ran in this column after Judge Jackson's Findings of Fact in the ongoing antitrust trial deemed Microsoft an abusive monopoly that has harmed consumers. That's not my bias speaking, the ruling stated that explicitly and at great length, and it was covered as such in a dozen news articles on CNN,, and elsewhere.

But reading those first two articles (here and here), it's hard to tell that those findings went against Microsoft. Or that anything ever has. Microsoft is on trial in a federal court and losing badly, and it's almost as if Microsoft's investors (like Microsoft itself) don't want to admit this might somehow pose a problem.

I'm not asking anyone to agree with me, I just want Microsoft investors to be aware of what I have to say. If I stimulate anyone to do their own research to disprove something I've said, I'm thrilled. There's more to doing business than a balance sheet and a cash flow statement. We all acknowledge that Microsoft's marketing arm puts out as much spin as any political party -- that's its job. But did it ever occur to anyone that Microsoft markets itself to its investors just as actively as it does to its customers?

A year ago, breaking up Microsoft wasn't a serious option. Now Microsoft's opponents are calling for it openly. Before the trial started, the Department of Justice (DOJ) was simply asking Microsoft to unbundle one product from another in accordance with the consent decree Microsoft signed to end a similar antitrust action in 1995. Microsoft turned it into a full-blown Sherman antitrust investigation with a strategy of perpetual confrontation, even lobbying to cut the funding of the DOJ when all else failed. From my point of view, this was just insane.

Continually upping the ante may work to put competitors out of business when Microsoft is the larger company with greater resources. But the federal government isn't going out of business anytime soon. It doesn't run out of resources during a test of endurance, and it's not easy to intimidate. An all-or-nothing test of strength is probably the worst possible course of action, but it seems to be all that Microsoft knows how to do.

Intel's (Nasdaq: INTC) recent encounter with federal regulators is now all but forgotten, despite the fact it happened during the Microsoft trial. It's over because Intel went in and negotiated the smallest concessions it needed to make, and then made them. It didn't ruffle any feathers, nobody's ego got bruised, and the whole thing was quickly, cleanly, quietly, and professionally dealt with. All the DOJ initially wanted from Microsoft was an option to uninstall Internet Explorer. Microsoft continues to claim that the two products are inseparable, even though Windows 95 initially shipped without Explorer, downloadable programs from third parties can completely remove Explorer from Windows 98, and a version of Explorer is even available for the Macintosh.

Microsoft's "us vs them" mentality has polarized the entire industry, and left it standing alone. During the trial, the Department of Justice snuck in videotaped testimony from extra witnesses above their allotted twelve, but Microsoft had to call its own employees to the witness stand nine times. Here's a link to an index of over 1600 anti-Microsoft websites. Microsoft even had to organize its own grassroots support, dubbed the "astroturf" campaign.

Microsoft hasn't won any friends in court, either. Judge Jackson has used a legal technique to make his judgment very difficult to appeal. By splitting his ruling into two parts, findings of fact and findings of law, he's insulated half of it from the appeals court. Findings of fact state that the evidence presented in the trial proved to be true, and findings of law contain the judge's legal opinion of how the law applies to those facts. Findings of fact are almost impossible to appeal because they're not so much a legal opinion as a summary of the evidence, and in this case the judge's summary of the evidence paints Microsoft into a corner, mostly because that's what the evidence itself did.

Since the appeals court did not hear the original testimony and see the evidence as initially presented, they're not in a position to dispute the findings of fact, only the findings of law. The purpose of an appeal is not to grant a new trial but to allow more experienced judges to reconsider the original ruling and confirm or overturn the legal opinions therein. Microsoft has already had its chance to present its evidence and argue its case. It doesn't get to do that all over again on appeal. It just gets a second opinion on the first trial, based on the original evidence.

In any case, the DOJ has the authority to skip the appeals court and jump straight to the Supreme Court due to the Sherman Antitrust Expediting Act. If the DOJ chooses to invoke this law, it will also prevent Microsoft from starting its appeal until after the penalty phase of the current trial. What that means is that Microsoft has to wait for the current judge to decide on a remedy, such as breaking up the company.

Meanwhile, Microsoft has been declared a monopoly in federal court, and until that decision is successfully appealed, it stands. All the other civil antitrust lawsuits currently outstanding against Microsoft (such as the class action suit arising from Windows Refund Day, or Caldera's lawsuit claiming damages for the suppression of DR-DOS) become much easier to win, as Microsoft's monopoly status is now assumed and the litigants only have to prove they were harmed by it. (Simply being a monopoly is not illegal, but using a monopoly to harm competitors in a way that couldn't be done without the monopoly is.)

I could literally go on about this for days, but don't worry, I won't; I'm not going to waste the space. If I've made anybody mad enough at me to go out and do their own research, my job is done. If not, you can unplug your ears now.

And if you'd like to talk more about this topic, let's take the discussion to the Microsoft board.

For more on Microsoft, see:
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