March 25, 2004
TAXING INNOVATION:
Paring Away at Microsoft (STEVE LOHR, 3/25/04, NY Times)
On its own, the European ruling might be seen largely as a nuisance to Microsoft. Yet it comes as other forces are also weakening Microsoft's grip on desktop computers.Beyond the moves to open the Windows desktop to rivals, Microsoft faces growing competition from Linux, an operating system that is distributed free. Even more important, Microsoft's dominance is threatened by a shift in computing from the personal computer to technologies like Internet-connected cellphones and Internet-based services offered by Google and similar companies.
"The significance of Europe is not the decision itself, but it adds to the other pressures on Microsoft," said David Yoffie, a professor at the Harvard Business School.
Those pressures may be having some effect. There are signs that Microsoft has altered its practices since the settlement with the Bush administration — and the European ruling could provide a further prod.
Industry analysts note that work on the company's next generation of Windows, expected in 2006 or 2007, emphasizes programming code as building blocks, or modules, that can be removed and snapped into the larger program.
This approach may be paving the way for the day when Microsoft shifts away from its bundling approach. Skeptics, however, say that Microsoft may be adopting this approach simply because it needs to be able to locate and combat security flaws in Windows more easily.
Other analysts say that the Microsoft division responsible for MSN Web sites — and not the Windows division — is working to develop a Web search service to compete with Google. To be sure, Microsoft could eventually decide to fold its search software into Windows, as it has with other products in the past.
Critics and competitors contend that the company, having long used the bundling strategy to protect and extend its Windows monopoly into other software products, will not significantly change its approach.
"How do you really deter Microsoft from pursuing this bundling strategy when they have bet the company on it?" asked Andrew I. Gavil, an antitrust expert at the Howard University law school in Washington.
Timothy F. Bresnahan, a professor at Stanford University who was chief economist for the Justice Department's antitrust division during the Clinton administration, said, "Microsoft sees a new product and says, `We were about to invent that, too,' comes up with its version and bundles the software into Windows." The result, he added, is that "the early leader in some promising new technology is bundled out of the market."
"It's an innovation tax that is a problem for society," Mr. Bresnahan said.
The fine is a joke--it's Mrs. Gates's pin money. Meanwhile, as Mr. Bresnahan notes, Microsoft uses predatory practices to stifle innovation and destroy people who come up with new ideas. Posted by Orrin Judd at March 25, 2004 11:54 PM
You mean like they did to Quicken? And if you want to talk about stifled innovation, just compare hardware that runs Windows vs. other operating systems.
Posted by: Annoying Old Guy at March 26, 2004 12:03 AMMicrosoft uses predatory practices to stifle innovation and destroy people who come up with new ideas.
And I, for one, am all for it.
Posted by: David Cohen at March 26, 2004 12:04 AMYeah, yeah, we know...businesses are incapable of crime and free market economics means ignoring monopolies no matter how they warp the market....
Posted by: oj at March 26, 2004 12:24 AMYou say it, but you don't mean it.
Posted by: David Cohen at March 26, 2004 12:41 AMDavid, as somebody who used OS/2 Warp for five years and would still be using it (or its successor, eComStation), if he had his druthers, I'm completely with Orrin on this. Microsoft is a pirate gang and Gates its captain. Doing _anything_ to punish them may be just about the only worthwhile thing the EU has done in its existence.
Posted by: Joe at March 26, 2004 5:27 AMRemember Netscape?
Posted by: Jeff Guinn at March 26, 2004 7:06 AMSo between Microsoft and the EU, y'all choose . . . the EU.
Posted by: David Cohen at March 26, 2004 7:08 AMoj - Microsoft earns about $8 billion a year, so the EU fine is 7.5% of income. If such fines are going to come every year, that'll reduce Microsoft's $265 billion market cap by $20 billion. That's a lot of money for pins.
Posted by: pj at March 26, 2004 8:29 AMAOG:
Well, they tried to buy out Quicken, but the DOJ blocked that.
And I still have my OS/2 media and documentation in the garage, although I run Linux these days.
Posted by: Mike Earl at March 26, 2004 10:30 AMOJ:
You are right--it is far superior (as is Safari on the Mac). But Microsoft gutshot Netscape the company through means that could only be described as predatory.
Posted by: Jeff Guinn at March 26, 2004 11:29 AMThe real issue isn't Microsoft's attitude; it is the EU's presumption. Time to slap a large tariff on every download of SAP. Like today. The bureaucrats in Brussels aren't scared of any European politicians, but they darned well better be scared of some over here.
Posted by: jim hamlen at March 26, 2004 11:54 AMJeff:
I use Mozilla and Opera these days (I'm typing this in Opera 7.11). Mozilla is Netscape without the cruft that AOL glued on, and as such, is an even match for Opera and highly superior to Internet Exploder.
No, that last was not a typo.
Posted by: Joe at March 26, 2004 6:37 PMOS/2 died not because Microsoft was predatory but because IBM was stupid. I was there, working in the industry at the time. Netscape is the same thing. I was there for that, too, and the problem was that as lousy as IE was, Netscape was even worse. It may work fine for some people, but the corporate customers my company dealt with frequently refused to install it because it was (1) old and (2) buggy. Home users are nice but it's corporate users that drove the revenues (and I note that Netscape was the first to give away the browser, not Microsoft).
As for warping the market, I'm with the guy who points out that Microsoft could never warp the market as badly as the EU. I'm not sure why OJ thinks the only valid views of Microsoft are angelic or the very incarnation of evil, since I don't hold either of those views.
OJ, you also seem to be going with a rather utopian view here, where some omniscient regulator can arrange for the optimal economic outcome, rather than accepting that we are fallen people who must make do with imperfect solutions.
Posted by: Annoying Old Guy at March 26, 2004 7:13 PMJoe:
Does Mozilla get along with an iMac? I'd like to give it a try.
Posted by: Jeff Guinn at March 26, 2004 8:57 PMAOG, you nailed OJ. For all his talk of the overpowering state, he is a statist, just a religious one. There is some daffy egalitarian thread to these anti-Microsoft crusades, as if free competition will naturally lead to a state of evenly balanced companies, and good new ideas somehow "deserve" to be rewarded with market success and leadership.
The EU's anti Microsoft position is in line with their anti US line. Both entities are dangerous precisely because they are powerful and successful.
Posted by: Robert Duquette at March 27, 2004 2:05 PMRobert:
No, that's the point. Where absolute freedom exists there will be no free market--the strong will eliminate it. Freedom requires laws.
Posted by: oj at March 27, 2004 2:17 PMJeff --
There are a number of official and unofficial Mozilla builds available.
I know practically nothing about the MAC world, so I cannot answer your question directly.
Perhaps this link will help you decide.
Posted by: Uncle Bill at March 27, 2004 3:27 PMUncle Bill:
Thanks! The OS X link is right there--I'm going to give it a try.
If the slashdoters are to be believed, IBM is preparing its revenge on Microsoft in the form of a Desktop Linux package that is being tested in house as we speak.
Posted by: Robert Schwartz at March 28, 2004 11:37 PM