News

Microsoft Responds Last Time to Breakup Plan

• By Scott Bekker
• 05/31/2000

In the first paragraph of Microsoft’s (www.microsoft.com) statement it said, not surprisingly, that it remains the company’s firm belief that a breakup is extreme and unjustified.

Microsoft says that this most recent document supplements a similar one filed on May 24, which provided 16 witnesses the company would have called if the court had allowed them to testify.

Today’s document offered seven more witnesses that would testify. They include Michael Capellas, president and CEO of Compaq Computer Corp. (www.compaq.com); Dr. Steven Davis, professor of economics at the University of Chicago’s Graduate School of Business; and Richard Schmalensee, professor of economics and management and dean of the MIT Sloan School of Management.

According to the Offer of Proof, Capellas would testify that breaking up Microsoft will slow its release of new products, thereby inhibiting innovation. Further, the fact that the operating system and applications have been developed by a single company makes the software more reliable, better performing, and less expensive. Cappellas' testimony would assert that breaking Microsoft up would complicate things for the consumer.

Dr. Steven Davis, author of two books relating to Microsoft’s case, would tell the court that Microsoft’s practice of integrating new features into its desktop operating systems has provided consumers with more rapid innovation, greater ease-of-use, and lower costs.

If allowed to testify, Davis would also refer to a paper written by the chief economist of the Antitrust Division of the U.S. Department of Justice, Dr. Timothy Bresnahan. The paper says that in the server DBMS market, Oracle Corp. (www.oracle.com) is the incumbent, and breaking Microsoft up would stifle its chances for competing.

Dean Schmalensee, according to Microsoft’s report, would testify that the computing landscape is shifting from PCs to other machines, and that Linux is gaining ground as an operating system competitor, particularly in non-Windows devices. Further, many industry analysts have questioned Microsoft’s ability to adapt to these changes.

Finally, Schmalensee would testify that breaking Microsoft up along the "increasingly artificial distinction between operating systems and applications," would make it more difficult for the company to compete in a market in which some experts already believe it will be very difficult for Microsoft to compete.

The Offer of Proof also states that Jeffrey Katzenberg, co-founder and officer of DreamWorks SKG (www.dreamworks.com); Edward McVaney, chairman and CEO of J.D. Edwards & Co. (www.jdedwards.com); Tony Nicely, chairman of Geico; and John Whitacre, chairman and CEO of Nordstrom Inc. (www.nordstorm.com) would testify on Microsoft's behalf.

Judge Jackson is expected to rule as early as June 1. - Thomas Sullivan