Decision "Makes Microsoft Case Less Important"

Welcome Guest. | Log In| Register | Membership Benefits

September 26, 2000 (11:55 PM EDT)

Decision "Makes Microsoft Case Less Important"

By Mary Mosquera,

WASHINGTON - The Supreme Court's decision to send the Microsoft antitrust case to a lower court first will buy Microsoft time.

And the more time that elapses, the less relevant the case becomes, analysts said Tuesday.

It also puts off the threat of fast-track action on remedies to impose conduct restrictions and split up the software giant.

The U.S. Court of Appeals for the District of Columbia Circuit, which has previously ruled in favor of Microsoft, will decide the appeal first. The Supreme Court denied the Justice Department an expedited review, which would have bypassed the appellate court.

U.S. District Judge Thomas Penfield Jackson ordered in June that Microsoft be split into two companies, an operating-system business and an applications business, because it had abused its OS monopoly to impede competition and hurt consumers. Jackson stayed his remedy during appeals.

The Supreme Court knew it would benefit from the D.C. Court of Appeals taking the first crack at the case, said Hillard Sterling, an antitrust attorney at Gordon & Glickson in Chicago. The Supreme Court always benefits from the decision-making of its mid-level appellate brethren, he said.

"The Supreme Court just doesn't do well with messy factual and legal issues that come straight from district court judges," the attorney said.

"It is much more likely than not that Microsoft will succeed in getting this decision reversed to some significant degree," Sterling said.

The Supreme Court's decision sends an undeniable signal that it doesn't buy the government's theory of imminent competitive harm, he added. "The government was sounding the sirens that imminent review was necessary to preserve competition," he said.

Microsoft (stock: MSFT) benefits by prolonging this case, he said.

"Each day makes this case less relevant in the competitive marketplace," Sterling said. Microsoft continues as a solid, uniform company as it launches new products and services, such as its .NET strategy, he added.

Even if the government prevails in its case against Microsoft, "the remedy phase will have to be redone because the world will be different," said Bill Whyman, Internet analyst at the Precursor Group in Washington, D.C.. That will buy the software behemoth even more time, he said.

But the lengthening of the appeals process does not offer any certainty to investors or customers, he warned. Microsoft's stock is almost half off its high, Whyman said. "Microsoft is trying to limit the damage," he said. The company will have time to get products out and sign up customers, "but it's not a get-out-jail-free card," Whyman said.

The antitrust case has driven Microsoft to rethink its business model. "The biggest thing is the market is moving away out from under them. Microsoft is chasing the Internet," Whyman said.

Microsoft is having trouble retaining talent and is spending billions to get out of slower-growing markets and into growth areas. Most of the approximately 100 investments or acquisitions made by the company in the last two years were outside Microsoft's core operating-system and applications businesses, Whyman said.