MICROSOFT RENAISSANCE.

As predicted in recent issues of Software Industry Report, the Supreme Court last week declined to hear a direct appeal of the Microsoft Corp. antitrust case and instructed that the matter be heard by the U.S. Court of Appeals for the District of Columbia (USCA). The decision makes sense since the USCA has a greater potential for developing more comprehensive records and facts which would be of assistance to the Supreme Court in its ultimate determination. The Department of Justice (DOJ) is dejected by the decision, and had hoped that its aggressive arguments of support for a Supreme Court hearing would have been more favorably received. The 8-to-1 decision against the direct appeal and remand to the USCA is both a defeat for the DOJ and a victory for Microsoft. The prime mover at DOJ on the Microsoft case, antitrust head Joe Klein, has recently announced that he is leaving to pursue other interests.

While the case still has to be heard, and the ultimate opinions of the USCA or the Supreme Court cannot be predicted with certainty, Microsoft benefits immediately from the now projected two-year time frame for final decisions, and the probable avoidance of any significant business operating restrictions during that period. Because of the dynamic nature of the industry, two years is an eternity, and Microsoft will in all likelihood be largely free to pursue its aggressive Internet based software strategy. However, the potential remains that the DOJ will seek to have some restrictions reimposed, since Judge Thomas Penfield Jackson had effectively stayed his breakup order pending final decision.

Microsoft can expect a more sympathetic hearing before a seven judge panel of the USCA (two judges having recused themselves) since there is a decided conservative cast to the panel and since this same court has ruled in Microsoft's favor on issues that are relevant to this case. Microsoft has to avoid any appearance of undue satisfaction with respect to the decision since this could result in Judge Jackson modifying his stay and reimposing some if not all of his operating restrictions. The USCA has requested a Microsoft briefing schedule to be filed by Monday, October 1, with the DOJ to respond by October 5.

Despite the litigation, Microsoft is moving aggressively to implement Microsoft.NET, its new Internet strategy. Last week it introduced eight new software products designed for major businesses some of which will specifically compete with IBM, Oracle and Sun Microsystems, Inc. One new product, Mobile Information 2001 server, will permit users to receive e-mail messages and other data from hand held devices and cell phones. Microsoft is also targeting the high-end server market and will continue to tie newly developed products together as it has in the past in order to maximize customer utility of its products. The Microsoft.NET strategy will inevitably place it into more direct competition with the large server companies, Sun, Oracle and IBM.