MICROSOFT VULNERABLE TO LOSSES; JUDGE'S RULING COULD DELAY WINDOWS 98.

Byline: John Markoff The New York Times

The wording of a temporary ruling issued Thursday in the government's antitrust case against Microsoft Corp. suggests that a final decision next summer could erode the power of the company, which had seemed poised to dominate information industries around the globe far into the next century.

Microsoft, arguably the world's most powerful and profitable software company, in recent years has leveraged its control of personal computer operating systems to enter a growing array of new businesses as varied as telecommunications, cable television, entertainment and travel. In the process, the company has evolved into one of the most respected and feared corporations in the world.

That could change if the final ruling in the case forces Microsoft to delay or halt shipments of Windows 98 and Windows NT 5.0, the next versions of the operating system that runs on more than 90 percent of the world's newly shipped personal computers.

Operating systems are complex programs that handle myriad interactions among a computer, a user and the software that is running at any given moment. Windows 98 is the next version of the operating system for personal computers that use single Intel processors. Windows NT 5.0 is a high-end business version of the operating system designed to run on more powerful network computers as well as on standard desktop machines.

Last summer, Microsoft demonstrated new features of Windows 98 that included television integration and the ability for users to upgrade their operating system automatically by downloading new features through the Internet. But those features pale next to the impact of the planned integration of its World Wide Web browser, Internet Explorer, because Microsoft faces stiff competition from Netscape Communications Corp.'s Navigator.

At issue in the antitrust case is the fact that Microsoft, in at least some instances, required hardware companies that wanted to ship their computers with Windows 95 already installed to also install Internet Explorer. In his temporary ruling, Judge Thomas Penfield Jackson called the company's control of the operating system market a ``monopoly'' and warned that this ``bundling'' of its browser with Windows had so stifled competition that Microsoft ``might also acquire yet another monopoly in the Internet browser market.''

It is not clear, however, whether the court will determine that a complete integration of the browser into the operating system poses the same kind of anti-competitive threat as bundling a separate browser application.

The difference is not apparent to the user, but it could have enormous legal implications, which in turn could have a sizable effect on Microsoft's bottom line.

Microsoft receives only a small payment for each machine sold with its operating system, but the almost 100 million computers sold worldwide each year added up to a huge part of the $5.97 billion the company's operating systems division earned this year. Such revenues have allowed Microsoft to invest billions of dollars over the years in both development of new technologies and expansion into other industries.

Friday, all sides in the dispute said that the impact of the temporary ruling on Windows 98 was unclear and would remain so until Jackson issued his final ruling next summer.

That means it is entirely possible that the case either could delay the expected June introduction of Windows 98 or dampen the computer industry's enthusiasm for upgrading to the new operating system if it is sold without an integrated Web browser.