Why Did Microsoft Really Settle?
By Ed Sperling -- EDN, July 8, 2005
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| Ed Sperling Editor-in-Chief |
Why is Microsoft settling all of its lawsuits?
A random and thoroughly unscientific poll I’ve conducted across the electronics industry shows the majority of industry executives believe it’s a case of Microsoft simply clearing out some old paperwork. Even if it ultimately cost the software giant $4.3 billion, as some published reports have documented, that number may seem manageable for a company with a market cap of $266 billion.
I disagree. I think the real reason behind the settlement is much more significant. And given Microsoft’s history, my theory is consistent with the company’s modus operandi.
Point No. 1: Corporate cultures don’t change easily. Moreover, change will come slowly, if at all, when the same people who started the company are still running it. Microsoft has been tweaking its nose at competitors for years, beginning with IBM back in the early 1990s when it stopped co-developing OS/2 and struck out on its own. IBM owned the glass house inside corporations, but Microsoft had all the necessary partnerships with the application developers.
Point No. 2: Microsoft won a series of high-profile battles because it ran its business well -- so well, in fact, that it beat everyone else to a bloody pulp. But while it gained market share partly by doing everything right, it also gained because everyone else made career-limiting mistakes. Consider Apple’s refusing to license its graphical user interface (which it obtained, incidentally, from Xerox PARC) or IBM’s refusal to drop OS/2.
Point No. 3: Microsoft leveraged its position on the desktop to gain access to other markets. The first victim was Lotus (later acquired by IBM), which invented the spreadsheet. It followed that up with Novell for a network operating system, and then finally Netscape with its Internet browser-years after analysts predicted Microsoft had blown its Internet opportunity.
Point No. 4: All of these companies were just as capable of making the alliances that Microsoft did. All of them underestimated the power of partnerships until it was too late. But rather than admit defeat, all of them filed suit, prompting investigations by the U.S. Justice Department and the European Union and ending in settlements that were little more than hush money for top execs.
So is Microsoft suddenly acting like a stodgy old company? Hardly. The next target on the list is Google, an incredibly fat target at the moment considering its stock price is hovering around $300. Bill Gates has already drawn his sword publicly. Now the company is simply getting its legal portfolio cleaned out to tackle another prominent rival.
I’m betting this will happen on two fronts. First, the company will begin building search capabilities into Windows CE and XP Embedded. The rationale is that if you have icons built into a handheld device for searching out restaurants, movies and the Internet, the average person won’t punch in Google’s URL. In the consumer world, the laws of average are far more appealing from a business perspective than the best technology.
The second attack will come in future generations of Microsoft’s desktop operating system with additional search capabilities for the external world as well as within a computer. That should prove extremely useful when you begin looking for a file that disappeared and you can’t remember what you named it.
So why exactly did Microsoft settle all those lawsuits? Because it’s good for business, of course. Microsoft has proven repeatedly that it can be a fearsome competitor, and there’s no reason to assume anything’s changed.
