A federal judge’s ruling last week that Microsoft Corp. is a monopoly and violates antitrust laws, which could lead to a break-up of the software giant, was met with a collective yawn from many in San Diego’s high-tech industry.
“I really haven’t heard anyone discuss it,” said Richard Custard, executive director of the San Diego Software and Internet Council. “It’s been a non-topic of conversation.”
Although Redmond, Wash.-based Microsoft controls more than 90 percent of the PC operating systems market and remains a dominant player in the nation’s high-tech economy, most local industry sources said its influence has waned in recent years, and that any court action would have limited impact.
“I don’t see (Microsoft’s break-up) affecting other companies very much at all,” said Mark Fackler, chairman and founder of Stellcom Inc., a San Diego information systems provider. “If they have to break it into two or three different companies, I don’t see anyone affected except Microsoft.”
Fackler apparently was talking about long-term effects and ignoring the ruling’s affect on Microsoft stock. Following the ruling, Microsoft dropped more than $15 to nearly $91, a fall of 14.5 percent.
That plunge set off a massive sell-off in the technology-laden Nasdaq stock exchange, which ended off 75 points after dropping nearly 600 points in furious trading April 4.
As of end of trading on April 6, Microsoft was trading about $86, off by more than $20 from the opening of the week.
David Allen, director of research for Granite Financial Group in San Diego, said while the Microsoft ruling could have been a catalyst, the market was ripe for a downward correction.
Allen expects the recent Wall Street gyrations to continue for at least the next six months, fueled mostly by day traders and momentum investors who favor the volatile technology stock sector.
Business As Usual
Fackler echoed the sentiments of other high-tech executives who appeared indifferent, or opposed to the government’s case against Microsoft.
“They’re just doing business, in my opinion,” Fackler said. “To think they are so powerful they can control the entire market is ludicrous. Information technology is moving so quickly and there are so many new products out there, it’s impossible to control.”
Among the key findings of fact by U.S. District Judge Thomas Jackson in the case was that Microsoft used its dominance with its main product, computer operating systems, to bully competitors in a separate product line, Internet browsers.
The company violated antitrust law when it bundled its browser, Internet Explorer, with its Windows operating system, and refused to licensing of the latter without including the browser product, Jackson said in his ruling.
“Microsoft’s decision to tie Internet Explorer to Windows cannot truly be explained as an attempt to benefit consumers and improve the efficiency of the software market generally, but rather as part of a larger campaign to quash innovation that threatened its monopoly position,” he wrote.
Microsoft said it intends to appeal the ruling on the case, which was originally filed in 1998 by the U.S. Department of Justice and joined by 19 states.
Pattric Rawlins, an attorney with Lyon & Lyon in San Diego, said based on the court’s ruling, Microsoft will likely be forced to split into three separate entities, which should foster increased competition among software providers.
“In the long run, the competition will drive prices down and increase quality, which will benefit the consumer,” Rawlins said.
Local Subsidiaries Ambivalent
Two San Diego companies partly owned by Microsoft took a low profile attitude about the court ruling, saying it would not affect their businesses.
Brigitte Engel, a spokeswoman for Wireless Knowledge LLC, a joint venture of Microsoft and Qualcomm Inc., declined to comment on the ruling.
“As far as Wireless Knowledge is concerned, it’s business as usual,” she said.
The company, formed in November 1998, provides wireless access to corporate Internet applications and has more than 100 employees, she said.
Anjeanette Rettig, a spokeswoman for InterVU Inc., which is 10 percent owned by Microsoft, said the ruling has no impact on InterVU’s business or its relationship with Microsoft. InterVU, a maker of software that enables audio and video streaming, has about 300 employees.
The company was more focused on InterVU’s impending sale to Akamai Technologies Inc. of Boston in a $2.8 billion stock deal expected to close later this month, Rettig said.
Perhaps more telling of how diversified the computer-related industry has become were comments by the president of a small Miramar firm.
Daniel Cunningham, president of DPC Technology Corp., said his six-person company, an Internet application service provider, doesn’t use the Windows operating system. Instead, they rely on Linux, an alternative operating system that is growing in usage among many businesses, and is challenging Microsoft’s market share.
“We want to employ Web-based technology that is more reliable,” Cunningham said. “Windows products aren’t satisfactory for our criteria.”
Cunningham speculated Microsoft’s decision to appeal the ruling may take several years before it’s resolved, which could “slow down Microsoft and distract them and keep them from being as competitive as they can be.”
While some competitors in Microsoft’s markets might cheer the judge’s ruling, Stellcom’s Fackler doesn’t see the potential breakup as necessarily benefiting most consumers.
The government may force the creation of several smaller companies, but that doesn’t always translate to better products and cheaper prices, he said.