Microsoft Losing in the Court of Public Opinion

BOSTON (05/23/2000) - Will Microsoft Corp. ever make a smart move in its losing antitrust battle? Even with its very existence now clearly at stake, Bill Gates and company are still sticking with the same strategy that has served them so poorly since the trial began: Demean your critics, deny any wrongdoing, attempt to rewrite history and warn of calamity if things don't go your way. If this mess is ever made into a book or movie, it should be called All the Wrong Moves.

The last few weeks have been perhaps the most damaging of all, or at least since Gates' terrible videotape testimony set the tone for this public relations megadisaster. First, the government's breakup plan was, by nearly all accounts, well-thought-out. Sure, you can nitpick about small issues such as the proposal's "middleware" software restrictions. But given how sweeping the plan is, it makes a surprising amount of intuitive sense. Although most of the media attention has, understandably, focused on the proposed breakup, the various behavioral restraints are nearly as important. Taken together, they clearly provide a plausible path toward a more competitive software industry.

Indeed, even the mainstream press has found it relatively easy to see how the breakup might help. Why wouldn't the proposed new operating-system company choose to enter the applications business and/or provide much more aggressive support to such vendors as Oracle, Lotus and Corel? Similarly, why wouldn't the proposed new application software company want to have its products run on such popular non-Windows operating system platforms as Linux and Solaris? This basic common sense helps explain why the government's position has been steadily gaining momentum.

In contrast, Microsoft has had plenty of time to respond to the government's proposals, but neither its public pronouncements nor its half-hearted legal counterproposal have impressed anyone other than its die-hard defenders. Like the media, Microsoft has also focused mostly on the divestiture issue, but its attempts to portray any breakup as an unmitigated disaster have generally consisted of groundless hyperbole. At various times, the company has warned that divestiture would be bad for its employees, the software industry, consumers and the country, but Microsoft has been largely unable to articulate exactly why.

Perhaps even worse, Microsoft has carelessly and foolishly squandered what little public credibility it has left. Anyone who has been around the software industry for a while probably remembers how often Microsoft vehemently denied that its Office group enjoyed any special competitive advantages by being part of Microsoft. Now it's saying that cooperation between its operating system and application groups wasn't only extensive, but also actually a crucial part of its development efforts. Do they think we're all stupid? Or are they thinking at all?

Microsoft's best defense has always been that whatever its mistakes, the proposed breakup represents a disproportional response. Indeed, were Microsoft behaving in a sophisticated and responsible manner, I would tend to agree with this position.

The core of this case has never been about Microsoft's specific actions. It's been the company's inability to accept that those with special power sometimes have to play by special rules. If Microsoft had only accepted this early on, things never would have gone this far.

But the sad irony of this story is that, by behaving so defiantly and deceptively, Microsoft has given the government and other divestiture proponents the compelling rationale they otherwise never would have had.

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