[Congressional Record Volume 141, Number 108 (Thursday, June 29, 1995)]
[Senate]
[Pages S9415-S9418]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       MICROSOFT SOFTWARE RELEASE

  Mr. GORTON. Although many in Congress and legions across the country 
will be on vacation in August, Microsoft people will be working 
overtime to make sure that their long-awaited new operating system 
software for personal computers is officially released as scheduled on 
August 24.
  The company is convinced that Windows 95 will help make personal 
computers significantly easier to operate, more fun, and more 
productive for millions of Americans.
  On that same day, Miscrosoft plans to launch a new online information 
service, the Miscrosoft Network, as a competitor to existing online 
services like America Online, CompuServe, and Prodigy.
  Microsoft is not alone in anxiously awaiting August 24 in this new 
product and online service. As the Wall Street Journal reported 
recently, hundreds of other computer hardware companies, equipment 
manufacturers, and independent software developers and content 
providers all stand to benefit enormously from the introduction of 
Windows 95 Microsoft Network. The Journal speculated much of the 
continued growth of the high technology economy and the overall stock 
market is tied to the timely and successful launch of this online 
service.
  It is not surprising, therefore, that several commentators have 
questioned the Department of Justice's belated investigation of 
Microsoft's decision to include access software for the Microsoft 
Network as a feature of Windows 95, a decision announced last year.
  I share the commentators' concern with the timing of this 
investigation, and hope that this 11th hour investigation will not 
delay the introduction of Microsoft's much anticipated software, an 
introduction that will increase both consumer choice and competition.
  In the event my colleagues missed the articles, I ask unanimous 
consent they be printed in the Record.
  There being no objection, the articles were ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, June 19, 1995]

Wall Street Anxiously Awaits Microsoft's Windows 95--System's Reception 
                  May Affect Stocks for Months to Come

                            (By Dave Kansas)

       It's the second-hottest topic on Wall Street after interest 
     rates, a driving force that could well influence the course 
     of the stock market for months to come.
       What's the big deal? Windows 95.
       With so-called beta test sites littered across the country, 
     anxiety about the late-August launch of Microsoft's new 
     operating system is intensifying. Questions about the 
     software are sweeping through Wall Street, and for a market 
     that discounts future news months early, investors are 
     already betting on the answers. Will it arrive on time? Will 
     it work? Who will benefit? Who will lose?
       The Windows 95 operating system has become the most 
     important product introduction in decades for the stock 
     market. With the technology sector firmly in the forefront of 
     the six-month-old stock-market rally, the success of the 
     program has taken on immense significance, becoming in 
     essence the linchpin of the market's future direction.
       A bad stumble by Microsoft in launching the product would 
     spill into the technology group and then ripple through the 
     rest of the market with dismal effect. But a successful roll-
     out will spur another cycle of technology upgrades. That 
     means personal-computer purchases, demand for more powerful 
     semiconductors, a plethora of new software and other 
     products. If it works, the entire technology sector will get 
     a lift and that, in turn, will take the broad market higher 
     into record territory.
       ``This is big-time important, and not just for Microsoft,'' 
     says Robert Doll, executive vice president at Oppenheimer and 
     head of the Oppenheimer Growth Fund, a big holder of 
     Microsoft stock.``If Microsoft were to announce that they 
     were having big problems and they'd have to put off the 
     introduction for more than two months, then we'd have a 
     problem not just with Microsoft, but throughout the sector.''
       One reason for the nervous anticipation of Windows 95 is 
     the technology sector's uninterrupted rise this year. 
     Traditionally, the technology group has experienced a 
     correction in the late spring or early summer. That 
     correction has yet to occur, creating anxiety among some 
     analysts who figure tech stocks have risen too-far too fast.
       But other analysts argue that expectations of a successful 
     Windows 95 introduction late this summer has helped the group 
     defy history and avoid the annual pullback, thereby upping 
     the stakes for the product's introduction.
       Microsoft insists that Windows 95 remains on track. But the 
     path leading to introduction hasn't been smooth. Originally 
     code-named Chicago, the product was first expected to arrive 
     late last year. That was postponed and the delay extended to 
     mid-1995, and now to late August.
       According to the company, final versions of the operating 
     systems will reach hardware makers in the next several weeks. 
     Industry insiders say Microsoft has managed to jawbone 
     computer makers into including Windows 95 personal computers, 
     to be shipped for the crucial Christmas shopping season.
       The importance of Windows 95 stems from the intricate 
     interrelationship of products and companies in the personal 
     computer sector. Windows 95, in many ways, is the equivalent 
     of a brand-new engine that many new cars will require. In 
     turn, other companies make products akin to doors, tires, 
     frames, windshield wipers, brakes and lights. Dataquest, a 
     market research firm, projects sales of nearly 30 million 
     copies of Windows 95 in the first four months, not to mention 
     an increase in personal-computer purchases.
       ``It's believed that Windows 95 will increase the number of 
     personal computers sold by a large number, especially in the 
     home, because it makes games and entertainment software more 
     accessible,'' says Irfan Ali, an analyst with Massachusetts 
     Financial Services in Boston. ``There's no question that 
     Windows 95 is the key to another wave of product upgrades in 
     the personal-computer area, and that's key for not only for 
     Microsoft, but for the whole sector.''
       Indeed, more than 500 mutual funds own chunks of Microsoft, 
     and are, in a sense, wagering on Windows 95. Among them are 
     such big names as Fidelity Magellan, Janus Twenty and 
     Twentieth Century Ultra, according to recent industry data.
       For Microsoft, a successful Windows 95 introduction already 
     is largely reflected in the price of its stock, money 
     managers say. Trading at a whopping 36 times earnings, many 
     investors are already counting on Windows 95 to provide the 
     Redmond, Wash., software company with another leg of 
     explosive growth. Even the unraveling of its bid to purchase 
     Intuit, a maker of popular finance software such as Quicken, 
     has failed to halt Microsoft's stock rise.
     But analysts say other areas of the market still represent 
     value to those looking to bet on Window 95. Among them, big 
     semiconductor firms such as Intel, Texas Instruments and 
     Advanced Micro Devices. Also, makers of the computers that 
     would use the new operating system: Compaq Computer, Dell 
     Computer and Gateway 2000.
       ``As investments, Compaq and other hardware companies don't 
     yet reflect the big surge that is likely if Windows 95 
     succeeds,'' says Roger McNamee of Integral Capital Partners 
     in Menlo Park, Calif. ``If you want to look at bang-for-your-
     buck, the hardware area will likely be a better sector.''
       Perhaps the largest fear would be any unexpected problems 
     with the new generation operating system. And some money 
     managers, like Oppenheimer's Mr. Doll, concede that Windows 
     95 could face a modest delay, which the market could swallow. 
     Anything more serious, however, would be a setback.
       ``Any disappointments could hit the rest of the personal-
     computer industry, and that could make people rethink the 
     whole technology sector,'' says Neil Hokanson, president of 
     Hokanson Financial Management in 

[[Page S 9416]]
     Encinitas, Calif. ``Whatever happens with Windows 95, we're going to 
     see a significant ripple effect throughout the whole market. 
     It will affect the whole food chain.''
       One possible stumbling block for Windows 95 is the Justice 
     Department's concern about Windows 95 inclusion of the 
     Microsoft Network, the software maker's own on-line network. 
     Competitors such as America Online complain that Microsoft's 
     inclusion of the on-line network in the operating-system 
     software is anticompetitive. Many analysts think time is too 
     short for the Justice Department to prevent Microsoft from 
     rolling out Windows 95 without the network.
       Even if Microsoft shakes the department's inquiry, and does 
     get Windows 95 out in time, that still doesn't guarantee 
     success.
       The big ``question is whether people upgrade to Windows 95 
     immediately, or do it over time,'' says Frederick J. Ruvkun, 
     a money manager at Bessemer Trust in New York. ``It could 
     happen right away, or it may take a little while. But in any 
     case, this product is the key event for the industry, and the 
     market.''


                         friday market activity

       Stocks mustered modest early gains built mostly on trading 
     related to the expiration of options and futures. Equities 
     then settled into a listless session and finished narrowly 
     ahead.
       The Standard & Poor's 500-stock index advanced 2.71, or 
     0.50%, to 539.83. The New York Stock Exchange Composite Index 
     gained 1.20, or 0.42%, to 289.96. The Dow Jones Equity Market 
     Index added 2.55, or 0.50%, to 507.15.
       The Nasdaq Composite Index jumped 5.97, or 0.66%, to 
     908.65, while the American Stock Exchange Market Value Index 
     climbed 0.68, or 0.14%, to 495,40.
       For the week, the Dow Jones Industrial Average added 86.80, 
     or 1.96%. The S&P 500 gained 11.89, or 2.25%. The Nasdaq 
     Composite shot up 24.26, or 2.74%.
       Many telecommunications and media companies posted gains on 
     enthusiasm for the new telecommunications-deregulation 
     legislation working its way through Congress.
       Capital Cities/ABC rose 3\1/4\ to 106, Clear Channel 
     Communications added 4\5/8\ to 69 and Time Warner gained 1\1/
     2\ to 40\5/8\%.
       Among telecommunications companies, Ameritech advanced \7/
     8\ to 46\1/4\, Bell Atlantic moved up 1\1/2\% to 57 and 
     BellSouth climbed 1\1/8\ to 63\7/8\.
       Microsoft jumped 2\1/8\ to 87 on Nasdaq after a federal 
     appeals court held that a lower court judge shouldn't have 
     rejected the Justice Department's antitrust settlement with 
     the software maker over software-discounting practices.
       Caremark International advanced 1\7/8\ to 21\7/8\. The home 
     health-care services provider reached a settlement with 
     criminal investigators that will end an inquiry into 
     kickbacks. The company agreed to plead guilty and pay about 
     $159 million in civil damages and criminal fines. In the wake 
     of the news, Rodman & Renshaw raised its rating on the 
     company to ``buy'' from ``neutral.''.

                    Who May Benefit From Windows 95

       CompUSA (CPU)--Computer superstore retailer should see a 
     pickup in traffic with customers looking for the Windows 95 
     upgrade.
       Integrated Silicon Solutions (ISS)--As Windows 95 requires 
     more memory, conputer makers will likely be placing orders 
     with this SRAM memory-chip maker.
       Symantec (SYMC)--Windows 95 users will need new utilities 
     (such as backup and virus-protection programs) from Symantec, 
     which controls 75% of software-utilities market.
       Diamond Multimedia (DIMD)--Graphics-broad and multimedia-
     chip maker will see more orders as consumers want to take 
     advantage of all of Windows 95 capabilities.
       Microcom (MNPI)--More consumers will want high-end modems 
     and communications products for faster on-line service 
     (particularly if Windows 95 comes with Microsoft Network).
                                                                    ____

    Windows 95--Successful Launch Would Be a Boon to Dozens of Firms

                            (By Molly Baker)

       Microsoft's Windows 95 may create a tidal wave in the 
     technology and financial markets, but investors looking to 
     profit by it should search among the ripples.
       Certainly no one should underestimate the significance of 
     the new operating system, scheduled to be shipped on Aug. 24, 
     less than 10 weeks from now.
       ``This is a broad infrastructure change that will have 
     ramifications not seen before,'' proclaims Chris Galvin, a 
     software analyst with Hambrecht & Quist. ``This is not your 
     normal upgrade cycle; it is a very significant event.''
       Obviously, Microsoft has the most to gain or lose from 
     Windows 95 and its price already reflects that. But changes 
     the system will bring--providing, of course, that it is 
     successful--will be a boon to dozens of other companies.


                             replacing pc's

       Consider, for instance, that the new operating system 
     probably will make obsolete many of the personal computers 
     sold in the past decade. The sheer number of people who will 
     be seeking to replace or upgrade their existing PCs suggests 
     that computer retailers like CompUSA will be mobbed.
       ``With its ease of use, [Windows 95] will also draw new 
     users to computers for the first time. It's likely to be one 
     incredible Christmas season,'' says Shelton Swei, a 
     technology analyst and portfolio manager at Fred Alger 
     Management.
       ``Because CompUSA is more on the consumer side, they will 
     benefit from the consumers' quick adoption rate,'' says Mr. 
     Swei. ``They'll get traffic from people in the stores getting 
     the upgrade and those people just might pick up a game or two 
     at the same time.''
       Wholesale distributors such as Tech Data and Merisel can 
     also expect burgeoning orders for both hardware and software. 
     They are two of the largest middlemen that put computer 
     equipment and supplies from the major manufacturers on the 
     shelves of retailers.


                           utilities programs

       Along with Windows 95, consumers will also be snapping up 
     new utilities programs, such as virus protection and hard-
     drive backup tools, as the old set won't work Windows 95. 
     Many money managers are betting on Symantec, which controls 
     about 75% of the utilities market.
       ``Our logic with Symantec is real simple. Once [Windows 95] 
     gets released, the utilities upgrades will be pervasive, just 
     like when Windows 3.0 was introduced,'' says Edward Antoian, 
     a portfolio manager with Philadelphia-based Delaware 
     Management.
       Than there are the memory makers. Windows 95 will gobble up 
     memory, requiring at least eight megabytes of random-access 
     memory, or RAM, to run its various tools. Most consumers have 
     been buying computers with just four megabytes of RAM and 
     will be turning to the memory providers for upgrades.
       ``I think eight megabytes of RAM will be underpowered, and 
     most are going to be looking for 16 megabytes,'' predicts 
     Charles F. Boucher, a semiconductor analyst with Hambrecht & 
     Quist.
       Although the big RAM makers such as Micron and Texas 
     Instruments are the obvious names, smaller companies could 
     profit from the memory demand.
       ``When it comes to Windows 95, anyone selling anything 
     remotely related to memory will benefit--because you'll need 
     it,'' comments Lise Buyer, an analyst with T. Rowe Price's 
     Science and Technology Fund.
       Integrated Silicon Solutions, which makes the higher 
     performance SRAM memory circuits, is already producing at 
     capacity and orders are expected to increase. The Sunnyvale, 
     Calif., company's shares, which rose \1/4\ to 51 Friday on 
     the Nasdaq Stock Market, have soared from an initial offering 
     price of 13 in February.
       Another 1995 IPO that might ride Windows 95 to bigger gains 
     is Oak Technology, a maker of semiconductors and software 
     specifically for multimedia applications. Multimedia is 
     supposed to be one of Windows 95's especially strong suits. 
     Oak's stock has been rising in tandem with consumer demand 
     for CD-ROM-equipped computers. Shares have more than doubled 
     since Oak's first-quarter IPO at 14 a share to Friday's close 
     of 34\1/4\, up 3\1/4\.
       Once armed with the latest turbocharged computers and the 
     new operating system, consumers will turn to software 
     developers to write more advanced multimedia titles to take 
     advantage of that power. To hear and see all of the bells and 
     whistles of the new programs, computer makers and consumers 
     will be loading their PCs with all kinds of graphic 
     accelerator chips and boards.


                             soaring shares

       A number of smaller companies specialize in the graphic 
     chips market, and their stocks have been soaring this year. 
     S3 has more than doubled this year, closing Friday at 34\5/
     8\, down 1. Trident Microsystems has gained 64% this year to 
     close at $19.25 a share on Friday, up \1/2\, while Chips & 
     Technologies, which focuses on the portable PC market, has 
     gained 55% since January to end last week at $11.125, up 1.
       S3 got an added boost last week when Compaq Computer said 
     it would use an S3-produced multimedia chip package in one of 
     its PC lines. Following the announcement, S3 said it was 
     comfortable with analysts' sales estimates for the year of 
     $300 million, compared with $140 million in 1994.
       The second quarter played host to two hot IPOs of companies 
     which make boards combining the various graphics and 
     multimedia chips. Diamond Multimedia Systems and Number Nine 
     Visual Technology should both get a boost from consumers who 
     want to upgrade their capabilities without buying a new 
     computer.
       In addition to selling the boards, Number Nine also makes 
     its own high-end 128-bit graphics card--enabling computing to 
     run at near Mach speeds compared with the current 16-bit 
     standard and Windows 95's breakthrough 32-bit capabilities.
       ``It's a small market right now, but that's where a lot of 
     the growth will be coming from in the next few years,'' says 
     Brad Hoopman, a technology analyst with Philadelphia-based 
     PNC Small Cap Growth Fund.
       With increased memory and the speed of the new system, more 
     consumers will be turning to the Internet for entertainment 
     and information. They might need high-performance modems made 
     by Microcom and U.S. Robotics.
       One warning from the analysts: Software makers that aren't 
     ready for Windows 95 when it arrives could be in for some 
     hard times. They recommend evaluating software stocks in 
     light of their ability to offer Windows 95 products.
       ``Clearly it's something that has to be thought of in the 
     overall investment equation,'' advises Fred Alger's Mr. Swei. 
     ``When 

[[Page S 9417]]
     considering the technology stocks, you've got to think about whether 
     the product can complete or will it just become irrelevant'' 
     in the post-Windows 95 world.


                         friday market activity

       The week ended with the small-capitalization stock rally 
     intact. On Friday, the Russell 2000 index of small-cap stocks 
     was up 0.51, or 0.18%, at a record 280.80, and the Nasdaq 
     Composite Index, at a record 908.65, rose 5.97, or 0.66%.
       The New York Stock Exchange Composite Index rose 1.20, or 
     0.42%, to a record 289.96, and the Dow Jones Industrial 
     Average, at a record 4510.79, rose 14.52, or 0.32%.
       Nasdaq advancing issues led decliners, 1,836 to 1,542, on 
     overall volume of 403.2 million, down from 412.3 million 
     Thursday.
       For the week, the Russell 2000 was up 5.59, or 2.03%, and 
     the Nasdaq composite rose 24.26, or 2.74%.
       Bird Medical Technologies was up 1\3/4\, or 25%, at 8\3/4\ 
     after the Palm Springs, Calif., respiratory care and 
     infection-control products company received an unsolicited 
     acquisition proposal from Allied Healthcare Products of $9.50 
     a share, 51% of which would be in stock and 40% in cash.
       Earlier this month, Bird Medical signed a letter of intent 
     to be acquired by Thermo Electron that prohibits Bird from 
     engaging in discussions with any third-party bidders for a 
     one-month period ending July 9. But Bird said it isn't 
     precluded from considering other proposals and intends to 
     evaluate the Allied offer seriously.
       Medaphis dropped 8\1/4\, or 26%, to 23\3/4\ after the 
     Atlanta-based company, which provides business-management 
     services for doctors and hospitals, disclosed late Thursday 
     that it was the subject of a criminal investigation by 
     federal authorities in California.
       Aramed was up 1\1/4\, or 14%, at 10\1/4\ after the San 
     Diego pharmaceuticals-research company agreed to be acquired 
     by Gensia for a combination of cash, stock and contingent 
     value rights. Aramed, which was formed by Gensia in 1991, 
     will become a unit of Gensia, a San Diego biopharmaceuticals 
     company. Gensia was up \1/8\, or 3.1% at 4\1/8\.
       Sunshine Jr. Stores (AMEX) added 1\1/4\, or nearly 12%, to 
     11\3/4\ after the Panama City, Fla., convenience-store 
     operator agreed to be purchased by E-Z Serve for about $20.4 
     million, or $12 a share.
       Hutchinson Technology rose 4, or about 10%, to 42\1/2\ on 
     news the Hutchinson, Minn., disk-drive component company 
     entered an agreement with International Business Machines in 
     which the companies will cross-license patents and work to 
     develop certain products. Hutchinson said the combined 
     effects of strong demand and improving manufacturing 
     efficiencies should result in third-quarter earnings of 85 
     cents a share, doubling the 42 cents it made in the year-
     earlier period.
       Finlay Enterprises added 1\1/8\, or 9.2%, to 13\3/8\ after 
     Goldman Sachs raised its rating on the New York City jewelry 
     company to ``trading buy'' from ``moderate outperformer,'' 
     citing the company's strong results so far this year.
       Lakehead Pipe Line Partners (NYSE) dropped 5\1/4\, or more 
     than 17%, to 25 following a ruling by the Federal Energy 
     Regulatory Commission that threatens to erode revenue and 
     earnings for pipeline partnerships. The commission said 
     Lakehead can't include in its cost of service an income tax 
     allowance for income attributable to limited partnership 
     interests held by individuals.
                                                                    ____

               [From the Washington Times, June 16, 1995]

              Suit Against Microsoft Doesn't Serve Public

                            (By Jeff Nesbit)

       There's a funny little principle missing at the core of the 
     Justice Department's ongoing antitrust wars with Microsoft 
     Corp. It's called the ``public interest.''
       Antitrust laws are, allegedly, about the government's job 
     to protect you and me--the ``public''--from big, bad 
     monopolies that charge higher prices for basic goods and 
     annihilate any of their would-be competitors.
       The federal government is clearly trying to establish a 
     principle that Microsoft is a ``monopoly''--in the ever-
     changing computer world.
       Justice may still revive its 5-year-old antitrust suit 
     against Microsoft. It killed off Microsoft's bid to acquire 
     Intuit. And the government is scrutinizing Microsoft's entry 
     into on-line services (competing against Vienna-based America 
     Online and others) later this summer.
       But there is something very, very wrong about all of this 
     monopoly-busting activity. What's missing is that funny 
     little principle at the heart of the antitrust laws--the need 
     to protect the ``public interest.''
       Ignore the Justice Department's--and U.S. District Judge 
     Stanley Sporkin's--cyberspeak nonsense about how Microsoft 
     rules the software world with an iron fist. They don't know 
     what they're talking about.
       The truth is that the public is being served--with better 
     products, more of them and cheaper prices--right now in the 
     cutthroat world of software development.
       The software industry is exploding with growth, and the 
     consuming public is being served by this. Microsoft is 
     playing a central role in this, to be sure, but not the only 
     role.
       IBM is buying Lotus, for crying out loud. That purchase 
     alone tells the world that competition is very much alive in 
     the software industry.
       It's IBM, by the way, that controls more of the software 
     market world-wide--not Microsoft. IBM holds 14.6 percent of 
     the global software market, compared with just 6.2 percent 
     for Microsoft. And other computer companies, such as Novell, 
     Oracle, Hewlett-Packard and Digital, own significant software 
     market shares worldwide as well.
       No, despite Justice's protests, the software industry is 
     growing and competing right off the charts--and the pubic is 
     being served.
       Software is the fastest-growing industry in the United 
     States. It grew by 270 percent between 1982 and 1992. In 
     1994, $77 billion of software was sold worldwide, an increase 
     of 11 percent over 1993. And it will likely grow another 10 
     to 15 percent again in 1995.
       Is Microsoft responsible for all of this growth? And, in 
     the process, is it pushing players out of the marketplace, 
     dominating competitors, gouging consumers by running up 
     prices and generally skewing software industry practices? 
     Nope.
       There are three times as many independent software vendors 
     today as there were five years ago. Eight of the top 10 
     software industry growth leaders are new to the industry 
     charts this year.
       Many of these software companies are experiencing 
     astronomical growth rates. A company called Shapeware, for 
     instance, grew 2,444 percent last year. Others, such as 
     Interplay, MicroHelp and Citrix Systems, grew by more than 
     100 percent.
       But that's the industry. What of consumers? Are they hurt 
     or helped by Microsoft? What's happened to their choices as 
     Microsoft has gotten bigger and better?
       The answer is that Microsoft and its thousands of small and 
     large competitors now offer consumers a dizzying array of 
     choices. Today, software is more powerfully, easier to use 
     and costs less than in years past. That trend is the result 
     of fierce competition, not a monopoly.
       In 1986, the state-of-the-art microprocessing chip could 
     process information at about 3 ``millions of instruction'' 
     (MIPS) per second. Today, Intel's Pentium chip processes at 
     100 MIPS.
       Multimedia computers cost more than $4,000 several years 
     ago. Today, you can buy a state-of-the-art multimedia 
     computer with a Pentium chip for less than $2,000.
       And what about the area where Microsoft has the most direct 
     ``monopoly''--in sales of operating systems? Early versions 
     of the DOS operating system once sold for $100. Today, you 
     can buy Microsoft's vaunted MS-DOS and Windows together for 
     the same price. Consumers are hardly being gouged there.
       Are software companies being killed off in this fierce 
     price-cutting atmosphere, which might lead Justice to believe 
     Microsoft is cutting prices to drive competitors away? Nope. 
     Among the top 100 software companies in the United States, 
     the ones with the most competitive consumer prices also saw 
     the greatest revenue growth. As a group, these top 100 grew 
     by 25 percent last year.
       And what about choices? Are consumers being denied choices 
     by big, bad Microsoft? Nope. There were fewer than 200 CD-ROM 
     titles available to consumers in 1993. Today, there are more 
     than 2,000 titles. And consumers can choose from about 31,000 
     packaged software products today. Most of them didn't exist a 
     few years ago.
       So never mind all the fireworks and histrionics from 
     competitors and related industries that are worried about 
     Microsoft, and that have persuaded the federal government to 
     target Bill Gates and his vaunted empire. Just ask consumers 
     if the ``public interest'' is being served by antitrust 
     harassment of Microsoft. The answer is clearly ``no.''
                                                                    ____

                        [From Upside, July 1995]

                                Bad Boy

                             (By Eric Nee)

       In the eyes of much of the high-technology community, Bill 
     Gates is well on his way to entering the rogues' gallery. 
     There he will join the ranks of other business executives who 
     have used their power and wealth for evil intent, such as the 
     fictional banker Mr. Potter in the movie ``It's a Wonderful 
     Life'' and Mr. Burns in the TV show ``The Simpsons,'' or the 
     real-life John D. Rockefeller and Michael Milken.
       Demonizing successful business executives is part of a long 
     tradition in the United States. As a nation, we have always 
     been schizophrenic in our attitude toward wealth. We pride 
     ourselves on being a nation of risk-takers and entrepreneurs, 
     yet are suspicious of anyone who really succeeds.
       If that's all there was to the attacks on Gates, we 
     wouldn't have that much to worry about. As they say, ``It 
     comes with the territory.''
       But the attacks on Gates are more insidious. By appealing 
     to the legal powers of the federal government, Microsoft's 
     competitors are trying to stop the company from extending its 
     reach into any new area. If successful, this effort would not 
     only emasculate one of the country's premier high-tech 
     companies, but establish legal precedents that could be used 
     to stop other companies from entering new businesses as well.
       The first battle was won by those aligned against 
     Microsoft, when they were able to get the company to drop its 
     attempted acquisition of Intuit. Gates beat a hasty retreat 
     on the issue, hoping to avoid a drawn-

[[Page S 9418]]
     out battle with the Justice Department. But he is likely to find that 
     instead of declaring victory and going home, Justice will 
     pursue him into the next arena, Microsoft Network.
       Microsoft's foes argue that the company would have an 
     unfair advantage in on-line services if it is allowed to 
     bundle Microsoft Network with Windows 95. As an alternative, 
     they want Justice to force Microsoft to unbundle the two 
     products or offer other on-line services alongside Network on 
     the operating system.
       A central issue in the debate is whether Microsoft's 
     dominance of the PC operating system should prevent it from 
     moving into new markets or from adding functionality to the 
     OS. Those who argue that Microsoft should be restrained, a 
     view championed by Gary Reback's White Paper, claim to be 
     taking a dynamic view of the computer market based on 
     leverage and future change. In fact, they are taking a very 
     static view that projects the present into the future.
       Microsoft's opponents believe a fixed line can be drawn 
     between the operating system and other applications, but it 
     is natural and preferable for the OS to absorb new features 
     as they become standard. Technology is not static.
       Microsoft opponents also say that the company's dominance 
     of operating systems gives it leverage to move into adjacent 
     markets, such as on-line services, and dominate those as 
     well. Again this is a static view of the industry. On-line 
     services such as CompuServe and America Online may indeed go 
     down in flames, but if they do it is more likely to be 
     because of the growing popularity of the World Wide Web than 
     because of Microsoft bundling Network and Windows 95. In 
     fact, Microsoft Network may be dead on arrival because of the 
     growing popularity of the WWW.
       If Microsoft's foes succeed, other companies had better 
     watch out. Intel may be told that it cannot push native 
     signal processing because of its dominance of 
     microprocessors. Novell may be told it cannot offer 
     networking enhancements to its applications suite because of 
     its dominance of LAN OSes. And Netscape may be told to drop 
     its home page because of its dominance of WWW browsers. Let's 
     put our trust in the market, not in illogical, artificial 
     constraints.
                                                                    ____

                      [From PC Week, June 5, 1995]

                Despite Appearances, Is the DOJ All Wet?

                            (By Stan Gibson)

       Watching big, bad Microsoft ``lose one'' and the Clinton 
     administration ``win one'' has got to make all those who 
     favor the underdog happy. But it is not clear whether there 
     is more competition today than there was two weeks ago. 
     Further, the Justice Department may have created a precedent 
     of involvement in the computer industry and electronic 
     commerce that will be difficult to sustain.
       Wasn't Intuit, with more than 80 percent market share among 
     personal-finance software makers, the real monopolist?
       Why wasn't Justice going after it years before Microsoft 
     showed any interest?
       Now that Justice has discovered Intuit is dominant in its 
     market and had previously acquired National Payment 
     Clearinghouse Inc., will Anne Bingaman's hordes seek to break 
     it up? Perhaps they should. Microsoft's--almost Novell's--
     Money has never needed more help competing than it does now.
       What about other software makers that gain, for a few 
     years, a stranglehold on a given market? Lotus' 1-2-3 at one 
     time was a near-monopoly. Should Ashton-Tate have been broken 
     up in 1986?
       Notes had the groupware arena all to itself until recently. 
     Meantime, Lotus was attempting to leverage one of its 
     monopoly products, Notes, with the E-mail market leader, 
     cc:Mail, which it acquired without complaint.
       Now that Lotus has had an embarrassing quarterly loss, does 
     it deserve federal help in restraining its Redmond rival?
       Maybe this means it is all right to have a monopoly, as 
     long as you are small, incompetent, or both.
       If Intuit is not to be broken up, who could buy it? Could 
     Novell? Would Novell be judged sufficiently incompetent that 
     it could not cobble together any meaningful synergy between 
     its NetWare, WordPerfect, TCP/IP, Unix, and network-
     management wares?
       The big question is whether the Justice Department can 
     practically regulate the software industry, an industry that 
     is vastly different from the big oil, railroads, or even the 
     IBM of the 1970s, that it once grappled with.
       The single most apparent fact of the computer industry is 
     that today's market-share leader is tomorrow's loser.
       Trying to level the playing field through legal maneuvering 
     is too cumbersome a procedure for today's markets, where 
     innovation and risk-taking can bring about surprising 
     reversals.
       Maybe the fact that Microsoft will not own Intuit is for 
     the best. But where will the Justice Department act in the 
     future? It is highly speculative to say that, because a 
     company has been successful in the past, it is likely to 
     dominate a market such as electronic commerce that has barely 
     come into being.
       We can't help but think that the Justice Department is 
     trying to create legal order that, like sand castles built 
     near the water's edge, will be gone in the next tide.
     

                          ____________________