August 10, 1995 in Nation/World

Justice’s Delay Seen As Victory For Microsoft Feds Waited Too Long To Interfere With Windows 95 And New On-Line Service

Seattle Times
 

In the end, the Justice Department waited too long to decide whether to bring anti-competitive charges against Microsoft Corp.

Preventing the world’s largest software company from launching Windows 95 with access to its new on-line service would have caused financial upheaval throughout the software industry and on Wall Street, analysts said.

“It would have had a significant impact,” said Robin Enderle, a senior analyst for Dataquest, a San Jose, Calif., high-tech research firm. “They just couldn’t take that risk.”

The Justice Department announced Tuesday that it does not expect to complete its investigation into Microsoft’s marketing plans for The Microsoft Network, known as MSN, before the launch of Windows 95, its new operating system for personal computers.

Many industry experts agreed the Justice Department would have had to decide to sue Microsoft before the launch date so the company could separate the on-line service from Windows 95 before its public release. When Windows 95 went into final production last month, such action seemed unlikely.

Though the Justice Department said its investigation is continuing, Tuesday’s announcement was seen as a victory for Microsoft.

“We’re pleased that the uncertainty that has hung over the launch date has been lifted,” said Erin Carney, a Microsoft spokeswoman.

The new operating system is expected to sell between 20 million and 40 million copies in 1995. Microsoft, which controls 80 percent of the operating-system market for personal computers, plans to solidify its dominance with Windows 95.

But the ramifications stretch beyond Microsoft. Many software companies had been completing upgrades of their applications to coincide with the debut of Windows 95.

Retailers were counting on the new operating system to boost sales of computers, memory chips and accessories, particularly for Christmas sales.

In Washington state, 81 percent of the Washington Software Association’s 500 software developers had staked their futures on Windows 95, association officials said.

“For most players, it’s a major positive,” said Scott McAdams, a computer analyst for Seattlebased Ragen McKenzie.

“A lot of upgrade programs for Windows 95 were waiting in the wings. It means the industry ought to have a good second half.”

From the start, many experts said the Justice Department had a weak case. They speculated the investigation was fueled by personal or political motivations more than by fears of a Microsoft monopoly.

“To say that you went up against the richest man is something you can tell your grandchildren,” Enderle said. “But first you have to win.”

Observers said Justice Department attorneys still were smarting from earlier showdowns with Chairman Bill Gates over Microsoft’s licensing practices, which resulted in a controversial settlement early this year.

More recently, the relationship worsened when the Justice Department threatened legal action after Microsoft announced it wanted to buy Intuit, the maker of the top-selling personalfinance software called Quicken. Microsoft dropped the Intuit deal.

By late last month, the Justice Department and Microsoft were locked into a high-stakes game of virtual poker over Microsoft’s plan to offer easy MSN access to Windows 95 users.

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