Players Ponder Effects Of Microsoft Ruling Netscape, Justice Department And Microsoft All Wait For Events To Unfold

The decision is in but the full implications are still unclear: How much will a federal judge’s ruling on Micorsoft’s marketing practices actually affect the software giant?

U.S. District Judge Thomas Penfield Jackson on Thursday ordered the Redmond-based company to stop requiring personal computer makers to install its Internet-browsing program on the machines as a condition for licensing its industry-dominating Windows operating system.

Jackson, however, turned down the Justice Department’s request that Microsoft be fined $1 million a day for allegedly violating a 1995 court order aimed at preventing anticompetitive practices in the software market.

“We’re pleased that the court has not held Microsoft in contempt. This is clearly a preliminary decision, and the court agrees with our position that more facts are needed,” Microsoft spokesman Greg Shaw said.

“We remain confident that what we are doing is good for the software industry and good for consumers,” he said.

Though Microsoft may portray the decision in a positive light, “the people I have talked to there have expressed, shall we say, a substantial amount of shock,” said Chris LeTocq, an analyst with Dataquest in San Jose, Calif.

Microsoft has been wedded to the belief that Windows and Internet Explorer are one integrated product, and therefore the judge’s order doesn’t make sense to the company, LeTocq said.

LeTocq said he anticipates Microsoft will go to court soon to try to get Jackson’s order thrown out. Shaw said Microsoft was still studying its options on challenging the judge’s ruling.

For Microsoft foes, Jackson’s decision “has got to be viewed as good news because it sort of centrally attacks Microsoft’s thesis of the integrated product,” LeTocq said. “What it starts to say is that Microsoft’s ability to leverage its operating system monopoly, as it is described by Justice, is starting to get looked at with a magnifying glass, and in fact, in the courts.”

The judge’s ruling is going to get a lot of different interpretations, said Jim Balderston, an analyst at Zona Research in Redwood City, Calif.

“I suspect we are going to see a lot of people saying this is a good sign.

We see it as being a fairly neutral event,” with little or no immediate impact on Netscape, Microsoft or the industry at large, Balderston said.

“I can’t speak for Microsoft, but given their past behavior in the face of challenges, we’d be very surprised if we saw anything but business as usual in Redmond,” he said.

“This isn’t an event like ‘Independence Day’ and the aliens invading.”

Shaw said Microsoft believes the judge’s ruling only applies to licensing agreements going forward and does not void any agreements Microsoft already has.

However, the impact on Windows 98, due out next year and expected to completely merge the web browser with the operating system, “is a little unclear,” he said. “We hope the matter will be resolved before then.”

If Microsoft was pleased, so was its archrival, Netscape Communications Corp., maker of the Navigator web browser, the only major competitor to Microsoft’s Internet Explorer.

“Overall, we’re very pleased Judge Jackson has taken this important step,” said Lori Mirek, Netscape’s senior vice president of marketing.

“What we’ve been after is a level playing field, and we believe this is an important step in establishing this,” she said.

While Microsoft’s critics may be hailing the decision, “they may be cheering a little early in the game,” Balderston said.

“The judge did not throw Justice’s case out the door. Nor did he rule with Justice and say, ‘Microsoft, you’re bad.’ He just said ‘Stop, and I’m going to review it further,”’ Balderston said.

“We think it would be dangerous to make a prediction on how the judge is going to rule based on what the judge has done today.”

Joel I. Klein, assistant attorney general and head of the Justice Department’s antitrust division, welcomed the ruling even though the judge didn’t fine Microsoft.

“What is most important is that choice will be restored to the market,” Klein said. “They were taking their monopoly in Windows 95 and saying you can only get that if you take our Explorer.”

Microsoft has at least one loyal supporter in Micron Electronics, a computer manufacturer based in Nampa, Idaho.

“Our stance is we will continue to download the Microsoft Internet Explorer because we believe it is an outstanding product, and we continue to have high demand for that product,” said Steve Laney, company spokesman. “As long as it’s not prohibited by law, we will continue to have it as part of the standard package.”