Fatal Error Vs. Minor Glitch Pride And Arrogance Brought Microsoft Low In Court, Perhaps Sealing Its Ultimate Fate. Yet In The Near Term It Remains A Marauding Colossus, Says Alexei Bayer .

Those who remember the Greek tragedies of Sophocles must have watched the unfolding government antitrust case against Microsoft with a palpable sense of deja vu.

When the trial began in October 1998, it was clear the company refused to take the whole thing seriously. Bill Gates’ own videotaped testimony, which revealed a snickering contempt for his interrogators, was the writing on the wall. Here was a man about to be undone by his own hubris. Predictably, Microsoft made one mistake after the other, as though determined to provide evidence of its own wrongdoing and antagonize prosecutors, judges and the public opinion. It refused to give an inch during the mediation effort, leading to a bitter breakdown of talks over the weekend.

Gates showed nothing but defiance, even after U.S. District Judge Thomas Jackson found his company guilty of violating antitrust laws. He vowed to appeal the decision. In the meantime, the company will continue to incorporate Internet services into its software and ride roughshod over its competitors.

This self-defeating pride helps explain why Microsoft stock tumbled so sharply in the first two sessions in April, dragging down the rest of the technology-dominated Nasdaq Composite index.

In reality, nothing that’s happened so far poses even a remote threat to Microsoft’s existence. The company is extremely profitable and earnings continue to grow. It retains monopoly over its Windows operating system and Microsoft Office software suite. No matter what happens, it will be able to expand into Internet products and services, and develop new technologies. Even the worst-case scenario, a government-decreed breakup, would not be the end of the world. Shareholders caught in past antitrust breakups like Standard Oil and AT&T, did very well.

In fact, if reduced to several smaller companies Microsoft may gain the flexibility necessary to prosper in a complex high-tech marketplace of the future. For all the misery the stock market drop has caused them, there was an unmistakable sense of glee among high-tech entrepreneurs.

Microsoft has long become the Evil Empire of the computer revolution, with Bill Gates as its Darth Vader, a rebel gone over to the Dark Side. Today’s computer rebels, who have embraced the free and open operating system Linux as an alternative to Windows, see the software giant as an impediment to technological progress.

Some 100 lawsuits have been filed by Microsoft competitors, seeking damages for various forms of restraint on trade. However unpopular they make Gates, his boundless self-confidence, ambition and competitive zeal are the very qualities that drive the high-tech revolution.

The young guns who are getting ready to dance on Microsoft’s grave actually share the same qualities. They run companies with price-earnings ratios that make their elders cringe. They see nothing wrong with becoming multimillionaires - at least on paper - just out of college. They devise technologies and business ideas that have never existed, and which people with a modicum of experience and common sense have said would never fly.

They, too, believe that old norms, be it in business, in financial markets or the marketplace, no longer apply. This is what makes it a revolution.

Microsoft may have overreached. Tangling with the U.S. government may prove the company’s undoing in the long run, if only because it will waste vital energy on fighting rearguard action and seeking legal redress, instead of fending off competitors in the marketplace.

However, Microsoft and Gates have shown other high-tech startups how to aspire to the top and to get there. The high-tech revolution will go on.

Stock investors know it. After an initial panic, which saw the Nasdaq Composite drop 15 percent in a few hours, they moved in on a buying opportunity.

Alexei Bayer, an economist, is president of Kafan FX Information Services, a New York-based consulting firm.