The local media, especially Seattle’s daily newspapers, have been focusing on an irritating non-story: “big government” vs. poor little Microsoft. Most Seattle residents would be surprised to hear that the Justice Department’s lawsuit against Microsoft and the impending release of Windows 98 has barely made the news in the rest of the country, for several reasons:
First of all, it’s taking the Justice Department forever to file the damn thing. While Microsoft has continued to violate the 1994 consent decree requiring the company to separate its Windows software from its applications software with complete impunity, Justice continues to fiddle. Last year’s ruling for Microsoft to offer a version of Windows 95 without Internet Explorer (the web browser) has been flagrantly ignored and has had no impact on Microsoft’s business practices or its bottom line. If anything, sales of Windows software (with the browser) have increased since then, and their main competitor (Netscape) has slipped from a dominant position (about 70-80% of the web browser market) to about a 40% share (and slipping every week), within the last year alone.
Likewise, the dozen or so state attorneys general, who were set to file lawsuits against Microsoft on behalf of consumers and software companies in their own states, are having second thoughts or deciding to wait and see what Justice does first–like a group of kids daring each other to be the first to stick his finger in the light socket. And although Microsoft is ramping up its lobbying efforts in D.C., those expenses are for other issues–namely, to keep high-definition TV out of the U.S. (Microsoft is heavily invested in Web TV technology, which is incompatible with high-definition TV). Clearly Microsoft understands that whatever the Justice Department decides, it will have little impact on its business. After all, Microsoft has been investigated continuously by one government department or another for most of this decade.
Yet the company is milking the situation for all it’s worth–it provides free publicity for Windows 98. Witness Microsoft’s teary-eyed claim that any delay in the release of Windows 98 will have disastrous effects on the computer industry and U.S. businesses in general. Utter bullshit, especially coming from a company that’s built its reputation on “vaporware”–software that’s announced and scheduled to be released on a certain date, yet either never materializes or is released a year or more late (like Windows 95). The fact is that Microsoft already has contracts with major computer manufacturers to load Windows software on over 90% of all computer systems sold in the U.S.–whether it’s Windows 95 or Windows 98 makes no difference. In fact, Microsoft could release a program called MS Hell and still be able to make a fortune from it. Or they could release nothing in 1998 and still see their profits increase. That’s how monopolies work.
In case you don’t believe me, here’s a few facts and figures from Wall Street analysts, as quoted in last week’s Puget Sound Business Journal:
Sales of Windows 98 upgrades will account for only six percent of Microsoft’s business in the next year. Windows 98 sales will bring in about $630 million in revenues, but the company’s total sales will reach $17.6 billion.
In comparison, Windows 95, which provided major changes in the operating system software over Windows 3.1, accounted for 26 percent of the company’s sales in 1996.
The real money-maker for Microsoft is Windows NT, an operating system designed to compete with Unix. It’s been growing at a 75% rate in the past year and could bring in over $5 billion in 1998.
Microsoft recently released Windows CE, a new, stripped-down operating system for hand-held computers, that may eventually be installed in everything from cars to kitchen appliances.
And, in spite of its whining, Microsoft is rolling in dough. In 1996, the company began setting aside income to tide it over in years when it wouldn’t be able to release major upgrades. Currently it has $1.4 billion in cash set aside and no long-term debt, unlike most large companies (and most people I know). How did it amass this incredible pile of loot? Well, according to Fortune Magazine, Microsoft is the most profitable company in the U.S., with a 30.4% profit on its revenues for 1997 (the median profit for the top 500 companies in the U.S. is 4.9%). Look at it this way: because Microsoft has no competitors, it can charge whatever it wants for its software. If it had to take a smaller mark-up of, let’s say, only 10% (to be really generous), it would be charging around $77 for an upgrade to Windows 98, instead of $99. Yes, that extra cash is coming out of your pocket.
On top of all that, computer analysts who’ve previewed the new Windows 98 say it’s got very few new features over Windows 95, it doesn’t fix most of Windows 95’s bugs, and it’s even more of a memory hog. So if you want to upgrade, plan on buying new hardware. (Now you know why computer manufacturers are lining up to support Microsoft against the Justice Department!)
Welcome to MS Hell: the world of monopoly capitalism. In spite of what local newspapers and politicians (Senators Murray and Gorton) say, the government’s not really out to destroy Microsoft. It’s just belatedly responding to the dying gasps of Microsoft’s tiny competitors.