Either way investors will win!11/12/99 - Will Microsoft Become 'The Baby Bills'?
Nov 12, 1999 (Tech Web - CMP via COMTEX) -- Last Friday's announcement of the findings in the U.S. Department of Justice's case against Microsoft brings to mind what took place with AT&T a decade-and-a-half ago. Although dealing with numerous phone companies can be exceedingly frustrating, there's little doubt that those who held Ma Bell stock through the breakup and beyond have benefitted handsomely.
The media has had a field day with the findings in the battle between the DOJ and Microsoft. It may get even better in a few years. Bill Gates is clearly the leader in the pecking order of the world's wealthiest people, and he was the first individual with assets in excess of $100 billion. It would not be unreasonable to expect he will be the first trillionaire, as well. Barring a catastrophe, that will take less than a decade.
Will Microsoft remain as we know it today, or will it turn into a number of Baby Bills? If the latter happens, it would not be unlike the regional Bell operating companies that were the offshoots of what had earlier been AT&T. The next three months will probably provide the answer to that question.
On the surface, the arguments against Microsoft's current practices appear powerful. The business world as well as the consumer world have become heavily dependent on desktop computing -- and ground zero for desktop computing is located in Redmond, Wash. With few exceptions, the typical day for most PC users is one punctuated by many interfaces with Microsoft products and services.
In operating systems, there's Microsoft and not much else. In browsers, there's Microsoft Internet Explorer very much on the rise, and Netscape Navigator heading in the opposite direction. In the applications arena, Microsoft has been generally successful in capturing dominant market positions. Indeed, the third rock from the sun may soon become Planet Microsoft.
A naive view of where the case stands suggests Mr. Gates and company will be making concerted efforts to deal with the alleged troublespots. The possibilities are many. Could there be a breakup? Perhaps, but that could mean a little or a lot. Might that lead to disclosure of the underlying code? Maybe.
The more critical issue is what all this means to investors. In my opinion, the outlook is encouraging. Microsoft is one of the greatest business success stories of all time, and whether the software titan continues to operate in its present form and in discrete parts should not have a negative effect on the outcome. While the machinations are still under way, the road may be a bit bumpy.
Over the longer term, however, we think there's as good a reason to believe in Microsoft as there was to believe in Ma Bell.
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Copyright (C) 1999 CMP Media Inc.