Cringely's latest is interesting ...

[Dave Farber <dave () farber net>]

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From: Randall <rvh40 () INSIGHTBB COM>
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Date: Wed, 13 Nov 2002 15:47:45 -0500
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Subject: <[CYBERIA]> Cringely's latest is interesting ...

http://www.pbs.org/cringely/pulpit/pulpit20021107.html

 NOVEMBER 7, 2002

The True Believer

Can Mike Doyle Do to Microsoft What the Rest of the Computer Industry and
the
Department of Justice Couldn't Do?

By Robert X. Cringely

These are happy days in Redmond, Washington, with Microsoft having defeated,
coopted, or survived the Department of Justice, depending on what side of
the
issue you stand. Microsoft shares are surging, and the future seems bright
with only a few more legal speed bumps in the way. There are the private
anti-trust suits from AOL/Netscape, Sun, and others. There are a few
class-action lawsuits still pending in California, where Microsoft runs
afoul
of a state anti-trust law. And there are the inevitable patent infringement
cases that have dogged Microsoft for years. These latter lawsuits are the
topic of this column.

The only part of the final judgment I like is the part most Microsoft foes
hate the most. Instead of a panel of three outside observers to monitor
Microsoft's compliance with the judgment, the compliance officer will be one
person chosen by Microsoft from its own ranks. While this would appear to be
a matter of having the fox guard the hen house, the judgment specifically
makes the Microsoft board of directors personally responsible for
compliance.
So if the compliance officer, in a moment of weakness, looks the other way
as
Microsoft crushes an opponent in violation of the judgment, Gates, Ballmer,
Shirley and the others will have to pay, personally. I like that.

Two facts emerge from the final judgment issued last week -- that Microsoft
has abused its monopoly and that this judgment makes no effort to deprive
the
company of the fruits of that abuse. This is interesting because the point
of
Federal anti-trust law is two-fold, to prevent or correct abuses and to
deprive from the abusers the benefit -- called the fruit -- of their crimes.
No fruit here. Microsoft pays no fine, gives no rebates, distributes no free
product. The company sits on $40.5 BILLION in cash, at least some of which
can be counted as fruit, and that cash remains intact.

Isn't that odd? You'd think the Bush Administration could use some extra
money
for fighting terrorism or drilling for oil in wildlife refuges or even
paying-down the national debt, but no. Microsoft would have GLADLY paid a
few
billion to receive the very judgment they got last week, so this was a true
missed opportunity on the part of the government. Heck, they could have just
sent the Operation Saddam bill to Redmond, and Bill Gates would have paid
it.

Instead, it is left to the private anti-trust suits to seek damages. These
suits have been "tolled" (lawyerspeak for "delayed") until the Department of
Justice suit was settled, which is now.

Sun wants $1 billion, for example, and some behavioral changes in the way
Microsoft does business. But in the current economic climate, would Sun take
a quick $1 billion and no behavioral changes? They probably would if the
alternative was years of protracted litigation. So too with AOL, a company
that has almost completely subsumed Netscape and could sure use some extra
revenue in the current lousy ad market.

If Microsoft is smart they will quickly settle these suits -- all of the
anti-trust suits -- for cash. I can't imagine that it would cost more than
$5
billion, total, and maybe a lot less. Microsoft gets good PR for coming
clean
and its cash stash drops a bit, helping the company to justify its continued
reluctance to pay a dividend or buy back stock.

Bill Gates once told me that he liked to keep enough money on hand so that
Microsoft could go a full year operating as normal, but with no revenue at
all. Taking Microsoft $32 billion in expected sales for the current fiscal
year and deducting its expected $10 billion in expected profit, that means
it
takes $22 billion to run the store for a year, meaning Microsoft has plenty
of money to pay off its enemies and still hold enough reserves to keep Bill
happy.

All of this depends, of course, on the willingness of the remaining
plaintiffs
to settle for money alone. Most of the parties will do this. Certainly, the
public companies like Sun and AOL would be hard-pressed not to, since
shareholders might view rejecting a billion in cash as acting against their
fiduciary responsibility. The class action suits are generally looking for
money. And Microsoft has a long tradition of quietly paying-off plaintiffs
in
its intellectual property cases.

But what if they won't settle for money? This brings us to Mike Doyle, who
runs tiny Eolas Technology Inc., which controls a patent that covers
embedding plug-ins, applets, scriptlets, or ActiveX Controls into Web pages
-- the use of any algorithm that implements dynamic, bi-directional
communications between an app embedded in a Web page and external
applications. That more or less defines how the World Wide Web is used
today.
As I have written before, Eolas is suing Microsoft for patent infringement,
and has been generally wiping the floor with Redmond. Of course, so did the
DoJ, and look how THAT turned out. The suit comes to trial in the spring and
should be very interesting, not just because of the principles involved, but
also because Mike Doyle and Eolas insist they are looking for more than just
money.

"It would sure be nice for someone to actually consider all of this from our
point of view, rather than MS's," wrote Doyle in a recent message to me. "It
amazes me that everyone just assumes that MS will be able to merely write a
check and make the whole thing go away. What if someone went through the
following, purely theoretical, of course ;-), logical analysis?"

"Is there any practical settlement amount that is worth more to Eolas than a
victory at trial? Considering the facts in the case and the magnitude of the
stakes here, a highly likely outcome is that it will actually go to trial,
and, once it does, that a jury will award us both damages and an injunction.
Injunction is the key word here. That is what patent rights provide: the
power to exclude. What if we were to just say no? Or, what if some other big
player were to acquire or merge with us? What if only one best-of-breed
browser could run embedded plug-ins, applets, ActiveX controls, or anything
like them, and it wasn't IE? How competitive would the other browsers be
without those capabilities? How would that change the current dynamics in
the
Industry?"

"One possible scenario is that Eolas would have the power necessary to
re-establish the browser-as-application-platform as a viable competitor to
Windows. That would be an interesting outcome, wouldn't it? How much would
that be worth? The Web-OS concept, where the browser is the interface to all
interactive apps on the client side, was always a killer idea. It still is.
It lost momentum not because it wasn't economically or technically feasible,
but because MS made it unlikely for anybody but them to make money on the
Web-client side. Therefore, nobody could justify the necessary investment to
take a really-serious shot at it. It doesn't have to be that way, does it?
Just think of how we could use this patent to re-invigorate and expand the
competitive landscape in this recently-moribund industry. What if we could
do
what the DOJ couldn't, and in the process make Eolas and everybody else,
possibly excluding MS, richer? Wouldn't Eolas stand to profit more in such a
scenario than any kind of pre-trial settlement could provide? Wouldn't
everybody else?"

"The last couple of years in IT seem to have convinced people that the
current
status quo will continue indefinitely. They seem to have forgotten what
seemed so obvious as little as three years ago, that change is the only
invariance. That axiom has always proven out in the past, and I'm certain it
will continue to do so in the future."

So will Mike Doyle give in to the Microsoft checkbook or will he opt,
instead,
to change the world of IT as we know it, knocking Microsoft down to size
along the way? And notice how he referred to mergers and investors and being
acquired? What if an IBM or an AOL or some party behind door number three
was
to do exactly that?

As I said, it should be a VERY interesting trial.


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