Even More on: Microsoft on the Trail of Google

[David Farber <dave () farber net>]

Begin forwarded message:

From: Barry Ritholtz <ritholtz () optonline net>
Date: July 9, 2004 9:28:09 AM EDT
To: dave () farber net
Subject: Re: [IP] Even More on: Microsoft on the Trail of Google

Hey Dave,

Everyone seems to be missing the obvious point:

Microsoft has a monopoly on the desktop -- and because of that, there 
are certain behaviors they are legally restricted from engaging in (at 
least, in legal theory). Microsoft should not be able to disadvantage 
competitors by leveraging that monopoly in a way that restricts 
competition.

Search is a perfect example:  By setting the default to MSN search, and 
making it extremely awkward to change it, they automatically become one 
of the top 3 players in that space. What would take any other company 
billions of dollars to do, they get for, oh, about nothing.

Does that encourage or discourage competition? Apologists say it 
encourages it, but I find it hard to see how a dominant company 
automatically becoming the #3 player this way encourages Capital 
Investment. While there are many many other search players with great 
technology, why is it they are denied the #3 spot as a matter of right?

There is a reason these firms are underfunded:  I remember sitting on 
some Venture Capital committees in the mid 90s -- nearly every software 
firm I looked at, at some meeting, someone would say  "What's to stop 
Microsoft from building a similar functionality into their OS?" And 
that would pretty much torpedo that firm's funding. (I'm sure plenty of 
IPers had similar experiences)

In my opinion, a large part of the internet explosion was a function of 
all this pent up enthusiasm -- both Capital Investment and R&D -- 
finally breaking out from under the shadow of Microsoft.

That's right, I am -- indirectly -- placing some of the blame for the 
internet bubble at  Microsoft's feet.

And, it only gets worse. Google is a perfect example:  What happens 
when an MSN search bar is built into every window, app or utility on 
Longhorn? There would not be a need to ever go to Google -- or any 
other search firm via a web browser -- because Microsoft will have 
built into Windows that usability. Their search doesn't have to be 
great -- Hell, it merely needs to be adequate -- and Google is toast.

So much for encouraging competition.

The world's least innovative -- but most relentless -- software company 
can imitate the interface, or ape the algorithms, but that doesn't 
matter much. What Microsoft does so well is sandpaper away the 
competition by gradually turning their own buggy and insecure code into 
a very usable piece of software -- over time. By version 5.0, any 
Microsoft product based upon someoneelse's innovations is a usable and 
often dominant app.

Sitting on a massive pile of cash -- their $70 billion pile (cash and 
ST investments) is more than any other company on the planet -- they 
can afford to wait. Eventually, they will own yet another market. (Its 
one of the reason I own and have rec'd the stock, despite disliking 
their methodology. I hate to admit it, but its a fiercely successful 
strategy)

That's the power of a monopoly: By tying their existing dominance into 
other spaces, they can extend into these other quasi-related areas. 
That's why the DoJ settlement was so pathetic, and why the EU is so 
determined to stop MSFT's foray into media players.

Google is on the short list of companies scheduled for eventual 
"Netscaping."  So far, Yahoo and Intuit have escaped that fate. I'm 
sure the IPers can think of a few others that have survived and died at 
the hands of this monopolists . . .


Barry L. Ritholtz
Market Strategist
Maxim Group
britholtz () maximgrp com
(212) 895-3614
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
How Microsoft plans to destroy Google
http://bigpicture.typepad.com/comments/2004/07/micorosft_chasi.html



On Friday, July 9, 2004, at 08:20  AM, David Farber wrote:

> Begin forwarded message:
>
> From: Christian Huitema <huitema () windows microsoft com>
> Date: July 8, 2004 11:25:55 PM EDT
> To: dave () farber net, ip () v2 listbox com
> Subject: RE: [IP] More on: Microsoft on the Trail of Google (typo 
> fixed)
>
> The assertion that "There's no way to pick an alternative search engine
> which you might prefer, such as Google" is incorrect. The Microsoft
> Knowledge Base Article 198279 documents "How to change the default
> AutoSearch search page"
> (http://support.microsoft.com/default.aspx?scid=kb;en-us;198279). The
> procedure documented in the article involves editing a registry key,
> which is hard for the common user, but which can be implemented easily
> when an ISP is customizing IE for its customers. Users can also 
> download
> a "toolbar".
>
> -- Christian Huitema
>
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