Bad Boy Ballmer - Fredric Maxwell by Must Read Summaries

Author:Must Read Summaries
Language: eng
Format: epub
Publisher: Primento Publishing

Fifth chapter

In 1991, the Federal Trade Commission opened a formal investigation into Microsoft’s business dealings. It was suspected the company had acted in collusion with IBM to manipulate the operating system software market. The FTC was also acting on a complaint filed by Sun Microsystems, Novell and others who alleged Microsoft’s business practice of charging the computer original equipment manufacturers a royalty for each unit they shipped (regardless of whether or not it used Microsoft system software) was anticompetitive.

After investigating the complaint for more than three years, the FTC declined to file suit against Microsoft. During that time, however, the landscape had changed quite considerably. In late 1993, Steve Ballmer (now executive vice-president for sales and marketing for Microsoft) had attended a meeting of the Harvard Board of Overseers. (This was the governing body which ran Harvard. Steve Ballmer was elected to the board in 1992). He noted that all the students at Harvard were abuzz about something called “the Internet”. Years before, Bill Gates had dismissed the Internet as being completely irrelevant. Ballmer revisited the issue, and talked with other executives whether this wouldn’t be worth a second look.

When Microsoft eventually did decide to go the Internet route, they found there was already a well established company there in a dominant competitive position – Netscape run by Jim Clark and Marc Andreessen.

“Microsoft’s response to the Netscape threat was its usual ‘let’s be partners/we’re thinking about buying you’ approach, which it had taken with Novell and others. At the same time, Microsoft was plotting to ‘cut off their air supply’, as infamous testimony at the subsequent antitrust trial would reveal. The strategy was that, by integrating an Internet search engine into the Windows operating system, Microsoft would give its product away for free. But Microsoft would be in charge of how you entered the Internet, guiding you to as many Microsoft-friendly Web sites as possible. And Netscape would go broke. The technical term is bundling. If you want Windows, you have to take our search engine. Ballmer was well aware that IBM had been prevented from bundling and had signed a consent decree with the government promising not to. In fact, the move created the independent packaged software industry in 1968, eventually giving birth to companies such as Microsoft. Simply put, if you’ve got a monopoly in one area, you can’t use that monopoly to force a consumer to buy another product in another area. What was Microsoft thinking? It was simple doing what it has always done, protect its raging revenue river, which by now was over ten billion dollars a year.”

– Fredric Maxwell

This antitrust complaint would ultimately be settled by a consent decree under which Microsoft agreed to change the way it charged computer manufacturers for their operating system software. This decree was signed off by federal judge Thomas Penfield Jackson three days before Microsoft shipped Windows 95 on August 24, 1995. The Windows 95 launch was an incredible success for Microsoft, turning the mere release of a software upgrade into a news event.

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