First, there are the hard-liners, like former Netscape CEO Jim Barksdale, who are gleeful that the Redmond, Wash., giant got a generous helping of just desserts. Barksdale says big tech companies like Gateway and AOL, which remained largely silent last week, are unabashedly behind splitting Microsoft into two. “My friends who run those companies,” he says, “pat me on the back and say we’re sure glad you’re out there fighting this war.”
Then there are the more loquacious lot that groan about government intrusion. Outside the National Press Club in Washington, D.C., last week, Compaq CEO Michael Capellas damned the verdict and said it would make it more difficult to provide consumers with simple, integrated packages of hardware and software: “I’m against breaking up Microsoft; it makes collaboration harder.” David Ditzel, CEO of chip company Transmeta–which competes against Microsoft’s brother in arms, Intel–agreed, and said Reno & Co. remind him of… Fidel Castro: “There was rich and poor and [Castro] made everyone equal. That’s kind of what’s going on here.”
So when NEWSWEEK surveyed dozens of Microsoft friends and foes last week, asking what life with two Baby Bills would actually be like, responses were, not surprisingly, wide-ranging. Some said the brave new world would be no different from the cowardly old one, because the Internet has already taken a chunk out of Microsoft’s armor, relegating it to being just another tech company scrambling to remake itself for the age of mobile devices and ubiquitous Net access. Meanwhile, Microsoft’s competitors, like Sun Microsystems, said that the playing field would be leveled but conceded that a divided Microsoft might make for even fiercer competition. Finally, there were entrepreneurs like Shervin Pishevar, CEO of Columbia, Md.-based WebOS, who says the ruling will open up new possibilities for start-ups that often had to avoid Microsoft’s field of vision. Pishevar calls Judge Jackson “the Moses of entrepreneurs. He split the waters in two.” Others weren’t as momentous, but spun their own visions of the future. A sample:
Opening up: Bob Young is in the camp that thinks the main reverberations of last week’s verdict have already been felt. The CEO of Red Hat, a producer of the open-source Linux operating system, points to his company’s successful pre-IPO funding, with investments by high-profile Microsoft partners like Dell, Compaq and IBM. “Arguably that would have been a very difficult partnership to put together in the days when Microsoft was free to threaten and otherwise pressure companies,” he says. In other words, the government scrutiny has itself been the main factor changing the environment for upstarts that threaten Microsoft’s dominance. But Young also looks ahead to a world with two Microsofts. He thinks that a separate applications company would be more eager to make Linux versions of programs like Word and PowerPoint, since it will no longer be protecting its Windows market share.
Energized Baby Bills: But there’s another vision of the future that–for nerds in the Valley, at least–may evoke Obi-Wan Kenobi in “Star Wars”: “If you strike me down, I shall become more powerful than you can possibly imagine.” In other words, a divided Microsoft may be stronger than a unified one. Take the mobile computing space. Microsoft has been adamant about making software for proliferating devices like Pocket PCs and Web pads based on its Windows CE operating system, widely thought to be unwieldy. As a result, start-ups like Phone.com, which makes software for mobile phones, are far ahead in these burgeoning markets. But as Phone.com CEO Alain Rossmann concedes, a separated applications company, free from the Windows burden, may become a much more innovative and nimble competitor. On the other hand, he says, “this is a kind of fair competition we are very comfortable with.”
Start-up society: Nowhere is there more excitement–and uncertainty–about the possibility of a breakup than in the vibrant community of entrepreneurs and venture capitalists. True, most VCs think that the main zone of Microsoft’s dominance, the desktop, is already overfarmed land, and that a breakup won’t lead to newly funded companies selling, say, another word processor. But some see new opportunities for Web-based applications that compete with programs like Office, and for “middleware,” technology such as Java that works on all platforms and theoretically makes the OS irrelevant. Historically, Microsoft has seen both of these sectors as a threat to its core businesses.
WebOS’s Pishevar, whose company has 30 employees and is building programs that run solely on the Web and will compete with Office, is riding the wave of that new interest. The ruling, he says, “opens up the path for a lot of entrepreneurs with alternative technologies that can gain a lot of traction in the next 12 months.” Others say the effects of a divided Microsoft will be subtler, and are already being felt. Prospective investors used to weigh each and every business plan against Microsoft’s next move, fearful of getting in the software giant’s way. Alex Edelstein, CEO of 11-employee start-up Viralon, says that doesn’t happen anymore. “No one that has seen our plan,” he says, “has raised the issue of a Microsoft threat.”
Of course, for every opinion on what the new world will look like, there are two others that contradict it. By the end of last week, there was only one emerging strain of consensus on the verdict: enough already. “Everybody has moved on,” says Valley watcher Paul Saffo. “The general impact has already been felt.” Venture capitalist Janice Roberts of the Mayfield Fund chimes in, “I don’t know that a lot of people honestly care whether they are broken up or not.” Irrelevance–for Microsoft, that may be the scariest outcome yet.
