MICROSOFT CORP. Software giant remains at the top

Microsoft continues as if it's immune to depression in the computer industry.
WASHINGTON POST
Most technology firms haven't had to spend the past five years in court with the federal government. But Microsoft Corp.'s legal odyssey -- a big chapter of which seems complete with the recent court approval of a proposed antitrust settlement -- doesn't seem to have weighed it down a bit.
While many of the Redmond, Wash., software developer's primary customers -- computer manufacturers that sell millions of copies of Windows a year with new PCs -- had to stage serial layoffs, Microsoft continues to remain largely immune to the industry depression.
"I wouldn't say they're living large, but they're doing a lot better than the rest of the industry," said Roger Kay, an analyst with research firm IDC.
Exceeding expectations
Microsoft's dominant market share in operating systems has yet to be seriously challenged, and the company continues to pursue new markets for the Windows operating system. This fall, for example, marks the debut of two new versions of Windows: Media Center, to go with a hybrid television, stereo and computer, and the Tablet PC operating system for inclusion on a clipboard-like device with a touch-sensitive screen.
"There are at least three generations of analysts who have gone to their graves predicting the end of Microsoft's monopoly, and, of course, so far they've all been wrong," said Paul Saffo, a director of the Institute for the Future think tank in Menlo Park, Calif.
Some analysts point out that Microsoft no longer seems as eager to integrate Web programs and other applications into Windows -- the sort of behavior that won the company the attention of the federal government four years ago.
"Microsoft is clearly being less aggressive in trying to build application layers into next-generation operating systems," said Tim Bajarin, president of Creative Strategies, a research firm in Campbell, Calif.
Loss of trust
Other industry watchers say the antitrust case tarnished Microsoft's image, changing the willingness of other companies to ally themselves with it.
"I think that, more than anything else, it has affected Microsoft's reputation among partners and potential partners," said Matt Rosoff, an analyst with Directions on Microsoft, a Kirkland, Wash., research firm. "I think that this has hampered the ability for Microsoft to find partners in some areas." Rosoff sees evidence for this in the failure of Microsoft's .Net My Services program to gain major third-party support.
The idea behind My Services enabled Microsoft to store a consumer's information, from credit card numbers to address book entries, for more convenient online shopping. Other companies would team up with the company to sponsor the service.
But after the revelations about Microsoft's aggressive business tactics during the four-year antitrust saga, the program is in stasis, according to Rosoff. "A lot of business partners didn't understand why they should trust Microsoft with their customers' data," he explained.
Even in Microsoft's traditional areas of dominance, small cracks appeared. Where consumers once would never choose anything but Microsoft, a willingness now exists to explore other, cheaper options.
Other companies advancing
Take Microsoft's biggest moneymaker, for example: its Office productivity software. A few years ago, it was difficult to buy a computer that didn't come with Office or Works, a cheaper, home-oriented productivity package. Now Dell Computer Corp., Gateway Inc., Hewlett-Packard Co. and Sony Corp. offer Corel Corp.'s WordPerfect software instead of Microsoft Word on certain computers.
Corel's attracts computer makers and consumers because the Canadian software maker's goods cost less than similar products from Microsoft. But many think Microsoft's biggest challenge comes from the "open source" movement -- in particular, from the Linux operating system. Open-source software is free for anyone to use and revise, which proponents say means faster development and fewer bugs.
International Business Machines Corp. has pushed Linux, investing $1 billion in 2001 to promote, support and develop the operating system as part of its vision of computing as a cheap, ubiquitous commodity. Companies such as Boeing Co., Amazon.com Inc., DreamWorks SKG and search engine company Google Inc. have recently adopted Linux in important parts of their operations. The governments of China, Germany and about two dozen other countries, by a recent count, use Linux or considering its use.