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Envisioning life after Windows

Now that the software giant may be broken in two, Silicon Valley veterans are contemplating a high-tech world in which Microsoft is not the dominant force.

For years, aspiring entrepreneurs had two fundamental goals when starting a high-tech company: raising money and steering clear of Bill Gates' empire.

Now that the company may be broken in two, Silicon Valley veterans and just about anyone else who has encountered the software monolith are contemplating something never thought possible--life after Microsoft.

"I don't think anybody believes they're going to dominate the next wave of computing," said Ron Palmeri, a longtime Novell executive and co-founder of an unannounced San Francisco Bay Area start-up called Parachute. "The huge overhang Microsoft had a few years ago is kind of disappearing."

No one, of course, expects the Windows empire to fade into obscurity overnight. Many have judged the government's proposed division of Microsoft as insufficient to undo the company's dominance in operating systems for personal computers, where it maintains an overwhelming market share.

But even without the proposed breakup, executives and analysts say Microsoft's invincible reputation eventually could be dulled by use of applications through Web services, growth of Net devices other than personal computers, and a new breed of executives not intimidated by the software company's imperial past.

At first, the shift may be largely psychological--but that could be just as damning as reality for Microsoft, where perception alone has become a potent competitive weapon. The fear of becoming another casualty of the Windows juggernaut has shaped the strategies of many companies that have witnessed the fate of Apple Computer, Netscape Communications and other high-profile adversaries.

"It made it very difficult for a company building an alternative standard," said Atri Chatterjee, vice president of product management at direct-marketing firm Responsys.com and a former executive at Netscape and Go, an early 1990s company that hoped to seed the industry with handwriting recognition devices. "It was almost a death knell."

A breakup would abruptly halt Microsoft's transition from a software maker Special coverage: Breakup to an Internet company, a Herculean task that began with sweeping institutional changes in 1995 before the Web became a household medium. Anticipating today's ruling, Microsoft postponed a major conference where it was to outline plans to expand beyond its mainstay desktop PC presence with a new Web services initiative.

Much of the industry's largest growth is projected for technologies that have evolved well beyond the desktop PC software that has formed the core of Microsoft's business. And as people get onto the Internet through TV boxes, digital phones, handheld computers and other alternatives to the PC, technological development and related dollars are flowing away from the Windows-dominated desktop.

Chief executive Alain Rossman see full text of Judge's final rulingof Phone.com, today's leading producer of software that allows mobile phones to connect to the Internet, plays down the software giant as a genuinely dangerous competitor. Although he would "never dismiss" any large company, Rossman noted that Microsoft has no track record in the Net phone arena.

Other, perhaps younger, Web upstarts show even less concern. For example, phenomena like Napster, which blend social movements with capitalist interests, are inspiring an entire generation of entrepreneurs never touched by the strong arm of Microsoft.

"There is an opening to think outside the box online," said one representative of a software industry association. "The people who can do that in nontraditional ways, at least in the beginning, will succeed."

Like auction leader eBay, these kinds of companies have grown out of the type of global community that can exist only on the Internet. It is here where a post-breakup Microsoft may encounter some of its most daunting challenges, having far less control than in the hegemonic world of Windows.

The convergence of old media and the Web will present more obstacles with the creation of new markets and competition. As Microsoft is broken up, America Online and Time Warner are conversely allaying fears concerning their merger, which could result in a powerhouse whose scope is unrivaled online or off.

"The Internet has made the software battle less relevant," Chatterjee said.

AOL and Time Warner are not the only companies in this brave new world that are actively trying to keep Microsoft off their turf as the computer, entertainment and communications terrains increasingly overlap. That leaves the door open for Web services companies like Razorfish--which, unlike Microsoft, work to promote the branding of their clients before its own.


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"We create the brand identity for all the major television networks and a lot of the show packaging that goes on say (the sitcom) 'Friends' or NBC or MSNBC, Court TV or PBS, or ESPN's X-Games--all the graphic identity," Razorfish chief executive Jeff Dachis said in an interview earlier this year. "The way those shows look and the way those shows will be translated onto PCs, TVs and PalmPilots and cell phones--we'll be responsible for that."

Even before the breakup was proposed, some said the legal controversies encouraged uncharacteristic restraint throughout Microsoft's corporate compound at Redmond, Wash. Sources there say the aggressive business practices that were legendary at the software giant were blunted by antitrust concerns.

Although Gates and chief executive Steve Ballmer have told the rank and file not to overreact to these legal questions, those inside the company say a self-policing attitude has begun to take root where none existed before.

"It absolutely had a chilling effect. It was an overcompensation thing, like being the child of the teacher in the class--you had to do twice as much," one former Microsoft executive said. "It was more of a subtext than it was formal. There were certain lines we weren't crossing."

If that chilling effect grows colder still, it could embolden partners that have long been forced to do business on terms dictated by Microsoft.

See MS-DOJ timeline One former Gateway executive said the Windows-Intel duopoly, commonly known as "Wintel," could face increased challenges as it attempts to keep the PC relevant in the Internet age. "Now (the PC) isn't really helping us get to the next stage," said Anil Arora, now chief executive at Yodlee, a Web aggregator of information.

"What I've seen is more of an attitude change than anything else," Arora said. "Maybe the time is right to diversify."

News.com's John Borland contributed to this report.