Commentary: School's out for Microsoft

By David Smith, Gartner Analyst

November 20, 2001, was a good day for Microsoft. Despite objections from Apple Computer, the software giant was apparently going to be able to settle more than 100 private antitrust lawsuits--without having to admit any wrongdoing--by giving away $1 billion in cash, software and services to the nation's poorest schools.

But last Friday was not such a good day for Microsoft. A federal judge in Baltimore threw the deal out.

The settlement was an interesting proposal, seemingly making lemonade out of lemons. But perhaps it was always going to be too good to be true. U.S. District Judge

	See news story: Judge tosses Microsoft schools settlement

J. Fredrick Motz threw the deal out for several reasons, but mainly because he thought that the deal, arising out of the antitrust cases against Microsoft, was itself anti-competitive. He also hinted very strongly that the $1 billion was nowhere near enough money.

Microsoft had been gaining legal momentum for some time with its wins and clever strategies, but this latest setback, the second in a week, will take a lot of wind out of its sails.

Last Monday in a separate antitrust case, U.S. District Judge Colleen Kollar-Kotelly said no to a request that would have delayed a remedy hearing by four months. In November, the Justice Department and nine out of 18 states had settled with Microsoft, but nine other states and the District of Columbia didn't, leading to the March hearing that will now go ahead as scheduled.

Judge Motz's decision shouldn't be seen as surprising. Complaints from Apple about predatory pricing and unfair erosion of its position in the education marketplace have picked up a fair amount of support in the industry. Moreover, the deal was not consistent with the intent of the original lawsuits or antitrust laws.

While Microsoft might be bowed on this, it's not beaten. With the $1 billion school deal all but dead--there being little likelihood Microsoft will appeal against the finding--Microsoft will lose out with the disappearance of some golden public relations opportunities. But in the long term, the raft of antitrust lawsuits dogging it will be settled and business will continue.

And the effect of all of this on customer strategies? Absolutely none.

(For a related commentary on the original Microsoft settlement proposal in November, see Gartner.com.)

Entire contents, Copyright © 2002 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.