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Microsoft rivals walk fine line

Sun and Netscape are calling for more regulation of Microsoft while simultaneously asking for free rein in their software businesses.

Sun Microsystems and Netscape Communications are walking a fine line in calling for more regulation of Microsoft while simultaneously telling the government to keep its hands off their software businesses.

In testimony before the Senate Judiciary Committee today, chief executives Scott McNealy of Sun and Jim Barksdale of Netscape repeated their requests for enforcement of existing antitrust laws to keep Microsoft from monopolizing the industry.

"I and many others have become increasingly concerned that See special coverage: Face-off Microsoft's abuse of its monopoly power, unless addressed through enforcement of our antitrust laws, will adversely affect the course of American commerce and communications in the Information Age," Barksdale said in prepared remarks.

McNealy echoed that sentiment. "It is critical...that these laws be enforced quickly and decisively to address anticompetitive behavior," he said in his statement.

But both men are also quick to point out that the government should not engage in excessive regulation of the software industry.

"We don't think the outcome of this meeting should result in new legislation or regulation," Barskdale told the Judiciary Committee earlier today. He said such a result ultimately would be "harmful" to the software industry.

"All we're asking for is aggressive, brisk, and current scrutiny" of Microsoft's practices, McNealy said. "We can use the help of the government to enforce the laws of the land."

The comments by the two Microsoft rivals illustrate how they are walking both sides of the rhetorical street. They are beseeching Congress for help, at the same time that they are underscoring that there is no need for further government involvement in their business.

Bob Levy, a senior fellow at the nonpartisan Cato Institute who last month published a paper called "Microsoft and the Browser Wars: Fit to be Tied," stressed this issue about today's hearing: "All the participants took the position, bar none, that no new legislation is needed and that the current antitrust laws can apply in this industry."

Analysts add that any enforcement of antitrust laws against Microsoft has the potential to stymie efforts by other software makers to establish a commanding lead in any particular area of the industry, including Sun and Netscape.

Both companies seem more interested in the short-term gains possible if Microsoft's grip on key markets is loosened by the government, analysts say. Netscape hopes to find some breathing room for its Internet browser and server software in a market increasingly driven by the empire in Redmond, Washington, while Sun hopes that a regulated Microsoft will clear the way for its Java programming language to establish a secure foothold in corporate applications.

But any gain made by Microsoft's competitors may be short-lived if new legislation intended to protect the software industry from a monopoly restricts other companies from establishing a controlling position in the market, according to Stan Dolberg, an analyst with Forrester Research.

"Netscape and Sun are hoping that if they can find a crack in the [Microsoft] facade, they can take advantage of that and worry about the ramifications later," he said. "They want to live to fight another day. If they can loosen Microsoft's grip on operating systems, the technology stack that runs on Windows NT, e-commerce standards, Web browsers, etc., then they feel that they can sort the rest out later."

However, "I don't know how they can distinguish between the areas where they have market clout and those that Microsoft does," Dolberg added. "Companies like Netscape that want to be the consolidation point for industry standards, will be prevented from doing that in the same way that Microsoft will be. So everyone will be prohibited from consolidating and laying the next layer for innovation."

Microsoft's plight has been compared with antitrust issues faced by IBM in the 1980s. Big Blue was eventually forced to unbundle its software from its mainframe hardware.

Microsoft CEO Bill Gates claims that his company has less clout in the market than IBM once had. McNealy, on the other hand, maintains that Microsoft's influence is actually greater because information technology is now a much larger segment of the economy.

Dolberg said any antitrust judgment against Microsoft could have huge ramifications in the software business. "The implications are very broad, especially if the government delves into software engineering."

After the government's decision against IBM in the 1980s, it took the company nearly 12 years to regain a stable market position. A similar ruling against Microsoft might virtually redefine competitive positions in the software business, Dolberg said.

"For Microsoft to reinvent around a new set of dynamics will clearly open the door for competition," he said.

Reuters contributed to this report.