Suits could lead to NT, Office

Microsoft chairman and CEO Bill Gates said there could be broader implications for his company's remaining software products under the principles used by the Justice Department and several states in filing action against the firm.

Specifically, based on the parameters of the historic lawsuits, Gates said that action against other elements of the company's business beyond Windows 98 could not be ruled out, including the company's Windows NT operating system.

The 20 states involved in the action have already singled out the licensing practices for the company's Office suite of desktop productivity applications in today's filing.

This could lead federal and state regulators to Microsoft's fast-growing Windows NT Workstation and Server operating systems, two corporate-focused products that do not hold a dominant position in the market but could form the crux of a "nip it in the bud" antitrust strategy. The workstation and server components of NT are not included in the legal action.

"Their basic principle that we shouldn't be able to put in new functionality, including in particular their disagreement with our design of putting the browser into the operating system-?that's a very broad set of things that obviously would affect all the different forms of Windows," Gates said at a press conference in Redmond, Washington.

"I think the lawsuit specifically speaks to Windows 98, but the principles they have in mind would stop all advances in all forms of Windows," he said.

One state official has already pointed to NT as another possible component of legal activity, as reported last week by CNET's NEWS.COM.

Bill Neukom, Microsoft's senior vice president for law and corporate affairs, was quick to add at the press conference that the current litigation focused "entirely on Windows 98 at this point."

The states' complaint differs from the Justice Department's action in that it takes aim at Microsoft Office, as well as the company's bundling of the Internet Explorer Web browser with its forthcoming Windows 98 consumer operating system.

Office is a suite of programs that includes word processing, spreadsheet, and calendar software. The states' filing claims Microsoft makes it "economically impractical" for computer makers to license other so-called office productivity programs.

Office remains the primary cash cow for Microsoft, but the company is placing a huge bet on NT as the driver of future profits.

Windows NT Workstation shipments grew more than 80 percent for 1997, while Unix-based workstation sales declined, according to market researcher International Data Corporation. The firm expects NT Workstation to experience an annual growth rate of 40 percent through 2001.

At a workstation-focused event in March, Gates made his expectations for NT workstation clear: "Over time NT will totally dominate the business desktop," he said.

The server version of NT continues to make gains in the marketplace, outselling all other server-based operating systems in 1997, according to IDC. But the nature of server-based software and Microsoft's nascent campaign to take the operating system into all corners of corporate America could make it an unlikely target for regulators, according to observers, even though the company uses similar bundling practices such as offering a Web server for free with every copy of NT.