The week in review: Courting Microsoft

No stranger to the courtroom, the software giant finds itself embroiled in a barrage of legal filings related to its antitrust woes, but that doesn't mean it's taking it lying down.

Steven Musil
Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
Expertise I have more than 30 years' experience in journalism in the heart of the Silicon Valley.
4 min read
No stranger to the courtroom, Microsoft found itself embroiled in a barrage of legal filings related to its antitrust woes, but that doesn't mean the software giant took it lying down.

The first salvo was fired by Netscape Communications, which sued Microsoft, claiming that the software giant's business practices crushed the onetime upstart's Internet browser. The lawsuit is based on previous court findings that Microsoft's business practices amid the infamous browser wars of the 1990s violated two sections of the 1890 Sherman Antitrust Act.

Netscape, which was acquired by AOL in 1999, is seeking an injunction that could include forcing Microsoft to sell a stripped-down operating system that does not include a browser. In some ways, the Netscape lawsuit is trying to achieve what the government failed to do at trial: proving Microsoft tried to extend its Windows monopoly to the browser market.

Microsoft responded by filing a legal brief alleging that rival AOL Time Warner is not supplying information subpoenaed as part of a discovery process for a March 11 hearing in the ongoing antitrust case against the Redmond, Wash. behemoth.

AOL asked the court for the opportunity to file on Jan. 29 a legal brief responding to Microsoft's allegations. Microsoft would have until Feb. 1 to file a response. Hours later, Microsoft shot back with a tersely worded legal brief of its own.

"Counsel for Microsoft will not dignify the misrepresentations in AOL's reply unless and until the court indicates a desire to receive such a reply," the document stated.

High-tech industry lobbyists issued a collective yawn after Netscape filed its lawsuit. Some industry leaders said they had been expecting the lawsuit since November 1999, when U.S. District Judge Thomas Penfield Jackson issued a "findings of fact" that came down harshly against Microsoft's business practices.

Layoffs mark earnings season
As earnings season continued, PC maker Gateway confirmed a steep drop in fourth-quarter sales, announced more job cuts and store closures, and said it would reduce PC prices. The company is cutting 2,250 jobs, or more than 15 percent of its remaining work force and will close 19 under-performing stores.

Gateway also said it will try to improve sales and gain market share through more aggressive pricing on its PCs. As a result, the company said, it expects to post losses, excluding charges and taxes, for the next several quarters.

The announcement was a bitter homecoming for CEO Ted Waitt. Since his return in January 2001, Gateway has lost U.S. market share in PC sales, revenue has continued to decline, and the company's stock price has fallen nearly 70 percent. Meanwhile, the tech-heavy Nasdaq has declined 30 percent, and competitor Dell Computer is slightly up.

Although many of its problems can be blamed on the overall economic slowdown, Gateway has been hit much harder than other PC makers--so much so that some Wall Street analysts give the company only a 50-50 chance of survival.

Also looking to cut more jobs is EMC, which saw its fourth-quarter net loss widen from a year ago. The storage maker said it had reduced staff from a peak of 24,500 down to 20,140 in the fourth quarter, adding that it plans to reach 19,000 by mid-2002.

"Expect us to squeeze out more costs," CEO Joe Tucci said.

However, a relic of the recessions of the 1970s and '80s may help some of the laid-off techies of today. The Worker Adjustment and Retraining Notification Act, which requires companies to give employees 60 days notice before mass layoffs or a plant closing, was originally intended to help blue-collar workers deal with plant shutdowns. Now laid-off tech workers are finding out that it can apply to them as well, and they're taking action.

The Net cost
The trend toward fewer freebies on the Internet continued as Yahoo unveiled a pay-per-view search product, the latest in a string of premium services aimed at offsetting a sharp decline in the company's online advertising. The service, dubbed "Yahoo Premium Document Search," is designed to expand on a previous agreement with search technology provider Northern Light Technology.

Even file-swapping company Aimster is looking to turn free users into paying customers. Aimster founder Johnny Deep transferred the Aimster name to America Online last week and re-branded the company Madster.com

Madster remains free, but the company has added a subscription service that offers features such as better connectivity and recommendations from other members. Despite handing over the Aimster name, the company is still caught in legal struggles with trade groups for the movie industry, recording industry and music publishers, which have filed separate lawsuits alleging the file-swapping company violated their copyrights.

Bucking the trend is Amazon.com. On the same day it reported its first-ever net profit, the company announced that it would extend permanently its holiday season offer of free shipping for orders of $99 or more.

Free shipping is second only to coupons in terms of what lures shoppers, according to the operator of Fatwallet.com, a community site dedicated to online bargain hunters. Though the Amazon program is certainly attractive to consumers, it could end up costing a lot in the long run, analysts said.

Also of note
Verizon Wireless plans to launch commercial service on its next-generation phone network as early as next week, according to sources close to the company...High-speed Internet access on airplanes is becoming the latest victim of the economic malaise and the attacks of Sept. 11...David Woodley Packard has re-entered the debate over the proposed merger between Hewlett-Packard and Compaq Computer, accusing HP of misusing his father's words as part of an effort to promote the deal...Meanwhile, one of HP's largest institutional investors threw its support behind the planned acquisition of Compaq...The case of the alleged eBay hacker took another twist when the former Los Alamos National Laboratory employee asked to have his lawyer back just hours after dismissing her...Strong demand for Apple Computer's new top-of-the-line iMac means a longer wait for prospective buyers...The Southern California city of Garden Grove has imposed restrictions on cybercafes, hoping to quell real-life violence that has mirrored the virtual mayhem depicted in computer games played in the cafes.

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