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The week in review: Microsoft at a loss

A federal judge predictably rules that Microsoft is an anti-competitive monopolist, but the antitrust trial's endgame is far from apparent.

A federal judge predictably ruled that Microsoft is an anti-competitive monopolist, but the antitrust trial's endgame is far from apparent.

Building on last November's findings of fact, Judge Thomas Penfield Jackson concluded that the giant aggressively used harsh and illegal means to preserve its Windows operating system franchise and to drive rival Netscape from the browser market. Although the judge will level penalties within 60 days, Microsoft said it will appeal; the company said the software market is very different from the time when the antitrust case was opened.

The meaning of monopoly
Microsoft's week began with the collapse of settlement talks with the Justice Department and 19 states. Negotiations failed after the mediator concluded that the states' demands were irreconcilable with Microsoft's offer.

On Monday, Microsoft's shares promptly fell more than 14 percent. The next day, Jackson issued a strongly worded ruling largely favoring the government's case. The decision sent the markets spiraling downward.

Jackson then surprised both the government and Microsoft by calling for an expedited, 60-day schedule to establish "remedies," or penalties. Chances of a breakup were rated at 10 percent or less.

Of course, the ruling raises the prospect that the software giant may temper plans to add new features to Windows, such as deeper security, instant messaging and voice recognition. But experts don't expect the company to retreat from its position that innovation is central to its business.

On Wednesday, Microsoft chairman Bill Gates breezed into Washington for a prearranged visit to the White House. After Gates spoke with Republican lawmakers, congressional leaders promised to probe the government's prosecution.

For all that, Microsoft's legal troubles may be mounting. Sun Microsystems is mulling a private lawsuit, as are some 115 other parties, which could expose Microsoft to more than $7 billion in damages.

Sun Microsystems' next-generation server computers may arrive later than the company had hoped. Any delays could mean lost sales in a competitive market that provides the lion's share of Sun?s revenue and profits.

Dell launched an array of services and programs--including business consulting services, venture funding and business incubation--designed to reinvent the company as a provider of Internet infrastructure. The company made its mark by pioneering sales of computers directly to consumers and businesses. Separately, Dell joined American Airlines in a program to make virtually free PCs available to American's employees.

America Online unveiled a new version of its Netscape browser software and announced Gateway will sell specialized Internet appliances featuring the program. But AOL initially said it will continue using Microsoft's rival Internet Explorer on its proprietary network. Meanwhile, almost half a million Netscape WebMail customers were forced to change their email usernames as part of an upgrade, and a software bug shut some people out of their email entirely.

Hewlett-Packard and Intel have begun shipping Oracle's long-delayed database server appliance, and Fujitsu Siemens Computers, Compaq and Dell are not far behind. The much-touted "Raw Iron" product is an all-in-one system featuring a database, processor and parts of Sun's Solaris operating system, and does not depend on Microsoft technology.

Wonders never cease
BellSouth and SBC Communications will combine their wireless phone businesses, a venture that could create the second-largest player in the U.S. wireless market. The merger comes shortly after rival telecommunication giants Bell Atlantic and Vodafone completed their joint venture, Verizon Wireless, and announced plans to go public.

Companies such as Yahoo,, Microsoft and AOL are moving quickly into the wireless Internet world, cutting valuable deals with the mobile phone companies that control the screen space on cell phones. When these giants hit technology roadblocks, they're buying up the wireless start-ups that have the know-how they need, using their high-flying stocks as currency.

Sega will begin offering rebates equal to the price of its Dreamcast game console to customers who sign up for its new SegaNet Internet service. As prices for high-end hardware such as PCs and expensive service contracts have migrated to the lowest end of the price spectrum--free--Internet appliance manufacturers and service providers have struggled to settle on pricing that will both attract subscribers and make money.

Days after the Broadband Digital Group launched its service, Microsoft's MSN dial-up Internet access service said it will offer six months for free. Monthly fee dial-up ISPs have found themselves sandwiched between increasingly popular free ISPs and broadband Net access providers.

Also of note
A federal appeals court cleared the way for a law professor to post previously banned encryption software on the Internet, finding that computer code qualifies as speech protected by the First Amendment ... MCI WorldCom's Internet unit UUNet extended its agreement to manage a significant portion of AOLnet and provide the interactive services giant with dial-up services on its dial access network ... Software maker BE said that more than 550,000 copies of BeOS 5 have been downloaded since the free PC operating system became available a week ago.