Does Microsoft need a makeover?

As Judge Jackson ponders a three-way breakup, experts offer the company some PR advice.

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It’s not too late to dream up a new name for Fusion 2000, the “world’s largest gathering of Microsoft business partners,” scheduled to take place in Atlanta this summer. Maybe Fission 2000?

On Wednesday, U.S. District Judge Thomas Penfield Jackson, who is presiding over the antitrust suit, hinted he had been pondering a split-up of the software giant — just not the one that the Department of Justice had suggested in its proposed remedies. “A bisection will in effect create two separate monopolies,” Jackson said, while asking the department’s lawyers why they hadn’t proposed a three-way split, dividing the company into operating system (Windows), applications (Office) and browser (Internet Explorer) divisions.

Jackson then asked the government to refine its proposal for breaking up the company and submit a fresh draft on Friday.

The judge’s orders come on the heels of two filings from Microsoft, both arguing vehemently for Jackson, who found the company guilty of violating antitrust laws, to reject the government’s break-up proposal. So far, Jackson doesn’t seem to be taking Microsoft’s suggestions to heart, but its courtroom troubles don’t seem to be slowing the company’s attempt to put a consumer-friendly spin on itself.

In recent weeks, Microsoft has run TV ads starring chairman Bill Gates talking about how he and his buddies struggled to “harness the power of the PC to improve people’s lives,” and CEO Steve Ballmer promising that the best is yet to come.”



Microsoft is also forging ahead with new products and partnerships, like those announced this week with Time Warner, Simon & Schuster and Barnes & Noble to promote its Microsoft Reader software for reading electronic books. The company even gifted 160 executives, who had come from around the world to join a “CEO Summit” led by Microsoft Chairman Bill Gates in Redmond, Wash., on Wednesday, with Hewlett-Packard Pocket PCs running Reader.

In other words, it appears to be business as usual in Redmond. This, according to Bob Lande, a law professor at the University of Baltimore, is just the kind of behavior that got Microsoft into trouble in the first place. “Don’t do that kind of thing anymore!” he advises Microsoft. “Maybe don’t sign an exclusive agreement [for your Reader software], maybe sign a nonexclusive arrangement instead, so that companies could sign a deal with another operating system, if there is ever one, or a Linux supplier.”

Microsoft, he argues, is arrogantly powering ahead with the idea that it will win on appeal. And they could well win, he says, but the aggressive business behavior “colors things — you don’t want to be doing this stuff during the appeal.”

Even in Wednesday’s proceedings, which Lande observed, Microsoft, he says, continued to weasel its way with complaints that contradict earlier trial testimony. Microsoft offered the opinion, for example, that entry to the operating system market is so difficult that Netscape could never have been able to compete, regardless of Microsoft’s tactics. During the trial, Lande points out, they said the opposite, claiming that creating a new operating system market was as easy as setting up a corner grocery store. “They should at least have a consistent story,” he says.

Bill Gates, Lande says, is still living in a dream world. “He’s been slapped in this face once with the finding of fact, and again with the conclusion of law; he’s gonna be slapped in the face a third time. His problem is that he’s in his own little world, and he has to realize that his world is not the entirety of the universe and it’s time he woke up.”

But not everyone concurs with Lande’s opinion. For others, Microsoft’s combination of hardball in the courtroom and business as usual outside the legal chambers is just what the spin doctor would order.

“Believe it or not, I think that Microsoft has done a good job in terms of its messaging,” says Bill Ryan, chairman of the high-tech public relations firm Niehaus Ryan Wong. “They always talk about ‘at the end of the day, we’re about making technology more friendly and easy to use for the consumer.’”

Julie McHenry, a principal at the public relations firm Wilson McHenry, agrees. “I know that they’re fighting a lot of other sort of distractions and that makes it really tough for them, but I think they’re doing everything they can and need to continue to do everything they can to get the product-oriented messages out to consumers so that the consumer can make informed choices.”

Richard B. McKenzie, a professor of economics and management at the University of California at Irvine and the author of “Trust on Trial: How the Microsoft Case is Reframing the Rules of Competition,” says if he were advising Microsoft on its tactics inside and out of the courtroom, he’d tell Gates and company to “hang tough … I remain skeptical that the judge is going to go with a breakup.” Even if Jackson does mete out the harshest remedy, McKenzie says Microsoft shouldn’t flinch. “I think a breakup is something [Microsoft] can get reversed. They can argue that it’s anti-competitive; that the integration of the browser and the operating system is something that the appellate court has already agreed was within its right.”

While it’s not clear that Microsoft will be able to keep marrying its technologies together, perhaps it’s not a bad idea to carry on with the “Fusion” celebration. For now, perhaps the best the company can do is come clean about what it is and where it’s headed and why anyone would want to come along for the ride.

“Brands are either needed, loved or feared,” adds Ryan. “I think that Microsoft is a needed brand and they have to act like one. They have to continue to communicate why they are needed and that … it’s OK to be needed. You don’t have to be loved. I will still suggest that they should be as aggressive as they are in this whole lawsuit — why shouldn’t you be aggressive? — be aggressive until they force you to stop being aggressive. That’s being good at business.”

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