What happened?
A federal judge issued a temporary order Thursday that Microsoft must stop forcing computer manufacturers to include Microsoft's Web browser, Internet Explorer, whenever they install Windows 95 on a new computer. He did not impose the $1 million-a-day fines asked for by the U.S. Department of Justice when it brought its complaint against Microsoft in October.
The background
Back in 1995, Microsoft reached a settlement, or consent decree, with federal antitrust lawyers that restrained the company from using its dominance of the PC operating-system market to help it gain monopolies in markets for other products. In October, the Justice Department charged that Microsoft was violating that settlement by intimidating computer makers, refusing them licenses to Windows 95 if they wished to install the competing Netscape browser in place of Microsoft's Internet Explorer.
The 1995 consent decree did provide a loophole for Microsoft to continue to "integrate" new functions into the Windows operating system. At issue in the current dispute is whether the IE browser is an integral part of Windows 95 or a separate product. Microsoft has already announced its plans to knit IE tightly into its new Windows 98 operating system, scheduled for a June 1998 release.
Who wins, who loses?
This is clearly not a happy development for Microsoft, no matter how hard the company tries to put a positive spin on the news ("We're pleased Judge Jackson has agreed with Microsoft that more facts are necessary," a spokesman told CNet). The ruling very specifically applies not only to Windows 95 but to "any successor version thereof" -- which sure sounds like Microsoft will have to rethink Windows 98.
Some analysts are suggesting Microsoft may have to produce two versions of Win98 -- one with the browser, whose "seamless integration" into the operating system has been so heavily touted as Win98's central innovation, and one without it. Though it's hard to see why anyone would want the "un-bundled" version of Win98 -- Microsoft is unlikely to offer a discount for those not opting for Internet Explorer! -- the requirement to make it available could at the least cause delays and confusion as Microsoft tries to explain this mess to users.
Netscape and its partisans are encouraged but certainly have no cause to break out the champagne yet. The real winners are Justice's lawyers, whose initial foray against Microsoft was greeted with arrogant disdain by the company. Gates and his lieutenants will now have to take their opponents more seriously.
What happens next?
Judge Thomas Penfield Jackson appointed a Harvard professor as a "special master" to file a report and recommendation by May 31, 1998, and further legal developments before then are unlikely. Since Windows 98 is slated to ship right around that time, all eyes will now be on Microsoft to see what, if anything, it does to modify Win98 in response to the court's order.
What's missing from this picture?
"Starting tomorrow, choice will be restored to the public," the Justice Department's lead lawyer declared after the ruling. But choice is complicated.
Microsoft gives IE away -- it's a free product. And as long as Microsoft is willing to give it away in its effort to grab an ever bigger share of the browser market away from Netscape, there's precious little incentive for computer makers to go to the bother of pulling IE out of Windows and adding Netscape instead. Even if the law says Microsoft has to make that option available, the company can still find ways to reward manufacturers who bundle IE and make life harder for those who prefer Netscape.
So don't expect the court's ruling to have any sudden effect on Microsoft's ability to dominate the desktop. Instead, the impact is likely to be psychological. Microsoft may look slightly less invulnerable for a while. Given the company's vast financial resources and marketing clout, that alone is significant.
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