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REPORT: From Microsoft Word to Microsoft World
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Date: Wed, 12 Nov 1997 12:39:23 -0800 (PST)
From: Nathan Newman
============================================== REPORT: From Microsoft Word to Microsoft World How Microsoft is Building a Global Monopoly ==============================================
November 12, 1997
Contacts: Nathan Newman, Project Director Phone: (510) 452-1820 E-mail: nathan@netaction.org or Audrie Krause, Executive Director Phone: (415) 775-8674 E-mail: audrie@netaction.org
Microsoft's Buying Spree Takes Consumers from Microsoft Word to a Microsoft World
SAN FRANCISCO, CA -- Microsoft has invested an estimated $4-$5 billion in its quest for control of cyberspace and is acquiring key strategic technologies at a rate of over one per month, according to a comprehensive NetAction White Paper that examines Microsoft's strategy for domination of the global information technology industry.
The report, "From Microsoft Word to Microsoft World: How Microsoft is Building a Global Monopoly," was released today by NetAction. The complete report is available on NetAction's Web site, at:
http://www.netaction.org/msoft/world/
"What is most disturbing about Microsoft's buying spree is that Internet markets are expected to explode geometrically within the next few years," said Nathan Newman, author of the report and Project Director of NetAction's Consumer Choice Campaign.
With financial analysts predicting anywhere from $80 billion to $160 billion in electronic commerce by the year 2000, the stakes are high.
"If Microsoft isn't reigned in soon, there is a very real possibility that it will become an unprecedented financial and technological colossus, reaching into more markets and industries than any monopolist has ever aspired to dominate," said Newman.
NetAction's research documented nearly 50 Internet-related investments and acquisitions made by Microsoft, most of them within the past 24 months, and the White Paper traces the company's leveraging of these investments into dominance of the global information technology industry.
In addition to a detailed description of the steps Microsoft is taking to gain control of Internet access, content, and commerce, NetAction's report reveals that the company is spending millions of dollars to subsidize developer tools and train software developers and other computer professionals in order to tie them to the Microsoft framework.
"Microsoft is not only forging partnerships with commercial and academic training institutions, it is literally stealing key employees away from its competitors," said NetAction Executive Director Audrie Krause.
The White Paper is one of the most comprehensive examinations to date of Microsoft's strategy for global dominance. NetAction is distributing copies to key members of Congress and the Justice Department, as well as to participants in Ralph Nader's Appraising Microsoft Conference, which takes place Thursday and Friday in Washington, D.C.
The report includes five recommendations for action by policy makers to restrain the negative aspects of Microsoft's dominance:- Require Microsoft to divest its Windows operating system monopoly into a separate company from the application and Internet divisions, and determine whether there is a need for divestiture of the Internet division, as well.- Restrain predation by stopping Microsoft from giving away its Internet browser.- Prohibit licensing practices that restrict customer dealings with Microsoft's competitors, as well as exclusive dealing and tying arrangements for products.- Promote processes that support open standards, and defend open standards established through industry processes from anti-competitive abuse by Microsoft.- Establish processes to ensure that Internet users can participate in policy decisions effecting consumer use of the Internet, including appropriate mechanisms for addressing complaints about product marketing and the quality and reliability of Internet services.
"Implementing these recommendations will benefit consumers by ensuring that the Internet develops as a vigorously competitive market," said Krause.
In May, NetAction launched the Consumer Choice Campaign to educate
cyberspace consumers about the threat of a Microsoft monopoly of the
Internet, and mobilize Internet users to pressure federal officials for more
vigorous enforcement of antitrust laws. Additional information about the
campaign is on the NetAction web site at:
###
From Microsoft Word to Microsoft World: How Microsoft is Building a Global Monopoly
A NetAction White Paper by Nathan Newman
Executive Summary
The full report can be found at:
Introduction: Where do you want to go today? Microsoft has other plans
Is Microsoft building a monopoly?
To ask the question, one has to ask in what markets, since through a combination of business acumen, hardball tactics that many consider monopolistic, and a buying spree of acquisitions, Microsoft is now involved in almost every aspect of the computer and computer-related telecommunications markets and is emerging as a major player in Internet commerce and on-line media ventures.
It controls the operating system of 94.1% of the personal computers sold on the market today (Dataquest numbers) and just finished off a $150 million investment in Apple Computer to tie the other 5.9% of new desktop sales into an alliance. In major software applications, Microsoft has steadily expanded its market share- in the case of word processors from barely a third of the market in 1995 to over 80% in 1997. It has used its Windows NT server software to rapidly enter the business workstation, client-server and large-scale "enterprise" computing segments. Over sixty-five percent of new intranet sites are deployed on Windows NT servers, while Windows NT workstation clients are growing 177 percent annually. (Source: IDC)
It owns not only operating systems and software applications but sells the development tools used by a majority of programmers involved in the industry and has strong dominance of the training programs of information technology professionals. As of March 1997, 87 percent of the 2.4 million software developers were developing for the Windows 32-bit platform, up from 61 percent a year earlier. Fifty-three percent of 2.4-million U.S. professional developers use Microsoft's Visual Basic program as their primary development language. Along with controlling software used by developers, Microsoft is playing an increasing role in their technical education, forging commercial partnerships with both commercial and academic training institutions, while spending millions of dollars subsidizing the training costs of computer vendors and professionals in order to tie them into the Microsoft framework.
Microsoft is using both its control of the desktop and its inroads into the server market to leverage control of emerging Internet standards and commerce. Its Internet Explorer desktop browser is rapidly overtaking Netscape's software for navigating the Internet, while its combination of Internet servers, Web editors, Internet development software, and network-based applications are establishing dominance in control of the evolution of the Internet. Its purchase of and alliance with a range of audio and video "streaming" technology companies is already assuring Microsoft control of the standards for delivery of multimedia over the Net. In the fight over the software standards that will run the Internet, particularly in the maneuverings over the Java language standards that many see as crucial, Microsoft has leveraged every advantage possible to design those standards to suit its own commercial interests.
Through alliances with banks and its financial software, Money and Personal Investor, along with its financial server software, Microsoft is emerging as a key player in shaping the on-line financial transaction system of the future. Microsoft is establishing on-line commercial ventures in airline ticket sales, auto sales, news, games, local events and entertainment (along with local advertising revenue), and a range of other on-line commercial ventures. Its ownership of the Microsoft Network (MSN) and its partnership with NBC in the creation of the MSNBC venture are giving Microsoft strong distribution outlets for its emerging range of media content. Its investments in Dreamworks gives it a position in Hollywood movie and music production that can be integrated into its on-line ventures involving interactive multimedia as computers and television converge in coming years.
Beyond software and content, Microsoft is working to control the way people connect to the Internet from work and home. Its $425 million purchase of WebTV gives it control of a major avenue for non-PC Internet access. Its $1 billion investment in the cable company Comcast and proposed investments in US West cable now make it a major player in designing the standards for accessing the Internet over cable. And in a breathtaking venture, Microsoft's Bill Gates is in partnership (with a one-third stake) in a $9 billion venture to create a low-orbit satellite system called Teledesic that could give high-speed Internet access to anyone anywhere in the world, an investment supported by the US government through a massive free giveaway of radio spectrum to the company.
Buying Its Way Into Dominance
The raw fact is that Microsoft is now a financial behemoth which, when it fails to create viable competitive software, readily uses its financial resources to buy-out startups and key technology to maintain its stranglehold on the industry. The company had annual revenues of $11.4 billion for fiscal 1997, a 31% increase from the year before, and has a cash and short-term investment war chest totaling $9 billion. With a soaring stock price and a market capitalization of roughly $160 billion, the only company in the country that consistently has a higher market capitalization is General Electric ($228 billion in July). Microsoft rivals Coke in value and has a market value three times that of General Motors.
Microsoft has used that financial clout consistently over the last few years to acquire companies and their software and human assets, while sealing financial alliances with a range of partners. While many of the financial details have not been made public, Microsoft spent an estimated $1.5 billion between 1994 and 1996 on acquisitions. Through these investments, Microsoft has bought out dozens of companies, buying or investing in over twenty companies in 1996 alone. Its investments have only accelerated in 1997 with the $1.5 billion spent in the WebTV and Comcast investments, the $150 million invested in Apple, and the hundreds of millions invested in additional Internet-related companies, including its key investments in audio and video streaming. . It has been acquiring key strategic technologies at a rate of over one per month. These are all in addition to its large strategic alliance investments in MSNBC and Dreamworks over the last few years. All told, Microsoft has spent an estimated $4-$5 billion on acquisitions and equity alliances in the last few years to expand its reach.
Microsoft has acquired or invested in companies involved in 3D animation, web site design, Internet development tools, speech recognition, handwriting recognition, joystick controls, Internet payment security, on-line gaming, technical training, e-mail connectivity, mainframe connectivity, multilingual translation software, business news services and a range of other Internet-oriented companies. In doing so, it has helped assure that companies that might have supported a broad range of different systems, including Microsoft competitors, have instead developed breakthrough technology in-line with Microsoft's goals and strategies for dominance. Microsoft has also traded cash and expanded training subsidies to establish equity stakes in a few key vendors who integrate and manage large-scale computer networks for many corporations in order to leverage their strategic position into a bias towards Microsoft systems.
And as Microsoft acquires both technology and key individuals, it can add them to a research and development department that has grown to a size that threatens to overwhelm any potential competitor. During fiscal year 1997, Microsoft spent $1.93 billion on product research and development activities. That amounts to 16.9% of revenue, an admirable percentage commitment to innovation but a raw amount that tilts the whole competitive nature of the industry towards Microsoft's control.
Most disturbingly, especially when comparing its economic heft to comparable financial powerhouses in other manufacturing industries, Microsoft is not at the peak of an industry's size but at an early stage in markets that are expected to explode geometrically in the next decade. If unchecked, there is a very real possibility of Microsoft becoming an unprecedented financial and technological colossus bestriding more markets and industries than any monopolist has ever aspired to dominate.
Table: Recent Microsoft Acquisitions (partial list)
More detailed information is included in the full report, at:
Table: Recent Microsoft Acquisitions (partial list)
NAME OF COMPANY TECHNOLOGY DATE AMOUNT /SOFTWARE INVESTED Stac Electronics Disk compression 1994 $39.9 million Aha software Handwriting recognition 1996 not disclosed Lernout & Hauspie Speech recognition 1997 $45 million Fox Software Database software 1992 $175 million Altamira Graphics software 1993 not disclosed Santa Cruz Server operating system 1989 20% stake Operation (still 11.5%) Netwise Link databases 1995 not disclosed to mainframes Panorama Software Multidimension database 1996 notdisclosed Trados Multilingual document 1997 20% stake production facilities Wildfire Voice recognition for 1997 Undisclosed Communications e-mail equity invest VANstar Professional services 1995 Equity stake and skills ENTEX Information Professional services 1996 5% equity Services and skills stake XLConnect Professional services 1997 Equity stake Solutions and skills VDONet Corp. Video steaming 1996 5% stake Progressive Audio/Video streaming 1997 10% stake Networks Inc Vxtreme Video streaming 1997 $75 million One Tree Source code management 1994 not disclosed Vermeer Web site management 1996 ~$100 million NetCarta Web site management 1996 $20 million Aspect Engineering Tools for the Web 1996 not disclosed ResNova Software Mac Web server Software 1996 not disclosed Proginet Corp Linking Web apps 1996 not disclosed to mainframes (10% stake) Interse Corp. Web site analysis 1997 not disclosed Coopers & Peters Java and Smalltalk 1997 not disclosed LinkAge Software E-mail in enterprise 1997 not disclosed Colusa Object-oriented tools 1996 not disclosed Dimension X Java tools 1997 not disclosed Apple Computer Computer company 1997 $150 million eShop Internet retailing 1996 not disclosed & payment system MSNBC On-line news 1995 $500 million Individual Inc. Business news 1995 7.4% stake MSBET News & entertainment 1996 Undisclosed w/Black Entertainment TV Softimage High-level 3D animation 1994 $177 million DreamWorks Int Multimedia titles 1994 $30 million Dreamworks SKG Movies, music 1994 not disclosed RenderMorphics 3D graphics for games 1995 not disclosed Bruce Artwick Org Games software 1995 not disclosed SingleTrac Games software 1996 not disclosed Atomic Games Games software 1996 publishing Rainbow America Games software 1996 publishing Exos Joystick and input 1996 not disclosed Electric Gravity On-line gaming 1996 not disclosed UUNet Internet network 1994 13% stake (bought by MFS in 1996) Web TV Networks Internet access device 1997 $425 million Navitel Internet telephone 1997 not disclosed Comcast Corp Cable company, QVC 1997 $1 billion (10% stake)
Note: Bill Gates has also made personal investments through his digital image archive company Corbis and in his proposed $9 billion joint venture in the Teledesic company seeking to create high-speed satellite access to the Internet.
TABLE OF CONTENTS:
Introduction: Where do you want to go today? Microsoft has other plans Buying Its Way Into Dominance Why Microsoft Dominates: The Economics of Networks Table: Recent Microsoft Acquisitions (partial list) The Core: Leveraging the Operating System for Desktop Dominance MS-DOS Windows Using Windows to Leverage Applications Dominance Moving on Up: From the Desktop to Control of Corporate Computing Mind Share: Development tools and business computing Squeezing out Application Rivals in Enterprise Computing Training and Education: Controlling the Professional Workforce Microsoft Bids for the Internet The Browser War: Giving It Away and Taking Control The Next Step: Audio/Video standards The Payoff: Selling its Web and NT servers Using Developer Tools to Dominate the Internet Java: The Showdown Fight From Software to Hard Cash: Controlling Financial Transactions on the Internet Intuit Failure and Server Success Taking on Internet Commerce Across Industries: Travel, Cars, Real Estate and Local Information Tying it all Together: How Microsoft will dominate Internet Commerce Content and Media Dominance Networking the Networks (TV, that is) Licensing Literature, Hocking History Games and Interactive Entertainment Controlling Access to the Home: Web TV, Cable and Satellites in the Sky WebTV and the dominance of Consumer Electronics Comcast and Company: Investing in Cable, Defining the Standard Teledesic: Domination from the Skies Conclusion and Recommendations ```
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