Verdict won’t alter Microsoft strategy to
by David Streitfeld
and Ariana Eunjung Cha
The Washington Post
April 3. 2(X)()
WOODSIDH, Calif. —Three thousand
miles away from the courtroom where
Judge Thomas Penfield Jackson was
readying his devastating verdict, it was
business as usual for Deanna Sanford.
The lead product manager for
Microsoft's Internet access operation,
Sanford was in Silicon Valley to tout
the division’s umpteenth retooling. “It
has gone through several versions over
the last five years,” she conceded. “But
now we’re clearly focused."
Perhaps this incarnation of the
Microsoft Network service, which has
only a tenth the subscribers of America
Online, will succeed. If not, Microsoft
will assuredly try again, pouring as
much money and sweat into the pro
cess as necessary. Like the villain in
some cheesy Hollywood horror movie,
the company can never be counted out.
Monday's verdict, which slammed
Microsoft for anti-competitive prac
tices, won’t change that, a half-dozen
experts said. In some ways, they added,
the trial has even strengthened the com
pany which was and remains the
:single most dominant technology firm
in the world, despite its struggling MSN
■service.
“There's a saying along the lines of which lead directly to the antitrust suit, wonder a bit about what happens in
‘Nothing concentrates the mind like the But it also happens in many more Redmond,” the Seattle suburb where
news you’ll be hanged in the morning, ’" minor ways. In jump-starting MSN this Microsoft is headquartered. “But will
■said Seattle software consultant Frank time around, for instance, Microsoft will it stop Microsoft’s revenue growth?
■Catalano. "This verdict was Microsoft’s give away 13 million free CDs to make Probably not. This has been a growing
.deadline. And they used it to integrate it as easy as possible to get consumers cloud for the last seven or eight years,
ithe Internet into everything that they’re hooked up the same strategy AOL The antitrust suit has become like the
: doing.” used. And, borrowing from Yahoo’s wallpaper. It’s always there in the back-
Microsoft's core businesses its w ildly successful decision to do heavy ground.”
;Windows operating system and Office advertising, Microsoft plans to spend What may stop Microsoft’s revenue
Software may be threatened on vari- $ 150 million on television and maga- growth instead are changes in the tech
ious fronts, but at the moment they’re zinc spots. nology world, which is shifting even
'still generating tremendous revenues These plans are unlikely to be af- more rapidly than the famously nimble
land profits. As the company tries to get fected by Monday's verdiet. Nor will company can follow,
la grip on a future that involves wireless consumers shun Microsoft. For one “Two or three years ago, if you
Gunmaker Smith & Wesson calls
meeting to explain new settlement
by David Olinger
KmgVw-Ruldct Tribune
March 29, 2000
Smith & Wesson has called a hastily
scheduled conference with gun whole
salers alarmed by the terms of its new
agreement with the federal govern
ment.
About 25 Smith & Wesson distribu
tors had been invited to a meeting
Thursday, April 6, at the gunmaker’s
Nashville, Tenn., headquarters. Com
pany President Ed Shultz plans to dis
cuss the pact it signed to settle pending
lawsuits with several cities and to avoid
a threatened lawsuit from the U.S. De
partment of Housing and Urban Devel
opment.
ln interviews, several of those dis-
tributors said they may sever long
standing relationships with Smith &
Wesson rather than try to meet the new
regulatory demands being placed on
them and gun-store owners.
"It's sad to see this happen,” said Ron
Shirk, a Smith & Wesson distributor in
Pennsylvania for 15 years. "The
company’s always been good to us.”
But Shirk said he also has to con
sider the risk that few of the 250 au
thorized Smith & Wesson retail deal-
ers in Pennsylvania will accept various
new sales restrictions as well as de
mands for liability insurance and fire
Questions raised about national missile defense
by John Diamond
Knight-Ridder Tribune
Apnl 05, 2000
WASHINGTON With a major presi
dential decision approaching, the Pentagon
said Tuesday that the cost of building a
national missile defense system is rising
sharply because of an expanded defensive
scheme and technical problems that have
raised questions about whether missile de
fense is even possible.
Adm. Craig Quigley, a Pentagon spokes
man, said the total cost of building and
operating a national missile defense from
1991 to 2026 is now an estimated $30.2
billion. That’s up $6.4 billion, or 27 per
cent, from die previous estimate, accord
ing to the Pentagon office in charge of the
program.
The new Pentagon numbers track
roughly with a recent Congressional Bud
get Office estimate pointing to a $5 billion
cost increase. They come on top of an ear
lier announcement by Defense Secretary
Wiliam Cohen of a $2.3 billion cost in
crease.
All of this comes as military specialists
and defense contractors scramble to pro-
communications, hand-held devices
and all sorts of other new technologies
that are distant from its core competen
cies, that boodle is proving extremely
useful.
"Microsoft’s basic business strategy
is to use profits from the businesses it
unquestionably dominates to subsidize
money-losing entrants into new busi
nesses,” said Richard Shaffer, a consult
ant with Technologic Partners.
"Microsoft goes to the heart of the busi
ness models of its competitors, giving
away what others must sell.”
Sanford was announcing just such a
development. Until Monday, a sub
scription to MSN’s service cost the
same as AOL: $22 a month. But since
MSN wasn’t gaining ground fast
enough, Microsoft will now give it
away free for the first six months.
Observed Shaffer: “Using this strat
egy, there’s no business that Microsoft
couldn’t get in. The only reason it
wouldn’t dominate is the same factor
that has held it from dominating other
markets it has entered: its own incom-
petence.”
Microsoft has never been accused of
being a technological innovator. But
it’s brilliant at “reverse engineering”
taking another company’s successful
product, figuring out what made it work,
and copying it. This is what it did with
Netscape’s Internet browser, of course,
proof gun storage. try,” said Gil Hebard, a Smith &
“V ve talked to quite a few of them. Wesson distributor for 42 years.
They say they can’t do it. What hap- He predicted that the settlement will
pens to my customer base?” he said. eliminate thousands of gun-store own-
“We can let others make choices for us and de
termine our fate or we can be actively involved
in the process and exercise some control. The
effect of this agreement will mean a change in
the way Smith & Wesson does business. It will
not sacrifice the Second Amendment rights of gun
owners
One leading wholesaler, RSR Group
Inc., has announced it will no longer
sell Smith & Wesson products when its
current contract expires. At the same
time, RSR plans to attend the Nashville
meeting and press Smith & Wesson to
reopen negotiations with the govern
ment.
Other wholesalers expressed unhap
piness with the Smith & Wesson settle
ment but said they want to hear the
company’s explanation before closing
the door to a leading gun manufacturer.
Tm concerned about it. I think it’s
going to be bad for the whole indus
duce a second successful test of the all
important missile interceptor. In the most
recent flight test in January, the interceptor
missed its dummy warhead target in space
over the Pacific when a cooling system
malfunctioned. The rising cost estimate
could be crucial because President Clinton
has identified cost as one of the four crite
ria along with technical feasibility, the
nature of the threat, and Russia’s posture
on which he will base his decision
whether or not to approve the project.
“We are committed to giving enough
technical information to the President for
him to make an informed decision,”
Quigley said. But he suggested that
Tuesday’s announcement may not be the
last missile defense price increases.
“Things could change,” Quigley said.
“The further you go into the future, the less
certainty you have.”
National missile defense, as currently
envisioned, is a scaled-down version of the
Star Wars defensive shield proposed by
President Reagan in 1983. It would not be
able to cope with a massive nuclear attack
of the kind that Russia could launch hut
would be designed to shoot down a few
incoming missiles launched by potential
World News ■
thing, at least at this moment, computer wanted to pick a software program that
buyers have little choice. was pretty well unassailable, you’d
“Some people may not have liked pick Microsoft’s Office,” said Davis,
Henry' Ford, but if they wanted a car, former editor of Windows Watcher. “It
Microsoft chairman Bill Gates speaks to reporters about a federal
judge's “findings of fact” that the software giant acted as a monopoly
in relation to its operating system and web browser.
they had to buy a Model T," said Dwight
Davis of Summit Strategies. “For the
average person, if they want a computer
and want it to be compatible with other
stuff, they have to buy a Bill’Gates prod
uct, whether they like him or not."
The antitrust verdict, Davis added,
will “probably” cause "more people to
-Ken Jorgensen,
Smith & Wesson spokesman,
on company Web site,
www. smith - wesson.com
ers currently authorized to seil Smith
& Wesson products, “and 1 cannot sell
to them if I agree to this." But “the
door is slightly open,” he added. “1
want to get the facts before 1 make a
decision.”
Smith & Wesson spokesman Ken
Jorgensen said the company does not
fear a shortage of distributors willing
to take its firearms along with the new
sales restrictions.
A memo from Smith & Wesson Vice
President Chris Killoy acknowledged
the wholesalers’ concerns and invited
them to review its interpretation of the
enemies such as North Korea, Iran, or Iraq.
Republicans want to delay a decision in
hopes that a Republican president could
deploy a more robust missile defense.
Democrats who oppose the program want
a delay because they assume a rushed de
cision would be to deploy.
About three-quarters of the cost increase
stems from the growing scope of the mis
sile defense system envisioned by the Pen
tagon. Where earlier plans involved 20
silo-based missile interceptors, the latest
estimate is for 100 interceptors along with
an advanced "X-Band” radar system that
can accurately track the flight of an incom
ing warhead.
But a portion of the higher cost stems
from emerging technical problems and
changing demands, according to Air Force
Lt. Col. Rick Lehner, spokesman for the
Ballistic Missile Defense Organization, the
Pentagon agency running the missile de
fense program. These cost factors include:
-Needed upgrades to the X-Band radar
so that it can better distinguish an actual
warhead from decoys deployed to foil the
missile interceptor.
-Upgrades to computers involved in
early warning and command and control.
was a category leader that had pretty
much obliterated the competition. But
suddenly now there’s application func
tionality over the Internet being offered
by companies from Sun Microsystems
to little start-ups.”
Meanwhile, the operating system
Linux written by Finnish program
mer Linus Torvaids and refined over
the years since by developers all around
the world who work on the project
gratis has continued to capture the
hearts of technology wonks who loathe
Microsoft, as well as the wallets of in-
vestors.
Linux's share of the market for large
"server" computers has jumped, but it
has made few inroads into the personal
computer systems market. In terms of
retail sales. Linux accounts for only 17
percent of sales while Microsoft’s Win-
dows has 77 percent, according to
Howard Dyckovsky. vice president of
wholesaler
settlement on the Smith & Wesson
Web site
"There has been more than enough
emotion over this past week,” Killoy
wrote. "Please take the time to read
our side of the story."
Two weeks ago. Smith & Wesson
signed what President Clinton hailed
as a landmark agreement to change its
marketing practices and improve gun
safety. In return. lIUD and several cit
ies suing the gun industry agreed to
drop Smith & Wesson as a defendant.
As part of the agreement, Smith &
Wesson promised that its products
would be withheld from any gun show
where private, unregulated stiles occur.
The company also agreed to stop sales
of high-capacity ammunition maga
zines and limit multiple handgun sales
by letting customers take only one
Smith & Wesson handgun home on the
purchase date. In addition, wholesal
ers may be told to cut off deliveries to
any retail dealer whose guns are fre
quently traced from crime scenes.
The settlement has been praised by
guncontrol groups but condemned by
gun-owner and industry associations.
One group, Gun Owners of America,
called for a boycott against Smith &
Wesson.
To date, no other manufacturer has
agreed to the terms of the Smith &
Wesson settlement.
-More ground and flight tests that the
Pentagon believes are necessary to ensure
the system can work.
Proponents and opponents of national
missile defense jumped on the cost esti
mates as indicators of political maneuver
ing. Anns control advocate John Isaacs
of the Council for a Livable World said
the lower earlier estimates were deliber
ately inaccurate to stave off opposition and
to “get people to buy in at a lower level.”
Rep. Curt Weldon, R-Pa., one of the
leading advocates in Congress for national
missile defense, said the new, higher esti
mate represents the Pentagon's effort to
give Clinton an escape hatch in case he
wants to postpone a decision or kill mis
sile defense.
By the standards of large and complex
weapons programs, the cost increases en
countered by the national missile defense
program are not out of the ordinary. The
Congressional Budget Office routinely
anticipates cost growth of 50 percent to
65 percent in new missile systems. But
such budgetary minutiae may be lost on
taxpayers being asked to pony up tens of
billions of dollars for an as-yet unproven
defensive system.
boost MSN business
operations for PC’ Data.
Yet Windows' stranglehold may not
be secure. Despite its reputation as
clumsy or difficult to use, hardware
makers like Dell Computer Corp. are
increasingly pre-installing Linux as well
as Windows on their personal comput-
Microsoft’s personal computer share
is “down a little bit but they are not hurt
ing,” Dvckovsky said.
For the past few months, Microsoft
emissaries have been quietly touting the
development of the company's Next
Generation Windows Services, which
it calls “a new set of softw are, services
and solutions for its customers, built
around the Internet, Windows and new
devices.”
While the company has released no
further details about the product, sev
eral industry analysts say they expect it
to be a big step in creating a central com
puter system connecting everything
from your telephone and television to
your toaster.
"Will it be the watershed event that
gets people forgetting about the Justice
investigation'? Maybe. But 1 think it’s
just one thing of many that is getting
them back in a position where Wall
Street is hyped up in terms of the fun
damental picture," said Michael Stanek.
a vice president at Lehman Brothers.
If executed poorly, however, analysts
say the effort could be Microsoft’s big
gest embarrassment in its mission to
dominate in the online world, w here it
has continued tv) lag behind its younger
competitors despite billions of dollars
of investments.
America Online, the upstart that
Microsoft Chairman Bill Gates once
promised to buy or "bury." has captured
half the Internet access market. MSN
spokeswoman Sanford said Monday
that the network has added S(X).(XX) sub-
scribers in recent months, giving it a to
tal of 2.5 million. But AOL has more
than 22 million - - and promises to be
Human rights official
urges probe in Chechnya
by Richard C. Paddock
Los Angeles Times
March 4, 2000
MOSCOW —The United Nations’ top
human-rights official, saying she was
“shocked and appalled” by accounts of
Russian atrocities in Chechnya, called
on the Russian government Tuesday to
establish an independent commission
to investigate alleged human-rights
violations in the separatist republic.
After a three-day visit to the war-tom
Caucasus region, High Commissioner
for Human Rights Mary Robinson
urged Russia to respond to mounting
concerns in the West about Moscow’s
conduct in the war by opening its own
inquiry into charges of murder, rape,
and looting by Russian troops.
Robinson said she was horrified by
the “accounts of Chechen civilians,
many of them women, and by the ut
ter devastation that has been visited on
Grozny and other parts of Chechnya.”
For the most part, Russian officials
have dismissed allegations of atroci
ties committed by their soldiers as
Chechen propaganda and misinforma
tion spread by Western media outlets.
Last'week, however, authorities ar
rested a Russian army colonel in the
slaying of a Chechen woman who had
also been raped.
Human Rights Watch, a New York
based group, reports that it has docu
mented at least 130 cases in which
Russian troops summarily executed
Chechen civilians. Most, if not all, of
the killings occurred while the troops
were looting newly conquered towns
and villages.
“I listened to testimony of summary
executions, intimidation, looting by
military personnel, disproportionate
use of force, attacks on civilian con
voys, rape, and other violations,”
Klavdiya Nefyodova, 87, of Grozny has been unable to give her son,a
proper burial.
come an even bigger powerhouse after
it completes its merger with media con
glomerate Time Warner.
Meanwhile, Yahoo has become the
premier search and directory site. And
Amazon.com is now consumers e-com
merce destination of choice.
"MSN has been ;t work-in-progress
for quite a long time. It has never even
come close to achieving the critical
mass of AOl.and right now I think that’s
really on the back burner," said George
Godfrey, an analyst with ING Barings.
Money and a renewed effort may en
able Microsoft to improve here. “There
have always been markets where
Microsoft was the underdog. We were
the underdog in graphical user inter
faces and applications and Web server
space,” said Charles Fitzgerald,
Microsoft's director of business devel
opment. “Historically this company has
done a very good job of going from the
underdog to being a leader a variety ot
product categories."
The brightest sign for Microsolt has
been its surprising success in many in-
ternational markets, where it is the sec
ond most popular Internet portal after
Yahoo. The victories are even more
stunning because the company in 1997
conceded failure in the MSN access ser
vice in France and Germany by shut
ting them down. But once again, it re
tooled.
As Microsoft prepares for more shifts
and improvements in its Internet strat
egy yet again, it began last week by re
shuffling its executive team for the
fourth time in 18 months. It is melding
two of its four main business groups:
the platforms division, which oversees
the Windows operating system, and the
developer division, which builds tools,
will lie combined to be led by Paul
Maritz and Jim Allchin. Mich
Mathews, vice president for corporate
communications, will oversee a new
marketing group.
Robinson said. “These accounts cor
roborate much of the serious and
cfocumented information available so
far-, and they require a serious re-
sponse.”
Russia has faced growing criticism
in the West for the high number of ci
vilian deaths in the war and its appar
ent unwillingness to investigate war
crimes in Chechnya. The Council of
Europe, the continent’s top human
rights body, is expected to vote this
week on whether to suspend Russia’s
membership in the group.
During her visit, Robinson did not
meet with President-elect Vladimir V.
Putin, but she did hold talks with other
top officials, including Foreign Min
ister Igor S. Ivanov.
Ivanov, in a statement after his talk
with Robinson, denied systematic
abuses in Chechnya and said Russia
will not permit other nations to dic
tate how to handle its internal matters.
“We will never allow this problem
[the Chechen war] to be used as a pre
text for interference into Russia’s do
mestic affairs,” he said.
Ivanov said Russia is trying to re
spond to international concerns and
oiganized Robinson's trip to Chechnya
to give her a firsthand look at the situ
ation.
“I cannot remember even one case
in international practice in which a
government of a country solving its
internal problem would have been so
open for cooperation with interna
tional organizations,” he said.
Robinson noted that the Chechens
also have committed atrocities. But
she defended her criticism of Russia
by pointing out that the main focus of
her agency’s work is to prevent hu
man-rights violations by government
agencies and troops.