WinInfo Daily UPDATE, March 23, 2004

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In the News

- Microsoft Faces Record Fine, New Windows Version in EU Case
- Microsoft Wins MLB Contract Over RealNetworks
- Intel Drops Gigahertz Ratings from Microprocessor Names
- Revamped MSN Search Engine Due in July

==== In the News ====

by Paul Thurrott, [email protected]

Microsoft Faces Record Fine, New Windows Version in EU Case

European antitrust regulators will fine Microsoft a record $613 million, require the company to offer a separate version of Windows that doesn't include Windows Media Player (WMP), and compel the software giant to share more Windows Server code with competitors, according to various reports. Microsoft representatives in Europe have already described the fine as "too big," and the company has vowed to fight the ruling with an appeal.
Before any of that can happen, however, the European Union (EU) will take a few steps to finalize its ruling against Microsoft. Yesterday, its European Commission arm took the first of those steps by finalizing the wording of the ruling, which labels Microsoft a monopoly that abused its market power to crush rivals in the emerging markets of media players and server software.
Today, Commission representatives will discuss the $613 million fine with senior aides to all 20 commissioners and fine-tune the presentation of its case. Tomorrow morning, the Commission will hold its final meeting about the Microsoft ruling and officially inform the company. After that EU Competition Commissioner Mario Monti will hold a press conference about the decision.
A $613 million fine isn't going to create many problems for a company with more than $50 billion in cash assets, although Microsoft representatives in Brussels, Belgium, have already denounced the amount. "In view of the absence of a clear legal standard under EU law, a fine of this size isn't warranted," a Microsoft spokesperson said. "We believe it's unprecedented and inappropriate for the Commission to impose a fine on a company's US operations when those operations are already regulated by the US government." An EU representative responded, "We have already told Microsoft many times that a negative ruling will incur a fine. A small company could claim it didn't know the rules but not one the size of Microsoft." The company does about 30 percent of its business in countries covered by EU law.
Regardless of the fine amount, the biggest problem from Microsoft's perspective is the requirement that it ship alternative Windows versions that don't include WMP in Europe. These WMP-less Windows versions would presumably cost less than the typical Windows versions and would let PC makers more easily pursue deals with third-party media-player makers such as RealNetworks and Apple Computer.
For European trustbusters, the WMP bundling question mirrors the problem with Microsoft Internet Explorer (IE), which destroyed the market for third-party Web browsers and was at least partially responsible for sinking Netscape, which started as a high-flying Internet startup but ended as a lame-duck acquisition of AOL. The Commission is concerned that Microsoft will later duplicate this bundling strategy in Longhorn, its next major Windows release, by bundling features, such as an Internet search engine, that will have similar anticompetitive effects on other emerging markets. Microsoft has already stated its intention to add Internet search features to Longhorn and has rejected a settlement with the Commission that would have required the company to stop adding new features to Windows.
Microsoft is expected to appeal the ruling as soon as possible. Company representatives say it will appeal to the European Court of First Instance in Luxembourg.

Microsoft Wins MLB Contract Over RealNetworks

In what can only be construed as a major defeat for media giant RealNetworks, yesterday Microsoft and Major League Baseball (MLB) announced a broad deal in which Microsoft's MSN online services will promote MLB products and provide exclusive free online baseball content in Windows Media format. The online content will include live baseball games, Microsoft says.
"MSN is our top choice to provide live video Internet broadcasts of all MLB games because it is the number-one general destination on the Web, with 350 million monthly unique visitors worldwide," Allan H. "Bud" Selig, the commissioner of baseball, said. "MSN's global reach, significant subscriber base, and software innovation enable us to bring Major League Baseball to the most far-reaching audience in the most exciting way possible."
Both Microsoft and MLB noted that the deal is "all encompassing" but not exclusive, making it possible for MLB to adopt other formats as well, including formats from RealNetworks, which once had an exclusive MLB deal. But that deal ran out after the 2003 baseball season, prompting MLB to seek deals with RealNetworks' rivals. RealNetworks recently sued MLB for breach of contract, alleging that the organization violated a newer, nonexclusive deal with RealNetworks when it announced its intention to provide baseball content in Windows Media formats. MLB says it will continue to offer customers the RealNetworks format option when the regular baseball season starts next week but, currently, preseason games are available only in Windows Media format. This situation, RealNetworks says, is a violation of its contract with MLB. Separately, RealNetworks is also suing Microsoft in federal court, alleging that the company has abused its market power to limit RealNetworks' business.

Intel Drops Gigahertz Ratings from Microprocessor Names

In a move similar to Microsoft's decision to drop product-version numbers for year-based monikers such as Windows 95, Intel announced this week that it will drop raw speed measurements from its product names and move to a new model numbering system. The new system resembles the systems certain automakers use, Intel says. The idea is to make the company's chips more readily identifiable to average consumers, which has become increasingly difficult as Intel's microprocessor product lines have dramatically expanded in recent years.
The change also formalizes a move away from the so-called "megahertz myth," which Intel started with the introduction of its Pentium M processors in late 2002. Pentium M processors run at raw clock speeds far below desktop processors such as the Pentium 4 processor, but they often outperform Pentium 4 chips. Although raw clock speed will no longer be included in Intel product names, the company will still market those figures, and we can expect PC makers to continue to do so as well.
Rival chipmaker AMD was the first company to address the megahertz-myth problem by naming its products according to which Intel chip they compared to rather than by raw clock speed. So, for example, the AMD Athlon XP Processor Model 3200+ typically outpaces a 3.2GHz Intel Pentium 4 processor, despite the fact that the AMD chip runs at only 2.2GHz. AMD describes Intel's new scheme as "arbitrary," noting that AMD's own naming scheme is designed to be more open and obvious.
Under Intel's new naming scheme, which is similar to automaker BMW's naming structure, Intel processors will fall into one of three series--300, 500, or 700. Within each series, a higher number will denote a wider range of features, so a hypothetical Intel 550 chip would be more powerful than a 530 chip. In the company's current range of desktop-oriented products, the entry-level Celeron will become part of the 300 series, the Pentium 4 will become part of the 500 series, and the Pentium 4 with HT Technology Extreme Edition will become part of the 700 series. Under the new scheme, a typical 3.2GHz Pentium 4 processor, now called the Intel Pentium 4 processor with HT Technology 3.20 GHz, might be called Pentium 4 Processor 550 D or something similar. The D suffix denotes a desktop chip, and Intel says it will use the M suffix for mobile chips.

Revamped MSN Search Engine Due in July

Microsoft's MSN division will launch a radically redesigned search engine in July, creating a new front on the company's offensive against Internet search giant Google. Microsoft began testing its new inhouse algorithmic search engine after its MSNBot Web-crawling robots began indexing Web content last summer. In fall 2003, the company opened the MSN Search Beta to testers, offering them an early look at the new UI.
Separately, MSN also announced that it will change the way its search results present paid advertisements, which today can often be mistaken for actual search results. To distinguish paid ads from search results, Microsoft will visually separate ads by moving them to a new column on the right side of the search-results page. "We're making it easy to distinguish between what is a paid link and an unpaid link," MSN Marketing Director Lisa Gurry said. "And we're putting algorithmic results in the top half of results 100 percent of the time." MSN will launch the new search engine and the paid results UI on July 1.

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