WinInfo Daily UPDATE, July 1, 2004

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In the News

- Massachusetts Loses Microsoft Antitrust Appeal
- Microsoft Unveils New MSN Search Service

==== In the News ====

by Paul Thurrott, [email protected]

Massachusetts Loses Microsoft Antitrust Appeal

Massachusetts, the sole remaining nonsettling state in Microsoft's epic US antitrust case, received a stinging legal defeat late yesterday when the US Court of Appeals for the District of Columbia Circuit shut down the state's appeal attempt. In a tersely worded ruling, the court rejected the state's argument that the Microsoft settlement didn't curb the software giant's voracious anticompetitive behavior.
"Massachusetts alone \[appealed\] the district court's ... decree," the ruling noted. "It \[argued that\] the district court abused its discretion in adopting several provisions Microsoft proposed while rejecting several others \[that\] Massachusetts and the other litigating states proposed. Massachusetts also \[challenged\] a number of the district court's findings of fact. Based upon the record before us ... and the record of the remedial proceedings following remand, we affirm the district court's remedial decree in its entirety. We uphold the district court's approval of the consent decree as being in the public interest."
Unless Massachusetts attempts a final appeal before the US Supreme Court, an event that legal experts agree is unlikely, this ruling effectively signals an end to Microsoft's US antitrust-related legal woes. The ruling also affirms that the company's weak settlement will remain unchallenged.
The appellate court ruling contains some interesting clauses, however. For example, the court reinforced a lower court ruling that Microsoft's bundling of Microsoft Internet Explorer (IE) with Windows was harmful to consumers, although the court decided that the current solution to that problem--a feature in recent Windows XP releases that lets computer makers, IT administrations, and end users hide IE in favor of another Web browser--is sufficient and that Microsoft doesn't need to physically remove IE from Windows. Massachusetts had correctly argued that hiding IE wasn't enough because the IE code still remains on the system.
Massachusetts Attorney General Tom Reilly, who spearheaded the expensive battle with Microsoft, expressed dismay at the outcome. "This decision is bad news for consumers, bad news for competition, and ultimately will be bad news for our economy," he said in a statement issued late yesterday. "This clearly shows that our antitrust laws are not effective in protecting consumers. Our high-tech economy will not reach its full potential unless regulators and the courts are willing to deal with Microsoft and its predatory practices."
At Microsoft, predictably, people met the decision with relief, and the company is now free to announce how it will spend its massive $55 billion cash hoard now that its final major legal struggle is over. "Of all the steps we've taken over the past 2 years, this is the most important step in resolving our legal issues and moving forward," Microsoft Senior Vice President, General Counsel, and Corporate Secretary Bradford L. Smith said. "Today's unanimous decision sends a clear and emphatic message that the settlement reached 2 years ago is a fair and appropriate resolution of these issues. We remain 100 percent committed to fulfilling our obligations under the settlement and earning the trust of our customers and the industry."

Microsoft Unveils New MSN Search Service

This morning, Microsoft unveiled its new MSN Search portal (see the URL below), a Web site that looks suspiciously similar to market-leader Google's search tool. Microsoft's search-engine plans had been widely reported but few people had expected the new MSN Search to so closely resemble Google, especially when the Microsoft unit's last major product, the MSN Toolbar for Microsoft Internet Explorer (IE), so closely resembled Google's toolbar. They say imitation is the sincerest form of flattery but does the MSN Search site go a bit too far?
"With this significant upgrade to MSN Search, we are delighted to now offer what we believe is the best search service available for the 350 million MSN customers," MSN Corporate Vice President Yusuf Mehdi said. "Among the many improvements, we're particularly excited to increase the relevancy of many search query results by up to 45 percent. This massive investment kicks off a wave of innovation from MSN that will move search beyond its current, limited offering to delivering the next-generation search experience."
The new MSN Search service is devoid of advertisements until you launch a search query; at that point, you'll see no more than three ads, all of which will be text based, clearly differentiated from the actual search results, and relatively innocuous. In my admittedly unscientific tests of the site this morning, MSN Search appeared to work as promised, with a minimum of distracting advertisements.
MSN is also testing a next-generation version of its search service that will feature a new algorithmic search engine built entirely on Microsoft technology (the current version uses Yahoo! search technology). The new site (see the URL below) will be online only for a short time. Microsoft expects to roll out this engine to its default search site sometime later this year.
As for the fairly obvious homage to Google, detractors are sure to point to earlier Microsoft inroads into the Web browser and media-player markets and wonder whether the company is again abusing its market power. Indeed, Microsoft is spending $100 million to improve MSN Search, and--with almost 100 million unique users every month--the MSN portal is already the most popular online destination in the United States. Users have downloaded the MSN Toolbar almost as often as they've downloaded Google's toobar, which has been on the market almost a year longer.

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