microsoft : industry predator or fierce competitor?

introduction : Microsoft, one of the most influential software companies of the twentieth century, was
founded by bill gates , paul allen and several other friends to fill a niche in the personal computer (PC)
operating system and software business. the company's business practices came under close scrutiny.
district judge thomas penfield jackson released his finding on November 5, 1999, declaring that
microsoft held a monopoly in the PC industry. several months later, jackson ordered a breakup of
microsoft, but this oroder was overturned on appeal. numerous subsequent events eventually led to a
resolution of the antitrust allegations.

the road to monopoly : microsoft enjoys a monopoly in the market for Intel compatible PC operating
systems. No products currently in the marke or anticipated in the near future can be subsitituted cost.

Market share : Microsoft maintains a dominant and increasing market share for intel-compatible PC
operating systems. In each of the 10 years preceding the lawsuits, Microsoft has had a 90% market share
in operating systems for Intel-compatible PCs. In the last two years of that period, Microsoft’s market
share stood at 95% and is expected to increase even further.

High barriers to entry : Microsoft managed to maintain its monopoly in PC operating systems because of
persistent high barriers to entry for competing operating systems. Consumer interest is based on the
ability of operating system to run software applications. Consumers also prefer an operating system that
has several software vendors applications in different software categories. Microsoft has more than
70,000 software applications written for it.

Lack of Viable alternatives : the fixed cost of developing software applications are high, although the
margins for selling software applications are low. Producing software to run on multiple operating
systems is time consuming and expensive. Software developers produce software for an operating
system that has the largest base of useers. A goal is quick recovery of net costs. Windows has the largest
market share for PC operating systems, which means software developers profit by producing
applications for Windows.

Barriers to entry do not prevent Microsoft’s competitors from attracting consumer interest, nor do the
barriers prevent software vendors from making a profit. However, the high barriers to entry do prevent
competing operating systems from drawing a large percentage of users away from Windows. There are
several operating systems on the market that server niche markets but do not pose a direct threat to
Windows.

Another PC operating system on the market today is the Linux open ended operating system, which has
an estimated 15million users.
IBM : during the summer of 1994, IBM informed Microsoft that IBM wanted the same favorable terms
that Microsoft gave Compaq for lincensing Microsoft’s OS products. Compaq paid the lowest rate in the
market and had strong marketing and technical support from Microsoft. Microsoft asked IBM to enter
into a “Frontline Partnership”, which meant that it would have to abandon its own operating system.

At an industry conference in November 1994, Microsoft and IBM met and IBM rejected the terms, IBM
then went on to acquire Lotus Development Corporation. And if offered users a common interface across
platforms.

Sun’s Implementation of Java Technologies : sun’s aim with java technology was to permit applications
written in Java language to run on variety of platforms with minimal porting ( creating a software
designed for one platform available to run on another platform the process involves changing
programming details within software to enable it to run on a different platform). More applications
would be written for operating systems other than windows if developers found it easier to link their
applications