In an announcement most media sources refer to as 'stunning', Bill Gates resigned his position of 25 years as Microsoft CEO and handed the reins over to company president Steve Ballmer. But the story is not really as significant as it sounds, since Gates will retain his position as Microsoft's chairman and created a new job for himself as chief software architect. Ballmer, who will continue being Microsoft's president, has been running the company since he was picked for that position in 1998 [see NewsSource, July 27 '98], so giving him the CEO title only makes official what has been going on for quite a while anyway. Gates will keep doing what he has always done, thinking up new high-minded software concepts that will never see the light of day and touring media events to sell his snake oil. Not even Microsoft investors were moved by the news, with MSFT stock barely fluctuating from the rut it fell into after Christmas.
However, the latest executive shuffling inside Microsoft has thrown gasoline on the rumor fire, pushing more people to speculate that the company is about to voluntarily break itself up as part of some settlement with the government [see story below]. Microsoft's current structure of products and people does leave it ripe to be split apart into three distinctive divisions; one with operating systems headed by Gates, another massive division in charge of applications operated by Ballmer, and an unprofitable Internet/consumer unit operated by Richard Belluzzo, the man who ran SGI into the ground until he left to run MSN late last year [see NewsSource, Sep. 13 '99]. While three different Microsofts to invest in would be a great advantage to stock traders, it would do little about the actual problem we have with the company now. Each Microsoft would be run by people whom one might argue never learned the first thing about business ethics, and the two larger companies would retain their current hold over consumers - namely the dominant operating system and office suite. Unless the government demands that Microsoft at least revise its current user licenses and OEM contracts, the two-years and millions of dollars spent on the antitrust trial will result in nothing more than three times more Microsoft than we started out with.

COURT NOTES: Several days before the executive title-swapping was announced, rumors started flying fast and furious about that still-ongoing antitrust trial against Microsoft. According to the rumors and a USA TODAY report, the federal Department of Justice and 19 individual states involved in the trial have finally agreed to push for Microsoft to be broken up into two groups as punishment for its illegal activity. A representative of the DoJ said part of the report is "inaccurate" but would not reveal what facts were wrong or even acknowledge if the department and states have agreed on any one punishment. Microsoft refused to comment on the rumors, choosing only to say that a breakup of the company would be "an extreme and radical proposal" in the same vein as drawing a moustache on the Mona Lisa. As with most rumors, this report has a high likelihood of being inaccurate - although Bill Gates' abrupt change of job titles [see above] did nothing to ease speculation about the possibility of a two or three-way split.

After the stock market closed last Monday an unexpected statement was issued by Microsoft declaring that one of the private antitrust case against it had been officially settled. That case, filed against Microsoft by Caldera several years ago, charged the company of using the popularity of Windows to destroy DR-DOS, a Novell product later acquired by Caldera. According to sources the meeting was Microsoft's idea and the negotiation only took a few hours - meaning that The Behemoth essentially caved in to Caldera's demands.
The nearly detail-free press release gave no details of the settlement, only specifying that it will cut an estimated three cents per share from Microsoft's earnings in the next quarter. While three cents per share would be a little over $150 million, don't believe that Caldera settled for that amount when its case was worth an estimated $2 billion. Remember that Microsoft has over $10 billion in cash just lying around, and also has accountants capable of nearly anything since they aren't burdened by morality. The settlement costs will probably be spread across earnings for the next two or three years, a creative way of applying the infamous 'cookie jar' accounting method.
What did Microsoft get for its money? Beyond escaping a potential $2-billion-plus punishment handed down by a jury from Caldera's home state, they also bought their opponent's silence, since Caldera agreed to sign a non-disclosure agreement as part of the settlement. That would be Microsoft's main reason for settling, since Caldera reportedly gathered up a mountain of damaging evidence that would make the government antitrust trial look like a party in comparison. And all of that evidence could have been used in additional cases filed by damaged competitors like AOL-owned Netscape, or in class-action suits filed by groups of consumers and money-hungry trial lawyers. Caldera v. Microsoft Corp was scheduled to begin on February 1, three weeks and one day after the settlement was announced.

Although Windows 2000 won't be officially released until the middle of February [see NewsSource, Nov. 22 '99], several antivirus software companies are issuing reports about a virus made specifically for that system. The Win2K.Inta or Win2000.Install virus is being described as the first created specifically for 2000, since it takes advantage of features not present in other versions of Windows. According to F-Secure manager Mikko Hyppšnen, the virus was likely made only for publicity for its creators since the group responsible for Win2K.Inta sent the virus in to control groups instead of releasing it to the public. Viral experts concede that the virus will pose no risk since they are aware of its existence and have updated virus scanning software to detect it.

On January 10, one of Microsoft's longest-running and least-reported legal battles reached an anticlimactic end with a US Supreme court decision. The case in question is a class-action suit filed by thousands of former full-time 'temp' workers who accuse Microsoft of using that temporary classification to exclude them from benefits like health care and stock options. The lawsuit was first filed in 1992, and when it reached trial Microsoft lost and was ordered to settle with every temporary employee that worked for the company more than 20 hours a week since 1986 [see NewsSource, May 17 '99]. The Behemoth appealed that decision and a federal judge limited their settlements to 500 employees instead of the thousands originally involved. Attorneys representing the permatemps appealed that appeal and had it reversed - which of course prompted Microsoft to appeal once again. That appeal was settled last week when the supreme court decided [as mentioned above] not to hear the case, essentially siding with the workers.
This could have a significant impact on Microsoft's financial condition in the next few quarters, since repaying those workers is likely to be quite expensive. That just goes to prove that you should do the right thing to begin with, as it would have cost Microsoft less to give their employees full benefits from the start instead of going through some eight years of legal maneuvering and being forced now to reimburse stock options worth a dozen times their initial value.

Appliance giant Maytag announced on January 14 that it has teamed with Microsoft to create 'smart appliances' based on the fuzzy Universal Plug and Play standard proposed last year. This follows earlier announced plans from Sun Microsystems to create similar networked home appliances with Sears and Whirlpool, among others. But all that aside, do we really need network-aware coffeepots and dishwashers anyway?
Continuing its recent application host buying spree, Microsoft last Monday invested some $10 million into Corio, a California-based application service provider. Two days later Microsoft and Compaq together put $100 million into another ASP, Digex. Each of these companies will undoubtedly be providing services for the promised Web-based version of Microsoft Office.

CORRECTION: Last week we misspelled Microsoft Consumer Division head Richard Belluzzo's last name as Belluzio. We apologize to Mr. Belluzzo and his family, and hope that in the future we will spell his name properly while attacking the motives and character of himself and his employer.

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