COURT NOTES: With Judge Thomas Penfield Jackson's settlement deadline looming less than a week away, Microsoft on March 25 faxed a detailed settlement agreement to attorneys representing the government. According to sources close to the settlement discussions, Microsoft said it would agree to remove Web browsing technology from Windows (something it argued would be impossible earlier in the trial), adopt universal licensing contracts, and open up the code for SOME software - so long as it could avoid having to admit that any laws were broken. At the request of mediator Judge Richard Posner, Judge Jackson agreed to push his deadline back from March 28 to April 7 so the prosecution would have enough time to study Microsoft's proposal. But with that 10 day extension nearly gone, the Department of Justice and 19 states involved in the trial have apparently rejected the offer because it failed to go far enough. That puts the trial back into the hands of Judge Jackson, who is expected to hand down his 'conclusion of law' ruling on or before the adjusted April 7 deadline.

After the above report was written, Judge Jackson issued his ruling and found Microsoft guilty of breaking two antitrust laws. We will have a full report on the verdict in next week's edition of MSBC NewsSource.

According to several reliable sources, a pirated early version of Microsoft's 'Whistler' project was posted online on March 22. Whistler, the next major version of Windows after 2000 (WinME will definitely NOT be major), was previously not expected to see the light of day until at least early next year. Microsoft at first denied that the pre-beta software had been posted online, calling the reports a 'fraud' until they had located every server with the software and had it removed. With that accomplished, platform development group leader Jim Allchin came out and admitted that the stories were, in fact, true afterall. Still no word on how the embryonic OS reached the open Internet, but it was likely put there by one of Microsoft's supposedly trustable internal pre-beta testers.
However it was released, the software does give us an opportunity to look at Microsoft's plans for the future. Notably, the system (build 2211.1) refers to itself as Whistler Windows 2001 - a sure sign that it will wear the 2001 title by completion. Also interesting, the software includes MarsCore.dll, a file pointing to the eventual integration of Internet Explorer 6 (code-name Mars) and MSN (also code-named Mars) with Windows 2001 - an event we forecast back in February [see Watching Windows]. But casting doubts on Whistler's eventual use as a consumer operating system, the released build does not include any major changes to its user interface - something Microsoft has publicly said it will need to do in order to make computers more usable for the average home user.

On March 21, Microsoft released ServicePack 1 for Office 2000, the first significant update for that product. SP1 includes only two small new features, a deliberate action to try and avoid the embarrassment associated with a buggy Office 97 service update from several years ago. Unfortunately for Microsoft and its customers, the stripped down SP1 for Office 2000 was far from problem free and may have made the software suite's many problems worse. For starters, the patch is 26 megabytes for consumers and 40 for corporate versions, so it's not exactly a 10 minute download with the standard 56K Internet connection. (A CD of SP1 is promised, but so far Microsoft has been slow in getting it out the door.) Also troubling, the installation program requests "Microsoft Office 2000 SR-1 Setup Disk" even though no disks or CDs have been made available (Some users have had to use pirated CD keys to get past that portion of the install). Another problem is a conflict with SP1 and Outlook Express that disables the free e-mail program. And in addition to those bugs, SP1 brings back the Registration Wizard seen in Office2K betas - meaning that the product will shut down after 50 uses unless you register with Microsoft first.

Ever since Microsoft agreed to buy MediaOne's 29.7% stake in Britain's Telewest Communications back in May [see NewsSource, May 17 '99], the European Union Competition Commission has been investigating the deal's ramifications. On March 22, after extending its ruling deadline by two weeks, the EU announced that it will launch a full four-month probe into the agreement. The probe will especially look into Microsoft's relationship with AT&T's LibertyMedia, the other primary TeleWest shareholder, in addition to investigating clauses in the agreement that call for Microsoft software to be used on Telewest cable boxes. This investigation is unrelated to the EU's ongoing probe into Microsoft's potentially anticompetitive business practices.

Reorganizing itself for the third time in a year, Microsoft on the 31st rearranged its divisions again - this time combining the platforms division (Windows, Media Player) with the developers group (VisualStudio, et al). The combined platformdevelopers unit is headed up by Paul Maritz, who was running the former developer group. Former platforms group head Jim Allchin will also stay inside the group, still in charge of platforms, only this time with Maritz as his boss. The reasoning for this shuffle is unclear, but we suspect that it was merely a ceremonial change to keep Maritz from leaving the company in favor of his farm in Zimbabwe - something the Wall Street Journal recently reported he was preparing to do.

Microsoft recently delivered the final release candidate for a third beta of Windows Millennial Edition to testers, indicating that the Windows 9X replacement will be completed by the beginning of summer. The B3 RC1 release (build 2499.3) is smaller than previous builds because Microsoft removed several features, including network clients, support for older hardware, and realtime DOS. Microsoft defends that decision by pointing to the hardware support drivers available for download, but it's still very obvious that WinME will be used as a lever to push network-reliant businesses towards adopting Windows 2000.

On March 27 Microsoft released a preview of Windows MediaPlayer 7, a product that highlights the company's talent for stealing ideas. MediaPlayer 7, which Microsoft promises to complete 'later in the year', is very familiar to anyone who has ever used any mainstream media software. Just like most popular MP3 players (notably Nullsoft WinAmp), MediaPlayer 7 uses skins that allow users to change the software interface. The default skin, of course, looks like a cross between RealNetworks' RealPlayer and Apple's QuickTime Player - Microsoft's main competitors in this arena. MediaPlayer 7 also features 'visualizations' or animations that move with the music - something included in WinAmp and MacCast for years. MediaPlayer 7 is compatible with more media types that the previous versions but lacks compatibility with RealNetworks files, even though future RealNetworks products are expected to support Microsoft's format [see NewsSource, Mar 20].

Ensuring Microsoft's eventual domination of voice recognition technology, Lernout & Hauspie put down $590 million in stock last month to purchase Dragon Systems, its only independent competitor in that market. Lernout & Hauspie, itself a recipient of a generous investment from Microsoft back in 1997 [see NewsSource, Sep 15 '97], also recently bought the dictation services company Dictaphone. With Dragon absorbed into L&H, that leaves only IBM ViaVoice as a serious competitor in the software-based voice recognition market. But considering IBM's long history of non-competition, that one may not make much of a contender.

Ending a two year project to develop its own Web-based tax preparation software, Microsoft on March 22 announced an agreement with H&R Block that would integrate the companies' existing products, TaxSaver and TaxCut. Immediately after the announcement, Microsoft gave a two day notice of dismissal to 60 temporary workers involved in the development of TaxSaver. Last week Microsoft released a Macintosh version of Internet Explorer 5 - a year after the PC version was completed. Microsoft claims that the year long delay is related to a new rendering engine developed for the browser, but it was obviously not because of new features since IE5 for the Mac brings nothing new to the table except an 'auction manager' for tracking online auctions and customizable color schemes that can make the browser look like an iMac.
Three former Microsoft executives have joined together and purchased the Professional Bowlers Association, a loose-knit league for professional bowling tournaments. The buyers, Chris Peters, Mike Slade and Rob Glaser (of RealNetworks), paid an estimated $3 million to cover the PBA's debts, and are expected to put up an additional $1 million to provide prize money and keep the association going. All three are known for being big fans of the game.
The state of New York is investigating Microsoft for a $2399 dinner it threw on behalf of several highly influential state politicians. According to the New York Temporary State Commission on Lobbying, Microsoft's list of people attending the event last November included several politicians who were actually not present. The commission refused to comment on why that lead to an investigation, but the inaccurate list could have raised suspicions about Microsoft paying off politicians with the money supposedly spent on their food.

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