COURT NOTES: On October 19, nearly two years after the original lawsuit was filed and exactly one year to the day since the antitrust trial began, US District Court Judge Thomas Penfield Jackson's court posted a brief statement on its Web site revealing when the first decision will be handed down. Sort of. According to the site, Jackson's finding of fact will be handed down on a Friday evening at exactly 6:30 PM, two hours after being revealed to the opposing sides in the case. Unfortunately, the notice failed to specify _which_ Friday the decision would be handed down. That was not a mistake on the part of Judge Jackson, but rather (we believe) a calculated move to push the sides closer to a settlement. But whatever Friday the decision is announced, you can rest assured we will cover it.

On October 19 Microsoft reported its earnings for the first quarter of fiscal year 2000. The numbers for Q1 2000 are almost hard to believe, with Microsoft making $2.191 billion from revenues of $5.38 billion - a 41 percent profit. Those numbers are some 28% higher than the same quarter in fiscal year 1999, although they drop a bit from the preceding quarter. The results were slightly boosted by the sale of MSN Sidewalk [see NewsSource, July 26] for $156 million. Surprising to some is a sales decline for Microsoft Office despite the release of an upgrade for that suite earlier this year. Apparently less expensive productivity suites (particularly AppleWorks) that can be bundled with inexpensive computers have taken their toll on Microsoft's usually dependable cash cow. In other areas, Windows sales rose 17 percent along with the demand for new PCs, productivity and development tool sales increased by some 40% over Q1 1999, and the company's Internet properties made 30% more revenue than during the same quarter last year - although they still lost far more than they made.

Just as NewsSource originally reported back in January [see NewsSource, January 18], Microsoft is now confirming Windows 2000 will hit store shelves in February. The confirmation was prompted by a story last week on ZDNet that claimed 2000 would be released to manufacturing the last week of December and would then reach consumers six to eight weeks later. Microsoft has refused to commit to a timeline, but said the system is likely to be on store shelves early next year - even if the Y2K crisis does reduce its sales, as many expect.

According to a Washington Post report, Microsoft-funded lobbyists are urging congress to cut $9 million from the president's proposed year 2000 Department of Justice Antitrust Division budget. While that figure is a small part of the division's $120 million allocation, it is almost equal to the amount spent over the last few years pursuing the current Microsoft case [see NewsSource, October 11] - and would most certainly limit the Department of Justice during an appeal of the trial's verdict. A Microsoft spokesman admits lobbyists have spoken to congress about "serious concerns with the way the DoJ has handled our case" but claimed a reduction of the antitrust budget is "not a major priority of Microsoft." This plan could eventually backfire on the company; the government could use this as evidence showing why Microsoft should pay back its trial-related legal expenses, and influential members of congress none too happy with the pathetic, heavy handed lobbying may now decide to increase funding.

On October 14, Internet travel service Priceline.com filed suit against Microsoft for patent infringement and breaking Connecticut state business laws. Specifically, the suit says Microsoft received confidential business and technical information last year during discussion about a possible joint marketing agreement or investment deal between the two. When Priceline founder Jay Walker refused to give Microsoft shares of its stock below the IPO price, Microsoft walked on the deal - with Bill Gates allegedly telling Walker that patents wouldn't stop Microsoft from using his company's technology. Priceline says Gates dismissed the threat of an infringement suit, saying they "could get in line with all the others" already suing Microsoft. Gates then made good on his threat, with MSN Expedia launching a service almost identical to Priceline's a week after the incident. Microsoft spearcatcher Mark Murray said The behemoth could not comment, since its lawyers had not yet fully reviewed the complaint.

Not long after Microsoft patched the last big IE security problem [see NewsSource, Oct. 11], yet another was uncovered. This latest breach of security lies within Microsoft's implementation of Java on Internet Explorer. According to German graduate student Karsten Sohr, who discovered the problem, Internet Explorer allows insecure Java applets to pose as applets that have been certified secure. The applets could then delete files or do other damage to a computer system. The problem reportedly does not affect other companies' programs, since it takes advantage of extensions Microsoft illegally added to Java that are not present in other software. Microsoft confirmed the bug report and has issued a patch, but says the hole is so complex it would be rare for a hacker to actually take advantage of it.

Just in time for the holiday shopping season, Microsoft has added an Internet wallet feature to its MSN Passport e-commerce and registration portal. The service is fairly simple, with users providing Microsoft with name, address and credit card number, then using the Passport password (also used with Hotmail) to pay for purchases over the Internet. But unlike other MSN services Microsoft actually charges for this one, although the "competitive yearly fee" will be held off until March 2000. More than 50 sites have already signed on to use the service, including longtime Microsoft partners Dell and Barnes & Noble. And if the MSN Passport wallet isn't invasive enough, MSN Passport electronic bill payment is expected to launch early next year.

Microsoft is undermining its channel partners with the relaunched Shop.Microsoft Web store. Back in March when the store was created, customers could choose to purchase Microsoft products from Insight, CompUSA, CDW, Beyond.com or Microsoft itself - but now those less expensive partners have been removed. Microsoft claims the site only sells products not available from retail stores, but it currently features such rare items as Windows 98 SE and Intellimouse.
Earlier this month the MSN bCentral small business portal was launched, with a surprisingly small amount of media coverage compared to that of its original announcement [see NewsSource, September 27]. The portal, for now just a glorified link list to preexisting MSN business services, is part of the latest refocus for Microsoft's struggling network of sites.

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