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Microsoft Cites Linux in DOJ Defense

Oct 14, 1998, 02:04 (60 Talkback[s])

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By Dwight Johnson

Microsoft has issued a detailed response to U.S. Department of Justice allegations refuting the government's charges.

Linux figures prominently in Microsoft's arguments in ways which significantly distort the truth.

For example, Microsoft claims:

"Market entry costs are very low and profit opportunities vast in software platform technology, leading to constant efforts to unseat the incumbent leader (witness the advance of Linux, a new version of UNIX developed by a single individual). Once a software program is developed, replication costs are very low, so a market entrant can quickly and easily produce enough copies of its product to immediately satisfy all demand."

There are two significant distortions of fact in this statement.

First, Linux was not developed by a single individual but by thousands of individuals contributing hundreds of thousands of man-hours.

Second, Microsoft suggests that, because replication costs are low, it is therefore easy to launch a competitive product when, in fact, marketing costs are by far the greatest part of the costs of launching any product.

Further on, Microsoft states:

"The notion that either Intel or Microsoft pushes the other around is completely inaccurate, and it's especially absurd to imagine that Microsoft could bully Intel, a large, successful company with almost twice the annual revenues and double the number of employees. It is also important to note that while Intel and Microsoft are great business partners, both companies have also worked with each other's direct competitors for many years. Intel has worked with other operating system manufacturers for 15 years (it recently took a stake in Red Hat Software, a distributor of the Linux operating system) and Microsoft has worked with other microchip manufacturers for 10 years."

Here, Microsoft seems to suggest that Intel's taking an equity stake in Red Hat proves that Intel was not bullied by Microsoft, when, in fact, the Intel/Red Hat partnership was formed a year after the Department of Justice sued Microsoft for its conduct. It may well be that the Department of Justice's law suit has forced Microsoft to desist from its former behaviors.

Still further on, Microsoft asserts:

"Contrary to the Department of Justice's assertions, market entry costs are very low and profit opportunities vast in software platform technology, leading to constant efforts to unseat the incumbent leader (witness the very recent increasing popularity of Linux, for example - a simplified version of UNIX originally developed by a single individual)."

Microsoft is evidently hoping here that it's previous statement in the same vein but contained in the executive summary will be the one read in the news media where it wants to sell its case, reserving this more qualified statement for the more informed Department of Justice attorneys.

Microsoft continues:

"Unlike in traditional industries, Microsoft controls no productive capacity. A new entrant into the software industry need not build a new chip fabrication plant for $2 billion, or even a factory of any kind. The only necessary input for software development is innovative programmers, inexpensive development tools, and PCs or workstations, all of which are readily available."

Microsoft engages in two gross distortions here.

Microsoft suggests that the investment required for software development is rather insignificant compared to a chip fabrication plant when, in fact, it is not. Just the software development cost Microsoft has invested in Windows NT would quite easily compare to a chip fabrication plant construction.

The comparison with the GNU-Linux system is quite unjustified. If the volunteered man-hours of development time were calculated at market rates, the investment would be quite significant.

But the biggest missing variable in Microsoft's calculation is, once again, the marketing cost which Microsoft has totally excluded but which is known to be by far the largest part of any successful software product launch.

Microsoft seems to imply there is some direct comparison between thousands of individuals contributing hundreds of thousands of hours of labor hours to develop Linux and the labor and marketing costs of developing and launching a commercial product when, in fact, the comparison is much more complex.

Finally, Microsoft wants us believe:

"And, of course, Microsoft is not in a monopoly position in the software market, however narrowly that market is defined. In operating systems it faces competition from IBM OS/2, PC-DOS, Caldera OpenDOS, Apple Mac, Linux, Novell NetWare, Sun Solaris, Sun JavaOS, HP/UX, DEC VMS and Digital UNIX, Lucent Inferno, SCO OpenServer and UNIXWare, IBM AIX and OS/400, and many embedded real-time operating systems."

Here, finally, we can agree with Microsoft. While Microsoft may have seemed to have a monopoly when the Department of Justice filed its complaint, it is quite clear today that Microsoft faces formidable competition from Linux.