The Giant Unbowed

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Four years, millions of dollars in legal fees and countless court documents have passed since the U.S. Department of Justice launched its antitrust case against Microsoft. In the wake of Friday’s court ruling affirming a settlement between the software giant and the DOJ, it’s fair to say that this arduous process has brought one major change in Redmond’s behavior: Bill Gates, Steve Ballmer, et al., now are much more humble (read: shrewder) in their public comments.

That Microsoft has traded hubris for humility — Redmond execs managed not to gloat Friday over U.S. District Judge Colleen Kollar-Kotelly’s decision to uphold a disputed settlement — is scant solace for the company’s competitors. The truth is that Kollar-Kotelly’s ruling was a resounding victory for Microsoft. In rejecting much tougher settlement proposals sought by nine states, the decision effectively preserved the status quo for Microsoft and the tech industry over which it dominates, with only a few minor concessions to competition.

You know Redmond likes a court ruling when it says it won’t appeal, and what’s not to like if you’re Microsoft? Sure, the “remedy” in effect for five years under the judicial order prohibits Microsoft from punishing computer makers who install competing operating systems (OS) in their boxes, among other things. The source of Microsoft’s power — its Windows operating system, which has more than 90% of the OS market — remains intact.

Given that two years ago it was facing the real prospect of being split up, Microsoft is more than willing to suffer this brand of “punishment.”

Microsoft’s legal battles are far from over. Some or all of the states involved in the DOJ suit may appeal, and Redmond appears destined to contend an unending stream of private lawsuits. Further, the company’s business practices are being investigated by the European Union’s Competition Commission, with some kind of preliminary ruling due within a couple of months.

Friday’s court decision, however, will make it more difficult for plaintiffs pursuing an appeal or independent lawsuit. Battle fatigue will be another disincentive, for Microsoft’s aggressive defense of its competitive prerogatives cannot be underestimated. The company by now may employ more attorneys than programmers. As in the marketplace, Microsoft in the courtroom plays to win.

The bottom line is that Microsoft has taken the best shot of its biggest, most formidable adversary — the U.S. Department of Justice — and is still standing, only slightly bloodied but indisputably unbowed. There won’t be a rematch.