Microsoft split: An open letter from Forrester research

Microsoft: Forget the Appeal
By Carl D. Howe

Open Memo to the Microsoft board of directors:

You probably weren't surprised when Judge Jackson ruled today that Microsoft should be broken up. You undoubtedly have plans to appeal this verdict and expect that Microsoft will eventually prevail.

Don't do it. Instead, drop the appeal and get on with business.
Why accept a breakup when you believe you are right? Because while Bill Gates was asking the Justice Department to define the word "compete," others were raising billions of dollars of venture capital to do just that. And rather than Microsoft using its cash hoard to innovate ahead of that fray, it frittered away two years with unconvincing testimony and outrageous argumentation. Look what has happened to the infrastructure market while this case has been in court:

* Open source software gained a foothold.

Microsoft made its name delivering useful software on cheap commodity hardware. But creeping featuritis has added megabytes of rarely used code to key Microsoft products-adding complexity and reducing reliability. The result? Open source Apache Web servers now outnumber those running Microsoft's Internet Information Server two to one, and the svelte Linux OS is showing up inside corporate firewalls-dashing Microsoft's dream of "Windows everywhere."

*The Internet put new emphasis on nonstop supersized servers.

Microsoft's success was based on rapid deployments of thousands of small Wintel servers inside companies. But today, Global 2,500 eBusinesses want high-end servers like Sun E10000s, IBM S80s, and HP 8700s for their Internet infrastructures, and Forrester sees that shift accelerating. Where's Microsoft? Nowhere: Microsoft's low-end focus and poor track record for reliability just doesn't make the grade for mission-critical apps today-and its one high-end offering, Windows 2000 Data Center Edition, still isn't ready.

* Internet engine rooms don't care about Microsoft.

Dot Coms, ISPs, and managed service providers consistently tell us that only four infrastructure vendors matter to them: EMC, Cisco, Oracle, and Sun. Why? Because those vendors' solutions have proven their ability to serve millions of users every day worldwide for months at a time-without requiring the weekly reboot common in the Microsoft world.
OK, so the world has changed. But why accept the breakup? With the world changing at Internet speed, Microsoft must focus on the marketplace, not the courtroom. Why?

* Conduct remedies will cripple Microsoft's nimbleness.

You hoped that the divestiture remedy would be replaced with a conduct one. But living with an ongoing legal review of every product announcement will sap Microsoft's will to live-ask the guys who were at IBM in the 1970s. You haven't appeared to enjoy Judge Jackson's attention to date-do you want to spend the next 10 years having him review every business decision you make?

* Wall Street hates uncertainty.

The brain drain over the past two years must have scared you-and throwing options at the employees who remain won't do any good if you can't keep the stock price moving up like you used to. Ending the ongoing litigation would go a long way toward convincing investors that Microsoft is back on the upswing.

So you must choose between two alternative futures. One is represented by the choice that Andy Grove made when Intel resolved its antitrust suit with the FTC: Settle the matter, and move on. The other is to fight for a monolithic Microsoft, let your market and technology influence erode, and spend the next decade innovating for federal judges.

Where do you want to go today?