December 15, 2006

Dvorak Thinks Microsoft Will STILL Be the Next ‘Big Tobacco’

John Dvorak thinks a case that is essentially the State of Iowa suing The Evil Empire for $330 mil is the first of many, and that they will succeed:

This began when some sharp lawyers in Des Moines dug through all the old antitrust documents and found even more crazy notes and memos from all sorts of important insiders. This includes memos that hint at anticonsumer behavior. The latest update to the case sent out by the PR machine promoting this lawsuit is here and definitely worth reading if you have the time.

I have mixed feelings about this lawsuit. If successful, it’s going to lead to more and more copycat lawsuits against Microsoft in an attempt to bleed the company dry. My advice to the company: Get that cash out of the bank immediately! Spend it or give it to shareholders before you lose it to these folks.

The danger for Microsoft is that with each new set of attorneys in each state (the ones that didn’t get a piece of the original federal antitrust suit), you’ll see newer and more creative concepts developed for the court to hear. In the Iowa case they are promoting something called ABTE—”applications barrier to entry.” This is exemplified by the practice of cutting products out of the loop in various ways and focusing on applications that run only on Microsoft products—a Web page that opens only under Internet Explorer, for example, or a media file that can be played only by a Microsoft player. It doesn’t take much research to find Web sites that were created by Microsoft to this day that won’t run properly under Firefox.

If the ABTE concept flies, then Microsoft is toast in one state after another as long as any sort of consumer-protection laws lurk on the books someplace. The smart state attorney generals are watching the Iowa case while scouring the books for some way to get on this potential gravy train. I mean, let’s face it, there are a lot of laws that nobody pays much attention to that are still there waiting for the unwary.

The worst part about this is that Microsoft will have a very difficult time beating these cases, since each one will be more fine-tuned than the next.

….. I don’t see how the company is going to get out from under these suits. First, the suits will come from state after state. Then certain cities will find a way to soak the company. Microsoft will fight the first few, but then a cookie-cutter template and precedents will emerge, making each case easier than the next. Then Microsoft will get out the checkbook, and it will become a money-grab.

This is ridiculous. I hope Dvorak’s wrong.

No one would ever confuse me for a Microsoft cheerleader, but if he’s right, the states and the private law firms representing them will pocket hundreds of millions, if not billions. If form holds, the average “deceived” consumer will get, oh, I don’t know, maybe a $100 discount on their next Vista or Office purchase. Big whoop. Or, as was the case with tobacco, the winning state(s) will convince the courts that they should handle the settlement money instead of their supposedly aggrieved citizens. That would be just another way to get what is in effect a tax increase levied on a single company.

To what possible constructive end?



  1. I think Dvorak is on target here.

    What’s ridiculous is that Microsoft sitting on this mountain of cash. In a former era, this would have been spent in dividends long ago.

    If individual and group investors were cashing annual Microsoft dividend checks, this whole lawsuit thing wouldn’t see the light of day. No prosecutor would dare the wrath of going after senior citizens dividends.

    Dvorak has also proposed that Microsoft be split up into an operating systems, applications, and consumer media company. That move would also have nullified any lawsuit potentia

    Microsoft has brought it on themselves by hoarding cash and control long after it served any real purpose.

    As far as the prosecutors case, it’s at least as valid as the Tobacco settlements, in other words, not very, but enough to work.

    Comment by dave — December 15, 2006 @ 2:21 pm

  2. #1, Here I thought MS’s huge dividend some time ago took its mountain of cash down quite a bit. Maybe it just built back up in a relatively brief time.

    There’s an obscure tax called the accumulated earnings tax that would perhaps be worth an investigation.

    Comment by TBlumer — December 15, 2006 @ 11:20 pm

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