Antitrust concerns delay future Windows OS

Microsoft plans to push back the next major release of its operating system, codenamed "Blackcomb," to 2005, because it fears that technology it plans to include in the release could bring it further into conflict with antitrust regulators, various industry analysts said.

In the interim, the company is expected to release a less ambitious version of Windows dubbed "Longhorn" some time in 2003 -- when Blackcomb had originally been due to ship, according to analysts from research firm Gartner. Like Blackcomb, Longhorn will include features that contribute to Microsoft's much vaunted .Net initiative, but will omit database technology that would have forged greater ties between Microsoft's operating systems and its Web services.

"There is one major interesting plan in Microsoft's operating system future that has significant legal and antitrust implications," said Tom Bittman, an analyst with Gartner. "They (Microsoft) know it does, and it all relates to what would be coming out in that Blackcomb time frame."

Microsoft officials declined to discuss specific technology for future products.

The company, however, plans to bundle a database with Blackcomb that would create new ways for users to store all kinds of data -- from MP3 and e-mail files to Word documents -- and make them more easily accessible from a variety of computing devices, Gartner analysts said.

The database offers Microsoft's interpretation of "unified storage," and uses technology that will also be included in the next release of Microsoft's SQL Server database, code-named "Yukon."

Unified storage allows disparate data to be combined in a common database and accessed from a variety of devices regardless of its format. Currently, a PC operating system stores data in a file system, where files are stored in directories on a hard drive and saved in a particular format to be retrieved by compatible applications. Allowing users to access their files from devices such as handheld computers or set top boxes through a unified storage system is an important part of Microsoft's effort to make its operating system a basis for Internet-based computing.

If a database is built into the new operating system, Microsoft is likely to draw more criticisms that it is trying to leverage its monopoly in the operating system market to expand in other sectors, in this case the emerging Web services market.

In a similar way that bundling a free Web browser with Windows riled antitrust regulators, including a database with the operating system that is closely tied to its Hailstorm Web services efforts could once more make critics cry foul, analysts said.

"If they incorporate a database into the operating system, that starts to get into the age-old question about bundling applications with the operating system," said David Smith, a Gartner analyst.

Other analysts agreed. "The question is, to what degree can Microsoft integrate what's on the operating system with the services it offers on the Web and avoid tripping over the antitrust issue," said Chris Le Tocq, an analyst with Guernsey Research. "I think Microsoft is very sensitive to this."

One use for the technology, according to Le Tocq, would be to make it easier for users to make use of Microsoft's Web Store, an online storage service where users can store personal files and access them over the Internet. Microsoft offers Web Store services currently to users of its Exchange Server software. It has said Web Store will be part of its Hailstorm set of Web services, which also includes notification services and Passport, Microsoft's user identification service.

"It makes storing objects locally or on the Web essentially follow the same process," Le Tocq noted.

News of Blackcomb's delay emerged as Microsoft prepares to launch its Windows XP desktop operating system on Oct. 25. Already, the software giant has been criticized for plans to bundle applications including its Windows Media Player, instant messenger software and applications for managing digital photos. Industry opponents from Eastman Kodak Corp. to AOL Time Warner Inc. have taken issues with the bundling plans. Privacy advocacy groups and the U.S. government officials have also raised concern over the new operating system.

Microsoft originally had said Blackcomb would include all of the .Net technology that Microsoft failed to get into Windows XP and its server counterpart, Windows.Net. -- due out before June 2002. That includes greater support for industry standards for building and delivering software and services, a key part of its .Net initiative.

Exact details of Microsoft's plans are still unclear, said Smith, who authored a research note on Microsoft's plans for unified storage in Blackcomb. Microsoft is likely to make use of XML (Extensible Markup Language) as an enabling technology to allow users to locate and retrieve their data over the Internet, he said.

"It could make transfer between what's stored on the desktop and the Internet much easier," he saidMicrosoft first talked about unified storage in 1993 when it began work on a project code-named "Cairo." Cairo was the company's name for the Windows 95 operating system, but it lost much of its luster as Microsoft scaled back parts of the project because of concerns about antitrust issues. By the time the operating system was finally released in 1995 it lacked many of the features first touted for Cairo, including unified storage.

Microsoft tried to revisit unified storage with Windows NT and its follow up release, Windows 2000, but ditched the plans due to technology complications and continuing concerns about antitrust matters, Smith said. A scaled back version of unified storage was eventually delivered in Microsoft's Exchange 2000 Server, under the name Web Storage System.

Microsoft would not confirm or deny whether Blackcomb would be the next major operating system release after Windows XP. "While there obviously will be future Windows products we cannot confirm specifics at this time," said Jim Cullinan, a spokesman for the Windows platform group. "There are future products in development."

As far as its antitrust case causing Microsoft to delay any future Windows products, Cullinan said Microsoft is "focused on developing our products as usual."

Analysts have long speculated that Microsoft would put out an interim operating system after Windows XP but before its fully .Net-capable operating system, at least in part to drive PC sales. [See, "Gartner sees bumpy road towards .Net," May 3.] The company is now thought to be? planning an interim release as a kind of "Plan B" as it awaits a conclusion from a U.S. District Court in its antitrust battle. The court is expected to start revisiting the case as early as this week.

"It is safe to say that the current antitrust case has major long-term implications for Microsoft's operating system plans," said Gartner's Bittman.

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