States, users still worried about Microsoft

California, home to Microsoft Corp.'s most ardent business rivals, has emerged as the leader among the nine states that rejected the federal government's settlement of its antitrust case against the software giant. It's a leadership position Kevin Dempsey, CIO at Reliance Steel & Aluminum Co. in Los Angeles, says he can understand.

"California is definitely poised to take a more aggressive stance," said Dempsey, who also said he believes that California is interested in protecting its technology firms. "The state has always been a leader in technology, so I think they have a great stake."

The dissenting states aren't alone in their concern.

The settlement between Microsoft and the U.S. Department of Justice (DOJ), which is aimed primarily at helping PC makers and some rival software vendors, is expected to have little effect on corporate end users, who are becoming as worried about Microsoft's increasing market power as some vendors are.

While some corporate IT managers may praise Microsoft for bringing standardization to a networked world, they're also concerned about its ability to change enterprise licensing terms with little apparent fear of competitors.

"We feel more uncomfortable with the power that Microsoft is wielding as time goes by," said Dempsey.

Amy S. Courter, director of IT at Valassis Communications Inc. in Livonia, Mich., agreed. "They are definitely operating from a position of strength," she said.

Broader Issues

Microsoft's market power has been untouched by the five-year consent decree reached last week with the DOJ and nine of the 18 states involved in the case, say the company's critics, many industry analysts and the states continuing the litigation. The settlement largely addresses issues related to PC operating systems, such as licensing terms with PC makers and desktop configurations. But it doesn't address technologies such as Web services and intelligent devices that analysts believe will supplant the PC in the years ahead.

"The personal computer that is the focus of this suit isn't the center of the universe anymore," said Dwight Davis, an analyst at Summit Strategies Inc. in Boston.

The decision by technology-centric states such as California, Massachusetts and Utah to continue the lawsuit means the ultimate scope of the remedy is yet to be resolved. The DOJ settlement is now seen as a baseline from which U.S. District Court Judge Colleen Kollar-Kotelly could add tougher restrictions, if she can be convinced that they're needed.

Corporate IT managers are mixed on the merits of the DOJ's settlement.

Lisa Bender, IT manager at Falcon Plastics Inc., a Brookings, S.D.-based manufacturing firm, said she doesn't believe the settlement will foster innovation on the scale she would like to see. "I think we're going to be regimented to incremental steps instead of giant leaps," she said.

But Edward Flynn, CIO at chemical maker FMC Corp. in Philadelphia, said there's a big-picture reason for the government to settle: the economy.

"Lack of spending in the economy as a whole is due to uncertainty," and the Microsoft case is part of that uncertainty, said Flynn.

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