Injunction against Windows XP unlikely: analysts

Scott Hillis

SEATTLE: Microsoft Corp. is facing calls for the courts to block its upcoming

Windows XP operating system because of competitive concerns, but political and

legal issues make such a move unlikely, analysts say.

Last month, Microsoft opponents stepped up pressure on the software giant,

with Sen. Charles Schumer of New York saying the company should make Windows XP

- the biggest update to the flagship product in six years - more open to rival

software applications.

Also, New York Attorney General Elliot Spitzer was said to be looking closely

at the possibility of seeking a court order to block shipment of Windows XP,

which is scheduled to launch on October 25.

New York is home to Internet and media giant AOL Time Warner Inc., which is

duking it out with Microsoft over Internet access and instant messaging, and to

photography titan Eastman Kodak Co., which has complained that Windows XP favors

Microsoft's digital picture application.

Some Microsoft opponents say Windows XP should be stopped, arguing that by

including new applications like instant messaging and a digital media player,

the company is continuing the same tactics that sparked an antitrust suit

against it by the US Justice Department and 18 states.

That case centers around how Microsoft bundled its Internet Explorer Web

browser into Windows 95 as it battled upstart Netscape for supremacy in software

that enables people to easily view the Internet.

A US appeals court ruled in June that Microsoft tried to illegally maintain

an operating system monopoly by tying the browser to Windows.

But it rejected claims that the simple act of tying software to Windows was

illegal, and ordered a lower court to examine the issue using the more

complicated standard of whether the benefits of tying outweighed harm to rivals.

So some have said sales of Windows XP should be stopped until the tying issue

has been resolved.

"There exists a worry that AOL (or the states on their behalf) will ask

for an injunction of Win XP," Lehman Brothers analyst Michael Stanek wrote

in a research note last week.

Legal, political reasons



But such an attempt to delay the launch of Windows XP is unlikely to succeed,
analysts said. First, there are legal grounds that set a high bar for such a

measure. Second, there are political reasons that boil down to the fact that for

every opponent trying to trip Microsoft up, there is an ally throwing its weight

behind the company.

In a report issued on Monday, Brendan Barnicle, a former lawyer who is now an

analyst with Pacific Crest Securities, said any injunction against Windows XP

would require showing that the product would inflict irreparable damage on

competitors.

"It is highly unlikely for a couple of different reasons," Barnicle

told Reuters. "The standard for giving an injunction is very difficult. The

courts are loathe to give injunctions and instead favor monetary damages."

Moreover, while the browser was once viewed as a possible alternative to the

Windows operating system, the new products aren't seen threatening Windows, just

Microsoft's ability to be a high-profile player in the next era of Internet

services.

"In the end we believe the attempts by the states to enjoin Windows XP

will fail, as these injunctions are rarely ever granted. Their contentions are

not at the heart of the case," Stanek said.

Lifeline to industry



The court would also have to weigh what impact halting Windows XP in its
tracks would have on Microsoft and the public, Barnicle said.

With the tech industry in a worsening slump, heavyweights like microprocessor

maker Intel Corp., PC giant Compaq Computer Corp. and electronics retailer Best

Buy Co. Inc. are counting on Windows XP to help revive sluggish sales. Those

companies also boast political muscle that could counter complaints from

politicians like Schumer.

"There are other members of Congress who have other constituencies, and

the constituencies in favor of getting XP out on time far outweigh those

opposed," Barnicle said. "They really want to see the new product come

out to really spur PC sales," Barnicle said.

Microsoft rivals may be using the threat of an injunction, however slim, as a

bargaining chip in ongoing settlement talks, said Chris Le Tocq, an analyst with

Guernsey Research. "The threat of asking strengthens the asker's hand when

negotiating with Microsoft. Some of this is background to current negotiations

over XP," Le Tocq said.

Microsoft has defended Windows XP, saying it marks a huge leap over its

earlier products.

"What we've heard from our partners and the beta testers has been

nothing but positive feedback. The industry as a whole is extremely excited

because they think it is the most reliable and best version of Windows,"

spokesman Jim Cullinan said.

Shares in Microsoft fell 76 cents, or 1.14 per cent to $66.13 in Nasdaq

trading on Monday. Despite the legal worries and the gloomy business climate,

Microsoft stock has risen about 65 per cent this year.

(C) Reuters Limited 2001.