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Microsoft reeling

If you can’t beat it, buy it. If you can’t buy it, sleep with it.

You have to give Microsoft credit for its determination to corner the Office software market. A few years ago, when it only owned 80 percent of the office software market and 65 percent of the browser market, Bill Gates sat down with Steve Jobs and made him an offer he couldn’t refuse. Apple was in trouble and Jobs had recently been appointed as its savior. Another year of historic losses and Apple would have bitten the dust. Problem was, it had few friends with enough dough to relight the R&D fires.

Gates wanted more of the office market. Apple owned the second largest office software maker–Claris–and Gates wanted its customers. Gates came in, offered the desperate Jobs cash and a chance to have Office 98 released for the Macintosh first in exchange for Jobs folding Claris into Apple, shutting down new development on Claris Works and offering Internet Explorer as the default browser on all new Macs. Basically, Gates got another 10 percent of the office and browser software markets for $100 million.

In October, the scene was similar. Corel–the former giant of desktop graphics software–was in trouble. It was losing money at record levels and running out of cash. It needed someone to infuse it with cash and focus it on its core products once again. It had invested in two ventures that were not giving it much return: 1) It had purchased WordPerfect from Novell in the mid 90s and, despite the fact that it worked wonders with it, Microsoft prevented many inroads there (nice try, bad timing). 2) It had created its own Linux distribution in a crowded market that has thin margins even for its leaders such as Red Hat and Caldera (good idea, bad timing).

Gates came in and invested some of his pocket change in exchange for Corel getting out of the office and Linux businesses. In fact, Gates made Corel an offer it couldn’t refuse–take the money or die. Corel is now safe from insolvency and the last vestige of shrink-wrapped office competition is out of the way. Officially, Corel claims it will focus its attention on it core graphics business. Translation, it will do to WordPerfect Office what Apple did to Claris Works (now AppleWorks)–gut it yet support it. Microsoft is now the only viable maker of PC office software outside of ASPs such as Sun.

For decades Apple and Corel had been Microsoft’s arch enemies. In a few twists of Gate’s pen on a couple of checks, he had gotten in bed with his enemies and made them go away in his key market–Office. Microsoft is most famous for its operating systems and browser software, but Office pays the bills. And, because everyone needs office software, a difference of 20 percent of the market share translates into billions in profits over a period of years. By spending a mere $230 million, Gates had gained that extra 20 percent market share.

Problem is, as The Wall Street Journal and other media outlets, including CU, recently reported, the Justice Department is investigating Mirosoft’s Corel investment. As you know, it kinda frowns on buying out all your competitors in order to corner a market–the quintessential monopolistic act. The funny thing is, despite the fact that Microsoft is in the midst of antitrust litigation both here and abroad related to its OS and browser businesses, media outlets brushed the case aside, as reported in The Standard yesterday.

The way I see it, even if the DOJ decides not to pursue its Office case or the case is unsuccessful, the investigation itself will only harm Microsoft’s credibility in its OS/browser antitrust cases here and abroad. One way or another, the Microsoft’s legal future continues to dim.

James Mathewson is editorial director of and ComputerUser magazine

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