REPORT: From Microsoft Word to Microsoft World

[Nathan Newman <newman@xxxxxxxxxxxxxxxxxxxxx>]

	==============================================
	REPORT: From Microsoft Word to Microsoft World
	  How Microsoft is Building a Global Monopoly
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November 12, 1997

Contacts: Nathan Newman, Project Director
	    Phone:   (510) 452-1820
	    E-mail:   nathan@xxxxxxxxxxxxx
                or                Audrie Krause, Executive Director
                Phone:   (415) 775-8674  E-mail:   audrie@xxxxxxxxxxxxx

Microsoft's Buying Spree Takes Consumers from Microsoft Word to a Microsoft
World

SAN FRANCISCO, CA -- Microsoft has invested an estimated $4-$5 billion in
its quest for control of cyberspace and is acquiring key strategic
technologies at a rate of over one per month, according to a comprehensive
NetAction White Paper that examines Microsoft's strategy for domination of
the global information technology industry.

The report, "From Microsoft Word to Microsoft World: How Microsoft is
Building a Global Monopoly," was released today by NetAction.  The complete
report is available on NetAction's Web site, at:

http://www.netaction.org/msoft/world/

"What is most disturbing about Microsoft's buying spree is that Internet
markets are expected to explode geometrically within the next few years,"
said Nathan Newman, author of the report and Project Director of NetAction's
Consumer Choice Campaign.

With financial analysts predicting anywhere from $80 billion to $160 billion
in electronic commerce by the year 2000, the stakes are high.

"If Microsoft isn't reigned in soon, there is a very real possibility that
it will become an unprecedented financial and technological colossus,
reaching into more markets and industries than any monopolist has ever
aspired to dominate," said Newman.

NetAction's research documented nearly 50 Internet-related investments and
acquisitions made by Microsoft, most of them within the past 24 months, and
the White Paper traces the company's leveraging of these investments into
dominance of the global information technology industry.

In addition to a detailed description of the steps Microsoft is taking to
gain control of Internet access, content, and commerce, NetAction's report
reveals that the company is spending millions of dollars to subsidize
developer tools and train software developers and other computer
professionals in order to tie them to the Microsoft framework.

"Microsoft is not only forging partnerships with commercial and academic
training institutions, it is literally stealing key employees away from its
competitors," said NetAction Executive Director Audrie Krause.

The White Paper is one of the most comprehensive examinations to date of
Microsoft's strategy for global dominance.  NetAction is distributing copies
to key members of Congress and the Justice Department, as well as to
participants in Ralph Nader's Appraising Microsoft Conference, which takes
place Thursday and Friday in Washington, D.C.

The report includes five recommendations for action by policy makers to
restrain the negative aspects of Microsoft's dominance:

* Require Microsoft to divest its Windows operating system monopoly into a
separate company from the application and Internet divisions, and determine
whether there is a need for divestiture of the Internet division, as well.

* Restrain predation by stopping Microsoft from giving away its Internet
browser.

* Prohibit licensing practices that restrict customer dealings with
Microsoft's competitors, as well as exclusive dealing and tying arrangements
for products.

* Promote processes that support open standards, and defend open standards
established through industry processes from anti-competitive abuse by
Microsoft.

* Establish processes to ensure that Internet users can participate in
policy decisions effecting consumer use of the Internet, including
appropriate mechanisms for addressing complaints about product marketing and
the quality and reliability of Internet services.

"Implementing these recommendations will benefit consumers by ensuring that
the Internet develops as a vigorously competitive market," said Krause.

In May, NetAction launched the Consumer Choice Campaign to educate
cyberspace consumers about the threat of a Microsoft monopoly of the
Internet, and mobilize Internet users to pressure federal officials for more
vigorous enforcement of antitrust laws.  Additional information about the
campaign is on the NetAction web site at: <http://www.netaction.org>.

###

>From Microsoft Word to Microsoft World:
How Microsoft is Building a Global Monopoly

A NetAction White Paper by Nathan Newman <nathan@xxxxxxxxxxxxx>

Executive Summary
The full report can be found at: <http://www.netaction.org/msoft/world/>

Introduction:
Where do you want to go today?  Microsoft has other plans

Is Microsoft building a monopoly?

To ask the question, one has to ask in what markets, since through a
combination of business acumen, hardball tactics that many consider
monopolistic, and a buying spree of acquisitions, Microsoft is now involved
in almost every aspect of the computer and computer-related
telecommunications markets and is emerging as a major player in Internet
commerce and on-line media ventures.

It controls the operating system of 94.1% of the personal computers sold on
the market today (Dataquest numbers) and just finished off a $150 million
investment in Apple Computer to tie the other 5.9% of new desktop sales into
an alliance.  In major software applications, Microsoft has steadily
expanded its market share- in the case of word processors from barely a
third of the market in 1995 to over 80% in 1997.   It has used its Windows
NT server software to rapidly enter the business workstation, client-server
and large-scale "enterprise" computing segments. Over sixty-five percent of
new intranet sites are deployed on Windows NT servers, while Windows NT
workstation clients are growing 177 percent annually. (Source: IDC)

It owns not only operating systems and software applications but sells the
development tools used by a majority of programmers involved in the
industry and has strong dominance of the training programs of information
technology professionals. As of March 1997, 87 percent of the 2.4 million
software developers were developing for the Windows 32-bit platform, up
from 61 percent a year earlier.  Fifty-three percent of 2.4-million U.S.
professional developers use Microsoft's Visual Basic program as their
primary development language.  Along with controlling software used by
developers, Microsoft is playing an increasing role in their technical
education, forging commercial partnerships with both commercial and
academic training institutions, while spending millions of dollars
subsidizing the training costs of computer vendors and professionals in
order to tie them into the Microsoft framework.

Microsoft is using both its control of the desktop and its inroads into the
server market to leverage control of emerging Internet standards and
commerce.  Its Internet Explorer desktop browser is rapidly overtaking
Netscape's software for navigating the Internet, while its combination of
Internet servers, Web editors, Internet development software, and
network-based applications are establishing dominance in control of the
evolution of the Internet. Its purchase of and alliance with a range of
audio and video "streaming" technology companies is already assuring
Microsoft control of the standards for delivery of multimedia over the Net.
In the fight over the software standards that will run the Internet,
particularly in the maneuverings over the Java language standards that many
see as crucial, Microsoft has leveraged every advantage possible to design
those standards to suit its own commercial interests.

Through alliances with banks and its financial software, Money and Personal
Investor, along with its financial server software, Microsoft is emerging as
a key player in shaping the on-line financial transaction system of the
future.   Microsoft is establishing on-line commercial ventures in airline
ticket sales, auto sales, news, games, local events and entertainment (along
with local advertising revenue), and a range of other on-line commercial
ventures.  Its ownership of the Microsoft Network (MSN) and its partnership
with NBC in the creation of the MSNBC venture are giving Microsoft strong
distribution outlets for its emerging range of media content.  Its
investments in Dreamworks gives it a position in Hollywood movie and music
production that can be integrated into its on-line ventures involving
interactive multimedia as computers and television converge in coming years.

Beyond software and content, Microsoft is working to control the way people
connect to the Internet from work and home.   Its $425 million purchase of
WebTV gives it control of a major avenue for non-PC Internet access.  Its $1
billion investment in the cable company Comcast and proposed investments in
US West cable now make it a major player in designing the standards for
accessing the Internet over cable.  And in a breathtaking venture,
Microsoft's Bill Gates is in partnership (with a one-third stake) in a $9
billion venture to create a low-orbit satellite system called Teledesic that
could give high-speed Internet access to anyone anywhere in the world, an
investment supported by the US government through a massive free giveaway of
radio spectrum to the company.


Buying Its Way Into Dominance

The raw fact is that Microsoft is now a financial behemoth which, when it
fails to create viable competitive software, readily uses its financial
resources to buy-out startups and key technology to maintain its
stranglehold on the industry.  The company had annual revenues of $11.4
billion for fiscal 1997, a 31% increase from the year before, and has a cash
and short-term investment war chest totaling $9 billion.   With a soaring
stock price and a market capitalization of roughly $160 billion, the only
company in the country that consistently has a higher market capitalization
is General Electric ($228 billion in July). Microsoft rivals Coke in value
and has a market value three times that of General Motors.

Microsoft has used that financial clout consistently over the last few years
to acquire companies and their software and human assets, while sealing
financial alliances with a range of partners. While many of the financial
details have not been made public, Microsoft spent an estimated $1.5 billion
between 1994 and 1996 on acquisitions.   Through these investments,
Microsoft has bought out dozens of companies, buying or investing in over
twenty companies in 1996 alone.  Its investments have only accelerated in
1997 with the $1.5 billion spent in the WebTV and Comcast investments, the
$150 million invested in Apple, and the hundreds of millions invested in
additional Internet-related companies, including its key investments in
audio and video streaming. .  It has been acquiring key strategic
technologies at a rate of over one  per month.   These are all in addition
to its large strategic alliance investments in MSNBC and Dreamworks over the
last few years.  All told, Microsoft has spent an estimated $4-$5 billion on
acquisitions and equity alliances in the last few years to expand its reach.

Microsoft has acquired or invested in companies involved in 3D animation,
web site design, Internet development tools, speech recognition, handwriting
recognition, joystick controls, Internet payment security, on-line gaming,
technical training, e-mail connectivity, mainframe connectivity,
multilingual translation software, business news services and a range of
other Internet-oriented companies.   In doing so, it has helped assure that
companies that might have supported a broad range of different systems,
including Microsoft competitors, have instead developed breakthrough
technology in-line with Microsoft's goals and strategies for dominance.
Microsoft has also traded cash and expanded training subsidies to establish
equity stakes in a few key vendors who integrate and manage large-scale
computer networks for many corporations in order to leverage their strategic
position into a bias towards Microsoft systems.

And as Microsoft acquires both technology and key individuals, it can add
them to a research and development department that has grown to a size that
threatens to overwhelm any potential competitor. During fiscal year 1997,
Microsoft spent $1.93 billion on product research and development
activities. That amounts to 16.9% of revenue, an admirable percentage
commitment to innovation but a raw amount that tilts the whole competitive
nature of the industry towards Microsoft's control.

Most disturbingly, especially when comparing its economic heft to comparable
financial powerhouses in other manufacturing industries, Microsoft is not at
the peak of an industry's size but at an early stage in markets that are
expected to explode geometrically in the next decade.  If unchecked, there
is a very real possibility of Microsoft becoming an unprecedented financial
and technological colossus bestriding more markets and industries than any
monopolist has ever aspired to dominate.

Table:   Recent Microsoft Acquisitions  (partial list)
More detailed information is included in the full report, at:
<http://www.netaction.org/msoft/world/table.html>


Table:   Recent Microsoft Acquisitions  (partial list)

NAME OF COMPANY		TECHNOLOGY		DATE	AMOUNT 		
  /SOFTWARE					INVESTED
Stac Electronics	Disk compression 	1994	$39.9 million
Aha software		Handwriting recognition 1996	not disclosed
Lernout & Hauspie 	Speech recognition 	1997	$45 million
Fox Software		Database software	1992	$175 million
Altamira		Graphics software 	1993	not disclosed
Santa Cruz		Server operating system 1989	20% stake
Operation						(still 11.5%)
Netwise			Link databases		1995	not disclosed
			 to mainframes	
Panorama Software 	Multidimension database 1996	notdisclosed
Trados			Multilingual document 	1997	20% stake
			production facilities
Wildfire		Voice recognition for 	1997	Undisclosed
Communications 	     	  e-mail			equity invest
VANstar			Professional services	1995	Equity stake
			  and skills
ENTEX Information	Professional services	1996	5% equity
  Services		  and skills			stake
XLConnect		Professional services	1997	Equity stake
  Solutions		  and skills
VDONet Corp.		Video steaming		1996	5% stake
Progressive		Audio/Video streaming	1997	10% stake
  Networks Inc
Vxtreme			Video streaming		1997	$75 million
One Tree		Source code management	1994	not disclosed
Vermeer 		Web site management	1996	~$100 million
NetCarta		Web site management	1996	$20 million
Aspect Engineering	Tools for the Web	1996	not disclosed
ResNova Software	Mac Web server Software 1996	not disclosed
Proginet Corp		Linking Web apps	1996	not disclosed 	
			  to mainframes			(10% stake)
Interse Corp.		Web site analysis 	1997	not disclosed
Coopers & Peters	Java and Smalltalk 	1997	not disclosed
LinkAge Software 	E-mail in enterprise	1997	not disclosed
Colusa			Object-oriented tools	1996	not disclosed
Dimension X		Java tools		1997	not disclosed
Apple Computer		Computer company	1997	$150 million
eShop			Internet retailing	1996	not disclosed
	  		  & payment system
MSNBC			On-line news		1995	$500 million
Individual Inc.		Business news		1995	7.4% stake
MSBET			News & entertainment	1996	Undisclosed
			w/Black Entertainment TV	
Softimage		High-level 3D animation	1994	$177 million
DreamWorks Int		Multimedia titles	1994	$30 million
Dreamworks SKG		Movies, music 		1994	not disclosed
RenderMorphics 		3D graphics for games	1995	not disclosed
Bruce Artwick Org	Games software		1995	not disclosed
SingleTrac 		Games software		1996	not disclosed
Atomic Games		Games software 		1996	publishing
Rainbow America		Games software		1996	publishing
Exos			Joystick and input 	1996	not disclosed
Electric Gravity	On-line gaming 		1996	not disclosed
UUNet			Internet network 	1994	13% stake
						   (bought by MFS in 1996)
Web TV Networks 	Internet access device	1997	$425 million
Navitel			Internet telephone 	1997	not disclosed
Comcast Corp		Cable company, QVC	1997	$1 billion 	
							(10% stake)

Note: Bill Gates has also made personal investments through his digital
image archive company Corbis and in his proposed $9 billion joint venture
in the Teledesic company seeking to create high-speed satellite access to
the Internet.


TABLE OF CONTENTS:

Introduction:  Where do you want to go today?
  Microsoft has other plans
Buying Its Way Into Dominance
    Why Microsoft Dominates:  The Economics of Networks
    Table:   Recent Microsoft Acquisitions  (partial list)
The Core: Leveraging the Operating System for Desktop Dominance
    MS-DOS
    Windows
    Using Windows to Leverage Applications Dominance
Moving on Up: From the Desktop to Control of Corporate Computing
    Mind Share: Development tools and business computing
    Squeezing out Application Rivals in Enterprise Computing
    Training and Education: Controlling the Professional Workforce
Microsoft Bids for the Internet
   The Browser War: Giving It Away and Taking Control
   The Next Step: Audio/Video standards
   The Payoff: Selling its Web and NT servers
   Using Developer Tools to Dominate the Internet
   Java: The Showdown Fight
>From Software to Hard Cash: Controlling Financial Transactions on the
Internet
   Intuit Failure and Server Success
Taking on Internet Commerce Across Industries: Travel, Cars, Real Estate and
Local Information
   Tying it all Together: How Microsoft will dominate
      Internet Commerce
Content and Media Dominance
   Networking the Networks (TV, that is)
   Licensing Literature, Hocking History
   Games and Interactive Entertainment
Controlling Access to the Home: Web TV, Cable and Satellites in the Sky
   WebTV and the dominance of Consumer Electronics
   Comcast and Company: Investing in Cable, Defining the Standard
   Teledesic: Domination from the Skies
Conclusion and Recommendations