06/01/19 ONLINE ORIGINAL: A TALK WITH SUN'S MICHAEL MORRIS

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A TALK WITH SUN'S MICHAEL MORRIS

Michael H. Morris is vice-president and general counsel for Sun Microsystems Inc. He oversees a separate legal battle with Microsoft, in which Sun contends Microsoft changed Sun's Java software in breach of their contract. On May 12, Sun filed new motions asking that Microsoft ship Sun's version of Java with Windows 98. Morris hopes Sun's and the Justice Dept.'s cases will help open up competition in the computer industry. He spoke to Business Week's Robert D. Hof on the recent antitrust developments.
Q: What do you think of the decision?
A: These are serious cases that have been filed. We certainly applaud the courage of the Department of Justice and the state attorneys general for their willingness to file cases that are this sweeping and this important against arguably the most powerful private corporation in the world.
Q: Did the lawsuit surprise you?
A: No. I had the sense that both the states and the Department of Justice were serious, and would bring serious cases. Then when the talks collapsed over the weekend, I was virtually certain that they would bring a court case.
It seemed to me all along that any settlement would be bad. I could not imagine Microsoft agreeing to settle a case on terms that would touch upon its monopoly power. The only question was whether the states and the DOJ would stand fast. That's what we got.
Q: Are the particular remedies appropriate?
A: They seem appropriate to address some of the issues that the complaint addresses. The browser question is an important one. Given Microsoft's egregious abuse of its monopoly power, there are really only a limited number of ways that remedies could address the competitive playing field and restore competition. The government in essence is giving Microsoft some choices here about what it can do.
One interesting question is the degree to which, if those remedies go into effect, the original equipment manufacturers [personal computer makers] will exercise their freedom. I think it's a reasonable thing to be a little skeptical, because of their reaction to the [1995] consent decree order. What the judge said was that Microsoft had to offer the OEMs either Windows 95 without a browser or Windows 95 with a browser. And of course, they all took Windows 95 with a browser.
One of the reasons they did that was that they know their consumers expect to have Internet browsing capability these days. But I think the other reason was they live in fear and intimidation of Microsoft. That hasn't changed. Their first reaction is going to be absolute caution, because they are scared to death of what Microsoft can do to them if they displease them.
Q: So is the Justice Dept. too late here?
A: I don't know about that. This is Day One of a very complex case. It would be hazardous to try to guess where we're going to be a month from now or three months from now. [The PC industry] is a very competitive business, and in a business that allows you to differentiate your product from your competitor's by very, very few means -- essentially price and distribution strategies are it -- you would think that they would jump at any chance to differentiate their products. And if they control the boot-up screen, or have the opportunity to offer the Netscape browser in addition to or as a substitute for [Microsoft's Internet] Explorer, they'd jump at that chance.
In a normal environment, they would jump at that chance. This is not a normal environment. It's impossible to overestimate how much fear and intimidation there is in the OEM community with respect to Microsoft. It's terrible.
Q: Should Justice do anything else?
A: They themselves pointed out that their investigation continues. And I don't think that they believe that this is necessarily the end of the story. It would be highly unusual in a case of this complexity and sweep if it looked exactly the same at the end of the process as it did on Day One. What we see today is just the beginning.
Q: Do you think that Justice will find more evidence of wrongdoing in the discovery phase, or that Microsoft will settle?
A: That's possible, but I think it's highly unlikely that Microsoft would agree to anything that would genuinely impinge upon their monopoly power. I think they'll fight this out to the bitter end before they agree to anything along those lines. I don't think the government has any expectation other than that. I think the government is prepared to litigate this one to a full determination.
We also don't know what discovery will hold. We don't even know all the documents the government currently has at its disposal. They hinted at some of them in the complaint and in Joel Klein's press conference. But I gotta believe they have a lot of stuff there. The only thing that might change Microsoft's mind is if the revelation of more and more information about their business practices has begun to turn the public decisively against them. Then they might change their tune and do the right thing.
Q: Microsoft contends it should be able to innovate by including new capabilities in the operating system. Is that valid, or does a company with that much dominance have to play by different rules?
A: It's not our view that if you're a monopolist, you have to play by different rules. It's the law. I didn't hear anything the government said today, or read anything about their filing, that suggests that there's some wholesale prohibition on Microsoft improving its operating system, or even adding functionality that isn't there already.
Q: Except the browser.
A: The browser's a different story. That's a technology that in the first place has incredible importance to consumers, because it's the principal way to get to the Internet. So it provides a lever point for a monopolist like Microsoft to end up controlling big chunks of the Internet. So it's a public-policy concern in a way that other types of technologies are not.
Secondly, it's a type of technology that was offered not first by Microsoft, but by Netscape, and was highly successful. It was only after this bundling strategy and restrictive licenses that Microsoft imposed on the OEMs took effect that Netscape's market share began to drop. And of course, it was offered by Microsoft as a separate product for two, three years before they attempted to "fully integrate" it. So the circumstances regarding the browser are very special and very different.
The idea that they're trying to peddle -- which is that the government's response to the browser bundling means that Microsoft can't integrate anything into the operating system going forward -- is patently absurd. The government has never made that claim, doesn't make that claim, won't make that claim. But it's the kind of thing that Microsoft likes to say because it sounds good and, to the uninformed, it may even engender some sympathy. It's pure demagoguery. Their hypocrisy is genuinely towering.
Q: Justice's requirement that Microsoft include Netscape's browser with Windows 98 seems to go beyond what even some supporters of limitations on Microsoft think is justified. Do you think so?
A: When you consider the kind of damage to the competitive process that Microsoft's practices have done in the browser field, there are only a limited number of ways you can try to undo that harm. Simply saying to Microsoft, "Don't do it anymore," doesn't help, because everybody's going to get a copy of Explorer with a new computer that they buy.
So how do you address this harm? It seems to me there are a couple of ways you can do it. You can say to Microsoft, "Look, you can continue to offer Explorer, but consumers ought to have the same opportunity with the same ease of use to get another browser as they do Explorer." Now, how do you do that? One of the ways is to force bundling. The other way is to say, "You guys don't offer a browser. If you're going to offer a browser, it's gotta be separate from the operating system, just as Netscape's currently is, so that the user has to go through the same hassle to get your browser as they do to get Netscape's."
That's all the product of Microsoft's egregious behavior. That's the only reason we've come to this pass. They have nobody to blame but themselves.
Q: Justice makes no mention of Java. How does this case bear on Sun's Internet software?
A: I'm not particularly unhappy about that. We have our own case against Microsoft [charging Microsoft with changing Java, in breach of its contract with Sun] that we think is an extremely strong case. We think we're going to win. We're doing O.K. so far. And we think we can take care of ourselves with our own case.
The case the government did file at least has an indirect potential effect on Java. To the degree that the remedies get imposed and Netscape gets a better shot at the competitive marketplace, that's good for Java and the Java community. Netscape has been the principal distribution channel for compatible, standard Java technology.
Q: Will the issues raised in the Justice case help Java in any way?
A: To the degree that Microsoft's behavior has had a chilling effect on innovation and competition in the information technology business -- and it has had that effect -- then the removal of those effects will improve the competitive climate for the industry as a whole. We think that's good for us and good for virtually everybody who participates in the business. We're not afraid of competition. We welcome it.
I don't know that any of the particular issues that the government or the state AGs have raised are going to be helpful or harmful in our case. Our case is going to stand or fall on its own merits. In the PC space, we don't have a dog in that fight. The real effect is that the case can lift this dead hand of monopoly from the industry as a whole.
Q: Will what the Justice Dept. has done change how and where Sun competes going forward?
A: We're always looking for opportunities, and should the competitive landscape improve because of what the government has done, I know that our people will be figuring out ways that we can compete. To the degree that the playing field is a more level one, we'll be there.
Q: How has Sun been involved in the case?
A: We've indicated in the past that we've been the recipient of confidential investigative demands from both the DOJ and state governments, and we've responded as required. Beyond that, our policy is we don't comment on the substance of our dealings.
Q: What will be the impact of this decision on the computer industry?
A: It has the potential to have a dramatic impact on the computer industry. It can really make a difference in the decisions people make about investing, whether to form new companies and invest in new technologies. I can't see anything but positives out of this.
Q: So you aren't worried the government will get too heavy-handed?
A: No. Microsoft makes this claim that government regulators want to design software. Listen, the last thing Joel Klein wants to do, or thinks he's competent to do, is design software. The last thing a federal judge wants to do is get involved in running Microsoft. These are red herrings. The government is only interested in doing what it has to do to restore competition to an important segment of the computer business. Period. End of story. They wish to go not a millimeter further than they have to.
Q: What can Justice or Microsoft's opponents do to counter its public-relations fight against the decision?
A: There are limits to what the states or the federal government can do. Microsoft has a lot more freedom of movement than they do. I'm sure Microsoft will try to exploit that advantage to the max. It's important for us and other folks in the industry to understand what the real issues are. We'll do what we can to fight what will be an enormous spin job by our friends up in Redmond. It's in their interest to distort reality, it always has been, and they continue to do it. We'll do what we can to act as a counter to the fear, uncertainty, and doubt that's going to come out of the PR machine up there.

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