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THE REAL THREAT TO MICROSOFT

A court victory for Java could loosen Windows' grip

In testimony that has come to light in the Justice Dept.'s antitrust suit against Microsoft Corp.(MSFT), there's an unmistakable sense of paranoia when Chairman William H. Gates III and his executives talk about (IBM)are growing too fond of the Sun technology.

Now, Microsoft may have a real reason to be paranoid. Across the continent in California, a U.S. District Court granted Sun a preliminary injunction in its civil suit against Microsoft that could turn Java from a shadowy plot to a much more tangible threat. Judge Ronald M. Whyte ruled that in 90 days Microsoft must make its own Java comply with the ''100% Pure'' Java that Sun CEO Scott G. McNealy insists upon.

TWEAK-FREE. That may sound like legal one-upmanship between nerds, but at stake is nothing less than a battle over which type of software might prevail in the 21st century. The ruling lifts a huge cloud from over Java--the question of whether there will be a single standard for the programming language or whether Microsoft would continue to tweak it, in violation of its contract with Sun, according to the Nov. 17 ruling.

Having a single version, pure Java, is essential to Sun's strategy: creating software that runs on any computer--from mainframes on down to whizzy handheld Internet devices--or what Sun calls ''write-once, run-everywhere'' programs. In practice that means that a software writer could produce a program and zip it across the Internet to perform a task on any other computer. ''The Fords and GMs of the world were taking a wait-and-see attitude,'' says Ted Schlein, head of Kleiner Perkins Caufield & Byers' Java Fund. ''This ruling will eliminate some of that risk.''

That new model for developing and using software could, over time, undermine Windows' dominance and do more to unlock Microsoft's grip on the market than anything Judge Thomas Penfield Jackson's court could mete out in the Justice Dept.'s antitrust case. Java proponents say the software makes it possible to store giant software programs on powerful mainframes and servers, and then just download Java applets--small programs--to tackle each task as needed. That reduces the need for Windows and other big, ''bloatware'' programs such as spreadsheets and word processors that Microsoft sells.

Microsoft, according to documents that have surfaced in the federal suit, was out to ''pollute'' Sun's Java campaign by creating a unique Windows version. And Sun hauled Microsoft into civil court to enforce the contract between the companies that forbade alterations to Java. Microsoft says it merely improved upon the original to get speedier performance.

Even while the legal battle brewed and programmers couldn't be sure if the write-once, run-everywhere concept would work, Java continued to gain momentum. The number of software developers using Java is expected to hit 900,000 by yearend, up from 700,000 at the end of 1997. Corporations from Allied-Signal Inc. (ALD)to Xerox Corp. (XRX)are using it to make diverse computer systems work together. Gillette Co. (G)recently gave large retailers the ability to check on the status of orders over the Internet, using Java. ''I see [Whyte's ruling] as a positive,'' says Gillette Chief Information Officer Patrick J. Zilvitis. ''From a customer standpoint, the more standardization we have the better.''

Java is even making headway in noncomputer applications, such as screen-phones. ''People are writing Java-based applications at an increasing rate,'' says Joseph W. Beyers, general manager of Hewlett-Packard Co.'s Internet Software Business unit, which is pushing a version of Java for the so-called embedded market--phones, appliances, etc. Adds John Seely Brown, director of Xerox's Palo Alto Research Center: ''We know Java is real and can do an awful lot.''

Now, Judge Whyte's injunction ensures that all software used to create Java products--even that made by Microsoft--have ''100% Pure Java'' code. Programmers can still write programs in Microsoft's Java, but they'll be warned that the resulting code may not work with all computers. What's more, Whyte made it clear he's likely to prohibit Microsoft from adding more ''extensions'' that would tweak Java for Windows.

To be sure, Whyte's injunction is only preliminary. While it's expected to be upheld, the actual trial isn't slated to start before next year. And the ruling only requires Microsoft to adapt its products, including Windows 98 and the Internet Explorer browser, to meet Sun's Java compatibility tests within 90 days. Microsoft does not foresee having to stop shipments of any of its products.

But the ruling also has immediate ramifications back in Washington, where the antitrust suit proceeds. For starters, Whyte's finding that Microsoft likely engaged in ''unfair business practices'' in its approach to the contract with Sun will resonate in Judge Jackson's courtroom, where the government is trying to show a pattern of such behavior (page 38). Antitrust experts say chief government counsel David Boies will likely cite the legal doctrine of ''persuasive authority'' to ask about such practices during testimony of Sun vice-president James Gosling, who invented Java. Says Boies: ''[Whyte's] finding is material help to what we are trying to establish.''

And Sun's victory could bring on more trouble for Microsoft. ''When you are on a losing streak,'' says George Mason University antitrust expert Ernest Gellhorn, ''things start to snowball--and there's no question that this is part of the snowball.'' Next? Experts say that other high-tech rivals may be emboldened to take on Microsoft in civil suits. Small-fry Caldera Inc. and Bristol Technologies already have filed suits against Microsoft. And others may follow--proving that you don't have to be paranoid to feel you have enemies everywhere.

By Peter Burrows with Robert D. Hof and Andy Reinhardt in San Mateo, Calif., Susan Garland in Washington, and bureau reports



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