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Griping over Microsoft's Future Grip


Microsoft Corp.'s (MSFT) legal quagmire just got a lot more complicated. Now Sun Microsystems (SUNW) is challenging the mighty software giant in a lawsuit filed March 8, becoming the third Microsoft rival to accuse it of throwing its monopolistic weight around, following suits by AOL Time Warner (AOL) and defunct operating system maker, Be Inc. But Sun Microsystems Inc.'s suit is very different--and potentially far more threatening to Microsoft. While the other suits seek damages for alleged antitrust violations, Sun's suit is about the future.

Sun is asking a federal court in San Jose, Calif., to block Microsoft from leveraging its Windows monopoly into so-called Web services. That's the same tactic that got it into hot water with federal trustbusters. Web services is at the heart of Microsoft's .Net strategy. Without antitrust protection, Sun worries that Microsoft will use its Windows monopoly to keep rivals out of the emerging business.

It's a huge market that Microsoft is aggressively going after by weaving .Net into every piece of software it sells, including Windows and its server software, which competes with Sun's server business. Microsoft wants corporations that use Web services to buy servers that run its software; that way, those machines will connect more smoothly with Windows-equipped PCs.

Not so fast, says Sun. If Microsoft proceeds with its .Net rollout unimpeded, Sun argues that those smooth connections to Microsoft's monopoly Windows operating systems will give it an unfair--and illegal--advantage. Sun and others could be cut out of large swaths of the lucrative business of selling the technical plumbing of the Web. Sun's solution: yank .Net technology out of Windows. "If they are allowed to continue their bundling with .Net, they're going to control the on-ramps and the exit ramps to the Internet," charges Sun general counsel Michael Morris. Microsoft denies that. But if successful, Sun's legal moves could cripple Microsoft's .Net strategy.

But does Sun have any chance? The suit starts on solid legal footing. It relies largely on an appeals court ruling last June that found that Microsoft used illegal tactics to thwart the growth of Sun's Java programming language. Java was designed to allow software developers to create programs that work on multiple operating systems, not just one system such as Windows. Now Sun wants the courts to force Microsoft to include support for Java in Windows, something the company dropped when it launched Windows XP last October. "Sun goes into court with the enviable position of having the nugget of its case already established," says Howard University law professor Andrew I. Gavil.

Even so, Sun still has to prove that Microsoft's actions caused financial damage. That's a tall order. Despite Microsoft's actions, Java is one of the most popular corporate computing languages.

Moving the case beyond that will also be a stretch. Sun argues that Microsoft illegally bundles features into Windows to gain advantage in the low-end server equipment business, a claim that wasn't a piece of the antitrust case. The company accuses Microsoft of building features into Windows that drive customers away from buying Sun servers, costing it nearly $1 billion in lost sales. But Sun needs to establish that Microsoft's desktop dominance has given it an advantage in the server world, a tough connection given that Sun is losing ground on the low-end server business not just to Microsoft but to companies that make servers running Linux software as well, such as IBM (IBM). Moreover, Sun was also late to market with its Web-services strategy.

Microsoft, predictably, accuses Sun of using the courts to make up for its shortcomings in the marketplace. "They'd rather litigate than compete," says Microsoft spokesman Vivek Varma. But in the hardball world of software makers, litigation and competition increasingly go hand in hand. By Jay Greene in Seattle, with Dan Carney in Washington and Peter Burrows in San Mateo, Calif.


Steve Ballmer, Power Forward
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