|
PureBytes Links
Trading Reference Links
|
Those who are convinced that Microsoft is just a simple, benign peddler of
operating systems which are likely to become obsolete in short order, should
actually take the time to read Judge Jackson's decision i.e. "Findings of
Fact". I found it at WSJ Online, however I understand that it has been
widely posted to the web, in fact, I believe that the decision was released
on the web. It is very well organized and very easy reading and it provides
substantial history (competitive OS, middleware, Java, info appliances,
browsers, etc.) for those who fancy themselves expert enough in matters of
technology evolution to judge the degree to which Microsoft has observed
free-market practices. Bottom line ... this is not a finding of fact which
was written by some neophyte who is out of touch with the real world of
technology - quite the opposite.
Some of the most revealing comments apply to Microsoft's pricing
methodology:
"Indicative of Microsoft's assessment of the situation is the fact that, in
a 1996 presentation to the firm's executive committee, the Microsoft
executive in charge of OEM licensing reported that piracy continued to be
the main competition to the company's operating system products. Secure in
this knowledge, Microsoft did not consider the prices of other
Intel-compatible PC operating systems when it set the price of Windows 98."
"The license for one of Microsoft's operating system products prohibits the
user from transferring the operating system to another machine, so there is
no legal secondary market in Microsoft operating systems. This means that
any consumer who buys a new Intel-compatible PC and wants Windows must buy a
new copy of the operating system. Microsoft takes pains to ensure that the
versions of its operating system that OEMs pre-install on new PC systems are
the most current. It does this, in part, by increasing the price to OEMs of
older versions of Windows when the newer versions are released. Since
Microsoft can sell so many copies of each new operating system through the
sales of new PC systems, the average price it sets for those systems is
little affected by the fact that older versions of Windows never wear out."
"Microsoft's actual pricing behavior is consistent with the proposition that
the firm enjoys monopoly power in the market for Intel-compatible PC
operating systems. The company's decision not to consider the prices of
other vendors' Intel-compatible PC operating systems when setting the price
of Windows 98, for example, is probative of monopoly power. One would expect
a firm in a competitive market to pay much closer attention to the prices
charged by other firms in the market. Another indication of monopoly power
is the fact that Microsoft raised the price that it charged OEMs for Windows
95, with trivial exceptions, to the same level as the price it charged for
Windows 98 just prior to releasing the newer product. In a competitive
market, one would expect the price of an older operating system to stay the
same or decrease upon the release of a newer, more attractive version.
Microsoft, however, was only concerned with inducing OEMs to ship Windows 98
in favor of the older version. It is unlikely that Microsoft would have
imposed this price increase if it were genuinely concerned that OEMs might
shift their business to another vendor of operating systems or hasten the
development of viable alternatives to Windows"
Bottom line ... Microsoft's pricing is constrained not by competition, but
by a desire to avoid losing revenue to piracy and is able to get away with
charging higher prices for obsolete versions than for current versions.
On middleware:
"Windows 98 exposes nearly ten thousand APIs, whereas the combined APIs of
Navigator and the Java class libraries, together representing the greatest
hope for proponents of middleware, total less than a thousand."
Earl
|