AOL Time Warner Inc's antitrust suit against Microsoft Corp aims more to counter the No. 1 software company's Internet strategy than to collect billions of dollars in damages, analysts say.
"This case is about the future and not the past," said Neil MacDonald, vice president and research director of Gartner Group Inc. "Ultimately they want to stop Microsoft from dominating the future of where they see the Internet going." AOL is seeking damages for harm to its Netscape unit while vying with the largest software company to offer Internet services like instant messaging and e-commerce. AOL wants tougher restrictions on Microsoft's business practices than the Bush administration proposed in the tentative settlement of the landmark government antitrust case against Microsoft.
"AOL and Microsoft are increasingly competing head to head in the way they do business online," MacDonald said. "That is what this lawsuit is all about. It is not about US$25 billion. That would be nice. What is stake long-term is much more than that." Armed with an appeals court finding that Microsoft "inflicted considerable harm on Netscape's business," the suit filed Tuesday by AOL seeks triple damages as compensation for what it calls "the harms inflicted upon it by Microsoft." Microsoft's exposure to damages should be limited because "it's not like Netscape was making a lot of money," said Tim Gaumer, senior equity analyst at Transamerica Investment management, which owns 2 million shares of Microsoft, based in Redmond, Washington.
AOL won't have to prove Microsoft violated antitrust laws.
Still, analysts say the New York-based media giant faces an uphill fight to revive other claims set aside by the appeals court. These include the claim that Microsoft illegally bundled its Internet Explorer into the Windows operating system, forcing Netscape to give away its Navigator browser for free.
To collect damages, AOL must give a reasonable estimate of how much profit and revenue it was denied by contract restrictions Microsoft imposed to discourage computer makers and Internet service providers from promoting Netscape Navigator, experts said.
Netscape's short corporate history from its founding in 1994, through periods when it lost money to its 1999 acquisition by AOL for US$9.8 billion, creates "a tough question of coming up with a value," said Ernest Gellhorn, an antitrust expert at George Mason University law school in Arlington, Virginia.
Still, "the inability to come up with a precise figure will not prevent collection of damages once you prove the fact of injury," Gellhorn said. A trial judge and a unanimous appeals court have already established Microsoft's liability, he said.
Microsoft probably will repeat arguments it made during the 78-day trial of the government's case that Netscape offered an inferior product and fumbled many opportunities to capitalize on its creation of the first Internet browser.
"They clearly were the kind of poster child for being the next Microsoft and they did fail to execute in a spectacular fashion," said Rob Enderle, a technology analyst for Giga Information Group Inc.
Netscape "had a vast majority of the market" and "should have been able to hold on to 60 to 50 percent of the market," Enderle said.
With less than 20 percent of the browser market now, Netscape will be able to show that Microsoft's behavior caused it to lose revenue from advertising on its Netcenter Web portal, Enderle said.
RSS