OPINION: Bundling competitor answer for Microsoft

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Here's an answer to Microsoft Corp.'s troubles with the Justice Department: Bundle Netscape's browser with Windows 98.

This would be smart business--the same ultimate logic that drove Microsoft's decision to bundle America Online and CompuServe software in Windows 95 and to buy a $150 million stake last year in Apple Computer.

Those earlier deals had stated--and unstated--reasons for being. The online services got distribution for their access software in Windows 95, and Apple got money and a commitment from Microsoft to support the floundering Macintosh.

AOL, CompuServe and Apple, in turn, agreed to make Microsoft's Internet Explorer their default browsers.

But Bill Gates gained another advantage: He managed to shut up AOL's Steve Case, whose whining about the previous bundling of Microsoft Network access with Windows 95 made him one of Microsoft's loudest critics of 1995. Mr. Gates presciently saw the merit of sacrificing MSN's status as the only online service in Windows 95 in favor of promoting IE and silencing critics.


Likewise, Mr. Gates smartly bought off Apple savior Steve Jobs on the eve of last August's Macworld Expo. On the surface, Microsoft affirmed support for a competitive product, Macintosh, for which Microsoft always has been the No. 1 seller of applications software. By supporting Macintosh and its piddling 3% market share, Mr. Gates keeps a semblance of competition for Windows and avoids the cries of monopoly sure to come if Apple imploded.

But below the surface, Mr. Gates also helped ensure that Mr. Jobs--and Apple's new ad agency, TBWA Chiat/Day--didn't cast Microsoft as the bogeyman for Apple's largely homegrown problems.

It's in Microsoft's interest to strike a deal with Netscape Communications Corp. to bundle a Netscape browser with Windows 98, due by midyear. The advantage to Netscape is obvious: Near ubiquitous distribution of its browser.

How would a deal benefit Microsoft? It would provide a solution to a battle with the Justice Department that is jeopardizing Microsoft's public image and potentially its business opportunities. It would shut down more Microsoft critics. It would allow Windows 98 to ship on schedule, with IE 4.0 as the built-in default browser. And it could still allow Microsoft to win the game.


Microsoft, a late arrival to the browser market, has shown it can match or beat Netscape's browser in performance. And Microsoft is the superior marketer, using online promotion, traditional media and aggressive PR to build its browser base. Netscape? It's shown itself to be an underwhelming marketer; the company hasn't had an ad agency for the past year.

By creating a level playing field for distribution, Microsoft would be free to try to blow away Netscape based on product and marketing. Microsoft doesn't need distribution advantage to win.

What does Microsoft think? Dave Fester, IE's group manager, contends this speculative spin is moot since Microsoft expects to ship Windows 98 on time with IE 4.0, the browser it launched last fall. "It is not possible . . . [to] decouple" the software and IE 4.0, he adds.

Mr. Fester says the Justice issue only involves soon-to-fade Windows 95 and IE 3.0. "We've had no indications from the Justice Department that they have any problems with Windows 98," he says. "If the landscape changes, we'll deal with that at that time. No sense speculating on what we don't know."

It's hard to fathom that Justice will roll over when Microsoft ships Windows 98. Microsoft would benefit by reaching a deal with Netscape that placates antitrust regulators and allows Microsoft to get on with its winning game.

Copyright January 1998, Crain Communications Inc.

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