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Microsoft Corporation logo
Worker Rights Human Rights Political Influence Environmental Business Ethics

This company has Areas of Concern regarding Political Influence and Business Ethics.

Microsoft Corporation

One Microsoft Way Redmond Washington USA
98052
+1-425-8828080
http://www.microsoft.com

Type:

Public (NASDAQ: MSFT)

Microsoft Corporation is the world's largest software company, with 2005 global annual sales of 40 billion US dollars and nearly 60,000 employees in 85 countries and regions. Headquartered in Redmond, Washington, Microsoft develops, manufactures, licenses, and supports a wide range of software products for computing devices. Its most popular products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software, each of which has achieved near ubiquity in the desktop computer market. Microsoft possesses footholds in other markets, with assets such as the MSNBC cable television network, the MSN Internet portal, and the Microsoft Encarta multimedia encyclopedia. The company also markets home entertainment products, such as the Xbox and WebTV.

Contents

Microsoft Chairman and Chief Software Architect William H. (Bill) Gates III
Microsoft Chairman and Chief Software Architect William H. (Bill) Gates III

With what is generally described as a developer-centric business culture, Microsoft has become widely known for some of its internal codes of conduct for its employees. One example is the "eat your own dogfood" mantra, which describes the practice of using pre-release products inside the company to test them in an environment geared towards the real world. Microsoft has also become notorious for its business practices—the U.S. Justice Department, among others, has sued Microsoft for antitrust violations and software bundling. In addition, Microsoft has been criticized for the insecurity of its software. Despite this, Microsoft has won several awards, such as the "1993 Most Innovative Company Operating in the U.S." by Fortune Magazine. The company is on the Fortune 500 list of companies as of 2005.

[edit] Corporate Facts

[edit] History

Bill Gates founded Microsoft (originally Micro-soft) in 1975 after dropping out of Harvard at age 19 and teaming with high school friend Paul Allen to sell a version of the programming language BASIC. While Gates was at Harvard, the pair wrote the language for Altair, the first commercial microcomputer. Microsoft was born in an Albuquerque, New Mexico, hotel room and grew by modifying BASIC for other computers.

Gates moved Microsoft to his native Seattle in 1979 and began developing software that let others write programs. The modern PC era dawned in 1980 when IBM chose Microsoft to write the operating system for its new machines. Although hesitant at first, Gates bought QDOS, short for "quick and dirty operating system," for $50,000 from a Seattle programmer, renaming it the Microsoft Disk Operating System (MS-DOS).

Allen fell ill with Hodgkin's disease and left Microsoft in 1983. In the mid-1980s Microsoft introduced Windows, a graphics-based version of MS-DOS that borrowed from rival Apple's Macintosh system. The company went public in 1986, and Gates became the industry's first billionaire a year later. Microsoft introduced Windows NT in 1993 to compete with the UNIX operating system, popular on mainframes and large networks.

The early 1990s brought monopoly charges from inside and outside the industry. In 1995 antitrust concerns scotched a $1.5 billion acquisition of personal finance software maker Intuit.

When the Internet began transforming business practices, holdout Gates at last embraced the medium; the Microsoft Network (MSN) debuted in 1995. That year Microsoft licensed the Java Web programming language from Sun and introduced its Internet Explorer Web browser. It also launched Expedia, an online travel site.

In 1997 Sun sued Microsoft for allegedly creating an incompatible version of Java; Microsoft countersued. (The ongoing court battle, settled by Microsoft in 2001 for $20 million, prevented the company from releasing new Java tools or accessing any of Sun's advances). Microsoft also purchased WebTV Networks for $425 million.

The US Justice Department, backed by 18 states, filed antitrust charges in 1998 against the software giant, claiming that it stifled Internet browser competition and limited consumer choice. Gates turned over the president's job to longtime Microsoft executive Steve Ballmer.

In 1999 Microsoft agreed to invest $5 billion for a minority stake in AT&T as part of that company's move to acquire cable operator MediaOne. In addition, Microsoft bought Windows-based technical drawing software specialist Visio for $1.3 billion, and sold a stake in Expedia to the public.

Gates named Ballmer CEO in 2000. Gates, who had held the CEO spot since the company's founding, remained chairman and added the title of chief software architect.

A federal judge's ruling later that year that Microsoft used its monopoly powers to violate antitrust laws left the prospect of two (smaller) Microsofts, a decision the company aggressively appealed.

In 2001 Microsoft completed the acquisition of longtime partner Great Plains Software, a specialist in applications for midsized and small businesses, in a $1.1 billion deal. A federal appeals court struck down the initial ruling to break up Microsoft, leading to a tentative settlement (pending approval by the 18 US states involved in the trial) between the company and the US Justice Department. The settlement would leave Microsoft intact, but impose restrictions on the company's licensing policies for its operating systems.

Netscape Communications filed suit in 2002 against Microsoft, seeking unspecified damages and injunctions against the company's alleged antitrust actions. Later that year the company transferred its controlling stake in Expedia to InterActiveCorp (formerly USA Interactive) in exchange for stock. The company also acquired enterprise software provider Navision for about $1.5 billion.

Microsoft settled the suit with Netscape in 2003, agreeing to pay AOL $750 million as part of a larger settlement that includes AOL licensing Microsoft's Internet Explorer browser and its digital media technology.

In part due to increasing demands from shareholders to explore alternatives for its ever-growing cash hoard, in 2003 the company declared its first ever dividend for common stock. Microsoft also eliminated stock options, instead moving to a system of distributing shares of its stock directly to employees.

In 2004 the company announced plans to spend up to $75 billion of its cash reserves over four years, including boosting its dividend payments and repurchasing up to $30 billion of its own stock.

[edit] Criticism

In recent years, Microsoft has been criticized for making features more important than usability.
In recent years, Microsoft has been criticized for making features more important than usability.

Microsoft Corporation has been the focus of much controversy in the computer industry almost since its founding in 1975. This article explores some of the areas in which it has received frequent criticism.

[edit] Products


[edit] Ease of use

Microsoft's focus on software usability was a large factor in its early successes. In recent years, however, Microsoft has been criticized for making features more important than usability and for allowing the user interface of its products to become inconsistent and overly complicated, frustrating users by actions which should be simple to perform and requiring interactive "wizards" to function as an extra layer between the user and the interface. Many books (such as "Windows for Dummies") and web sites (such as Annoyances.org) have been created to help users navigate Microsoft products. Many advanced users find that these features get in the way of control and have a difficult time making Microsoft products, particularly Windows, do what they want. This especially becomes apparent when diagnosing a problem or programming.

At the same time, in its efforts to make its products "friendlier" for users, the default settings in some Microsoft software have facilitated the spread of computer viruses and worms. For example, Windows operating systems released since 1995 hide file extensions by default, which can help malicious programmers trick unwitting e-mail recipients into opening dangerous file attachments which masquerade as harmless files with innocent-looking extensions. (See security, below.)

[edit] Stability

Versions of Windows based on MS-DOS, and later the Windows 95 kernel, were notoriously unstable, displaying kernel panics ("blue screens") or abruptly terminating applications at arbitrary times. Microsoft was widely perceived as indifferent to the hardship this caused users. The adoption of the "NT kernel" in consumer versions of Windows has seen an improvement in stability, but complaints still arise. Computer users not familiar with the division of responsibilities among applications, the operating system, and third-party device drivers sometimes blame Microsoft for problems that are created by third-party software.

[edit] Security

By 2002, several of Microsoft's networking- and Internet-related products had become the subject of intense criticism following several high-profile security lapses. Malicious programmers increasingly exploited weaknesses in Microsoft software by creating and distributing worms, viruses, and Trojan horses designed to spread across the Internet and waste computing resources or destroy data. These exploits targeted Microsoft's Outlook and Outlook Express e-mail programs, Internet Information Server (IIS) Web server, and SQL Server database server software.

Microsoft contends that its dominant position in several Internet-related software categories naturally subjects the company's products to more attacks, because the products themselves are so widespread. In addition, Microsoft contends that its security record on critical vulnerabilities has substantially improved and compares favorably to that of its competitors.

Critics counter that these attacks also target Microsoft products that do not hold commanding market shares, and suggest that this is because Microsoft products in general are fundamentally less secure than those of the company's competitors. This problem is compounded by the very ubiquity of Microsoft software. Once a working virus is released, it is almost certain to spread very widely because almost every computer it comes across is able to replicate and spread the virus. This effect has recently been dubbed the "Microsoft monoculture", by analogy to the problems associated with lack of biodiversity in an ecosystem. As an acknowledgement of the problem, the National Science Foundation on November 25, 2003 announced it had granted US$750,000 (Lemos, 2003) to computer scientists at Carnegie Mellon University and the University of New Mexico to further understand the causes and the (presumably) negative effects of the homogenization of the world's computing platforms (National Science Foundation, 2003).

In January 2002, Gates announced the "Trustworthy Computing" initiative, which he described as a long-term, companywide initiative to make the computing experience as trustworthy as other established experiences such as the telephone. Many people focused on the aspect of trustworthy computing that focused on the new emphasis on security and privacy in all of Microsoft's products. The initiative prompted the company to reevaluate and redesign several of its practices and processes, and delayed the release of Windows Server 2003, the successor to the Windows 2000 Server family of operating systems. Reaction to the Trustworthy Computing initiative has been mixed, with observers lauding Microsoft's increased focus on security but charging that the company still has a lot of work to do.

Earlier versions of Microsoft products had a security stance of "permitted unless forbidden", which is hard to change, as much Microsoft software relies on this policy. This stance can be taken advantage of to cause security problems. For example, macros embedded in documents or HTML in email can run programs allowing an attacker to take over the user's computer. However, a chief cause in the spread of viruses has been unskilled users failing to apply available patches even months after they have been released. In fact, Microsoft blames the spread of viruses on the very fact that it issues patches to fix security holes; crackers examine the patches, find out what problems they are meant to fix, then create exploits to attack systems which have not been patched. Windows XP Service Pack 2 attempts to address this by encouraging users to automatically apply patches and making the system "secure by default" (for example, by turning on the firewall).

Microsoft's licensing policy has actually aided the spread of viruses, because the first service pack for Windows XP checked for known pirate keys and refused to patch Windows XP installations which had been pirated. This resulted in a large number of Windows XP systems which were left vulnerable. To combat this, Microsoft briefly considered letting Windows XP Service Pack 2 be installable on pirated copies of Windows XP, but later decided against this as it would encourage further piracy, although they didn't update the validation engine in Windows XP SP2. [1]

In February 2004, partial source code from the Windows 2000 kernel was alleged by Microsoft to have been "illegally leaked" and widely distributed on filesharing networks. The leak contains source code for network protocols, parts of Internet Explorer, and certificate handling. Examination of the code revealed flaws (such as a negligence in checking for out-of-bounds values), and some people developed theoretical attacks to show how easily this leaked code could allow current versions of Windows to be compromised, but these flaws are not yet known to have been exploited maliciously.

[edit] Standard compliance

Critics decry Microsoft's perceived "embrace and extend" strategy of adding proprietary features to open, de facto standards, thereby using its market dominance to gain de facto ownership of standards "extended" in this way. Microsoft meanwhile depicts its actions as its response to customer demand, and has accused governments of trying to interfere with its desire to innovate and to bring consumers better technology at lower prices.

Microsoft critics have claimed as far back as 1994 that Microsoft implements "hidden APIs" in its operating systems, functions that Microsoft never documents publicly but uses in its application software products to competitive advantage. Microsoft is known to have implemented special APIs in Windows for use by other companies' applications, but examples of hidden APIs used by Microsoft products have not been forthcoming. Microsoft denies that its application products use non-public APIs.

[edit] Vendor lock-in

From its very inception, Microsoft defined itself as a platform company and understood the importance of attracting third-party programmers. It did so by providing development tools, training, access to proprietary APIs in early versions, and partner programs. The solutions and plugins built by third-party programmers in turn led to more Microsoft sales.

Now the ubiquity of Microsoft software allows a user to benefit from "network effects". For example, the large installed base of Microsoft Word almost makes MS Word files the de-facto standard word-processor format (in spite of the various versions of MS Word not being file-compatible among themselves), making it essential for most business users. In addition, more potential employees have training in MS Office than on competing products. Hence using MS Office can result in reduced training requirements, especially in the case of temporary employment.

Microsoft software also represents a "safe" choice for IT managers purchasing software systems, in that the ubiquity of Microsoft software allows them to claim that they are following accepted best practices. This is a particularly attractive option for IT managers with limited technical knowledge.

The European Commission quotes Microsoft head of C++ development Aaron Contorer as stating in an internal Microsoft report for senior management:

"The Windows API is so broad, so deep, and so functional that most independent software vendors would be crazy not to use it. And it is so deeply embedded in the source code of many Windows apps that there is a huge switching cost to using a different operating system instead... It is this switching cost that has given the customers the patience to stick with Windows through all our mistakes, our buggy drivers, our high TCO (total cost of ownership), our lack of a sexy vision at times, and many other difficulties [...] Customers constantly evaluate other desktop platforms, [but] it would be so much work to move over that they hope we just improve Windows rather than force them to move. In short, without this exclusive franchise called the Windows API, we would have been dead a long time ago."

[edit] Business practices


[edit] Copyright

The earliest criticism of Microsoft stemmed from its decision to market its software independently of the hardware it ran on by asserting copyright to the software and licensing it under terms similar to music. Software copyright was a legal novelty at the time and controversial. When Microsoft discovered that its first product, Altair BASIC, was subject to widespread illegal copying, Microsoft founder Bill Gates wrote an Open Letter to Hobbyists urging them not to use software without paying for it. Many computer hobbyists received the letter as a betrayal of the hacker ethic that was essential to the growth of the hobby. This disagreement over whether software should be proprietary continues into the present day under the banner of the open source movement, and Microsoft remains a major target of its criticism.

Microsoft characterizes open-source software as being "potentially viral" [2] and the GNU General Public License itself as a "viral license" which "infects" proprietary software and forces its developer to have to release proprietary source to the public. [3]

The Halloween documents, internal Microsoft memos which were leaked to the open source community beginning in 1998, indicate that Microsoft perceives open source software in general (and the freely available GNU/Linux operating system in particular) as a growing long-term threat to Microsoft's dominance of the software industry. In marked contrast to the company's public statements, which tend to downplay or ignore open source software, the Halloween documents acknowledge the technical superiority of GNU/Linux and outline a strategy of "de-commoditiz[ing] protocols & applications"; in other words, basing networks and documents around proprietary standards so that they can only interoperate with other computers which use Microsoft products. Opponents of Microsoft have dubbed this strategy "embrace, extend, and extinguish".

At the same time as Microsoft has been fighting the open source movement, it has tested the waters with its own concept it calls shared source. A shared source license generally allows someone to see code, but not to modify or reuse it. Microsoft has tried to use this to attract mind share, but shared source is generally criticized within the open-source developer community for leaving too much control in the hands of the shared-source code's owner.

A far more serious concern is that Microsoft is using the distribution of shared source programs to harvest names of developers who have been exposed to Microsoft code; these developers could someday be the target of lawsuits if they were ever to participate in the development of competing products. This question was addressed in April 2004 by the American Bar Association in a published paper, Open Source Software - A Legal Framework (page 26):

One of the great dangers of participating in Microsoft's Shared Source programs is that a key tenet of the programs is maintaining the confidentiality of the source code that is shared. Participants need to be aware that once their developers have had access to Microsoft source code, they are "contaminated" and are subject to intellectual property infringement claims if they should later use knowledge acquired under Shared Source in a manner not permitted by Microsoft. ... All in all, developers, equipment manufacturers, enterprise users, and governments should be cautious about participating in this non-open source approach for sharing source code and see it for what it is, a trap for the unwary.

That paper quotes another paper, titled "Shared Source: A Dangerous Virus" [4], released by the Open Source Initiative:

Shared source, therefore, behaves like a virus that infects developers' brains. Once you let it into your organization, you must keep careful track of which developers have been contaminated, avoid deploying them to any projects which might compete with a Microsoft product, and even erect "Chinese walls" between projects so that no knowledge from shared source can leak into projects with competitive implications. Failing to implement any of those precautions could result in your organization's being sued for ruinous compensatory damages by Microsoft's armies of lawyers.
If you are an academic contemplating exposing your students to shared source, consider the risk that you may be making the ones conscientious enough to disclose this to employers unemployable — and the others into time bombs that could blow up their employers if Microsoft ever goes looking for a cause of action.

[edit] Licensing agreements

"Microsoft tax" is a term used to describe the cost of Microsoft Windows, by people who want to purchase a computer but don't want to purchase a copy of Windows preinstalled. This generally annoys people who prefer to use free operating systems such as GNU/Linux, Unix, or BSD.

All large computer vendors in the USA, with the exception of Apple Computer, and the majority in other countries, bundle Microsoft Windows with their personal computers. Some free software advocates speculate that this bundling has occurred because of secret agreements between Microsoft and the large computer vendors (Dell, HP, IBM). The 2002 settlement in the United States v. Microsoft case prohibits Microsoft from giving special prices to select vendors. Instead the price list is public and based on volume sold with discount for 'features'. Features can include the provisioning of components that Microsoft want (such as FireWire), or the placement of Microsoft logos on the computer as a sticker (or, for more money, embossed into the keyboard). These market development funds are a source of controversy with both Microsoft and Intel. While they can be used to cover the cost of adding new features to the system, they can also bias PC OEMs towards Microsoft/Intel products. In particular, the co-funding that Intel and Microsoft provide for PC advertising, make it cheaper to advertise a Microsoft/Intel PC than a GNU/Linux/AMD system.

The Microsoft tax can be avoided by purchasing a computer without Windows, or by buying a "white box" machine. Some vendors, such as IBM and HP, now sell certain models bundled with GNU/Linux, although these are primarily high-end "workstations" or "Enterprise Systems". Many servers are sold without an OS. High-street retail chains in various countries (such as Dick Smith Electronics) have also been known to offer machines bundled with GNU/Linux from time to time.

The Microsoft tax can also be avoided by refusing to agree to the Microsoft EULA. (End User License Agreement - which Microsoft requires its users to accept, before allowing the use of the product.) The EULA specifically mentions that if you do not agree to the license you can return the product for a full refund. Unfortunately, some vendors, such as Toshiba, have a shrinkwrap sales contract that specifically voids the clause of the EULA that allows one to return the software for a refund.

[edit] Acquisitions

Microsoft has acquired dozens of companies, and thereby their products, during its history [5]. Microsoft assets purchased from other companies, or based on such technology, include MS-DOS, Microsoft FrontPage, WebTV, Hotmail, Direct3D, Internet Explorer, and Microsoft Visio. In most cases, Microsoft has not suppressed the primary products of the companies it has acquired, but has rebranded them as its own. This is Microsoft's legal right, and it is not atypical among growth-oriented companies (including companies that criticize Microsoft for the practice), but it has led to claims that Microsoft is misrepresenting the products as its own creations. Sun Microsystems chief executive Scott McNealy has often claimed (inaccurately) that Microsoft never produced technology except by buying it.

"Name one thing they've ever invented on their own? Seriously, name one! If you think of any, send me an e-mail, and I'll research it to find out who they bought it from.... R&D and M&A are the same thing over there."[6]

In 1995 Microsoft announced its intent to conduct a hostile takeover of Intuit, Inc., the maker of Quicken, which competed with its own product Microsoft Money. After a campaign by attorney Gary Reback and complaints to the Federal Trade Commission, Microsoft dropped the takeover plans.

[edit] Market power

In a 2003 publication, Dan Geer argued the prevalence of Microsoft products has resulted in a monoculture which is dangerously easy for viruses to exploit. (A response was published in MCP Magazine, which is sympathetic to Microsoft.)

There is no doubt that:

  • In most mass-market desktop software application markets, Microsoft is a dominant player.
  • This dominance attracts widespread resentment.
  • This resentment is not restricted to its competitors.

Critics of Microsoft have accused it of using its dominance in desktop operating system to leverage market share in other sectors of the computer market, such as web browsers (Internet Explorer), server operating systems (Windows NT), office software suites (Microsoft Office), and streaming media (Windows Media). They blame this on Microsoft's tactics of illegally tying software so that a new product can ride on the success of a monopoly product. For example, by including Microsoft Messenger and Windows Media Player with every copy of Windows, Windows users have less need to download and use competing products such as AOL Instant Messenger or RealPlayer, and will stick with the Microsoft alternatives even if the competing products are superior. Critics see this as a clear case of vertical integration based monopoly. This tends to starve the rival companies while giving Microsoft time to adopt their features. Microsoft defends its behavior by stating that it is giving its customers more software for free, and that it is doing the best it can to innovate and compete in a capitalist market.

The behavior of Microsoft executives during the United States v. Microsoft case - for example, Bill Gates quibbling over the meaning of simple words, and a Microsoft vice president insisting the judge had told him to ship a version of Windows which did not work - earned astonishment, amusement, and ridicule in the press.

Many companies have sued Microsoft over allegations of stolen intellectual property and anticompetitive business practices, and many of these cases have been decided against Microsoft. However, the cases often drag on for years due to appeals and delays initiated by Microsoft, so that by the time a verdict is delivered, the case has long since become irrelevant and the targeted company is no longer a viable competitor.

It has been argued that violations of antitrust and intellectual property laws, as well as of the restrictions which have been placed on Microsoft's behavior, are in fact an intentional business tactic of the company. Even if alleged misbehavior is discovered, bringing a case to court, to a verdict, and through appeals can take several years. Even when Microsoft is hit with penalties, it has never yet failed to negotiate these down to something which has had negligible effect on its operations and finances. Microsoft meanwhile defends itself in the public arena, portraying itself to consumers as a champion of popular software which its jealous rivals are trying to shackle.

[edit] Government anti-trust suits

In the 1990s, Microsoft adopted exclusionary licensing under which PC manufacturers were required to pay for an MS-DOS license even when the system shipped with an alternative operating system. It also used allegedly predatory tactics to price its competitors out of the market, and competitors claimed that Microsoft erected technical barriers to make it appear that competing products did not work on its operating system [7]. An investigation by the United States Department of Justice on August 21, 1993 resulted in an opinion stating that this behavior was illegal; in a consent decree issued on July 15, 1994, Microsoft agreed to a deal in which, among other things, it would not "tie" other Microsoft products into its operating system.

After bundling the Internet Explorer web browser into its Windows operating system in the late 1990s and acquiring a dominant share in the web browser market, an antitrust case was brought against Microsoft. In a ruling by judge Thomas Penfield Jackson, the company was convicted for violating its earlier consent decree and abusing its monopoly in the desktop operating systems market. The "findings of fact" during the antitrust case established that Microsoft has a monopoly in the PC desktop operating systems market:

III.34. Viewed together, three main facts indicate that Microsoft enjoys monopoly power. First, Microsoft's share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft's dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft's customers lack a commercially viable alternative to Windows. [8]

The findings of fact goes on to explain the nature of the "barrier to entry": The fact that there is a multitude of people using Windows makes the product more attractive to consumers. The large installed base impels ISVs (independent software vendors) to write applications first and foremost to Windows, thereby ensuring a large body of applications from which consumers can choose. The large body of applications thus reinforces demand for Windows, augmenting Microsoft's dominant position and thereby perpetuating ISV incentives to write applications principally for Windows. The small or non-existent market share of an aspiring competitor makes it prohibitively expensive for the aspirant to develop its PC operating system into an acceptable substitute for Windows. (III.39, 40)

The proposed remedy (dividing Microsoft into two companies) was overturned on appeal, and Microsoft has since reached a settlement with the Department of Justice (DOJ) and some of the states which brought suit against it, perhaps because with a new administration the DOJ changed its attitude. Meanwhile, several class-action lawsuits filed after the conviction are still pending.

In early 2002, Microsoft proposed to settle the private lawsuits by donating $1 billion USD in money, software, services, and training, including Windows licenses and refurbished PCs, to about 12,500 underprivileged public schools. This was seen by some as a potential windfall for Microsoft, not only in educating schoolchildren on Microsoft solutions but also in collecting additional license fees if the schools ever wanted to upgrade. After protests from Apple Computer, Inc., which feared further loss of its educational market share, a federal judge rejected the proposed settlement. [9]

In 2003-2004, the European Commission investigated the bundling of media player software into Windows, a practice which rivals complained was destroying the market for their own products. Negotiations between Microsoft and the Commission broke down in March 2004, and the company was subsequently handed down a record fine of euro 497 million ($613 million) for its breaches of EU competition law. The ruling is subject to appeal in the European courts. Separate investigations into alleged abuses of the server market were also ongoing at the same time. On December 22, 2004, the European Court decided that the measures imposed on Microsoft by the European Commission would not be delayed, as was requested by Microsoft while waiting for the appeal. Microsoft will thus have to pay the euro 497 million fine, ship versions of Windows without Windows Media Player, and license many of the protocols used in Microsoft's products to developers in countries within the European Economic Area.

[edit] Other suits and rulings by governments

In March 2004, during a consumer class-action lawsuit in Minnesota, internal documents subpoenaed from Microsoft revealed that the company had violated nondisclosure agreements seven years earlier in obtaining business plans from Go Corporation, using them to develop and announce a competing product named PenWindows, and convincing Intel to reduce its investment in Go. After Go was purchased by AT&T and Go's tablet-based computing efforts were shelved, PenWindows development was dropped [10] [11].

In May 2004, a class-action lawsuit accused Microsoft of overcharging customers in the state of California. The company settled the case for $1.1 billion USD. A California court ordered Microsoft to pay an additional $258 million USD in legal fees (including over $3,000 per hour for the lead attorney in the case, more than $2,000 per hour for colleagues, and in excess of $1,000 per hour for administrative work). A Microsoft attorney responded, "Somebody ends up paying for this. These large fee awards get passed on to consumers." [12]. The total bill for legal fees was later reduced to just over $112 million USD. [13] Because of the structure of the settlement, the law firm which sued Microsoft may end up getting more money from the company than California consumers and schools, the beneficiaries of the settlement.

In July 2004, Japan's Fair Trade Commission warned Microsoft to remove a provision from its licensing contracts whereby PC makers would not be allowed to file patent infringement suits if future versions of Windows add features similar to their own technology. Microsoft plans to appeal the warning.

[edit] Suits by private companies

Microsoft has fought legal battles against:

  • Apple Computer, Inc., which accused Microsoft in the late 1980s of copying the "look and feel" of the graphical user interface of Apple's operating systems. The courts ruled in favor of Microsoft in 1994.
  • Be Incorporated, which accused Microsoft of exclusionary and anticompetitive behavior intended to drive Be out of the market. [14] Be even offered to license its BeOS operating system for free to any PC vendors who would ship it pre-installed, but the vendors declined due to fears of pricing retaliation from Microsoft: by raising the price of Microsoft Windows for one particular PC vendor, Microsoft could price that vendor's PCs out of the market.
  • Burst.com, which claims that Microsoft stole Burst's patented technology for delivering high speed streaming sound and video content on the internet. Also at issue in the case is a 35-week period of missing emails in the evidence Microsoft handed over to Burst which was discovered by Burst.com's lawyers. Burst accuses Microsoft of crafting a 30 day email deletion policy specifically to cover up illegal activity. [15] [16]
  • Eolas and University of California, which accused Microsoft of use of software patents in Microsoft's Web browser, had Microsoft's appeal refused to be heard by the United States Supreme court, and will now be subject to the decision of the Appelate court of Virginia.
  • Caldera, which accused Microsoft of having modified Windows 3.1 so that it would not run on DR DOS 6 although there was no technical reason for it not to work. [17] The encrypted code that Microsoft added to five otherwise unrelated Microsoft programs in order to prevent the functioning of DR DOS can be found here [18], in pseudocode and assembler. The article describes error messages given to users of a pre-release beta version of Windows 3.1. According to the article, the version of Windows 3.1 sold to the public was able to run under DR DOS.
  • Netscape Communications Corporation
  • Opera, which accused Microsoft of intentionally making its MSN service incompatible with the Opera browser on several occasions.
  • Sendo, which accused Microsoft of terminating their partnership so it could steal Sendo's technology to use in Windows Smartphone 2002. [19]
  • Spyglass, which licensed its browser to Microsoft in return for a percentage of each sale; Microsoft turned the browser into Internet Explorer and bundled it with Windows, giving it away to gain market share but effectively destroying any chance of Spyglass making money from the deal they had signed with Microsoft; Spyglass sued for deception and won a $521 million settlement.
  • Stac Electronics, which accused Microsoft of stealing its data compression code and using it in MS-DOS 6. [20]
  • Sun Microsystems, Inc., which held Microsoft in violation of contract for including a modified version of Java in Microsoft Windows that allowed applications written with Microsoft proprietary extensions to the Java language to run; Microsoft lost this decision in court. Microsoft responded by not shipping a Java Virtual Machine at all, and users have to download one from the internet on a new installation of Windows.
  • WordPerfect
  • Many other smaller companies have filed patent abuse and predatory practice suits against Microsoft.

[edit] Labor practices

[edit] Review Process
  • Microsoft Corp. has over 60,000 employees, and like almost all large corporations, it uses a performance review process to rate them . . . According to employees, who said they would be fired if they spoke on the record, the annual review amounts to little more than a closed-door popularity contest in which managers "fight" for higher scores for their team, or defer to higher-level decision makers who mandate how many workers drop to the bottom of the review scale. One employee . . .said when it comes to her review score, "my performance is about 10 percent of the whole equation." Another employee denounced a compensation system that is "capricious in its tolerance of managers who corrupt the system for their personal gain," and blamed consecutive low-rankings on a "well-entrenched culture of favoritism." Source: WashTech News, March 2006 [21]
[edit] Vizcaino vs. Microsoft
  • In 1996 a class action lawsuit was brought against Microsoft representing thousands of current and former employees that had been classified as "temporary" and "freelance". The case was decided on the basis that such "permatemps" had their jobs defined by Microsoft, worked alongside regular employees doing the same work, and worked for long terms. After a series of court setbacks, Microsoft settled the suit for $100 million. Source: UNITED STATES COURT OF APPEALS May 1999 [22]

[edit] Political Influence

[edit] The H-1B Controversy

  • “Microsoft today praised a bill introduced in the U.S. Congress that would double the number of immigrant worker visas available each year under the H-1B program . . . "This bill will basically do nothing to stem employers from using the H-1B program as a source of cheap labor and to substitute for American workers," Hira said. "It doesn't require any kind of labor market test -- demonstrating that a shortage actually exists before hiring an H-1B . . . No matter how one dresses up this bill, it would do nothing to curb the practice of companies bringing in computer programmers for $12 per hour to displace U.S. workers," he said. "If this bill were to be passed as written, it would do serious damage to the American information technology labor market, displacing many American workers, discouraging the next generation of students from entering the career, and speed up the offshoring of high-wage high-technology jobs." PC World, March 2008 [23]
  • “The H-1B visa program allows skilled immigrants to work in the United States on a temporary basis . . . Microsoft founder Bill Gates is personally leading the industry's charge for more H-1B visas. Yet Microsoft asked its contract software developers earlier this year to take a seven-day furlough, to save money. And the firm admits that its salaries are not keeping up with inflation. Again, none of this squares with Microsoft's claims of a labor shortage. The hidden agenda here is industry access to cheap labor. Several university studies and two congressionally commissioned reports have shown that H-1B visa holders are paid less than Americans.” Source: San Francisco Chronicle, Dec 2006 [24]
  • "In Washington, D.C., today, Bill Gates testified before the U.S. House Committee on Science and Technology, calling again for Congress to reform the H-1B visa program that Microsoft and other companies use to bring foreign workers to the U.S. . . . The Microsoft chairman's assertions didn't go unchallenged. The question-and-answer period included a lively exchange on the topic between Gates and U.S. Rep. Dana Rohrabacher, a California Republican . . . Rohrabacher: If we bring in more people from the outside, realizing that we're bringing the most talented people from other countries, will it not hurt those countries? And will it also not depress the wages in our own country that people like yourself would have to pay your employees in order to get quality people or in order to train people within our own society? . . . My reading of all of this is that there are plenty of people out there to hire but people want to have the top quality people from India and China and elsewhere, and they're willing to have these 150,000 American computer programmers just go unemployed.” Source: Todd Bishop's Microsoft Blog, March 2008 [25] Also see:

Committee on Science And Technology, U.S. House of Representatives March 2008 [26]

[edit] Heavy Hitter

  • According to the Center for Responsive Politics, "Prior to 1998, the company [Microsoft] and its employees gave virtually nothing in terms of political contributions. But when the Justice Department launched an antitrust investigation into the company’s marketing of its popular Windows software, things changed. The company opened a Washington lobbying office, founded a political action committee and soon became one of the most generous political givers in the country. The move eventually galvanized an entire industry, as computer and Internet companies quickly moved to emulate Microsoft’s political savvy." Source, Open Secrets, 2008 [27]
  • According to the Center for Responsive Politics, Microsoft is one of the all-time "heavy hitters" when it comes to political contributions. Microsoft is listed as the 30th biggest donor from 1989-2008 - donating a total of $$17,743,669. For the 2008 campaign cycle, Microsoft has so far donated $1,759,736 with top recipients Barack Obama ($220,028), Hillary Clinton ($193,969), and Darcy Burner ($80,694). See Microsoft's OpenSecrets Profile. [28]

[edit] Public Relations

reprinted from Trust Us, We're Experts!, by Sheldon Rampton and John Stauber

Leaked by an anonymous whistle-blower, the documents detailed a multimillion-dollar media campaign designed for Microsoft by Edelman Public Relations Worldwide, one of the world's largest PR firms.
Leaked by an anonymous whistle-blower, the documents detailed a multimillion-dollar media campaign designed for Microsoft by Edelman Public Relations Worldwide, one of the world's largest PR firms.

In April 1998, as the Justice Department's antitrust investigation of the Microsoft corporation began to evolve from a background nuisance into a serious challenge to the company's future, a large binder of confidential company documents found its way into the hands of the Los Angeles Times. Leaked by an anonymous whistle-blower, the documents detailed a multimillion-dollar media campaign designed for Microsoft by Edelman Public Relations Worldwide, one of the world's largest PR firms.

The plan aimed to head off new antitrust investigations being considered by attorney generals in eleven U.S. states. The Times described the Edelman plan as "a massive media campaign designed to influence state investigators by creating the appearance of a groundswell of public support for the company." It proposed to hire local PR firms as subcontractors in Arizona, California, Florida, Michigan, New York, North Carolina, Ohio, Pennsylvania, Texas, Virginia, and Wisconsin. Freelance writers would be hired to write opinion pieces, which the local PR firms would then submit to local newspapers. "The elaborate plan.. hinges on a number of unusual--and some say unethical--tactics," noted L.A. Times writers Greg Miller and Leslie Helm, "including the planting of articles, letters to the editor and opinion pieces to be commissioned by Microsoft's top media handlers but presented by local firms as spontaneous testimonials." In the words of the leaked documents, the goal was to generate "leveragable tools for the company's state-based lobbyists," positive press clippings that "state political consultants can use to bolster the case" for Microsoft.

With documents in hand, the reporters played a cat-and-mouse game with Microsoft spokesman Greg Shaw, who denied knowing about the plan until they informed him of the internal memos in their possession, in which Shaw's own name figured prominently. Presented with this reality, he smoothly adjusted his story, admitting that the Edelman plan existed but describing it as merely a proposal. "The idea that we'd hire people who wouldn't identify themselves as representing Microsoft is totally false," Shaw said. "Actually, the proposal we received is quite mundane."

After a few days of embarassing editorials in the computer trade press, the Edelman plan was largely forgotten. A year later, it went unmentioned when several news stories discussed an "Open Letter to President Clinton from 240 Economists" that appeared in the form of full-page advertisements in the Washington Post and New York Times. The ads were paid for by a California-based, nonprofit think tank named the Independent Institute, a conservative organization that had been a leading defender of Microsoft since it first came under fire from federal prosecutors. "Consumers did not ask for these antitrust actions--rival business firms did," the Open Letter stated. "Many of the proposed interventions will weaken successful U.S. firms and impede their competitiveness abroad. ... We urge antitrust authorities to abandon antitrust protectionism," stated the economists, who came from institutions as far apart and as prestigious as the University of California, Johns Hopkins, the University of Miami, American University, Loyola, Ohio State, Dartmouth, Northwestern, Columbia University, Stanford, and Cornell.

Underneath the letter itself, a paragraph at the bottom of the newspaper ads advised readers that for more information they should read a new book titled Winners, Losers, and Microsoft: Competition and Antitrust in High Technology, published by the Independent Institute and authored by two of its research fellows, economists Stan Liebowitz and Stephen Margolis. The book was attracting favorable reviews from publications such as The Economist of London and Wired magazine. "Henceforth, any judges, economists, pundits or journalists who discuss Microsoft...without first dealing with the Liebowitz-Margolis critique should have their wrists soundly slapped," stated the Wall Street Journal.

David Theroux, Founder and President of the Independent Institute
David Theroux, Founder and President of the Independent Institute

Newsbytes magazine, a computer industry news service, noted that the Independent Institute's position "sounds like a brazenly partisan argument for Microsoft," but checked with a spokesman for the Independent Institute who said that Microsoft did not pay for either the Open Letter advertisements or the publication of Winners, Losers and Microsoft. The spokesman acknowledged that Microsoft was a member of the Institute, and "said membership dues for corporations start at approximately $1,000, but he would not comment on how much Microsoft had contributed to the institute over time," Newsbytes reported.

In September 1999, however, a second group of leaked internal documents found its way into the hands of another reporter, this time Joel Brinkley of the New York Times, who reported that Microsoft was the largest single outside donor to the Independent Institute. During the 1999 fiscal year, Brinkley wrote, Microsoft had provided 20 percent of the Institute's operation budget. In addition to helping pay for publication of Winners, Losers and Microsoft, the software company had paid for the newspaper ads in which the Open Letter appeared. Brinkley's documents included a bill from Independent Institute President David Theroux to Microsoft attorney John Kelly, in the amount of $153,868.67--the full price of running the full page ads, plus $5,966 in airfares and expenses for Theroux and a colleague to appear at a press conference timed to coincide with the ads release.

"Theroux has long acknowledged Microsoft is a dues-paying member of his institute," Brinkley reported. "But he has insisted all along that Microsoft is 'just one of the 2,000 members' and as such pays... an inconsequential part of the organization's overall budget that gives the company no special standing. All Microsoft gets for that, he said is 'free copies of our publications, discounted tickets to our events.' He has also maintained that Microsoft had nothing to do with the newspaper advertisements. The ads, he said in the interviews, 'were paid for out of our general funds.'

The documents leaked to the New York Times put the lie to these claims, but Theroux was unfazed, attacking Brinkley's story as a "smear campagin" based on "purloined" documents. "It appears that some people in the computer industry may now be stooping to any and all tactics that might be used to discredit the Independent Institute and our powerful new book," he responded. "Mr. Brinkley credits as his source, 'a Microsoft adversary associated with the computer industry who refused to be identified.'...Bottom line: Do Brinkley's charges make our book and the Open Letter any less credible or accurate? Absolutely not."

The Independent Institute calls itself a 'non-partisan, scholarly, public policy research and educational organization...that sponsors peer-reviewed, scientific studies on a wide range of economic and social issues." That its defense of Microsoft was company-financed is irrelevant, Theroux claimed, because "the academic process we use is independent of sources of revenue." There is some truth to these claims. It would be a little too facile to portray the Independent Institute as a mere mouthpiece for the company. As Theroux pointed out when its funding sources were uncovered, the institute was on record opposing antitrust laws since 1990, long before Microsoft came under federal scrutiny. And while professors Liebowitz and Margolis have worked on occasion as paid consultants to Microsoft, the positions they espouse in Winners, Losers and Microsoft were likewise developed years before the company became a target of government investigations.

Yet it is also ridiculous to pretend that the Independent Institute is truly independent. Microsoft had an obvious motive for helping the institute amplify its voice through major advertising, and it is precisely for this reason that the amount of its funding remained confidential until it was leaked to a newspaper reporter. David Callahan, a writer who has researched the relationship between corporate funders and conservative think tanks, notes that Microsoft's relationship with the Independent Institute is "perfectly legal given current tax laws," but adds, "At the same time, something is clearly wrong with this situation...It is naive to imagine that conservative think tanks aren't extremely beholden to their funders in the business world or to the corporate leaders on their boards. This is simply the way that the power of the purse works. Just as politicians can't ignore the demands of major donors if they want to survive, neither can institutions ignore their benefactors.


Microsoft continues to contribute money to several think tanks, including the American Enterprise Institute, the Center for Strategic and International Studies, the Heritage Foundation, the Cato Institute and the Alexis de Tocqueville Institution. These organizations have often been called "shills" by Microsoft's critics, who allege that the groups are paid by Microsoft in order to spread Microsoft propaganda under the appearance of being neutral and unaffiliated, and that they attempt to harm Microsoft's competitors by spreading fear, uncertainty, and doubt (for example, by stating that open-source software offers a target for terrorists). [29] [30] [31] [32]

[edit] Total cost of ownership

The full cost of software extends far beyond the purchase of the software itself; it can include costs for support, training, and upgrades. There is an ongoing debate regarding how to accurately measure the cost of software.

Microsoft supporters argue that the position and architecture of Microsoft software results in a lower "total cost of ownership" than competing open-source solutions such as GNU/Linux, the Apache web server, or the MySQL database. They contend that:

  • Microsoft software is designed to be easy to configure, allowing companies to hire lower-paid non-expert systems administrators.
  • There is a large pool of trained and certified Microsoft administrators available to help in deploying and managing Microsoft systems.
  • The Microsoft software ecosystem is designed to work well together since many products come from the same vendor.

Detractors argue that users do not own Microsoft software - it is licensed, forcing the user to have to obey the vendor's licensing agreements, and requiring regular upgrade costs - and therefore "total cost of ownership" comparisons with open source software do not compare like with like. Furthermore:

  • Lower base staff competence and less reliable software spells more problems.
  • Reducing computer insecurity requires highly trained systems administrators, regardless of the operating system in use.

In August 2004, the Advertising Standards Authority (ASA) of the United Kingdom ordered Microsoft to stop a run of print ads which claimed that the total cost of ownership of GNU/Linux servers was ten times that of Windows Server 2003. According to the ASA, the comparison put the Windows servers on Intel Xeon processors which were less expensive and offered better performance than the IBM z900 mainframe on which it put GNU/Linux; therefore the comparison included the hardware, and it was misleading to claim that the cost difference involved only the operating systems. [33] [34]

[edit] Notable critics

[edit] Praise

[edit] Worker Rights

  • Microsoft has scored 100% in the Human Rights Campaign Corporate Equality Index. The index rates large corporations on policies that affect their gay, lesbian, bisexual and transgender employees, consumers and investors. Source: Human Rights Campaign Corporate Equality Index, 2008 [35]
  • Microsoft UK has been recognized in the 2007 Times Top 50 Places Where Women Want To Work. “Organisations which are listed in this year’s Top 50 Places Where Women Want to Work have had to prove themselves in five key areas: the opportunities that they provide women; having progressive, transparent cultures; an ability to celebrate diversity; an eagerness to embrace new technology to facilitate work-life balance; and a commitment to being socially responsible.” Source: Times Online, Oct 2007 [36]

[edit] Charity Work

Bill Gates, founder and chairman of Microsoft, has also founded "The Gates Foundation"[37] which donates over $1 billion every year to causes such as disease treatment and vaccines. The foundation also gives grants to minorities to attend college through it's Gates Millenium Scholars Program[38].

[edit] Environment

As of 2006, Microsoft has joined a large group of companies no longer using the environmentally hazardous material polyvinyl chloride plastic (PVC) in their products. [39]

[edit] See also

[edit] References

[edit] External links

[edit] Brands & Subsidiaries

MSN, XBOX, Zune, Live

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