The vendor said Wednesday it will give PC manufacturers the option of removing the Start-menu pointer to Microsoft's Internet Explorer Web-browser software from pre-installed versions of Windows XP, slated to ship Oct. 25, and from older versions of Windows. In addition, Microsoft will let PC makers place icons pointing to non-Microsoft programs directly on the desktop screen of Windows XP and give consumers the option of removing access to Internet Explorer from XP. Microsoft says the changes don't take the place of settlement discussions with the government and won't affect the shipment date of Windows XP.
"This is definitely a response by [Microsoft] to the court ruling," says Nicholas Economides, an economics professor at New York University's Stern School of Business. "They didn't wait for a court to order them specifically to make these changes."
On June 28, the U.S. Court of Appeals for the District of Columbia upheld a lower court's finding that Microsoft violated antitrust law by illegally maintaining its Windows PC operating-system monopoly. The court upheld the position of the U.S. Department of Justice and 19 states suing Microsoft, saying the company illegally upheld its Windows monopoly, in part by prohibiting or making it difficult for hardware manufacturers to include a second browser with the operating system--namely, Netscape Navigator. The court ruled that Netscape had a chance to threaten Windows by creating a cross-platform environment in which application software could be run. The appeals court also overturned key findings against Microsoft.
Letting PC makers add icons to the Windows XP desktop--which Microsoft had previously prohibited--doesn't address the recent court decision. But it may help quell a rash of criticism Microsoft has endured from competing software companies that argue the vendor plans to use the new version of Windows as a toll bridge that favors the software of Microsoft and its allies. Microsoft and AOL Time Warner last month broke off talks about bundling America Online software with Windows XP.
Wednesday's moves are concessions by Microsoft in its plans to make Windows XP a launch point for other applications. There are other signs Microsoft is appeasing critics as well. Two weeks ago, the company said it would remove from Windows XP a feature called "Smart Tags," which would have created links to Microsoft-endorsed Web sites within Web pages on the public Internet.
Still, company execs insist they're pushing ahead as planned. During a conference call with reporters and analysts the day of the appeals court ruling, Microsoft chairman Bill Gates said the decision "sets a high bar for any ruling against the inclusion of new features in any software product."
Microsoft also reported after the close of trading Wednesday that it will take a $3.9 billion noncash charge for its fourth quarter ended June 30, related to investments that had sunk below levels Microsoft paid for them. The company expects an investment loss of $2.6 billion for the quarter when it reports earnings July 19. Microsoft says the write-off will result in earnings of a penny a share, though revenue is expected to be $6.5 billion to $6.6 billion.