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Why was Apple not able to compete with Microsoft in the home PC market?

Why was Apple not able to compete with Microsoft in the home PC market?


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Most of desktop market belongs to Microsoft, which is surprising to an Apple user. What went wrong, what factors were against Apple, what decisions were made that prevented it from conquering the market despite Apple's being the "technically" better machine?


The Rise of the IBM PC was very quick. The Apple II had done well and blazed a path but many as a hobby computer more than a business machine, and it was tagged as cute rather than practical. IBM had huge brand clout in Business an businesses looked at the IBM offering favourably just because it came from IBM.

The Apple II had an open architecture but had limitations as a computer. It was not a great architecture to support computer languages over assembler. Generally you added a CPM Z-80 card if you wanted that. It was too hard to develop applications in assembler.

The IBM-PC 8086 based PC was close to the old 8080 and CPM Z-80 cpus and was easy to rapidly port software from theses architectures. The IBMPC thus was a technically better platform for software development that the Apple II. Ot was easier to write software for.

Timing was good the IBM PC entered the market just as business was looking for a computer, and many software companies were starting to write software applications. The IBM PC intent was to quash apple, IBM were offended that by the notoriety of apple, the success actually was a surprise to IBM.

Really Really awful mistakes by their Competitors, the Apple III was a badly botched project. Incredibly badly delivered machine that saw Apple get the IBM PC the opening. The Earlier incredibly short sighted dumb more by DEC to castrate their micro-11 computers, the most advanced machines with the best existing suite of software (afraid that it would eat into their successful mini computer pdp-11 sales, they hamstrung the professional series of computers , perversely tis was what the Russian home computers of the early 1980s were based on, technically the Russian PC's were actually superior architectural, sure they stole the design, but they stole the best)

The Macintosh was an overly ambitious design and when it was delivered it was clunky slow computer to use, It just did not have enough memory to support a speedy windowing interface, sure the Mac had great design and the new interface (actually developed by Xerox PARC) would be a winner, but without enough memory it was too slow. It also was a big jump for software developers, Apple consistently produced bad systems software (Operating Systems) while much of the apple libraries were great the operating system architecture was poor. (Eventually apple solved this in OSX by just putting their own layer on top of unix, the world's best OS, remains so even though designed in the 70s, Windows remains a toy by comparison)

Developing a computer system and delivering it to the market is complex, and a lot of companies have failed even with basically good products. IBM delivered at the right time, their architecture was very close to existing 8080/Z-80, Hal was right about those code warehouses) which made them an easy and relatively familiar development environment, the IBM PC was a slighter more advanced design that had the ability for more memory and support languages that made application development easier. Previous machines like the apple II just were a little tight for that. After the IBM PC most companies delivered very ambitious designs (Mac, Atari ST, Amiga etc) which just were slow, clunky or buggy early and they were coming into the new IBM dominated markets with radically different software architectures that took a lot of work to conquer.

But the tim the Macintosh was competing with Microsoft (MS-Dos, Windows) Microsoft already had a very dominate position, and apple had chosen to go down the closed system path after it's experience with Apple II clones, Apple was much more closed with the Macintosh, this meant the Macintosh was going sell at a premium and not benefit from competing third party hardware suppliers. Once most software companies had already moved into supporting the 8086/Intel/Microsoft world, it was amor effort to write software for the Mac, which didn't have enough Market share, the Mac was always fighting from a minority share. Microsoft was able to use it's monopoly position to effective tax the manufacturers of hardware. With a large demand for ms-dos/windows, Microsoft insisted to get OEM versions of their OS software you had to install them of ALL the hardware produced, so even if the customer just bought the box and installed a non Microsoft OS the cost was already paid to Microsoft, if the producers did not play by Microsoft's rules they were just cut out of the Microsoft OEM. Microsoft had an established dominate position that it used. Apple having the smaller maker went for point of difference and become as smaller cult machine that people were willing to pay a premium for.


It wasn't just Apple. Commodore and Atari both had technically superior machines available for much of the early history of the PC platform, and both also got destroyed in the market.

The best answer I've ever seen to this question came from Eric Raymond's The Cathedral and the Bazaar*.

The basic gist of the argument is that when it comes to a competition between a more closed platform and a more open platform, the closed platform loses every time. Even if it starts off technically superior.

Other examples of this principle in the history of platforms are VHS vs. (Sony-only) Betamax, Unix vs (DEC-only)VMS, Android vs. Blackberry, etc.

Since computer platforms of the day could not run each-other's software, users had to pick one. If they picked the Apple world, they were reliant on a single company for all hardware and OS innovation on their platform. Also, Apple has nearly no price pressure, as nobody else makes alternative versions of their equipment.

In the PC world, anybody can make a new piece of PC hardware. Anybody. For instance, the PC I'm typing this answer on contains an AMD CPU. I bought it because it was a bit cheaper than the competing Intel CPU for the performance point it gave me. The same thing goes for my video hardware, motherboard, motherboard chipset, RAM etc. Everywhere intense competition pushing vendors to do better for cheaper.

Apple is a very innovative company. But no matter how good they are, they simply cannot beat the rest of the world combined. So what happened was that even though the PC was a technically inferior offering initially, its various vendors over the years improved it at a rate that single companies like Apple, Commodore, and Atari just couldn't match.

(The more interesting question to me is why Apple managed to survive. It nearly didn't)

* - My memory is that a much more explicit version of this argument was made by Nick Rossi of the Pittsburg Post Gazette in 1999, but sadly his original article no longer appears to be online.


Bill Gates and Steve Jobs were genius businessmen, but Steve Jobs made two missteps, the Apple III and the Lisa, and was fired for it just as his newest effort, the Macintosh, was exploding in popularity.

Gates, on the other hand, as a software impresario, let other people take risks with hardware.

He let IBM design the hardware, and then supported the early clones from Compaq and Dell and fostered a healthy commodity-PC ecosystem at IBM's expense. (IBM no longer manufactures computers that run a Microsoft operating system.)

He cheated people. Often. He acquired a CP/M-knock off OS, 86-DOS, for an absurdly low sum, and then used the product he had essentially obtained for free to undercut Digital Research's CP/M. Windows Internet Explorer was originally licensed to Microsoft by Spyglass for a royalty on every copy sold. Gates bundled it for free with every copy of Windows 95, which means he didn't have the pay the royalty. He paid them $8mil to go away when they threatened to sue, a paltry sum. Microsoft used pawns like the San Francisco Canyon Company to steal access to competitors' source code.

Then there are the little things he did to ensure an unchallenged monopoly (well, unchallenged until Jobs returned to Apple) - he required all PCs to be sold with Windows, or he'd ramp up the cost of bundling Windows until the hardware manufacturer went out of business. This had a huge hand in killing OS/2 and slowing Linux's adoption. They would make undocumented API changes to deliberately interfere with competitor's products, when Microsoft got into the productivity software game, the rallying cry at Redmond was "DOS ain't done until Lotus won't run!" They cut ludicrous bundling deals for large customers who bought MS Office, essentially giving them the OS for free. Sharp business, but an illegal use of their monopoly position, and par for the course.

The Mac has high-margin equipment that is simple to maintain and use - it doesn't need to be huge to be a success. Jobs' success with the iMac and iBook indicated a well designed product with a solid system underlying it could be profitable even in a niche.

Microsoft MS-DOS and then Windows are unfairly low-margin products designed to sell Office and other software licenses, using a business model that relies on hardware vendors to to develop advanced computers for them free of charge and compete with each other to apply downward pressure on hardware prices.


IBM was arguably one of the greatest companies in America as they introduced the PC. They had decades of continuous earnings growth. They were what every American business strove to become. They went decades without firing any employees. When they went into the PC market they used cheap off the shelf components including CPU, Architecture, and Operating System. What they invested in heavily was software. The day the PC came out it had 500 software packages to choose from. Apple had been on the market for years at the time and they still didn't have the kind of software catalog IBM introduced on day 1.

IBM PC became synonymous with Business and professionalism. Apple became synonymous with hobbyists, meaning "Looks good but not practical". Since IBM used open components, clone manufactures quickly brought cheap competitors to the market which made IBM computers / clones significantly less expensive. Big businesses still purchased IBM machines, but everybody else could buy clones for half or a third of the price. Apple had always been more of a hardware company and now they were competing with small shops which could afford to operate on $50 margins which Apple couldn't hope to reach.

In the end, the PC controlled the high-end business market, and the clones controlled nearly everything else. Apple became thought of as an expensive toy with 5-10% of the market. If you really wanted to do serious work, you purchased an IBM. That's what they used in schools, That's what was used at work, so that's what people purchased for their homes.

Apple nearly went under. Apple always had a diehard core group of supporters. But they had production problems, dead-end expensive product roll outs, and they always cost significantly more than PC offerings. Jobs 1.0 was a technical visionary, but he was never trusted by Apple's money men to run the company. So poor management decisions by Apple were also part of the problem. Poor coordination between Jobs and whoever was running the company. Apple hired a series of good general business people who just didn't understand the PC market. It nearly killed the company.


1975-1992: Information revolution, rise of software and PC industries - Wikipedia

By 1985 IBM was so dominant that competitors and analysts speculated that it would again be sued for antitrust.[170][171] Datamation and others said that IBM's continued growth might hurt the United States, by suppressing competitors with new technology. Gartner Group estimated that of the 100 largest data-processing companies, IBM had 41% of all revenue and 69% of profit. Its computer revenue was about nine times that of second-place DEC, and larger than that of IBM's six largest Japanese competitors combined. IBM's profit margin of 22% was three times the 6.7% average for the other 99 companies. Some companies complained to Congress, ADAPSO discussed the company with the Justice Department, and European governments worried about IBM's influence but feared affecting its more than 100,000 employees there at 19 facilities.

IBM's reaction to this was to back away from the most visible part of their business, which also was not among their best revenue generators, the PC. They introduced the Microchannel in 1987 and went from the leading PC manufacturer to a boutique PC provider specializing in servicing large companies/governments. But they had already supplanted the Apple as the primer personal computer years earlier. Almost from the beginning, there was no contest. The PC had the IBM name, the software catalog, and compared favorably on price.


History of Microsoft

Microsoft is a multinational computer technology corporation. Microsoft was founded on April 4, 1975, by Bill Gates and Paul Allen in Albuquerque, New Mexico. [1] Its current best-selling products are the Microsoft Windows operating system Microsoft Office, a suite of productivity software Xbox, a line of entertainment of games, music, and video Bing, a line of search engines and Microsoft Azure, a cloud services platform. [2]

In 1980, Microsoft formed a partnership with IBM to bundle Microsoft's operating system with IBM computers with that deal, IBM paid Microsoft a royalty for every sale. In 1985, IBM requested Microsoft to develop a new operating system for their computers called OS/2. Microsoft produced that operating system, but also continued to sell their own alternative, which proved to be in direct competition with OS/2. Microsoft Windows eventually overshadowed OS/2 in terms of sales. When Microsoft launched several versions of Microsoft Windows in the 1990s, they had captured over 90% market share of the world's personal computers.

As of June 30, 2015, Microsoft has a global annual revenue of US$86.83 Billion and 128,076 employees worldwide. [3] It develops, manufactures, licenses, and supports a wide range of software products for computing devices. [4] [5] [6]


Why was Apple not able to compete with Microsoft in the home PC market? - History

I’ll tell you why. Apple has gotten smarter about how it competes with Microsoft. Clearly the underdog, Apple has to make moves that can be seen as both supportive of the Windows marketplace and good for its Mac customers at the same time.

The switch to Intel was just such a chess move. Intel hardware makes it easier for Microsoft to create apps for the Mac. It solves a performance problem Apple had. It creates a better experience for Intel-Mac owners because it better supports Windows applications. The CPU architecture also puts Mac and Windows hardware on an easy-to-understand, level playing field. Perhaps most significantly, though, all these advantages appeal to potentially millions of Mac-curious Windows users because it makes the Mac more familiar.

For the first time in its 23-year history, the Mac is finally able to move fluidly into and out of the world of Microsoft Windows and its applications — both in the workplace and at home. Microsoft’s own Office suite plays a big role in that. Microsoft’s commitment to Office 2008 for the Mac lends additional support.

But the untapped source for the Mac is software designed for Windows. VMware is offering a public beta of its Fusion virtualization product for the Mac the final release is due this summer. In the meantime, it’s the Parallels Desktop software that has been truly transformational for the Mac.

Parallels isn’t just an easy-to-use virtualization utility for running Windows on the Mac. The company’s Coherence feature lets Windows apps run in an all but invisible Windows instance on your Mac. They look for all the world like they’re running on your Mac, not in Windows. Parallels also makes it easy to switch back and forth between a full-screen version of Windows and your full-screen Mac. And Windows XP runs flawlessly on the Mac in Parallels. (Parallels also supports Vista, but not the Aero interface, yet.)

For people who haven’t tried it recently, the most surprising thing about the Mac in 2007 is that software is simply not a problem. Most average Windows users have no idea how rich a software base the Mac has grown in recent years. With convenient access to Windows applications, as well as access to an intriguing, growing market of Mac-specific software, finding great software that runs on the Mac is easier than ever before.

That insidious Macintosh

OK, so full disclosure: I am a recent Mac convert. But before you chalk me up as an apple-eyed Mac fanboy, I’m not your average Windows-to-Mac switcher. No one knows better than me (well, maybe Microsoft’s accountants) how firm a grip on the computer industry Microsoft has. As a Windows reviewer since almost the beginning of Windows (my first tests were of Windows 2.11), I have no illusions about Microsoft’s market lock.

If the Mac or any other desktop OS were to truly put a dent in Microsoft’s desktop market share, it would take 15 years for Windows to “die.” And that’s assuming Microsoft stood still and did nothing. In other words, it ain’t gonna happen.

I also don’t hate Microsoft. I’m not a fanatic. I’m just someone who recognizes a good thing when he sees it.


You'll Never Have To Buy Microsoft Office 2016 Again

Last month saw the release of Office 2016 by Microsoft. The software suite has been updated a number of times since it was first released, and the recent switch by Microsoft to a cloud-based strategy has given Office a new lease of life, not least in how you pay for your copy.

Let's start with the biggest challenge of all. how to approach a review of a product such as Office 2016? It remains a gargantuan project from Redmond. I could spend days talking about each of the major components of the office productivity suite, I could talk about the strategy and the implications of the product, or I could focus on how Microsoft is trying to change the image of itself and how it earns money. But I don't have days, I have a thousand or so words. So the question is, where do you start?

Microsoft Office 2016 (image: Ewan Spence)

The jokey answer is 'near the end', so let's do just that. Office 2016 is an iterative update to Microsoft's dominant position in the productivity suites. It polishes the applications on offer and brings in a number of new features but there is nothing earth-shatteringly new. If you've never felt the need to use Office before, this is not the package for you. If you're coming up from older versions, do check the features list carefully to see if there is anything genuinely new that you are going to use.

Much like the first mission of the Surface hardware is to stem the tide of people switching to alternative platforms, Office 2016 feels like an application for the faithful. In that sense the new release is playing to a captive and raptured audience. That doesn't mean Microsoft has skimped on the work - far from it - but this is a refining product, not a revolutionary product.

And that's the point where Office 2016 feels like an alchemical mirror to the Windows operating system. Heralded as 'the last version of Windows you will need', Windows 10 takes you down the path of constant updates, small changes as required, rolling bug fixes and new features, in essence a living breathing operating system.

That's the plan for Office 2016 as well. Going forwards, Office 2016 will be updated as required, no tent pole release dates, just a program that evolves and stays relevant to you for the rest of your working life. Subscribe to Office now, and you'll get the next small update. And the next. And the next.

Gallery: Top 10 Tricks To De-Clutter Your Office

All of this is tied up in Office 365, Microsoft's key subscription service that is vital to its long-term health. If you have a subscription to Office 365, then you'll be able to download the Office 2016 apps to multiple computers. There are multiple options for business users to get an Office 365 subscription, but individual users can pick up Office 365 Personal for £6 a month which is suitable for a single user and installation of Office 2016, or Office 365 Home for £8 a month which will accommodate up to five different users and application installs. One-off pricing is also available, starting at £120 in the UK, but Microsoft's goal is to use Office 2016 as another reason to get you into Office 365.

Next: Moving into the cloud, and staying mobile.

The reason for this is to get Office into the cloud. While the previous version of Office did dabble with this, Office 2016 is tightly integrated with the cloud. it's a simple matter to have all your documents saving to the cloud and therefore accessible from any installation of Office or associated tools.

This is where the 'mobile' versions of the core apps come in. A quick look in smartphone stores across the world will find the mobile versions of Microsoft Office for Android and iOS. and Windows 10. Yes, it's possible to download the mobile versions of the Office apps to a Windows 10 desktop or laptop, and I would advise you to do so. They are great for quick edits and just getting ideas down without all of the power and complexity the larger apps offer. Mobility is a key part of the value of Office, and the clients for your mobile devices, be it smartphone, phablet, tablet, or ultraportable - all help that mission goal.

Microsoft Office 2016 (image: Ewan Spence)

It's also helped by the use of the cloud. The default option, and the one that provides the most flexibility, is to save your documents to the cloud (Microsoft OneDrive). This keeps them accessible on all of your devices, and an Office 365 subscription comes with a terabyte of online storage, which should be enough in the current climate for all your needs (and if you go for the one-off purchase you are provided with just 15 GB of online storage, so you can see where the priorities lie).

I would definitely recommend you use the cloud as much as possible. Not only does it keep your files accessible (and backed up), it also allows Office 2016's big focus to kick in, which is collaborative working in Word, Excel, and Powerpoint. This can happen in real-time on the same document, just select sharing from the menu, add an email address, and Office will do the rest. If you need to stay in touch during the editing process, Skype will handle both IM and video calling functions.

Yes, it looks remarkably like the solution used by Google in its cloud-based suites, but this is where the legacy of Microsoft will kick in. It's going to be far easier for corporate customers to keep using Office than switch to Google, and bringing the real-time collaboration tools will make it more likely that Office will remain the suite of choice.

Microsoft Office 2016 (image: Ewan Spence)

Office 2016 is of course more than one application, and the 'triple' of Word, Excel, and PowerPoint are still the major apps at the core of the Office experience. I've no doubt that anyone working in an office environment is going to make great use of these applications. As noted, little has changed in terms of the apps from the previous version of Office, and the iterative changes promised over the next few years will likely not make any major changes. You're going to know exactly what you're going to get with these apps now and in the future.

Next: Outlook, the minor apps, and conclusions.

Outlook is a bit of a different beast. Email may have been downgraded in the eyes of many in place of IM clients, but it still remains an important part of many office workers life. It's not a comfortable application to use, with a sprawl of icons, font sizes, tools, and icons seemingly thrown at the screen in the hope they make some sense. If you have an Exchange account it interfaces well, but for the personal user who is likely looking at accounts from other providers, Outlooks is not as polished.

In fact Outlook on the desktop is actually weaker than the mobile version of Outlook that Microsoft makes available for free on Android and iOS - the latter was an app Microsoft bought out, as opposed to the slow evolution of Outlook on the desktop. If there is an application that needs a bit more focus, thought, and polish in all of Office, it is Outlook.

OneNote (l) and OneNote Mobile ® in Windows 10 split screen (image: Ewan Spence)

The three 'minor apps' are also worth mentioning. Publisher continues to provide a competent desktop publishing experience with its focus on small business and home based templates, while Access is the database management system loved and hated in equal measures. My love of OneNote has been on show at Forbes before, and the update here, like that of the major apps, is more evolutionary. There are no totemic new features on show here, just wide integration across a number of platforms.

That is probably the biggest strength of Office 2016. You can work with your Office 365 subscription on a number of devices. Windows 10 for sure, but Office 2016 also runs on Windows 7 and Windows 8.1. Don't forget the mobile versions of Word, Excel, PowerPoint, and OneNote which are much lighter in use and perfect when you only need to make a few changes. I'd also be happy to argue that the lack of legacy furniture and a better focus on UI and layout means that the mobile versions - especially Word Mobile - are better suited to distraction free creating.

It's no longer restricted to hardware with 'Windows' in the about box. Office already had a competent foothold on OSX and that remains the case with Office 2016. While Apple does push the inclusion of Pages, Numbers, and Keynote as free downloads, the decades of history behind Microsoft Office is a strong marketing movement. No doubt the consumers who do make the jump from Windows to OSX hardware will take comfort knowing that Office 2016 is there waiting for them. And of course Microsoft is going to get that subscription to Office 365 just the same.

Microsoft Office 2016 (image: Ewan Spence)

With the rise of mobile, Microsoft's move to have Office available on iOS and Android (as well as Windows Phone and Windows 10 powered smartphones) is the logical extension of being able to work on your documents no matter where you are, or what device you are on. With Office 2016 'back at base', the smartphone applications with you wherever you are, and all your data in the cloud, the lightweight mobile applications are best suited to creativity and editing when on he road, Microsoft appears to have covered all the bases in modern life.

Even the worry of updates and being left behind as the code is refreshed is taken care of thanks to the 'software as a service' approach that is being undertaken by Office 365.

CEO Satya Nadella has been moving Microsoft away from a reliance on hardware, and putting the focus on the cloud. All the components of Office, including Office 2016, work in harmony with each other at a software level, and don't care what hardware you use.

Office 2016 is mature, knows what it needs to do to deliver, and now has a much wider market to address than any previous version of the productivity suite. There's always more work to do, but I see little reason for existing customers to not buy into Microsoft's vision of a new Office. For those looking to move up to an office suite, or even make a switch from a rival ecosystem, do be aware that you need to fully buy into Microsoft's vision of the cloud and make use of all of these services, but there's no obvious gotchas that should stop you if that's the path you want to take.


Thank you for posting your query in Microsoft Community.

I understand the inconvenience caused, I will be glad to assist you with this.

Just to clarify, what exactly do you mean by, "taking over my computer"?

As Microsoft edge is an inbuilt operating system browser, there is no option to remove it. However, I would suggest you to try changing the default browser and check if it helps. This way, every time there is a requirement of a browser, the default browser will be used. To change the default browser, follow the steps below:

1. Press Windows key + R to open the run command.

2. Type control and press enter to open control panel.

3. Type default programs in the control panel search box and open it.

4. Click "set your default programs".

5.Under "programs", locate your preferred browser, click on it and click "set this program as default" and click ok.


Chrome OS

Google’s approach to the world of desktop-class hardware is an interesting one. Chrome OS was originally designed as an OS that mostly relied on constant access to the internet — which made sense because it was designed as an extension of the Chrome desktop browser. Chrome hardware — usually called a “Chromebook” for laptops and sometimes a “Chromebox” for desktop designs — was intended for users who rely primarily on the web and only occasionally use more complex desktop software.

Today, Chrome OS feels more like an OS than a bloated browser. It packs an integrated file manager, a messaging app for sending and receiving texts via a linked Android phone (think iMessages), and more. It also supports both Google Play Android apps and Linux-based software. Users essentially get three platforms in one at a lower cost than a Windows PC or Mac.

It’s a web world

Riley Young / Digital Trends

Because Chrome OS revolves around a web browser, it’s the least complex of the three major operating systems. Calling it a “browser in a box” isn’t the whole story, but it’s a good way to think about it. Though Chrome OS includes some basic desktop tools like a file manager and a photo viewer, its primary focus is content on the web. Android app compatibility does expand its capabilities significantly, but not all the apps scale well with a laptop or desktop display.

The interface is designed to get users to the web quickly and easily and to present as few barriers to internet content as possible. Anyone who uses the Chrome browser on a Windows or MacOS machine will be instantly comfortable with the interface, and all their saved history, bookmarks, and extensions will sync over.

Chrome devices excel at web browsing, streaming video and music, chatting and video conferencing, and other relatively simple web tasks. It can do anything that the Chrome browser on a desktop can do, including advanced Flash and Java applications. Chrome extensions and apps can change the interface and add extra functionality to a certain degree, but they lack the fine controls and more advanced “power user” options of Windows and MacOS.

That’s where Android app compatibility comes in, providing millions of new app options that greatly expand the Chrome OS experience. Support for Linux desktop programs, currently still in beta, builds on the Chrome OS ecosystem for users who prefer more powerful, traditional software over mobile and web-based applications.

Since Google designed the system to rely on Chrome, it’s understandably reliant on Google tools, to a greater degree than Windows relies on Microsoft software and MacOS relies on Apple software. That’s either a good or a bad thing, depending on how completely a user has bought into Google properties.

If you already use Gmail, Sheets, Drive, and other Google services, Chrome OS is a fantastic platform for better integrating those tools with your everyday tasks.

Cheap and easy

The focus on the web gives Chrome OS some dramatic advantages over Windows and MacOS. It can run comfortably on very low-power, inexpensive hardware. Laptops with cheap processors, tiny solid-state drives, and very little RAM can run Chrome OS easily, all with expansive storage in the cloud. Sometimes, these inexpensive designs run faster and more reliably than Windows and MacOS, even when the latter is used primarily for a browser anyway.

If you want the best Android app experience, particularly gaming, then you’ll want a fast processor, but you’re much less reliant on high-end components for a usable experience. Options for high-end Chromebooks are more expansive than they’ve ever been, even if they aren’t the focus of the range. The Pixelbook leads the way, but there are plenty of other great Chromebooks to choose from.

Whether you go high- or low-end, if you aren’t running intensive applications, Chrome OS is essentially the same experience on every single Chromebook and Chromebox. It doesn’t suffer from the “bloatware” problem that Windows has, even though Chrome OS devices are sold by third-party manufacturers like Dell, Samsung, and Toshiba. And the administration of such devices is easier, making Chrome OS popular in educational environments.

The combination of this all-in-one approach and low-power requirements means that Chromebooks can be extremely inexpensive, sometimes even less than $200. More expensive models offer high-resolution screens, backlit keyboards, fold-back touchscreens, and other fancy features, including the top-of-the-line Pixelbook 2-in-1 sold by Google itself, complete with touch and pen support.

Is Chrome OS for you?

Mark Coppock/Digital Trends

Chrome OS originally offered virtually no compatibility with external software. Google is changing that dynamic by supporting mobile Android apps and traditional Linux-based software. Chromebooks won’t work with advanced accessories like USB monitors or complex gaming hardware — Google simply doesn’t provide the drivers. It can handle basic keyboards, mice, USB drives, and Bluetooth add-ons, but that’s about it.

Meanwhile, gaming on Chrome OS is one of the most meaningful beneficiaries of Android and Linux support. While you won’t be running the massive gaming titles available for Windows, and to a much lesser extent MacOS, there are at least hundreds of thousands of Android games that should run fairly well on newer Chromebooks and Chromeboxes. That’s a significant improvement over the early days of Chrome OS when gaming took a real back seat.

On the Linux front, you can install Steam along with any game you purchase that offers a Linux-based version. However, given that most Chromebooks offer lower-end specifications, storage and GPU processing will be the limiting factor. Google’s own Stadia streaming service and Nvidia’s GeForce Now offer means to play your favorites without those software and hardware limitations.

In short, Chrome OS is almost all web, all the time. If you’re a Windows or Mac user and you often find that the only app you’re using is a browser, or you’re okay with the huge ecosystem of simpler Android apps, then it’s worthy of consideration. But the almost complete lack of the most advanced third-party software is a deal-breaker for anyone who relies on a computer for more complex tasks.

If you conduct the vast majority of your business online, you’ll find Chrome OS incredibly appealing. Compared to competitors, it’s budget-friendly, easy to use, and designed with durability in mind. While it’s an excellent choice for students, it might fall short for users who need software to handle more complex tasks.


What you need to know about Microsoft 365

Source: Excel

Microsoft 365 is the new marketing name for the paid service that replaces Office 365. While the service has a new name, you are still getting the same apps available with Office 2019 and the same benefits from the previous brand. The only difference is that you will also be getting a lot of new extras.

Microsoft 365 is the new brand for the paid service that replaces Office 365.

Since this is a subscription-based service, you will be making payments every month (or every year) to use the suite of apps, such as Word, Excel, PowerPoint, Outlook, Publisher, Access, and others on all your devices (desktops, laptops, tablets, and phones). Of course, as long as only six devices are accessing the account at one time.

Also, if you get the Family subscription plan, you can share the benefits with up to five additional users for a total of up to six people with one account.

Perhaps one of the service's biggest advantages is that you never have to worry about upgrades ever again. When you install the Office apps from Microsoft 365, you are always in the latest version. This means that once the apps are installed on the device, they will automatically receive security and maintenance updates, improvements, and new features as soon as they are ready.

You will also have access to cloud-based features to enhance your productivity in school, office, and across devices (Windows, macOS, iOS, and Android). Every person you share the account with will get 1TB of OneDrive storage (up to 6TB in total with the Family subscription) and Skype minutes. The subscription also gives you access to the Microsoft support line to resolve any issue with the apps.

If you have a lot of pictures and videos, in addition to the already 1TB of cloud storage, you can also purchase up to 1TB of additional OneDrive storage on 200GB increments for an extra $1.99 per month, doubling the total storage capacity to 2TB (1TB already included with the plan and 1TB with the additional plan) for $9.99 per month. The option is available for Microsoft 365 Personal and Family members. However, there is one caveat, if you have the Family plan, only the primary account holder can get the separate terabyte.

Who should buy Microsoft 365?

Source: Windows Central

If you must have everything that the suite has to offer, Microsoft 365 (Office 365) is the best option since you get all the apps to install on every device (Windows 10, Windows 8.1, Windows 7, and macOS). It's also the only option that provides continuous updates at a low cost. In contrast, Office 2019 only allows you to install the apps on one device running Windows 10, and you have to pay again for upgrades.

If you need access to the suite of apps, Microsoft 365 is perhaps your best choice.

The cloud service comes in two flavors. If you are the only person planning to use the apps and cloud services, you can get the "Microsoft 365 Personal" (formerly "Office 365 Personal") plan for $70 a year (or $7/month), which gives you access to all the apps, alongside 1TB of OneDrive storage and Skype minutes.

If you want to share the subscription with family or friends, the "Microsoft 365 Family" (formerly "Office 365 Home") plan is the option you want. It costs $100 per year ($10/month), you can share (using the "Services & subscriptions" tab in your Microsoft account) the apps and benefits with up to six people, and everyone gets their own 1TB of OneDrive storage.

Whatever plan you get, you will also have access to the additional services, including the Microsoft Family Safety experience to manage screen time, app and game usage, share location, monitor driving behavior for young drivers, and much more.

Other premium features include Microsoft Editor for grammar checking, spelling, and writing style using AI assistance (similar to Grammarly) and other AI-based creative tools. For instance, PowerPoint Presenter Coach to help you practice presentations and Designer to help you create effective slide presentations. Resume Assistant to craft the best resumes in Word with insights powered by Microsoft LinkedIn. And Money in Excel to view, track, and organize household finances. You will also be getting access to creative content like stock photos, icons, premium templates, and fonts.

The subscription will unlock the premium version of Outlook.com, including everything available with the free version, plus 50GB of storage, no ads, message encryption, and enhanced security. Furthermore, as a paid member, you will also get access to special offers from Microsoft partners.

Some services bundled with Microsoft 365 are also available without a subscription using a Microsoft account, but they have limited functionalities that can be unlocked only with a subscription.

When you choose one of the subscriptions, you should get the yearly plan to save money in the long run, plus you do not have to worry about payments for a least a year.

If you are a student or teacher, Microsoft also offers the service at no extra cost using a valid school email address. This plan lets you install Word, Excel, OneNote, PowerPoint, Microsoft Teams, and other school tools on your computer for free.

Windows 7 is no longer supported, but Microsoft will continue to offer security updates for the Office apps until January 2023. However, new features won't be available until you upgrade to Windows 10.


De-de-entrenching

The important lesson that often is not learned is that the entrenched firm can often still fight back when this happens. Since Google really was not taking care of the OEMs Microsoft had a chance at aggressively moving back into the space by focusing on it again. This strategy has undergone many changes but most recently it is the combination of very affordable hardware coupled with Windows S.

Windows S is an interesting effort in that reflects on what has been learned from iOS and Chrome and addresses one of the problems with a prior similar effort. That similar effort was a locked down version of Windows which needed IT to install everything and did not scale well where IT resources were tight like education. A curated and potentially IT controlled app store bridges that gap much like it does with iOS and Chromebook hardware and the result is a solid alternative that should significantly slow the entry of Chromebooks into education.

Now Google does have a beach head in the segment and in the schools, they have captured they are now entrenched. But they tend to do a poor job of assuring customer satisfaction largely because their primary customers are advertisers, who fund the company, not the users of their products. This should leave them uniquely vulnerable even though Microsoft has yet to fully target that vulnerability. (Schools have historically rejected ad funded solutions even though this kind of funding would seem to appeal to the schools’ extremely frugal IT budget).


Yes, the Microsoft phone is really happening: Introducing the Surface Duo

The company known for its Windows operating system is getting back into smartphones by embracing its rival's ecosystem.

Microsoft Product Chief Panos Panay gave a glimpse of the Surface Duo Android phone that will go on sale in a year.

Microsoft is making an Android phone . And it has two screens. The Windows software maker showed off its device, called the Surface Duo, at an event in New York on Wednesday. The company said the two screens ( a slightly different design than Samsung's foldable Galaxy Fold) would make users more productive, and it showed video of people using a stylus with the phone, which it says isn't a phone at all . The device has two 5.6-inch displays that expand to an 8.3-inch device.

It didn't provide many other details about the Surface Duo -- which joins another, larger dual-screen device, the Surface Neo -- but said it will be available in holiday 2020. The event also saw the launch of Windows 10 X software for dual-screen devices. More prosaic new products included the Surface Laptop 3 , Surface Pro X and Surface Pro 7 tablets, Surface Earbuds and the SQ1 custom Arm chip .

By partnering with Google, the Surface Duo will be able to run apps from the Google Play Store.

"This product brings together the absolute best of Microsoft, and we're partnering with Google to bring the absolute best of Android in one product," Microsoft Product Chief Panos Panay said. "This is industry pushing technology."

See also

Microsoft tried for over two decades to make operating systems for mobile phones, but it gave up on the effort two years ago. It couldn't compete with the popularity of Google's Android and Apple's iOS, which will be on 87% and 13% of the world's smartphones this year, respectively, according to IDC. Instead, Microsoft has opted to expand its Office software and other services to rival devices, including iPhones. The company's first Android phone takes that further.

Getting back into phones won't be easy. There are really only three companies who sell devices in huge numbers and make any money from their smartphones -- Samsung, Huawei and Apple. In the second quarter, 22% of smartphones shipped in the world were made by Samsung, 17% by Huawei and 11% by Apple, according to Strategy Analytics. No one else cracked 10%, though Chinese vendors Xiaomi and Oppo came close. It's unlikely that Microsoft, with an Android phone, would ever become a major phone vendor.

The Microsoft Surface Duo will launch late next year.

Microsoft isn't the first company to make a smartphone with two displays -- but it's hoping to be the first that's really successful. ZTE's Axom M hit the market in 2017 but didn't exactly spark a trend. LG earlier this year showed off a Dual Screen attachment for its first 5G phone, the V50, as well as a version for its LG G8X ThinQ phone. But LG's device hasn't generated the same buzz as foldable phones from Samsung and Huawei and even rumored foldables from companies like Motorola .

While Microsoft is betting that dual screens is the future , most other companies in the phone market are counting on foldable displays. Nearly ever major handset maker is rumored to be working on a foldable device.


Apple Giving Away iWork Apps, iMovie, and GarageBand for Mac and iOS for Free

Didn’t get iLife or iWork bundled with your Mac? Now you can download both suites for free for iOS or macOS.

Microsoft Office is the king of productivity suites. Its reign is becoming even more supreme as it extends into the cloud with Office Online and deep into Apple territory with its macOS and iOS versions of Microsoft Office. Practically no contender has a viable shot at dethroning the likes of Microsoft Word, Excel, PowerPoint and Outlook but many have valiantly tried.

From Google Docs and Zoho to LibreOffice and Corel’s WordPerfect, Microsoft does have some token competition. Apple’s answer to the productivity suite is iWork, which we’ve seen hyped every now and then as a Microsoft Office killer. In 2013, Apple began bundling Pages, Numbers, and Keynote with new Macs in an effort to gain more market share. Now, they are taking it one step further by offering the iWork suite and the iLife suite for free to all macOS and iOS users.

For me personally, it doesn’t seem that all exciting maybe it’s my bias toward Microsoft’s de facto standard. But if you have a Mac and you haven’t made the significant investment in a Microsoft Office license or a Microsoft Office 365 subscription, then you have nothing to lose by giving Apple’s iWork a shot.

Mac Users Can Download Pages, Numbers, Keynote, GarageBand and iMovie for Free

Not only is Apple making its productivity suite free, the company is giving away its lifestyle apps, iMovie and GarageBand, too. In the early part of the 2000s when the PC was still considered the hub, Apple gained the envy of the industry for its iLife suite of apps, which included the now defunct iPhoto (replaced by Photos), iDVD (suffered the same fate as the internal SuperDrive), and iWeb (RIP, along with MobileMe).

Microsoft tried to counter Apple’s enticing collection of apps with similar tools first bundled with Windows ME such as Movie Maker. Microsoft went on to bundle apps like Photo Gallery and DVD Maker with Windows Vista. Windows 7 unbundled these apps then made them a part of the Windows Essential suite. Similar to how Apple’s iWork never put a reasonable dent in Microsoft’s Office market share, the Windows Live Essentials bundle enjoyed a small, loyal following but never got the widespread love that iLife did. In early January of 2017, Microsoft announced it was discontinuing development of the suite with no mention of a replacement.

Apple continues to develop and bundle its own productivity and lifestyle apps for macOS on new Macs. The apps have gone through significant changes over the years, making them much simpler to use and adding integration with services such as iCloud and technology such as Continuity on the iPhone and iPad.

For users who don’t want to fork out the cash for an Office 365 subscription and just need the basics for preparing short or long documents, managing a budget, this is a great deal. And honestly, the apps are decent, full-featured and perfectly workable alternatives to Word, Excel, and PowerPoint. Keynote, in particular, has given PowerPoint a run for its money and has received much praise for its approach to creating great presentations. So, this is quite the bundle—not to mention Apple keeps the app regularly updated with new features and functions. If you own a Mac running the latest version of macOS Sierra, you don’t have much to lose. You can download a copy at the following links:


Complaint : U.S. V. Microsoft Corp.

1. This is an action under Sections 1 and 2 of the Sherman Act to restrain anticompetitive conduct by defendant Microsoft Corporation ("Microsoft"), the world's largest supplier of computer software for personal computers ("PCs"), and to remedy the effects of its past unlawful conduct.

2. Microsoft possesses (and for several years has possessed) monopoly power in the market for personal computer operating systems. Microsoft's "Windows" operating systems are used on over 80% of Intel-based PCs, the dominant type of PC in the United States. More than 90% of new Intel-based PCs are shipped with a version of Windows pre-installed. PC manufacturers (often referred to as Original Equipment Manufacturers, or "OEMs") have no commercially reasonable alternative to Microsoft operating systems for the PCs that they distribute.

3. There are high barriers to entry in the market for PC operating systems. One of the most important barriers to entry is the barrier created by the number of software applications that must run on an operating system in order to make the operating system attractive to end users. Because end users want a large number of applications available, because most applications today are written to run on Windows, and because it would be prohibitively difficult, time-consuming, and expensive to create an alternative operating system that would run the programs that run on Windows, a potential new operating system entrant faces a high barrier to successful entry.

4. Accordingly, the most significant potential threat to Microsoft's operating system monopoly is not from a direct, frontal assault by existing or new operating systems, but from new software products that may support, or themselves become, alternative "platforms" to which applications can be written, and which can be used in conjunction with multiple operating systems, including but not limited to Windows.

5. To protect its valuable Windows monopoly against such potential competitive threats, and to extend its operating system monopoly into other software markets, Microsoft has engaged in a series of anticompetitive activities. Microsoft's conduct includes agreements tying other Microsoft software products to Microsoft's Windows operating system exclusionary agreements precluding companies from distributing, promoting, buying, or using products of Microsoft's software competitors or potential competitors and exclusionary agreements restricting the right of companies to provide services or resources to Microsoft's software competitors or potential competitors.

6. One important current source of potential competition for Microsoft's Windows operating system monopoly comes from the Internet, described by Microsoft's CEO, Bill Gates, in May 1995 as "the most important single development to come along since the IBM PC was introduced in 1981." As Mr. Gates recognized, the development of competing Internet browsers -- specialized software programs that allow PC users to locate, access, display, and manipulate content and applications located on the Internet's World Wide Web ("the web") -- posed a serious potential threat to Microsoft's Windows operating system monopoly. Mr. Gates warned his executives:

A new competitor "born" on the Internet is Netscape. Their browser is dominant, with a 70% usage share, allowing them to determine which network extensions will catch on. They are pursuing a multi-platform strategy where they move the key API [applications programming interface] into the client to commoditize the underlying operating system.

7. Internet browsers pose a competitive threat to Microsoft's operating system monopoly in two basic ways. First, as discussed above, one of the most important barriers to the entry and expansion of potential competitors to Microsoft in supplying PC operating systems is the large number of software applications that will run on the Windows operating system (and not on other operating systems). If application programs could be written to run on multiple operating systems, competition in the market for operating systems could be revitalized. The combination of browser technology and a new programming language known as "Java" hold out this promise. Java is designed in part to permit applications written in it to be run on different operating systems. As such, it threatens to reduce or eliminate one of the key barriers to entry protecting Microsoft's operating system monopoly.

8. Non-Microsoft browsers are perhaps the most significant vehicle for distribution of Java technology to end users. Microsoft has recognized that the widespread use of browsers other than its own threatens to increase the distribution and use of Java, and in so doing threatens Microsoft's operating system monopoly. For this reason, a presentation to Microsoft CEO Bill Gates on January 5, 1997, on how to respond to the Java threat emphasized "Increase IE share" as a key strategy. (MS7 005529-44).

9. Second, Microsoft recognized that Netscape's browser was itself a "platform" to which many applications were being written -- and to which (if it thrived) more and more applications would be written. Since Netscape's browser could be run on any PC operating system, the success of this alternative platform also threatened to reduce or eliminate a key barrier protecting Microsoft's operating system monopoly. This is the threat that Microsoft's CEO Bill Gates referred to as the threat that Netscape would "commoditize" the operating system.

10. To respond to the competitive threat posed by Netscape's browser, Microsoft embarked on an extensive campaign to market and distribute Microsoft's own Internet browser, which it named "Internet Explorer" or "IE." Microsoft executives have described this campaign as a "jihad" to win the "browser war."

11. Because of its resources and programming technology, Microsoft was well positioned to develop and market a browser in competition with Netscape. Indeed, continued competition on the merits between Netscape's Navigator and Microsoft's Internet Explorer would have resulted in greater innovation and the development of better products at lower prices. Moreover, in the absence of Microsoft's anticompetitive conduct, the offsetting advantages of Microsoft's size and dominant position in desktop software and Netscape's position as the browser innovator and the leading browser supplier, and the benefit to consumers of product differentiation, could have been expected to sustain competition on the merits between these companies, and perhaps others that have entered and might enter the browser market.

12. Microsoft, however, has not been willing simply to compete on the merits. For example, as Microsoft's Christian Wildfeuer wrote in February 1997, Microsoft concluded that it would "be very hard to increase browser share on the merits of IE 4 alone. It will be more important to leverage the OS asset to make people use IE instead of Navigator." (MS7 004346). Thus, Microsoft began, and continues today, a pattern of anticompetitive practices designed to thwart browser competition on the merits, to deprive customers of a choice between alternative browsers, and to exclude Microsoft's Internet browser competitors.

13. Microsoft's conduct with respect to browsers is a prominent and immediate example of the pattern of anticompetitive practices undertaken by Microsoft with the purpose and effect of maintaining its PC operating system monopoly and extending that monopoly to other related markets.

14. Initially, Microsoft attempted to eliminate competition from Netscape by seeking an express horizontal agreement not to compete. In May 1995, Microsoft executives met with top Netscape personnel in an attempt to induce Netscape not to compete with Microsoft and to divide the browser market, with Microsoft becoming the sole supplier of browsers for use with Windows 95 and successor operating systems and with Netscape becoming the sole supplier of browsers for operating systems other than Windows 95 or its successors. Netscape refused to participate in Microsoft's illegal scheme.

15. Having failed simply to stop competition by agreement, Microsoft set about to exclude Netscape and other browser rivals from access to the distribution, promotion, and resources they needed to offer their browser products to OEMs and PC users pervasively enough to facilitate the widespread distribution of Java or to facilitate their browsers becoming an attractive programming platform in their own right.

16. First, Microsoft invested hundreds of millions of dollars to develop, test, and promote Internet Explorer, a product which it distributes without separate charge. As Paul Maritz, Microsoft's Group Vice President in charge of the Platforms Group, was quoted in the New York Times as telling industry executives: "We are going to cut off their air supply. Everything they're selling, we're going to give away for free." As reported in the Financial Times, Microsoft CEO Bill Gates likewise warned Netscape (and other potential Microsoft challengers) in June 1996: "Our business model works even if all Internet software is free. . . . We are still selling operating systems. What does Netscape's business model look like? Not very good."

17. But Mr. Gates did not stop at free distribution. Rather, Microsoft purposefully set out to do whatever it took to make sure significant market participants distributed and used Internet Explorer instead of Netscape's browser -- including paying some customers to take IE and using its unique control over Windows to induce others to do so. For example, in seeking the support of Intuit, a significant application software developer, Mr. Gates was blunt, as he reported in a July 1996 internal e-mail:

I was quite frank with him [Scott Cook, CEO of Intuit] that if he had a favor we could do for him that would cost us something like $1M to do that in return for switching browsers in the next few months I would be open to doing that. (MS6 6007642).

18. Second, Microsoft unlawfully required PC manufacturers, as a condition of obtaining licenses for the Windows 95 operating system, to agree to license, preinstall, and distribute Internet Explorer on every Windows PC such manufacturers shipped. By virtue of the monopoly position Windows enjoys, it was a commercial necessity for OEMs to preinstall Windows 95 -- and, as a result of Microsoft's illegal tie-in, Internet Explorer -- on virtually all of the PCs they sold. Microsoft thereby unlawfully tied its Internet Explorer software to the Windows 95 version of its monopoly operating system and unlawfully leveraged its operating system monopoly to require PC manufacturers to license and distribute Internet Explorer on every PC those OEMs shipped with Windows.

19. Third, Microsoft intends now unlawfully to tie its Internet browser software to its new Windows 98 operating system, the successor to Windows 95. Microsoft has made clear that, unless restrained, it will continue to misuse its operating system monopoly to artificially exclude browser competition and deprive customers of a free choice between browsers.

20. Microsoft designed Windows 98 so that removal of Internet Explorer by OEMs or end users is operationally more difficult than it was in Windows 95. Although it is nevertheless technically feasible and practicable to remove Microsoft's Internet browser software from Windows 98 and to substitute other Internet browser software, OEMs are prevented from doing so by Microsoft's contractual tie-in.

21. Internet browsers are separate products competing in a separate product market from PC operating systems, and it is efficient to supply the two products separately. Indeed, Microsoft itself has consistently offered, promoted, and distributed its Internet browser as a stand-alone product separate from, and not as a component of, Windows, and intends to continue to do so after the release of Windows 98. For example, Microsoft will make available separately the same Internet browser that is bundled with Windows 98, through an upgraded version of Internet Explorer 4 that will be distributed and installed wholly apart from Windows 98, including for non-Windows, non-Microsoft operating systems. In addition Microsoft already plans to introduce a subsequent version of IE (Internet Explorer 5) that also will be distributed and installed separately from Windows 98, including for non-Windows, non-Microsoft operating systems.

22. Microsoft's tying of its Internet browser to its monopoly operating system reduces the ability of customers to choose among competing browser products because it forces OEMs and other purchasers to license or acquire the tied combination whether they want Microsoft's Internet browser or not. Microsoft's tying -- which it can accomplish because of its monopoly power in Windows -- impairs the ability of its browser rivals to compete to have their browsers preinstalled by OEMs on new PCs and thus substantially forecloses those rivals from an important channel of browser distribution.

23. Microsoft executives have repeatedly recognized the significant advantage that Microsoft (and only Microsoft) receives by tying its Internet browser to its operating system, rather than having to compete on the merits. As Microsoft Senior Vice President James Allchin wrote to Microsoft Group Vice-President Paul Maritz on January 2, 1997:

You see browser share as job 1 . . . . I do not feel we are going to win on our current path. We are not leveraging Windows from a marketing perspective. . . . We do not use our strength -- which is that we have an installed base of Windows and we have a strong OEM shipment channel for Windows. Pitting browser against browser is hard since Netscape has 80% marketshare and we have I am convinced we have to use Windows -- this is the one thing they don't have . . . . (emphasis added) (MS7 005526).

24. Fourth, Microsoft has misused, and continues to misuse, its Windows operating system monopoly by requiring PC OEMs to agree, as a condition of acquiring a license to the Windows operating system, to adopt the uniform "boot-up" sequence and "desktop" screen specified by Microsoft. This sequence determines the screens that every user sees upon turning on a Windows PC. Microsoft's exclusionary restrictions forbid, among other things, any changes by an OEM that would remove from the PC any part of Microsoft's Internet Explorer software (or any other Microsoft-dictated software) or that would add to the PC a competing browser (or other competing software) in any more prominent or visible way (including by highlighting as part of the startup sequence or by more prominent placement on the desktop screen) than the way Microsoft requires Internet Explorer to be presented.

25. Virtually every new PC that comes with Windows, no matter which OEM has built it, presents users with the same screens and software specified by Microsoft. As a result of Microsoft's restrictive boot-up and desktop screen agreements, OEMs are deprived of the freedom to make competitive choices about which browser or other software product should be offered to their customers, the ability to determine for themselves the design and configuration of the initial screens displayed on the computers they sell, and the ability to differentiate their products to serve their perceptions of consumers' needs.

26. These restrictive agreements also maintain, and enhance the importance of, Microsoft's ability to provide preferential placement on the desktop (or in the boot-up sequence) to various Internet Service Providers ("ISPs") and Internet Content Providers ("ICPs"), in return for those firms' commitments to give preferential distribution and promotion to Internet Explorer and to restrict their distribution and promotion of competing browsers.

27. As a result, these restrictions further exclude competing Internet browsers from the most important channels of distribution, substantially reduce OEMs' incentives and abilities to innovate and differentiate their products in ways that could facilitate competition between Microsoft products and competing software products, and enhance Microsoft's ability to use the near-ubiquity of its Windows operating system monopoly to gain dominance in both the Internet browser market and other software markets.

28. Fifth, Microsoft has entered into anticompetitive agreements with virtually all of the nation's largest and most popular ISPs, including particularly Online Service Providers ("OLSs"), firms which provide the communications link between a subscriber's PC and the Internet and sometimes related services and content as well. Windows 95 (and soon Windows 98) presents PC users with "folders" or lists including the names of certain of these ISPs that have entered into agreements with Microsoft and enable users readily to subscribe to their services. Because Windows is preinstalled on nearly all PCs in the United States, inclusion in these folders and lists is of substantial value to ISPs. As a result, almost all of the largest and most significant ISPs in the United States have sought placement on the Windows desktop.

29. Microsoft's agreements with ISPs allow Microsoft to leverage its operating system monopoly by conditioning these ISPs' inclusion in Windows' lists on such ISPs' agreement to offer Microsoft's Internet Explorer browser primarily or exclusively as the browser they distribute not to promote or even mention to any of their subscribers the existence, availability, or compatibility of a competing Internet browser and to use on their own Internet sites Microsoft-specific programming extensions and tools that make those sites look better when viewed through Internet Explorer than when viewed through competing Internet browsers.

30. Microsoft's anticompetitive agreements with ISPs have substantially foreclosed competing browsers from this major channel of browser distribution. Over thirty percent of Internet browser users have obtained their browsers from ISPs.

31. Microsoft has recently modified certain of its ISP agreements to reduce some of these restrictions. However,

  1. the modifications do not affect Microsoft's illegal agreements with On-Line Service Providers (e.g., America Online, CompuServe), which serve the majority of Internet users in the United States
  2. even the modified agreements remain unlawful in other respects
  3. the modifications do not address the anticompetitive effects such agreements have already caused and
  4. there is no assurance that Microsoft will not reimpose the restrictions in the future.

32. Sixth, Microsoft has entered into anticompetitive agreements with Internet Content Providers ("ICPs"). Prominent "channel buttons" advertising and providing direct Internet access to select ICPs appear on the "Active Desktop" feature that is shipped with the Windows operating system.

33. Microsoft's agreements condition an ICP's placement on one of these buttons on the ICP's agreement to not pay or otherwise compensate Microsoft's primary Internet browser competitors (including by distributing their browsers) for the distribution, marketing, or promotion of the ICP's content to not promote any browser produced by any of Microsoft's primary browser competitors to not allow any of Microsoft's primary browser competitors to promote and highlight the ICP's "channel" content on or for their browsers and to design its web sites using Microsoft-specific, proprietary programming extensions so that those sites look better when viewed with Internet Explorer than when viewed through a competing browser. These illegal agreements further inhibit competition on the merits between Internet Explorer and other Internet browsers.

34. As with some of its restrictive ISP agreements, Microsoft has recently announced certain modifications of its anticompetitive ICP agreements. However, these modifications do not remedy the anticompetitive effects such agreements have had and do not prevent Microsoft from entering into the same or similar agreements in the future.

35. Collectively, Microsoft's contracts with OEMs, ISPs, and ICPs have unreasonably restrained, and, unless enjoined, will continue to unreasonably restrain competition in the market for Internet browsers. They artificially increase the share of the market held by Microsoft's Internet Explorer, and they threaten to "tip" the market permanently to Internet Explorer, not because OEMs or PC customers have freely chosen Microsoft's product in a competitive marketplace, but because of the illegal exercise of monopoly power by Microsoft.

36. Neither the antitrust laws nor this action seeks to inhibit Microsoft from competing on the merits by innovation or otherwise. Rather, the Complaint challenges only Microsoft's concerted attempts to maintain its monopoly in operating systems and to achieve dominance in other markets, not by innovation and other competition on the merits, but by tie-ins, exclusive dealing contracts, and other anticompetitive agreements that deter innovation, exclude competition, and rob customers of their right to choose among competing alternatives.

37. Microsoft's conduct adversely affects innovation, including by:

  1. impairing the incentive of Microsoft's competitors and potential competitors to undertake research and development, because they know that Microsoft will be able to limit the rewards from any resulting innovation
  2. impairing the ability of Microsoft's competitors and potential competitors to obtain financing for research and development
  3. inhibiting Microsoft's competitors that nevertheless succeed in developing promising innovations from effectively marketing their improved products to customers
  4. reducing the incentive and ability of OEMs to innovate and differentiate their products in ways that would appeal to customers and
  5. reducing competition and the spur to innovation by Microsoft and others that only competition can provide.

38. The purpose and effect of Microsoft's conduct with respect to Internet browsers have been and, if not restrained, will be:

  1. to preclude competition on the merits between Microsoft's browser and other browsers
  2. to preclude potential competition with Microsoft's operating system from competing browsers and from other companies and software whose use is facilitated by these browsers
  3. to extend Microsoft's Windows operating system monopoly to the Internet browser market and
  4. to maintain Microsoft's Windows operating system monopoly.

II. JURISDICTION, VENUE, AND COMMERCE

39. This Court has jurisdiction over this matter pursuant to Section 4 of the Sherman Act, 15 U.S.C. § 4, and 28 U.S.C. §§ 1331, 1337.

40. Venue is proper in this District under Section 12 of the Clayton Act, 15 U.S.C. § 22, and under 28 U.S.C. § 1391, because defendant Microsoft transacts business and is found within this District.

41. Microsoft is a corporation organized and existing under the laws of the State of Washington, with its principal place of business located at One Microsoft Way, Redmond, Washington. Microsoft sells and licenses PC operating systems throughout the United States and the world and delivers copies of its operating systems to OEMs and retail customers across state lines and international borders. Microsoft is engaged in, and its activities substantially affect, interstate and foreign commerce.

III. PRIOR RELATED PROCEEDINGS

43. Microsoft consented to the entry of a final judgment, and the Court entered the Final Judgment on August 21, 1995. The Final Judgment prohibited Microsoft from continuing the challenged practices and agreements and prohibited Microsoft from engaging in certain other conduct that could have similar anticompetitive results, including (in Final Judgment § IV(E)) enjoining Microsoft from conditioning licenses to its operating system on an OEM's either licensing another Microsoft product or agreeing not to license or distribute a non-Microsoft product.

44. The purpose of § IV(E) of the Final Judgment was to prevent Microsoft from conditioning access to its monopoly operating system in order to protect or extend that monopoly. See Competitive Impact Statement, 50 Fed. Reg. 42845, 42852 (1994).

46. On December 11, 1997, the Court entered a preliminary injunction enjoining Microsoft "from the practice of licensing the use of any Microsoft personal computer operating system software (including Windows 95 or any successor version thereof) on the condition, express or implied, that the licensee also license and preinstall any Microsoft Internet browser software (including Internet Explorer 3.0, 4.0, or any successor versions thereof) pending further order of Court."

48. On December 17, 1997, the United States moved to have Microsoft held in contempt for this clear violation of the Court's December 11, 1997 Order. On January 21, 1998, the United States and Microsoft submitted a stipulated proposed order, which was entered by the Court. The Order required Microsoft to provide OEMs with two options in addition to those previously provided by Microsoft:

  1. the option of installing on their PCs a version of Windows 95 that was the same as the current December 1997 version of Windows 95 (OEM Service Release 2.5) "with the sole exception of Internet Explorer 4.0 functionality" not included and
  2. the option of shipping their PCs after removing the Internet Explorer "icon" from the desktop and from the "Start menu" within Windows 95.
  1. The Appeal of the Court's December 1997 Order

49. Microsoft appealed the Court's December 1997 order, arguing that since the United States had there brought an action for contempt and for permanent injunctive relief and not explicitly for a preliminary injunction, it was improper for the Court to have entered a preliminary injunction (even though the restraint of a preliminary injunction was less than the restraint that would have been imposed by a finding of contempt) that since the United States was there seeking to enforce the Final Judgment and had not commenced a new action under the antitrust laws, the alleged "integration" of Windows 95 and Microsoft's IE browser was a complete defense and that antitrust tie-in principles and precedents could not be used to construe the Final Judgment.

50. Microsoft believed the Court's December Order "prima facie applied to Windows 98." Nevertheless, Microsoft did not seek a "further order" of the Court regarding Windows 98, nor did it plan to offer an unbundled version of Windows 98. When the United States was informed of Microsoft's Windows 98 plans, it offered to join Microsoft in a motion to the Court seeking clarification of the December Order. Instead, Microsoft moved on May 5, 1998, in the Court of Appeals for a stay of the December Order as it applied to Windows 98.

51. On May 12, 1998, the Court of Appeals granted Microsoft's application for a stay, holding: "To the extent that the preliminary injunction awards the United States relief to which it has made no effort to show an entitlement under the consent decree, we must grant the stay." The Court also held: "The United States presented no evidence suggesting that Windows 98 was not an 'Integrated Product' and thus exempt from the prohibitions of Section IV(E)(I)."

52. The United States now brings this action explicitly for preliminary and permanent injunctive relief, and demonstrates that Microsoft's conduct constitutes clear violations of Sections 1 and 2 of the Sherman Act and will cause irreparable injury in the absence of preliminary relief.

53. There are two relevant product markets: The market for personal computer operating systems, and the market for Internet browsers.

54. The market for personal computer operating systems consists of operating systems written for the Intel x86/Pentium (or "PC") class of microprocessors. These microprocessors perform central processing unit ("CPU") functions for the vast majority of personal computers, and their operating systems manage the interaction between the CPU and the various pieces of hardware, such as a monitor or printer, attached to such computers. Operating systems also control and direct the interaction between applications, such as word processing or spreadsheet programs, and the CPU. No other product duplicates or fully substitutes for the operating system. The geographic market for PC operating systems is worldwide.

55. Because of the complex interactions among operating system software, applications software, and the hardware attached to the PC, an operating system written for one class of microprocessors typically will not work on another class of microprocessors without significant modification. Thus, OEMs and PC users do not consider an operating system that runs a non-Intel-based personal computer to be an effective substitute for an operating system that runs an Intel-based personal computer.

56. Internet browsers are specialized software programs that allow PC users conveniently to locate, access, display, and manipulate content and applications located on the web. Internet browsers are essential for quick, easy, and efficient use of the web and have been instrumental in building the Internet's popularity. No other product duplicates or fully substitutes for the functionality of Internet browsers. The geographic market for Internet browsers is worldwide.

57. Microsoft markets a variety of PC operating systems, including MS-DOS, Windows 3.11, Windows For Workgroups, Windows NT Workstation, and Windows 95. Beginning in or around June 1998, Microsoft will introduce to the market the latest version of its operating system for Intel-based PCs, Windows 98.

58. Microsoft has maintained a monopoly share (in excess of 80%) of the PC operating system market over an extended period of time. The durability of Microsoft's market power in part reflects the fact that the PC operating system market is characterized by certain economies of scale in production and by significant "network effects." In other words, the PC operating system for which there are the greatest number, variety, and quality of applications will be selected by the large majority of PC users, and in turn writers of applications will write their programs to work with the most commonly used operating system, in order to appeal to as many potential customers as possible. Economies of scale and network effects, which reinforce one another, result in high barriers to entry.

59. The primary channel through which Microsoft distributes its operating systems is preinstallation on new PCs by OEMs. Because a PC can perform virtually no useful tasks without an operating system, OEMs consider it a commercial necessity to preinstall an operating system on nearly all of the PCs they sell. And because there is no viable competitive alternative to the Windows operating system for Intel-based computers, OEMs consider it a commercial necessity to preinstall Windows on nearly all of their PCs. Both OEMs and Microsoft recognize that OEMs have no commercially viable substitute for Windows, and that they cannot preinstall Windows on their PCs without a license from Microsoft. For example:

  1. Packard Bell executive Mal Ransom testified that there were no commercially feasible alternative operating systems to Windows 98 (M. Ransom 3/19/98 Tr. 19-20)
  2. Micron executive Eric Browning asserted: "I am not aware of any other non-Microsoft operating system product to which Micron could or would turn as a substitute for Windows 95 at this time." (E. Browning Declaration, para.11)
  3. Hewlett Packard executive John Romano testified that "absolutely there's no choice" except to install Windows on HP's PCs (J. Romano Tr. 49-50) and
  4. Gateway executive James Von Holle testified that Gateway had to install Windows because "We don't have a choice." (J. Von Holle Tr. 37-41 GW 26521-27). Mr. Von Holle has testified that if there were competition to Windows he believed such competition "would drive prices lower" and promote innovation (Ibid.).

60. When Windows 98 is released, it will quickly succeed to Windows 95's monopoly position because, among other things, applications written for Windows 95 will run on Windows 98 and most consumers who purchase PCs want and expect their PCs to have the latest Microsoft operating system. OEMs will begin shipping most PCs, particularly for non-corporate users, with the Windows 98 operating system as soon as it is released. For example, Hewlett Packard executive Webb McKinney testified that even Windows 95 would be a commercially feasible alternative to Windows 98 "[o]nly for a short period of time." (W. McKinney 3/13/98 Tr. 11-12).

61. The first Internet browser widely used by the general public was Netscape Navigator, which was introduced to the market in 1994.

62. Microsoft responded by introducing its own Internet browser, which it called the Internet Explorer. Microsoft released the initial version of Internet Explorer (version 1.0) in or around July 1995. Microsoft has since released three subsequent versions (2.0, 3.0, 4.0), in each case adding features and functionality to the product.

63. Internet Explorer is, and always has been, viewed by Microsoft and by the market as an Internet "browser" -- a separate software program that allows computer users to efficiently locate, access, display, and manipulate content displayed on the World Wide Web. Microsoft and other industry participants carefully track Internet browser market share, and Microsoft has frequently and unequivocally stated that increasing its Internet browser share is its "number one" corporate goal. Internet browsers have product requirements, market usage, demand, distributors, and suppliers distinct from other products, including PC operating systems. These separate attributes, and Microsoft's separate commercial treatment of its Internet browser, all will continue after Microsoft releases Windows 98. Microsoft plans to continue to distribute and upgrade a stand-alone version of its Internet Explorer browser, and it has distributed (and plans to continue to distribute) versions of Internet Explorer for use on the Apple Macintosh, Sun Solaris, and other non-Windows operating systems.

64. Microsoft's share of the Internet browser market has grown steadily from less than 5% in early 1996 to approximately 50% or more today.

65. With the growth of the Internet and the World Wide Web, consumer demand for Internet browsers has increased dramatically. Indeed, because of the extraordinary growth and importance of the Internet, the Internet browser market is itself a substantial source of potential profits to any company that might achieve a durable dominant position and be able to charge monopoly prices for the efficient use of the Internet or the web. The importance of the Internet and the significant public benefits resulting from its use, make the potential benefit to a monopolist and the potential economic and social cost of monopolization in this market very high.

V. THE COMPETITIVE THREAT THAT
BROWSERS POSE TO THE WINDOWS OPERATING SYSTEM

66. Much of Microsoft's present monopoly power reflects the fact that Windows is the "platform" on which most popular applications software must run. Internet browsers, however, offer the potential to become alternative platforms on which software applications and programs could run instead. In addition, browsers can be an "interface" -- the primary visual environment in which a user performs most computing tasks -- to which both the operating system and application programs can be connected. The browser thus can be a software "layer" between the operating system and application programs. Application programs can be and are written to the browser instead of the operating system interface.

67. Because competing browsers operate not only on Windows but also on a variety of other operating systems, their widespread adoption and use would create significant potential to reduce the dependence of most PC users on any particular operating system, such as Windows. The development of numerous software applications not specific to Windows that could ultimately result from the widespread use of non-Microsoft Internet browsers would therefore greatly reduce or eliminate a key barrier that maintains Microsoft's Windows operating system monopoly (because application programs written to interface to a competing browser could run on any operating system).

68. Competing Internet browsers also threaten Microsoft's Windows monopoly because such browsers are a primary distribution vehicle for Java virtual machines ("JVMs"), the software programs necessary to run programs written in the Java programming language. JVMs that use Java enable any application written in the Java language to run regardless of the operating system on top of which the JVM and application are installed. The widespread distribution of Java virtual machines along with non-Microsoft Internet browsers could provide another avenue by which applications developers could write programs that are not dependent on Windows, thereby weakening the network effects that help entrench Windows' monopoly position in the operating system market.

VI. MICROSOFT'S ANTICOMPETITIVE CONDUCT

69. Faced with the threat browsers posed to its operating system monopoly, and desiring to monopolize the browser market itself, Microsoft undertook steps designed to ensure that it would win what it considers a "browser war." For example:

  1. Microsoft CEO Bill Gates declared on January 5, 1996: "Winning Internet browser share is a very, very important goal for us." (MSV 0009445). On August 20, 1996, Mr. Gates directed: "Internet Explorer will be distributed every way we can. . . . Bundled with Windows 95 upgrade and included by OEMs." (MS6 5004596-4669) and
  2. In September 1996, Microsoft's General Manager for the Windows PC Platform, Carl Stork, noted: "Browser share is job 1 at this company." (MSV 009363A).
  1. Microsoft's Attempt to Divide the Browser
    Market And Induce Netscape Not to Compete

70. In May 1995, not long before Microsoft released the first version of Internet Explorer, Microsoft executives visited Netscape and met with its top executives. During this meeting, Microsoft offered Netscape a deal: For Windows 95, Microsoft proposed to draw a hypothetical line between the operating system and the browser. If Netscape agreed not to compete below the line (i.e., in operating systems) or alternatively, in the production of browsers in the Windows 95 "space," Microsoft would agree not to compete above the line (i.e., in browser applications) or, alternatively, in the production of browsers for platforms other than Windows 95. As one participating Microsoft executive has subsequently admitted, Microsoft "absolutely" hoped to persuade Netscape not to compete with Microsoft.

71. Microsoft's proposal would have divided the browser market between Netscape, the early leader, and Microsoft, which was then on the verge of entering, and would have eliminated the competitive threat potentially posed by Netscape's competing browser to Microsoft's operating system monopoly. Microsoft's proposal was not intended to advance, and would not have advanced, any legitimate procompetitive interest. Rather, it was a blatant and illegal attempt to monopolize the Internet browser market. Indeed, if accepted, it would readily have enabled Microsoft to monopolize that market.

72. Netscape's executives refused Microsoft's proposal. They chose instead to continue to compete to serve all computer users, with successive versions of Navigator that work on Windows 95 as well as other PC operating systems.

73. Netscape's refusal of Microsoft's proposed scheme meant that its competing browser would continue to have the potential to become an alternative platform to Windows would continue to facilitate the development and distribution of other software with the potential to support applications regardless of the identity of the underlying operating system and would, thus, continue to threaten to "commoditize" the operating system and ultimately reduce or eliminate Microsoft's monopoly power.

74. Microsoft thereafter embarked on a coordinated course of conduct aimed at eliminating this threat by leveraging its monopoly power to drive competing Internet browsers from the market and to extend its monopoly to the browser market.

75. Microsoft unlawfully leverages its Windows operating system to require Online Service Providers (such as America Online and CompuServe) and other major Internet Service Providers (such as AT&T Worldnet, MCI, and Earthlink) to enter into agreements to distribute Internet Explorer to their subscribers, either exclusively or nearly exclusively. ISPs, including OLSs, are sometimes referred to as Internet Access Providers ("IAPs").

76. Starting in early 1996, Microsoft began to condition the granting to an ISP of placement in the "Internet Connection Wizard" screens or the Online Services folder in Windows 95 on the service provider's agreement to deny most or all of its subscribers a choice of Internet browser.

77. Because nearly all PCs in the United States are shipped with a copy of Windows preinstalled, and because Microsoft prohibits OEMs from replacing or materially modifying the default "desktop" screen on Windows PCs, nearly all U.S. computer users are guaranteed to see the Windows desktop when they turn on their PCs. Accordingly, placement on the Windows desktop is unique among the numerous ways that software firms, including ISPs and ICPs, promote and distribute their products and services because only this placement offers near ubiquitous distribution and advantageous promotion in exactly the place and context in which users are deciding which software to use. Promotion or distribution of a software product or service through a Windows desktop icon is perhaps unrivaled in its ability to reach the vast majority of PC users in a manner that ensures their attention. No other distribution channel matches the level of convenience, the number of users reached, or the premium placement that Microsoft's Windows desktop offers.

78. In return for attractive placement by Microsoft in its Internet Connection Wizard or Online Services Folder, ISPs agreed:

  1. to distribute and promote to their subscribers Internet Explorer exclusively or nearly exclusively
  2. to eliminate links on their web sites from which their subscribers could download a competing browser over the Internet
  3. to abstain from expressing or implying to their subscribers that a competing browser is available (and from displaying a logo for a non-Microsoft browser on the service provider's home page or elsewhere)
  4. to include Internet Explorer as the only browser they shipped with their access software (i.e., the software that enables a PC user to subscribe to the service) most or all of the time and
  5. to limit the percentage of competing browsers they distributed, even in response to specific requests from customers.

79. Microsoft's agreements with ISPs also require the ISPs to use Microsoft-specific programming extensions and tools in connection with the ISPs' own web sites. Web sites developed with these Microsoft-specific programming extensions and tools will look better when they are viewed with IE than with a non-Microsoft browser.

80. Under Microsoft's ISP contracts, the penalty for promoting a competing browser, distributing a competing browser more than the maximum permitted percentage, or otherwise failing to provide preferential treatment for Microsoft's Internet browser, is deletion from the Windows desktop -- a penalty even the largest ISPs are unwilling to risk.

81. Microsoft recognizes the importance to ISPs of favorable placement on Windows screens. For example:

  1. Brad Silverberg (Microsoft's former Senior Vice-President of its Applications and Internet Client Group) described such placement as "a distribution facility" for service providers that was "a tremendous value to them." (Silverberg Tr. 151-52) and
  2. In order to induce AOL to prefer IE and disadvantage Netscape's browser, Microsoft agreed to give AOL preferential placement in Windows at the expense of Microsoft's own online service (Microsoft Network, or "MSN") that competed with AOL -- thereby effectively, according to Microsoft's CEO Bill Gates, "putting a bullet through MSN's head." (Silverberg Tr. 186-87). The "browser war" was so critical to Microsoft that it was prepared to retreat in other markets in order to win it.

82. In late April 1998, on the eve of hearings before a committee of the United States Senate and immediately following news reports that the United States had issued civil subpoenas to various ISPs about their agreements with Microsoft, Microsoft announced that it was modifying its contracts with certain ISPs.

83. Significantly, Microsoft has not changed its exclusionary contract requirements with the largest and most important ISPs -- the Online Service Providers, including AOL and CompuServe. Microsoft's exclusionary agreements continue in full force and effect for these firms.

84. Even as to the ISPs whose contracts Microsoft has chosen to change, Microsoft's belated announcements, made on the eve of Congressional scrutiny and under the threat of litigation, do not correct the anticompetitive effects of the provisions which have been in place for almost two years nor do the announcements provide any assurance that Microsoft will not reinstitute the exclusionary restrictions in the future. Moreover, they do not eradicate all of the unlawfully restrictive aspects of even the ISP agreements they modify because they leave intact (according to Microsoft's Cameron Myhrvold, the executive responsible for dealing with ISPs) requirements that ISPs distribute and promote Internet Explorer at least at parity with any other browser. Finally, and perhaps most significantly, Microsoft's modifications, by its own admission, do not apply at all to OLSs, which as a group provide Internet access to more than fifty percent of Internet users in the United States. Thus, the modifications provide no relief from Microsoft's anticompetitive restrictions as to most browser distribution through ISPs.

85. Approximately one-third of Internet browser users obtained the browser they use from their service provider, and Microsoft's exclusionary agreements with these firms substantially foreclose Microsoft's browser competitors from a vital means of distribution. As Microsoft has itself acknowledged, distribution of Internet browsers through the largest online services providers is critical to the competitive success and viability of any browser. Microsoft's Cameron Myhrvold testified that for browsers "the ISP channel and the OEM channel are the two most important channels for distribution." (C. Myhrvold 4/24/98 Tr. 43). Microsoft substantially foreclosed the ISP channel with agreements with ISPs, and (as discussed below) Microsoft substantially foreclosed the OEM channel through agreements with OEMs.

86. The exclusionary restrictions in Microsoft's ISP agreements are not reasonably necessary to further any legitimate, procompetitive purpose.

87. Microsoft has also entered into exclusionary agreements with Internet Content Providers ("ICPs") -- firms such as Disney, Hollywood Online, and CBS Sportsline, that provide news, entertainment, and other information from sites on the web. One of the new features included in Internet Explorer 4.0 is the provision of "channels" that appear on the right side of the Windows desktop screen after Internet Explorer 4.0 has been installed on a Windows 95 PC. The same channels will appear automatically on the Windows 98 desktop screen if Microsoft is permitted to tie Internet Explorer 4.0 to Windows 98 in license agreements with OEMs and in sales to consumers.

88. Microsoft provides different levels of channel placement, "platinum" being the most prominent. Under Microsoft's Internet Explorer 4.0 channel agreements, beginning in mid-1997, ICPs who desired "platinum" placement (and even some seeking lower-level placement) were required to agree:

  1. not to compensate in any manner the manufacturer of an "Other Browser" (defined as either of the top two non-Microsoft browsers), including by distributing its browser, for the distribution, marketing, or promotion of the ICP's content
  2. not to promote any browser produced by any manufacturer of an "Other Browser"
  3. not to allow any manufacturer of an "Other Browser" to promote and highlight the ICP's "channel" content on or for its browsers and
  4. to design its web sites using Microsoft-specific, proprietary programming extensions so that those sites look better when viewed with Internet Explorer than when viewed through a competing browser.

89. These exclusionary restrictions are not reasonably necessary to further any legitimate, procompetitive purpose.

90. Notwithstanding these restrictions on their dealings with competing browsers, ICPs have entered into Internet Explorer 4.0 channel agreements with Microsoft. ICPs had to agree to these restrictions in order to gain placement on the Windows desktop, which provides a valuable distributional and promotional mechanism for their content.

91. Microsoft's exclusionary ICP contracts, expressly targeted at its primary Internet browser competitors, further foreclose these firms from access to customers, and further impede their ability to compete against Internet Explorer on the merits of the respective products.

92. Microsoft has recently announced that it intends to change its agreements with ICPs. However, the changes announced by Microsoft will not remedy the anticompetitive effects the exclusionary provisions of those agreements have had to date, and there is no certainty that Microsoft will not reimpose the same or similar restrictions in the future.

  1. Microsoft's Contractual Restrictions on OEM Modification
    or Customization of PC Boot-Up Sequence and PC Screens

93. In or around August 1996, Microsoft imposed on OEMs licensing terms that restrict OEMs' ability to alter the Windows 95 boot-up sequence. Specifically, among other things, Microsoft's license agreements prohibit OEMs from:

  1. modifying or obscuring the sequence or appearance of any screens displayed by Windows from the time the user first begins the boot-up process with a new PC until the "Welcome to Windows" screens have run and the Windows desktop screen first appears
  2. modifying or obscuring the sequence or appearance of any screens displayed by Windows in all subsequent boot-ups unless the user initiates some action to change the sequence
  3. displaying any content, including visual displays, sound, welcome or tutorial screens, until after the Windows desktop screen first appears
  4. modifying or obscuring the appearance of the Windows desktop screen, beyond a narrowly limited set of permitted changes or
  5. adding a screen that would automatically appear after the initial boot-up sequence or in place of the Windows desktop screen.

94. These contractual restrictions have (and were intended by Microsoft to have) two basic effects on competing browser suppliers. First, they enhance Microsoft's control over the screens presented to users and thus increase Microsoft's ability to require preferential treatment for Internet Explorer from ISPs and ICPs in return for such ISPs' and ICPs' access to the Windows desktop. Second, these contractual restrictions greatly limit an OEM's ability to modify or customize the screens or initial "boot-up" sequence on a new PC either in response to customer demand or in an attempt to differentiate their products, or to substitute or feature a non-Microsoft browser, alternative user interface, or other Internet offerings.

95. The Windows desktop screen is the screen through which most PC users access application programs and the other functionality on their PCs. The desktop screen contains, among other things, icons (i.e., graphical representations of certain features or functions) that, when selected by "clicking" on the icon with the left button of the "mouse," provide quick access to other installed software. Microsoft places a number of icons on the Windows desktop screen, prohibits OEMs from removing any of them, and permits OEMs to add others only subject to strict limitations.

96. Although Microsoft allows some customization of the "Active Desktop" in Windows 98 and Internet Explorer 4.0, an OEM may not delete icons or folders. Furthermore, an OEM that does not preinstall the Active Desktop may not add to Windows desktop screens new icons or folders that are of a size or appearance different from those already placed on the desktop by Microsoft.

97. Through these restrictions, Microsoft leverages its Windows monopoly to ensure that Microsoft-designated applications or other software reach all new Windows users, and that no software not designated by Microsoft receives preferential placement, no matter which OEM has built the computer or what options the OEM would like to have in presenting software products to its customers. Moreover, these restrictions ensure that users of Windows continue to see the Microsoft-specified Windows desktop unless and until they take affirmative steps to change the screens presented.

98. The restrictions preserve the advantageous desktop positioning that Microsoft secures for Internet Explorer and other Microsoft or Microsoft-designated software, foreclose competing Internet browsers from securing preferential placement, and foreclose OEMs from choosing among competing browsers on the merits. Microsoft's refusal to permit OEMs to alter the initial boot-up sequence and screens, or to install an alternative user interface, precludes OEMs from developing such alternative interfaces on their own or with competing browser suppliers. The effect of these restrictions is to significantly restrict the access of competing browsers to the important OEM channel and further perpetuate Microsoft's operating system monopoly by making the successful introduction of a new platform more difficult.

99. OEMs (including Micron, Hewlett Packard, and Gateway) have requested that Microsoft allow them to provide new PC purchasers with an alternative user interface, boot-up sequence, or initial or default screens, but Microsoft has refused.

100. Microsoft recognizes and intends that these restrictions consolidate its strategic power over the valuable real estate that the desktop screen represents for the provision of software, advertising and promotion. Indeed, Microsoft's Vice President of Marketing and Developer Relations made clear in an internal document that the underlying purpose of the restrictions was to prevent OEMs or others from ultimately gaining control over the desktop: "In order to protect our position on the desktop and increase the likelihood that IE gets the prominent position with the end user we should move the [Internet] Sign Up Wizard into the boot-sequence some where, before we give control over to the OEM. . . ." (MS6 9136A-9139A).

101. In Windows 98, Microsoft has done exactly as its Vice President of Marketing and Developer Relations urged, moving the Internet Connection Wizard feature of Internet Explorer, which presents new users with the ability to sign up (at the time of the initial boot and before the Windows desktop appears) with any of a number of ISPs, none of which (according to Microsoft's Cameron Myhrvold) is permitted to distribute or promote any other browser more favorably than Internet Explorer.

102. Microsoft's boot-up and first-screen restrictions make it more difficult for competing browsers to attract users and have resulted in fewer choices for OEMs and PC end users. These restrictions are not reasonably necessary to serve any legitimate, procompetitive purpose.

103. Internet Explorer is recognized by both Microsoft and the industry as a product separate and apart from Windows. For example:

  1. Microsoft has always sold Internet Explorer separately at retail, distributed it separately through the Internet, and paid for it to be distributed separately
  2. Microsoft has distributed Internet Explorer as a separate product through ISPs and other channels and has tied and conditioned the access of numerous companies (e.g., ICPs and ISPs) to Windows facilities on such companies' distribution of Internet Explorer as a separate product
  3. Microsoft and the industry separately track browser market share and operating system market share
  4. Microsoft bundles, and plans to continue to bundle, the stand-alone version of IE 4.0 with other application programs (e.g., Word, Works, Encarta) in a package that will be the successor to the Microsoft Works and Microsoft Home Essentials packages
  5. Microsoft promotes, and enlists others to promote, the distribution and use of Internet Explorer as a separate product
  6. ISPs consider IE to be a separate product from Windows, and, recognizing the demand for a browser separate from the operating system, Microsoft deliberately markets it as such to ISPs. (C. Myhrvold Tr. 26-27)
  7. Internet browsers and operating systems perform different functions and
  8. Microsoft markets Internet Explorer for non-Windows operating systems, including operating systems produced by Apple Computer and Sun Microsystems. Indeed, Microsoft devoted a substantial effort towards developing these versions of its Internet Explorer -- a counter-intuitive step (i.e., enhancing the capabilities and functionality of non-Windows, non-Microsoft operating systems) that is in Microsoft's interest because it is part of Microsoft's effort to foreclose opportunities for non-Microsoft browsers to establish themselves. Microsoft's Paul Maritz believed in June 1996 that in order to accomplish its browser share objectives: "In addition to shipping IE 3 on W95/NT, we need to get AOL & CompuServe shipping IE3. We need to ship IE3 on Win 3.1 & Mac." (MS6 6010346).

104. There is separate demand for Internet browsers from the demand for operating systems. For example:

  1. many PC users (who, of course, require an operating system) do not need or want a browser
  2. for a significant number of customers, the forced inclusion of a browser with the operating system is a significant negative -- including corporate customers who do not want their employees connected to the Internet (Y. Mehdi Tr. 34 D. Cole Tr. 50-51 M. Ransom 3/19/98 Tr. 9-10 B. Chase Tr. 80) and customers that would prefer only a different browser. Microsoft has acknowledged that some OEMs and PC users want to be able to delete Internet Explorer from Windows 95 and has provided the ability, through the Add/Remove utility, for them to do so
  3. many customers who want a browser do not need another operating system -- a majority of all browsers distributed to date have been distributed to users who already had a PC with an operating system installed and
  4. other PC customers want an up-to-date Windows operating system together with non-Microsoft browsers.

105. Microsoft has consistently treated and referred to its browser software as a separate product, and not merely as a component of the operating system, both internally and in agreements with other companies.

106. However, over "the last couple of years" Microsoft was told by its counsel to be "careful" not to refer to its browser software in such a way that it appeared that the software was a separate product. (P. Maritz Tr. 106 and MS7 005306). Microsoft executives became "very concerned" that statements in the ordinary course of business made IE "appear separate" and concluded it was "critical" that there be "a thorough walk-through looking for places in the UI that can be corrected" and that there be a "sweep" of the IE web site to remove references inconsistent with Microsoft's present legal position. (MS7 005306). It was agreed that there would be "a review of win 98" by Microsoft executives and "someone from legal staff" to "ensure IE is properly presented." (Ibid.).

107. Microsoft recognized that there was a potential danger that a competing Internet browser could eventually "obsolete Windows." (MS7 004127). Microsoft also recognized that Netscape was initially the leading browser supplier and that Netscape's "survival depends on their ability to upgrade a significant chunk of their installed base" (MS7 004128).

108. Microsoft's top executives internally declared that gaining browser market share for Internet Explorer and depriving Netscape of market share was a top priority. Microsoft recognized, however, that it could not win what it described as the "browser war" (MS6 6012954) on the merits alone, even if it gave its browser away for free -- indeed, even if it paid bounties for its distribution. Microsoft concluded that to win the browser war and preserve its Windows monopoly it would have to tie its Internet browser to the Windows 95 operating system that was being preinstalled on most new PCs. For example, Microsoft's Megan Bliss and Rob Bennett recognized that designing Windows 95 "to win the browser battle" required "a very substantial set of trade-offs." Nevertheless, they concluded the "key factors to keep in mind" were, first, the need to increase browser share and, second, that the way to do that was: "Leveraging our strong share on the desktop will make switching costs high (if they get our technology by default on every desk then they'll be less inclined to purchase a competitive solution. . . .)" (MS7 002689).

109. Accordingly, Microsoft tied Internet Explorer to Windows 95 and continued to do so until January of this year, when it came into compliance with an Order of the Court prohibiting it from distributing its Internet Explorer browser as a condition of licensing Windows 95. Microsoft effectuated this tie, among other things, by requiring, as a condition of licensing Windows 95, that OEMs also license, install and distribute Microsoft's Internet browser software, including software that provides the Internet Explorer icon and the other means by which users may readily use IE to browse the web. It is this software that establishes Internet Explorer's identity for commercial purposes as a separate product.

110. Microsoft's internal documents make clear that Microsoft tied that software to its Windows operating system, and refused to give OEMs an unbundled option, not because Microsoft believed the market wanted only a bundled product, but rather in order to foreclose OEM choice. For example:

  1. Microsoft executive Chris Jones noted in 1995 concerning "Internet Explorer" that OEMs "want to remove the icon from the desktop" but that the OEMs should be told "this is not allowed" (MSV 0009129 A)
  2. in the Spring of 1996, Micron asked if it could delete IE from Windows. Microsoft refused
  3. in June 1996, Compaq wanted to (and, for a time, did) remove the IE icon from the Windows desktop. Microsoft compelled Compaq to restore the icon by threatening to terminate Compaq's license to install the Windows operating system if Compaq did not comply and
  4. "On several occasions, Gateway representatives have asked [Microsoft] to remove the icon for IE from the desktop, but [Microsoft] representatives have refused each request, saying that the browser cannot be removed or sold separately. . . ." (Gateway 2000 Inc. 9/19/97 Answers to Interrogatories, p. 8).

111. By tying Internet Explorer to Windows 95 in this way, Microsoft has substantially foreclosed competing Internet browsers from a significant channel of distribution. Among other things, tying Internet Explorer to Windows 95 has significantly reduced the willingness of OEMs to install or distribute other browsers because of concerns about customer confusion and increased support costs and the forced tying has made it impossible for OEMs to differentiate their products by, or to receive consideration for, distributing only a non-Microsoft browser on some or all of their products. Tying Internet Explorer to Windows 95 also reduced demand for other browsers, even by users and OEMs that would otherwise have preferred another browser.

112. Microsoft's tying of Internet Explorer to Windows 95, and its refusal until ordered by the Court to permit OEMs to utilize the Add/Remove utility to remove IE from Windows 95, furthered no legitimate procompetitive purpose. Microsoft has distributed andcontinues to distribute Internet Explorer separate from its Windows 95 operating system, and it is efficient for it to do so. Microsoft can also efficiently distribute or permit the distribution of Windows 95 without Microsoft's Internet browser software.

113. Microsoft concluded in January 1997 that, for Windows 98, priority "#1 is to build IE 4 share via OEM distribution." (MS7 001033).

114. Microsoft considered not bundling IE with Windows 98 (code named "Memphis") as late as the Spring of 1997. However, it was decided (as Microsoft Senior Vice President James Allchin had previously proposed) "to tie IE and Windows together." (MS7 005526). For example:

  1. Microsoft's Christian Wildfeuer wrote on February 24, 1997: "It seems clear that it will be very hard to increase browser market share on the merits of IE 4 alone. It will be more important to leverage the OS asset to make people use IE instead of Navigator" (MS7 004346) (emphasis added)
  2. Microsoft Senior Vice President James Allchin had similarly written on December 20, 1996, that unless Microsoft were to "leverage Windows . . . . I don't understand how IE is going to win . . . . Maybe being free helps us, but once people are used to a product it is hard to change them . . . . My conclusion is that we must leverage Windows more. Treating IE as just an add-on to Windows which is cross-platform los[es] our biggest advantage -- Windows marketshare. We should dedicate a cross group team to come up with ways to leverage Windows technically more . . . . We should think first about an integrated solution -- that is our strength"
  3. on January 2, 1997, Mr. Allchin wrote concerning "IE and Windows" that Microsoft needed to begin "leveraging Windows from a marketing perspective" if it was to defeat Netscape. Allchin complained that without leveraging Windows from a marketing standpoint: "We do not use our strength -- which is that we have an installed base of Windows and we have a strong OEM shipment channel for Windows." Allchin emphasized: "I am convinced we have to use Windows -- this is the one thing they don't have . . . . We have to be competitive with features, but we need something more -- Windows integration. If you agree that Windows is a huge asset, then it follows quickly that we are not investing sufficiently in finding ways to tie IE and Windows together." Using Microsoft's code name, Memphis, for the next version of Windows, Allchin concluded that, "Memphis must be a simple upgrade, but most importantly it must be a killer on OEM shipments so that Netscape never gets a chance on these systems." (MS7 005526)
  4. on March 25, 1997, Microsoft's Megan Bliss wrote: "I thought our #1 strategic imperative was to get IE share (they've been stalled and their best hope is tying tight to Windows, esp. on OEM machines). That is, unless I've woken up in an alternate state and now work for Netscape." (TXAG 0009634)
  5. on March 27, 1997, Microsoft's Kumar Mehta, after analyzing "how people get and use IE" concluded that "based on all the IE research we have done . . . it is a mistake to release Memphis without bundling IE with it." (MS7 004273)
  6. Microsoft concluded in late March 1997 that if Windows 98 and IE "are decoupled, then Navigator has a good chance of winning" (MS7 003001) and that "if we take away IE from the O/S, most nav users will never switch to us." (MS7 004273)
  7. as Microsoft Vice President Brad Chase recognized in an April 21, 1997, memorandum, "Memphis is a key weapon in the IE share battle." (MS7 004365) and
  8. as a January 5, 1997, presentation to Microsoft CEO Bill Gates had emphasized: "Integrate with Windows" was a way to "Increase IE share." (MS7 005529-44).

115. For several weeks after entry of the Court's December 1997 Order, published reports quoted Microsoft as saying that it planned to offer Windows 98 in two versions ­ one with Internet Explorer included and one with Internet Explorer removed. However, Microsoft has since made clear that it intends to tie Internet Explorer to Windows 98. Microsoft intends to offer only a single, bundled version of Windows 98 and to require, as a condition of licensing Windows 98, that OEMs license, install and distribute Microsoft's Internet browser software.

116. Microsoft has acknowledged that some OEMs and PC users want to be able to delete Microsoft's Internet browser software from Windows 98 (and Microsoft provided the ability to remove such software from Windows 95 for this reason).Nevertheless, in order not to facilitate such a deletion from Windows 98, even by end users, Microsoft has designed Windows 98 so that the Add/Remove utility will not remove all or any part of IE.

117. Microsoft is tying its Internet browser software to the Windows 98 operating system in order to achieve a monopoly in the Internet browser market and to stifle the potential competition to Microsoft's operating system monopoly that competing Internet browsers might generate. Microsoft has distributed and continues to distribute Internet Explorer separately from its Windows operating system, and it is efficient for it to do so. Microsoft intends to continue marketing the Internet Explorer browser separately through retail outlets. Microsoft also intends to release an updated version of Internet Explorer, 5.0, in multiple distribution channels and for multiple non-Windows operating systems as a stand-alone product, without Windows.

118. Microsoft can, at a minimum, efficiently distribute or permit thedistribution ofWindows 98 withoutits Internet browser software. Microsoft's refusal to permit OEMs to delete such software from Windows 98, orto offer OEMs a version of Windows 98 from which it has already been deleted or in which it is not included, furthers no legitimate competitive interest. Microsoft can, at a de minimis cost per copy of Windows 98, either include in Windows 98 a ready means for OEMs and users to delete its Internet browser software or test any such means that are developed by or on behalf of OEMs. The deletion of such software will not impair any non-web browsing function of Windows 98.

119. Indeed, if including Microsoft's Internet browser software with Windows 98 is efficient, the combined product should thrive in a competitive market in which the two products are also available separately. A competitive browser market in which customers are free to choose among alternative Internet browsers or to choose no browser at all will lead to continuing innovation and price competition as suppliers compete on the merits for customers' favor. Microsoft has chosen to deprive customers of the competitive options of obtaining Windows 98 with Internet Explorer, with a competitive Internet browser, or with no Internet browser at all.

120. One consequence of tying Internet Explorer to Windows is that the Internet browser is made available to purchasers of Windows at no additional charge. Microsoft is devoting more than a thousand people and hundreds of millions of dollars to various aspects of browser development, and Microsoft has recognized that it would ordinarily be desirable for the company to earn a direct return on some of this investment by charging customers of Windows 98 separately for Internet browser functionality. Even though the leading browser supplier (Netscape) was charging OEMs for its browser, Microsoft made a decision to forgo the revenue that would have resulted from charging separately for Internet browsing functionality in Windows in order to gain Internet browser market share and exclude competition.

121. Microsoft could have charged for Internet Explorer separately, and it considered doing so. Microsoft's Vice President of Advanced Technology Sales Cameron Myhrvold testified that there was "a time where we thought we could charge for the browser" but that view was disavowed "quickly." (C. Myhrvold 4/24/98 Tr. 74).A proposal to separately price the "Active Desktop" shell (believed at the time to be an important way for Windows 98 users to use IE for web browsing) was made by Microsoft's Joe Belfiore and supported by Microsoft's Moshe Dunie. Microsoft Group Vice President Paul Maritz acknowledged that the proposal was "tempting" and "had merit" but ultimately rejected it because requiring customers to pay for the "shell" would impair Microsoft's ability to achieve its "number 1 goal" of becoming dominant in the Internet browser market.

122. Throughout Microsoft's internal analyses there is one consistent theme: Building a dominant Internet browser market share and restraining browser competition will protect Microsoft's Windows operating system monopoly. Microsoft has repeatedly recognized that the reason to win the browser war is to maintain the revenues and profits that flow from the PC operating system monopoly. For example:

  1. in a June 20, 1996, memo entitled "windows & internet issues" Microsoft Group Vice President Paul Maritz explained that among the reasons why "job #1 is browser share" was that: "No matter what happens, we have to slow Netscape's ability to drive new protocols/stds down." (MS6 6010346). Mr. Maritz went on to explain that it was necessary "to fundamentally blunt Java/AWT momentum" (momentum supported by cross-platform browsers) to "protect our core asset Windows ­ the thing we get paid