July 11, 2001, 5:10 PM — Microsoft Corp. will begin to immediately offer computer manufacturers more flexibility to configure desktop versions of the company's Windows operating system, Microsoft said Wednesday, admitting the change is in light of a recent Appeals Court ruling in the U.S. government's antitrust case against the software maker.
The company is taking the dramatic step, which will loosen Microsoft's control over how its operating system is configured for different hardware, because "we recognize that some provisions in our existing Windows license have been ruled improper by the court," said Microsoft Chief Executive Officer (CEO) Steve Ballmer in a statement.
The announcement does not take the place of any settlement discussions with the government in the company's ongoing legal wrangling, Ballmer said. The U.S. appeals court ruled June 28 that Microsoft should not be broken into two companies, but upheld a judge's ruling that the company engaged in illegal behavior befitting of a monopoly.
The Appeals Court ruled that certain provisions in Microsoft's licenses with the OEMs (original equipment manufacturers) thwarted the distribution of third-party Web browsers. In a move underscoring the pressure Microsoft has been under to be more flexible with OEMs, the software maker is now allowing OEMs to offer its operating system completely free of the company's Internet Explorer (IE) browser, if they so choose.
Microsoft said that it is changing its licensing rules immediately so that PC makers can take advantage of the changes for the upcoming launch of the company's eagerly awaited Windows XP software, due out Oct. 25. The rules also extend to Windows 98, Windows 2000 and Windows ME.
As of Wednesday, PC manufacturers will have the following licensing options:
-- Removing the Start menu entries and icons that provide end users with access to components of IE. Microsoft will add IE to the Add/Remove programs feature of Windows XP. In addition, OEMs will have the option of removing IE entries and icons from previous versions of Windows, including Windows 98, Windows 2000 and Windows Me.
-- OEMs retain the option of putting icons directly on the Windows desktop, even though the company designed Windows XP to have a "clean" desktop.
Microsoft's move didn't come as a surprise to Mark Schechter, partner at Howrey Simon Arnold & White LLP and a former official in the U.S. Department of Justice's antitrust division. The software maker clearly realizes that the Appeals Court didn't criticize the District Court's conclusion that Microsoft's way of dealing with OEMs is out of line and contributes to its monopoly power, he said.