COURT NOTES: After a 10 minute meeting with attorneys from both sides, Judge Thomas Penfield Jackson announced that his ruling on penalties will be handed down in exactly 60 days, with a hearing scheduled for May 24. He set an April 28 deadline for the government to submit a proposal for punishment, with Microsoft scheduled to reply by May 10, and the government set to issue a rebuttal by May 17. Jackson also announced that he would be using the "best and final offers" from Microsoft's failed settlement talks to create a remedy, and that he would be releasing transcripts of his private talks with the attorneys to prevent more one-sided leaking. Jackson's insistence on a 60-day schedule for remedies suggests that he has already ruled out the possibility of a breakup, since such a solution would require much more time to work out all the details. In addition to those declarations about the penalty phase, one of the Justice Department's lawyers stated that both sides and the judge have agreed to fast-track any appeals directly to the supreme court, avoiding years of extra litigation.

On April 14, Microsoft admitted the existence of a potential security hole on thousands of Web sites with FrontPage 98 extensions. The problem, which stems from the phrase "!seineew era sreenigne epacsteN" (Netscape engineers are weenies!) typed backwards into the dvwssr.dll file, turned out to not be such a security problem afterall, since it required anyone taking advantage of it to already have some permissions on the server. That eliminates the potential for an outside attack, but it still leaves openings for customers of Web hosting companies (like SimpleNet) that run more than one FrontPage enabled site from the same server.
However, the unprofessionalism of an attack like that embedded into shipping code did more damage to Microsoft's already dirtied reputation than a security problem ever would. Microsoft says the problem is no big deal, recommending that customers either delete the near-useless DLL file or upgrade to FrontPage 2000. They also put blame for the backwards phrase on programmers at Vermeer, the company that originally created FrontPage, but that denial rings hollow considering Microsoft's reputation for honesty and the likelihood that a useless DLL file would remain inside a program after four years of upgrades.

Microsoft stock, already battered and bruised from the antitrust trial, received another blow on April 20 when the company released its third quarter financial statement. As always, Microsoft beat per-share earning estimates by several cents, but the damage was found inside the company's sales report. Sales were down or flat for almost every product, including perennial bestsellers Windows and Office. Microsoft CFO John Conners blamed the slowdown on Y2K fears and a long-predicted dip in new computer sales, but investors were apparently unconvinced. Neither were the usually-optimistic stock analysts, several of which downgraded the company and lowered next quarter estimates. The combined bad news sent MSFT skidding down another six or seven percent into the mid-70s, its lowest level in over a year.

And with the stock faltering, Microsoft is having an increasingly hard time finding new employees and keeping old ones in a job market saturated with hot dotcom stock options. To make up the difference, The Behemoth is adding more stock options to its own employee compensation plan, increasing annual vacation time, and coming up with creative new job titles for employees who would rather not be promoted to management positions. Previously this year, Microsoft was forced to give a 15 percent raise to its Silicon Valley employees in order to stay competitive in that area.

Zurich American Insurance, a unit of Switzerland's Zurich Allied company, is suing Microsoft over the software company's legal bills. According to a Zurich spokesman, Microsoft has filed claims to have the legal expenses associated with 120 lawsuits paid in full under a liability policy. In its own suit, Zurich is claiming that the legal expenses are not covered by the insurance because Microsoft brought them on itself by committing illegal acts - as ruled by Judge Thomas Penfield Jackson in the government trial. If Zurich loses the suit, it could be forced to pay something in the range of 25 million dollars in lawyers fees and other costs, and could eventually have to pay monetary judgments issued against the company up to a $4 million cap. The insurance company would, we assume, also have to cover the legal costs associated with its own suit.

On April 13, Microsoft released a third beta of Windows ME to its testers. The latest preview release shows more new features, such as the 'integrated' Windows MediaPlayer, integrated MSN interface (like Whistler is expected to have), video editing software, and supposedly improved autoupdate. The third beta also restores a network client for Novell systems, something that had been removed from earlier builds. Microsoft usually only issues three betas of its products, so the next major release in early June should be the final product.

And at the same event where WinME B3 was announced, Microsoft officially unwrapped its newest scheme to conquer handheld computing - PocketPC. The PocketPC platform - which consists of a redesigned Windows CE, applications, and new hardware specifications - is another weak attempt to take away some of Palm's 85% marketshare. The core of PocketPC, WinCE 3.0, features a new interface optimized for using a stylus instead of buttons, color screens, an integrated Web browser, and a small version of Windows MediaPlayer. The handheld computer also includes Microsoft's software for displaying electronic books. As a result of all the supposed improvements, PocketPC devices will have an estimated battery life of 45 seconds.

On April 10, Microsoft invested some $100 million into VerticalNet, a company that operates e-commerce sites for various industries. The investment buys Microsoft 3% of the publicly traded company, along with an agreement for VerticalNet to sell Microsoft products to its customers in addition to using them on its large assortment of sites.
And while the purse was open, Microsoft took a little trip to Asia to purchase a 60 percent stake in Titus Communications, Japan's second-largest cable operator. The stake was previously owned by MediaOne group, which is being absorbed into AT&T's cable holdings. In a recorded statement, Bill Gates said that the investment will help Titus roll out broadband Internet access to homes across the island nation.
For the second time in a month, a pre-release copy of Whistler has been leaked onto the Internet. The most recent leaked version, a later edition than the last leak [see NewsSource, Apr. 03], reportedly has a tighter integration with MSN's new interface and other small changes. The person or persons responsible for either leak have yet to be identified.

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