The Windows 2000 schedule has slipped again, pushing the official release date closer to Christmas than previously expected. The third and final beta of the Windows upgrade, previously planned for mid-March, has been stretched out to late April of this year. Windows NT Server product manager Ed Muth explained that shipping in 1999 "remains, absolutely, our expectation," but said its "unlikely" that the operating system will be delivered before Labor Day. The company also announced that the NT server 4.0 upgrade promotion will be extended until the end of June, meaning Microsoft doesn't expect it until September or October 1999 at the earliest. Several source we know have even said Microsoft doesn't internally expect the Windows upgrade until February 2000, over a year from now.
If all five or six fabulous flavors of Windows 2000 don't ship before November 1999 not only will the company miss the Christmas shopping season, it will also be pushing against IT departments with tighter-than-normal budgets because of the expected Y2k crisis. And if Windows 2000 doesn't sell extremely well, Office 2000 sales will suffer since the next version of that product is geared around the next version of Windows. And according to reports we've heard, many ISVs and large corporate customers are pushing Microsoft to bring out an interim version of NT - possibly NT 4.5 or NT 5.0 - with all the stable features from Windows 2000. Whatever happens, it's looking more and more like 1999 will be an exceptional year for Novell and Unix.

COURT NOTES: Last week started out with a closed-door court session during which economics professor Franklin Fisher testified about Microsoft's pricing policy. Since the session was closed we don't know what went on, but the highly debated testimony reportedly showed how companies that Microsoft favors like Dell and Compaq (both of which fought the testimony) get a better price on Windows than other computer manufacturers like Gateway and IBM. Fisher then used that price disparity to boost his testimony that Microsoft is indeed a monopoly and has used that advantage to break into other markets. After the court was reopened to the public, Fisher acknowledged that consumers have, so far, benefited from Microsoft's decision to give away Internet Explorer. But he insisted that the benefit was simply a side effect of a tactic designed to undercut Netscape. After a final cross-examination, government attorneys submitted 365 documents and several new sections of the Gates video testimony as unseen evidence, then rested their case and gave the court to Microsoft.
After again failing with an attempt to have the case thrown out, Microsoft lead attorney John Warden called his first witness, Richard Schmalensee. Schmalensee, a former student of Franklin Fisher, has worked with Microsoft on and off since 1992 and is serving as the company's primary economic witness. He testified that Intel-based PC desktop operating systems shouldn't be considered as a "relevant market" because Microsoft is threatened by cross-platform technologies like Java, handheld computers and the internet. That argument is critical to the case against Microsoft because if no "relevant market" exists, the company cannot have a monopoly even though Windows runs on 90 percent of the world's personal computers.
Government attorney David Boies took aim at Schmalensee, asking him about companies that make products competing with Windows. In reply Schmalensee listed two "short-run" alternatives - Linux and BeOS, operating systems that have a maximum combined marketshare of 11 million users. Judge Jackson revealed some curiosity about Be, asking the witness if Be has made any money from its operating system so far. "I would be stunned if they were making a lot of money," Schmalensee conceded. But he said the significance of Be and Linux were not that they were making money or signing up millions of users, but that they appeared to be new entrants into the desktop operating system market that could rival Microsoft in years to come.
Boies destroyed the testimony by producing a 1987 article Schmalensee wrote for the Antitrust Law Journal that said the "presence of a few small competitors to a dominant firm doesn't mean there aren't significant barriers to entry for newcomers." Then digging deeper, Boies mentioned a deposition given by Schmalensee on October 7 1998 where the economist said other PC operating systems weren't a serious threat: "At the moment, except for specialized applications.... I'm not aware of anything at present that would count as viable competition." The witness retracted his statement, claiming that Microsoft has threats that cannot even be identified yet because software companies "come out of nowhere."
Finishing off a banner day, the Justice Department then introduced several e-mails from Bill Gates that shed doubt on a poll Schmalensee cited in his written testimony. The survey, which claims 85% of software developers support the integration of Internet Explorer into Windows, was apparently ordered up by Gates to soften the impact of his Senate testimony in March 1998. In one of the e-mails produced, Gates told several executives that "It would help me IMMENSLY [sic] to have a survey showing that 90% of developers believe that putting the browser into the OS makes sense." Coincidentally, later on Thursday Microsoft issued a press release announcing an [ahem] independent poll showing 73 percent of Americans believe Microsoft has benefited both consumers and the software industry.

Microsoft has confirmed that a bug recently discovered by Richard Smith of Phar Lap Software could cause Windows applications to show the wrong time for a week in the year 2001. The latest hole affects the local time function in Windows 95 and 98 during the daylight savings change, delaying the one-hour time jump from April 1 to April 8. The affected applications would then be in synch with the operating system's own clock and the rest of the world. Smith explains that the date lapse is due to a problem with the Visual C++ runtime DLL module, which assumes daylight savings time doesn't start until April 8th because April 1st falls on a Sunday in 2001. The bug also affects other years where April Fool's Day falls on a Sunday, like 1990 and 2007. Microsoft has admitted that the bug exists, but claims problems resulting from it will be rare. However, with some 40 to 50 million copies of Windows 95 and 98 sold, how many thousands of incidents could be classified as 'rare'? As Visual C++ product manager Chris Hargarten said, "We have bugs all the time, and we take them very seriously."

A federal judge scolded Microsoft lawyers last week during a hearing on the class action lawsuit filed by a group of former "temp" workers. The initial hearing was ordered by District Judge John Coughenour after he read Microsoft changed the language of its temporary contracts [see NewsSource last week]. As company attorney James Oswald tried to defend the reworded contract, Coughenour cut him off and then ended the hearing after just ten minutes, saying he wanted to "give the lawyers an opportunity to suggest to their client that they do the right thing." The judge added that he "might hear that, even if counsel was involved, that upon reflection and with 20-20 hindsight some might perceive this as being outrageously arrogant." He then ordered lawyers to return on January 26 with an update. Microsoft spokesman Dan Leach said the company will reconsider the contract language. "We'll have to look at all the issues the judge brought up. We always abide by what the courts tell us to do."

Microsoft revealed last week that it is making an investment into Banyan, the maker of Vines networking software. According to banyan the deal is not an endorsement of Microsoft products but a commitment to interoperability. Under terms of the alliance, Microsoft will buy some 1.75 million shares of the company's stock and give Banyan $10 million over three years to train at least 500 employees in marketing and product development for Windows NT/2000.

As we've expected them to do for a while now, Thursday Microsoft filed to appeal the preliminary ruling that forced it to make Windows, Internet Explorer and Visual J++ complaint with Sun's Java standards. Last week the judge ordered Sun and Microsoft to schedule a settlement conference in front of a magistrate to resolve their long-running dispute.
Jim Kinsella has been promoted to CEO of MSNBC online. The President position was created specifically for Kinsella, who had been acting as MSNBC online general manager. Before joining MSNBC he was the editor of Timewarner's Pathfinder and helped found the Internet Content Coalition.
Apparently the calendar in Outlook 98 marks May 24th as this year's Memorial Day holiday. Unfortunately for any Outlook users making plans for the long weekend, everyone else in the United States will be celebrating Memorial Day on May 31.

_{Microsoft, EchoStar in Net satellite deal
Bork Predicts Microsoft Will Be Broken Up
Ellison: The Net will break Microsoft
MS walks thin marketing line}