Microsoft's Augean Stables

Foreign antitrust regulators may due more to damage Microsoft's business that the
delayed release of its products or the migration of some of its most talented people
to competitors like Google.

The highest court in South Korea upheld a ruling that Microsoft must offer new
versions of its operating system and server software because the Korean Fair
Trade Commission said that Microsoft was abusing its dominant position
in the market to bundle its own software products like the Windows Media
Player to the exclusion of competing products.

On the other side of the world, all 25 members of the European Union have voted
that Microsoft is not in compliance with the 2004 sanctions based on the company's
anticompetitive behavior. The next step may be that Microsoft will be fined $2.5 million a day until it is in compliance.

Microsoft's stock, trading below $24, is priced about where it was in mid-2002.
The litany of problems at the company have been complicated by the late release
of key products and lack of profit growth at units outside the core operating system
and server software units. These are problems that can at least be addressed
internally by the company. The troubles in Europe and Korea, which could spread,
are one that Microsoft has been ill-equiped to handle. Perhaps this is because
the model for adding new software features to Microsoft's products is based on
the principle of bundling new products with the company's widely distributed OS.
Without this base, many new Microsoft products might be still-born. They would
at least have to face the expensive and painstaking competition that most other
software companies deal with every day.

Microsoft's slowing growth and lack of new products are successful is compounded
by government activism that is increasingly aimed at some of the software company's
core marketing strategies.


Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not
own securities in companies he writes about.