Microsoft and Apple: The History Casey Mulligan Doesn't Know

The rest of the piece is devoted to criticizing the foolishness of the Justice Department in having brought an anti-trust suit against Microsoft. The rise of Apple is at the center of the story, with Apple having surged past Microsoft in profits and market value and Microsoft now struggling to maintain its position with a new tablet computer.

This is a great story of the dynamism of the market in the computer industry. But there is some history that Mulligan apparently does not know. Back in 1997 Apple was in the intensive care ward with its survival very much in doubt. At that time, it was just a computer company. There were no iPads, iPhones, or even iPods, just Apple computers and it didn't seem that many people wanted to buy them.

The big question facing Apple was whether Microsoft would continue to design its office suite to be compatible with Apple computers. After all, Apple had a relatively small share of the market at the time, why should Microsoft go through the effort and expense of making Word, Excel and the rest compatible with Apple's silly system.

Here's what the NYT had to say at the time about Microsoft's decision to throw $150 million Apple's way and to continue to produce Apple compatible software:

"Odd or not, the bailout is good for both. Apple users are assured that their beloved company gets desperately needed cash and that Microsoft will continue to supply them up-to-date word processing and other applications software. Many would-be Apple buyers had been turning away out of fear that as Apple's market share shriveled, so would the programs made available for use on Apple machines.

"The bailout is also good for Microsoft because it preserves a demand for its software programs designed to be compatible with Apple machines. But some suspect a more Machiavellian purpose by Microsoft as well. Microsoft can now fend off antitrust charges by pointing out that Apple's continued existence will prevent Microsoft from acting as a monopolist. If Apple dies, Microsoft will appear nakedly monopolistic, the only major producer of operating systems for personal computers."

Of course there is no guarantee that the NYT's assessment is correct (others in the business press had a similar view) but if it is, we get a very different picture of the impact of the government's anti-trust suit. The implication of the NYT's assessment is that the threat of anti-trust litigation forced Microsoft to be less predatory even to the point of working to keep a competitor alive. In this case, the competitor in question turned out to be an enormously innovative company that now produces great products that consumers value immensely.

That story makes the government's anti-trust case against Microsoft look pretty damn good. Of course the benefits may even go well beyond the survival of Apple. Would Google have had the space to develop a first-rate search engine and subsequent products like the Android phone system if Microsoft had continued its practice of broadening its scope into other areas? (The immediate focus of the anti-trust case was the decision by Microsoft to add a browser to its operating system that essentially wiped out Netscape.)

Of course this doesn't establish that the Justice Department was necessarily right in going after Microsoft in the 90s, but the slam dunk case going in the other direction that Mulligan thinks is demonstrated by Apple's success requires a major re-write of history.

Not a monopoly because it didn't last 1000 years?
written by Walt French, June 21, 2012 12:32

There's no contradiction between saying that Microsoft HAD a monopoly in the 90's, but that being hemmed in by threat of another lawsuit, plus the plucky genius of one Stephen P. Jobs, and the rapid evolution of technology, allowed it to be broken.

The threat of lawsuits, not just free market forces, was an important part of the mix. (How are free market forces supposed to work when there is no free market???)

Today, Microsoft's business is actively threatened by the forces unleashed since it steamrolled over Netscape, Lotus, WordPerfect and others. Surveys show it with less than 50% share of the lucrative server market—certainly, well less than a monopoly. This year, more people will buy Android phones than all Microsoft-based products combined. And yes, smartphones are indeed little computers, for many people all the computer they need to check email, surf the web and socialize on Facebook—for many, they are the ONLY computers in the home. And unless current trends are surprisingly disrupted, next year Microsoft will fall to third place behind Apple in the total number of new computer platforms.

Microsoft no longer has a monopoly; it has lost it by not competing aggressively enough in a field where changes come so rapidly that EVERY other firm is a potential competitor. With their “Surface” tablet announcement this week, they are trying to get back into the game, sidestepping their erstwhile partners who also took their customers, and their businesses, for granted, while ignoring the same disruptive technology that had launched them into stardom just a few years earlier.

What's a Network Monopoly Anyway
written by Last Mover, June 21, 2012 7:09

So Mulligan doesn't understand network monopolies. What else is new. If the entire earth was separated into two enormous markets, each controlled by one MNC, Mulligan would claim everyone is better off because it could have been a single market controlled by one monopolist. If the two MNCs merged, Mulligan would then claim everyone is still better off because it's a private corporation rather than government.

...
written by skeptonomist, June 21, 2012 8:34

The history of the computer industry is a complex story of lost and retained monopolies, as determined partly naturally but partly by enforcement of copyrights and patents in court. Apple went to court to enforce its exclusive right to make and sell the original Apple, based on copyright of its software. It won and consequently nobody but Apple makes computers running its operating systems. IBM chose not to enforce its patents and copyrights, so lost control of the PC market, which has been highly competitive from early days. This is why Macintoshes cost twice as much as PCs. Microsoft's DOS was the better of the two operating systems offered by IBM, and now it has a natural monopoly on the operating system but not the hardware of PCs. The monopoly is natural because it would be inefficient to have many competing operating systems. Microsoft's monopoly is something that probably should be highly regulated, but so far it's hard to argue that it has caused much harm, although Microsoft does tend to use it to push its other software as in several anti-trust cases.

-2

...
written by skeptonomist, June 21, 2012 8:40

How lucrative is the server market? Microsoft may have lost 50% of this market, but what is that in total operating system dollars? Linux may make sense if you have or are a computer expert, but it's not on track to take over from Windows in the home market soon (although it might do so if its plug-and-play capability is improved).

WordPerfect, RIP
written by David M, June 21, 2012 9:00

When Microsoft helped bail out Apple and promised to keep making MS Office for Mac, it also helped put the final nail in the coffin of WordPerfect and other Novell office applications, since from then on MS Office would be the standard on both Mac and Windows platforms. Gates may have kept one competitor alive, but in the process helped kill off another.

The Microsoft Antitrust Case
written by H-Bob, June 21, 2012 12:23

Business and economics "reporters" consistently mischaracterize the antitrust case against Microsoft. As Dean mentioned, the antitrust case was not targeted against Microsoft's monopoly concerning Windows but was targeted against Microsoft leveraging that monopoly for competitive advantage in other markets -- e.g., browsers, word-processing and spreadsheets. However, the journalists kept characterizing the case as being similar to the AT&T or Standard Oil cases.

...
written by MacCruiskeen, June 21, 2012 2:07

Casey also ignores (as some of his commenters point out) the fact that the monopoly claims had as much to do with MS trying to force other software companies (Netscape, Wordperfect, Lotus) out of competition with MS products (Explorer and Office) as it did with Apple. Yes, Apple has persevered and expanded into markets that basically didn't exist then, to its great profit, but the basic points that MS was sued over were true.

...
written by Jay, June 21, 2012 3:29

If that is true then Mulligan needs a Mulligan on this one. I believe still well over 80% of computers still use the Windows OS. You cannot rely on units shipped to get a clear understanding how dominant MS still is as a software producer. They can still exert a lot of influence on personal computing.

A large number of individuals and companies simply upgrade Windows or acquire licenses rather than waste money on buying a new PC. Most of Apple's money is coming from higher margin, consumer gadgets that appeal to a large audience like those using mobile devices.

[Mighty] Casey has struck out...again
written by wkj, June 21, 2012 3:47

Universal comment for all Casey Mulligan pieces. http://en.wikipedia.org/wiki/Casey_at_the_Bat

Microsoft = Standard Oil
written by FoonTheElder, June 25, 2012 12:09

Microsoft is the Standard Oil of its era. Microsoft was given a monopoly by another monopolist (IBM) who was in the middle of an anti-trust case (back in the days when that actually happened). IBM couldn't take the risk of adding another monopoly to their portfolio.

Since then Microsoft behaves just as Standard Oil did. They move into an area and try to buy the competition. If the competition won't sell, they copy their product, price it below the market, and run the competition out of business.

With no significant competition, the price goes back up and the manipulated profits come rolling in. Then onto the next area.

It's no coincidence that the only real competition to Windows (Linux) has to be a free software in order to have any hope of competing.

Microsoft and Apple: The History Casey Mulligan Doesn't Know

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