Competition, Innovation and Microsoft By Steve Ballmer

The Wall Street Journal published this article on November 9, 1999 under the headline "No Court Will Stop Us From Innovating."

When Bill Gates and Paul Allen founded Microsoft a quarter century ago, they were inspired by a simple but powerful idea: that technology could improve people's lives.

Ever since then Microsoft has dedicated itself to developing the affordable, accessible software consumers tell us they want. Along with tens of thousands of other companies, we've helped build an industry where an ordinary personal computer now outperforms the mainframes of just a decade ago. It is an industry that has succeeded beyond its own wildest dreams and has become the most innovative and competitive in the world.

But we never dreamed that competing vigorously and innovating rapidly would make us a target for lawsuits inspired by our competitors. While we'd rather just build great software, Microsoft is standing up for a fundamental principle on which the entire high-technology industry is built--the freedom to innovate and create competitive new products that better meet our customers' needs.

Now the court that is hearing the Justice Department's lawsuit has released its findings of fact. Where do we go from here?

First, it's important to remember that the court's findings are only one step in a long legal process. The findings do not represent a final decision even for the trial court in the case. That will probably be issued sometime next year, after the court has examined the findings in the light of the relevant law. Then either or both sides may appeal.

In the meantime, we remain committed to resolving this dispute in a fair and responsible way. But we cannot compromise on the government's demands that Microsoft essentially stop listening to the marketplace and cease innovating its products. The current lawsuit would have Microsoft ignore the most important recent development in computing--the Internet--by shipping a version of Windows that omits the critical Internet capabilities.

It is the freedom to compete and innovate that has made the U.S. the global leader in computer technology. And it is this freedom that is driving our economy, creating millions of jobs, and making computers more powerful, affordable and accessible for everyone. So while we would like nothing more than to resolve this case, any resolution must maintain consumer choice, economic freedom and the ability of the high-technology sector to develop new products. And it must preserve the right of Microsoft--and every other company--to compete hard in order to remain competitive.

I'm optimistic about this case and about the future of our industry. That optimism stems in part from my confidence in the U.S. legal system. But it also reflects what I see going on in the marketplace.

Consider what's happened in the short time since the lawsuit was filed. More than 100 million PCs have been sold world-wide. The Linux operating system, virtually unheard of a year ago, is now an established competitor with more than 15 million users, and is supported by leading technology companies such as IBM, Intel, Hewlett-Packard, Dell, Gateway, Compaq and Sun Microsystems. Every day new mergers and alliances change the face of the industry. America Online, already a dominant player, has transformed itself into an all-in-one Web, hardware and software powerhouse by purchasing Netscape for $10.2 billion, forming a broad alliance with Sun and investing $800 million in an alliance with Gateway. AOL is competing hard with Microsoft on every front.

At the same time, potential new competitors are being created faster than ever. Thanks largely to Web and other computer-industry startups, U.S. venture capital funding soared to $12.6 billion in the first half of this year, a more than 70% increase over last year. And the changes we will see in the next few years--new computing and communications devices and online services, the rapid growth of wired and wireless broadband, hosted applications and so on--will make last year look like a model of stability.

You can see the result of all this competition and innovation in every computer store--incredible choice for consumers, a frenetic pace of technological advancement and prices that have never been lower. Our industry is the most dynamic, forward-looking and competitive in the world, and consumers are the biggest winners. Microsoft's products are popular because we offer consumers a great value. As Judge Thomas Penfield Jackson noted in his filings, the inclusion of Internet Explorer with Windows at no separate charge, and the competition it helped spur, "contributed to improving the quality of Web browsing software, lowering its costs, and increasing its availability, thereby benefitting consumers."

I'm proud of Microsoft's role in this industry, but I know that nobody has a guaranteed position in this fast-moving marketplace. So as our legal team tries to resolve our dispute with the Justice Department, Microsoft's 30,000 employees will stay focused on creating the products of the future--on making the PC better than ever and the Web more accessible to everyone. We will continue to compete hard but fairly, just as we always have.

We're excited about where this industry is heading, and about the incredible opportunities that lay ahead. At the same time, we understand that because of our success, we are held to a very high standard of conduct. That's a responsibility we have long accepted--and always will.

©Copyright 1999,Wall Street Journal . Reprinted with permission.