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Review Thursday, 28 December, 2000, 16:44 GMT
Microsoft's bruising year
A graph showing Microsoft's share price during 2000
A casual observer of Microsoft's share price could not be blamed for thinking the firm had been split in three during the past year.

Microsoft approached the end of the year valued at about $220bn, down by two thirds - or about $440bn - from its value towards the end of 1999.

The decline has been both steady and spectacular - prompted by a succession of bad news days for the once impregnable power behind the information age.

Of course, the entire year has been spent under the shadow of the continuing legal battle with US authorities who believe Microsoft has broken anti-trust (competition) laws.

Judge Jackson is a cautious judge - for a cautious judge to reach this decision, it says a great deal about Microsoft's record of recent years

New York Attorney General Eliot Spitzer

The long running legal process came to a head in June, when Judge Thomas Penfield Jackson finally ruled that Microsoft had indeed broken US laws and that it should be split in two.

In an effort to avoid the delays which had previously helped IBM to avoid punitive action (its dominant industry position was gone before the legal process was completed) the judge wanted Microsoft's inevitable appeal referred straight to the Supreme Court.

Legal fight goes on

But, in a rare bright spot for Microsoft during the year, its lawyers won the argument to have the case heard first at the lower levels.

This means that the legal battle is a long way from over - and even if all goes against it, Microsoft is unlikely to be forcibly split before 2002 at the earliest.

Microsoft has already filed a 249-page brief to the appeals court, while the US justice department have until 12 January to reply, with Microsoft then having until the end of the month to have the final submission.

This ruling is unfair... Consumers every day see lower prices and an economy full of competition. We are confident that we will win our appeal

Bill Gates

The whole court process - which began nearly three years ago - then moves back into court in February 2001 for the next stage of arguments.

The various legal battles have had a fairly hefty downward effect on the share price.

But the break-up ruling had been widely anticipated when the firm was the world's biggest by market value - in other words it has been something more fundamental which has been driving its share price lower.

This something else is all linked to the fact that the phenomenal growth of the company came on the back of the domination of the personal computer (PC) for all things tech.

Net on the move

About nine out of ten of all PCs use Microsoft's windows operating system, which just happens to have generally worked best with its own software.

The underlying issue throughout the year, heightened by a succession of profits warnings from computer makers and finally Microsoft itself, has been the fear that the days of the PC's dominance might be coming to an end.

The impact of the internet has been spectacular to date, but the pace of innovation will accelerate over the next five years

Bill Gates

A host of industry experts believe that soon, the majority of people will be accessing the internet via their televisions, handheld devices, mobile phones or even games consoles.

Microsoft seems to have been slow to have seen the switch and has been left playing catch-up with rivals - such as Psion and Palm on handheld devices and Sony and Sega on games consoles.

To speed this process the company's founder and driving force, Bill Gates, stepped down from day-to-day control of the company and took up a new position heading its push into these new areas.

Down...but not out

On the technical front, the past year has set Microsoft on course for two potentially big failures - and two potentially big winners.

The company is still struggling to come to terms with the intricacies of mobile computing and internet access.

Typically, when striking out beyond the desktop operating systems where it dominates, Microsoft has stumbled

What Mark Ward, BBC News Online internet reporter, wrote in June

Microsoft finally ditched its "light" operating system Windows CE, but the jury is still out on the replacement, Pocket PC.

Another failure was the Windows Millennium Edition - follow-up to Windows 98 for consumers.

The software is still based on the old MS-DOS code from the early 1980s, and triggered no rush to the shops.

But launching the Windows 2000 operating system for professional users helped Microsoft to make vital inroads in the business end of the software market. strategy

And the company may be yet again on the verge of reinventing itself.

"Chief software architect" Bill Gates is betting the company on his initiative, where Microsoft hopes that its software will tie together the vast range of information and communications devices of the future.

Meanwhile, the huge growth in popularity of Sony's Playstation 1 and 2, with the prospect of the latter providing internet access via televisions in the next year, has led to Microsoft's belated move into the games console market.

There are those who doubt that it will be able to repeat its PC dominance during the next phase of the technology age, of the internet on the move.

But given its past successes in entering late into markets - as in the way it bullied and cajoled its Internet Explorer web browser to market leadership above Netscape - few would entirely rule it out.

Top business stories of 2000 from UK and abroad

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See also:

14 Dec 00 | Business
08 Dec 00 | Business
08 Dec 00 | Business
12 Dec 00 | Business
13 Nov 00 | Science/Nature
27 Oct 00 | Business
30 Oct 00 | Business
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