News

Microsoft Bows to Pressure, Revises OEM Licensing Agreements

• By Scott Bekker
• July 12, 2001

Microsoft Corp. today changed its Windows XP licensing agreements to give OEM manufacturers the freedom to remove some icons and other shortcuts from Windows XP’s desktop and “Start” menu.

And in a major reversal, Microsoft confirmed that OEMs could add shortcuts and icons from its competitors to the Windows XP desktop and Start menu, as well. The terms of the new licenses also allow OEMs to remove the Internet Explorer icon from older versions of Windows for the first time.

Microsoft had previously allowed OEMs to add icons on a one-for-one basis – in which case an icon for Netscape Navigator could be added to complement the Windows desktop’s Internet Explorer icon – but wouldn’t allow them to remove any of its default icons.

Some observers interpreted the software giant’s latest move as an attempt to ensure a relatively smooth launch for its upcoming Windows XP operating system. XP incorporates many key applications and services – including integrated audio/video media and instant messaging – that have bundled with, or “tied” to, the base operating system itself.

“They’re really anticipating what they’re likely going to have to do anyway,” concedes Rob Enderle, a senior analyst with consultancy Giga Information Group. “The timing of this is to get it done so that the product itself doesn’t get delayed.”

Many software vendors – including Microsoft competitors America Online Inc. and Real Networks – have expressed concern that the tying of such technologies, coupled with Microsoft’s draconian control of the Windows XP desktop and Start menu, could place them at a competitive disadvantage.

Recently, several of the state attorneys general who are co-plaintiffs in the Justice Department’s antitrust case against Microsoft expressed concern over the close tying of applications and services in Windows XP. "The tying issue is an extremely important one," Iowa Attorney General Tom Miller recently confirmed to the Los Angeles Times.

Two weeks ago, the U.S. Appeals Court for the District of Columbia upheld Judge Thomas Penfield Jackson’s finding that Microsoft had violated the Sherman Antitrust Act when it illegally “commingled” software code between its Windows 98 operating system and its Internet Explorer Web browser. The court determined that Microsoft had done so for the purpose of maintaining its monopoly market share.

In light of all of this, Microsoft CEO Steve Ballmer offered a surprisingly pragmatic explanation for his company’s action. "We recognize that some provisions in our existing Windows licenses have been ruled improper by the court, so we are providing computer manufacturers with greater flexibility and we are doing this immediately so that computer manufacturers can take advantage of them in planning for the upcoming release of Windows XP," he said in a prepared statement.

According to Giga’s Enderle, Microsoft’s actions could be just enough to satisfy the state attorneys general and the Justice Department.

“It certainly casts Windows XP in a more favorable light,” he allows. “The belief right now is that since the Department of Justice said in the past that removing the icons is an okay way to deal with the problem, that it may be enough. So you can conceal these things if you want, you can replace them on the desktop with others – either of these may be enough.” –Stephen Swoyer