Splitting MS and the great Chinese Wall puzzle

Does it exist or not? Depends...


MS on Trial The DoJ's proposed splitting of Microsoft into operating system and applications companies is full circle in a sense. Previously such a split was referred to as the Chinese Wall issue, and it has a curious history. Microsoft has not been at all consistent in its claims about the so-called Chinese Wall between operating systems developers and applications developers. The allegation has been that Microsoft obtains two significant unfair advantages by breaching it: by passing information at an earlier stage across the wall to Microsoft's applications developers, it can develop its applications earlier and gain a considerable marketing advantage; and by releasing critical information selectively, it makes it difficult for unfavoured external developers to use all the facilities available to Microsoft developers and favoured collaborators. Steve Ballmer has repeated many times that there was a Chinese Wall between operating system development and applications development. For example in 1983 he told Business Week: "There is a very clean separation between our operating systems business and our applications business... It's like the separation between church and state." Gates also maintained in 1984 there was a barrier. In May 1991 during the FTC investigation, Microsoft was suspected of leveraging control over the information flow between its operating systems and applications groups, in order to hobble competitors. Then in July 1992, Stewart Alsop wrote: "The Chinese Wall between systems and applications doesn't exist any more (at least, according to Mike Maples [then President of Microsoft], who's in charge of both sides now)... Microsoft does now own a significant share of the market for all kinds of personal computer software and it must change its way of doing business or risk the wrath of the huddled masses in a way that no company has had to risk it since IBM and AT&T were sued by the government in the early 1970s." Prophetic words. Gates confused the issue further in an interview with Forbes in December 1992: "We would never, ever use the term 'Chinese Wall'" and went on to defend the existing practice of passing information from the applications group to the Windows group, and vice versa: "We've got two-way communication! ... The products help each other". By the beginning of 1995, a Microsoft memorandum submitted to the US District Court in Washington relegated the Chinese Wall to a footnote, claiming that it never existed, and called the idea that it had existed "irrational". The latest example of crossing the Chinese Wall is the Gates' smoking-gun email of 11 July last year, in which he is apparently urging his executives to find ways to tie Windows to PDAs, and to make life difficult for Palm. It looks as though leopards-and-spots questions will have to be asked when Microsoft's files its proposed conduct remedies on Wednesday. ®


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