Confident that no court would tear apart the company, Microsoft Corp. worked feverishly during the last year to release a battery of new products that could make the software giant even more dominant in the computing world.
Microsoft last month introduced Office XP, the latest version of the ubiquitous set of word-processing and other business programs that provides more than 30% of Microsoft's revenue. Windows XP, the operating system that computer makers hope will revive flagging PC sales, arrives in October. And November will bring the unveiling of Xbox, a high-powered video game console for which Microsoft is committed to spend $500 million to market during the next 18 months.
A hand-held computer that Microsoft supports, Compaq Computer Corp.'s iPaq, is outselling rival products by pioneer Palm Inc. More significant, Microsoft is planting a flag at the center of the World Wide Web, unabashedly using the same approach that troubled regulators in the first place.
The strategy ups Microsoft's bet that it can prevail against antitrust claims by the U.S. Justice Department, competitors and state prosecutors. A federal appeals court Thursday struck down the proposed breakup, ordering a new lower court judge to hold more hearings on the extent of Microsoft's wrongdoing.
"Conduct by Microsoft in the past year would appear to repeat many of the things that were problematic here, and they do it on a larger stage," said Tom Miller, the attorney general of Iowa.
Even as the technology industry has been staggered by an economic slowdown, Microsoft has emerged as a more potent force. The company, based in Redmond, Wash., has $30 billion in reserves, generates cash flow from operations exceeding $1 billion a month and plans to hire 8,000 new workers this year.
Even before Thursday's ruling, Microsoft's gamble was paying off in a huge way. The company's stock is by far the best performer this year of the 30 issues in the Dow Jones industrial average, gaining more than 68% as the overall index fell about 2%.
Microsoft actually has benefited from the dot-com implosion, which wiped out many small firms that offered competing services and products--firms that were big customers for Microsoft rivals Sun Microsystems Inc. and Oracle Corp. Young Linux companies aiming to provide upgraded services tied to the free operating system--a direct competitor to Windows--also have fallen victim to the tumult in the stock market.
