Possible endgames [LWN.net]

Possible endgames

Posted May 31, 2007 11:56 UTC (Thu) by robilad (subscriber, #27163)
In reply to: MS died once already. by AJWM
Parent article: What Microsoft and Novell agreed to

I'd put the time frame at around 5 years, depending on whether someone wants to invest a handful of billions of fresh money from China / Russia / India into pairing Microsoft down, and plundering their cash kitty by using the same successful tactic that worked so far : patent lawsuits.

While Microsoft spends 100M per year defending themselves on patent lawsuits, they also spend more than 1 billion per year on lost lawsuits (and there is a couple more coming, as far as I've seen, from Alcatel/Lucent, among others) or making those dreaded patent deals. With 1 billion fresh money flowing into Microsoft each month, there is a lot more Microsoft could afford lose, and remain the duck laying golden eggs for patent scheme 'investors'.

The fun thing about patent lawsuits is that Microsoft is virtually indefensible against an investment fund playing patent lottery against them, and there is a variety of reasons for others (outside USA) to get involved: money, market power, long term strategic interests, etc. In addition, since Microsoft started the patent war, it won't get any backup from other local companies in the field, until it quickly starts arguing for abolishing the current software patent regime in the USA. Not going to happen. ;) So it is ripe for plucking.

Finally, people with hot money outside the US now know how the US capital market works, and where the levers are. China has recently acquired a nice stake in Blackstone, for example, which is a fun little company that specializes in carving up beached whales. That deal has received highly hysterical commentary by the Economist, for example.

To give you just one fun scenario, Blackstone has the third-largest stake in Deutsche Telekom, who happens to have some interesting patents, now that Microsoft is going into the phone business in order to fight off the iphone. There are many other fun businesses Blackstone has a major stake in, and as Microsoft blunders around searching for a new profitable foundation outside its core competencies, it will inevitably tap into patent mine fields. Whoever controls them, gets to extract healthy royalties from that company, one way or another.

So, I guess Microsoft's worst case scenario could go a bit like this:
1) They will start facing an increasing number of high payout lawsuits globally, as more investors want to get their fair share of Microsoft's pile of cash,
2) They will start bleeding real money, resulting in a stock price correction,
3) They'll be carved up by a consortium of private equity firms

And only afterwards will the software patent laws in the US change to avoid 'losing' more of the local 'IP industry'. ;)

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