In a surprise move on Wednesday, Microsoft announced a major change in their licensing arrangements with PC vendors. That change allows PC manufacturers to remove the Internet Explorer icon from the desktop of Windows XP and previous versions of the OS. PC makers can also choose to remove the icon from the "Start" menu in the OSs. This issue was at the heart of the 19 states and US DoJ antitrust lawsuit against the company, and Microsoft has held out that their ability to control the desktop was at the heart of their rights as a company. The plaintiffs in that suit said that because Microsoft had monopoly power, and was trying to leverage that monopoly power against Netscape, that they lost some of those rights. From Microsoft's press release:

Microsoft Corp. announced Wednesday that it is offering computer manufacturers greater flexibility in configuring desktop versions of the Microsoft^® Windows^® operating system in light of the recent ruling by the U.S. Court of Appeals for the District of Columbia. The company said the changes would not affect the Oct. 25 launch date of Windows XP.

"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," said Steve Ballmer, CEO of Microsoft. "Windows XP represents a revolutionary step forward in personal computing, and computer manufacturers and consumers are looking forward to this product with great anticipation."

"This announcement does not take the place of settlement discussions with the government parties or any future steps in the legal process; however, we wanted to take immediate steps in light of the court's ruling. We are hopeful that we can work with the government parties on the issues that remain after the court's ruling," Ballmer added.

The appeals court ruled that certain provisions in Microsoft's licenses with PC manufacturers impaired the distribution of third-party Web browsers. Microsoft will now provide PC manufacturers with the following new flexibility:

• PC manufacturers will have the option to remove the Start menu entries and icons that provide end users with access to the Internet Explorer components of the operating system. Microsoft will include Internet Explorer in the Add/Remove programs feature in Windows XP.
• PC manufacturers will have the option to remove the Start menu entries and icons that provide end users with access to Internet Explorer from previous versions of Windows, including Windows 98, Windows 2000 and Windows Me.
• PC manufacturers will retain the option of putting icons directly onto the Windows desktop. Based on extensive customer usability studies, Microsoft had designed Windows XP to ship with a clean desktop and improved Start menu, but PC manufacturers will now have the option of continuing to place icons on the Windows desktop if they want to.
• Consumers will be able to use the Add-Remove Programs feature in Windows XP to remove end-user access to the Internet Explorer components of the operating system. Microsoft has always made it easy for consumers to delete the icons for Internet Explorer, but will now offer consumers this additional option in Windows XP.

Although some of these changes will require development work and testing for Windows XP, Microsoft said Wednesday it can complete the work and will be able to meet the date for worldwide launch on Oct. 25.

The rest of the press release is filled with testimonials from PC vendors about the importance of Windows XP. You can read the full text of the press release at Microsoft's Web site.

Spin: Where to start? Let's try the fact that the "development work and testing" it will take to remove these icons is likely to take all of about 5 minutes. Thanks for the effort there, Sparky. My cynicism aside, this is a very interesting move from Microsoft. The company has steadfastly held to the concept that it would never, ever, allow anyone to dictate to it what it could, or could not, include with Windows. Of course, removing the icon for IE is not the same as debundling IE from Windows, but for all intents and purposes it is close. Note too that the company will allow end users to delete access to IE, and that *is* the same as removing the app. At this point, I will also point out that it is moot. Netscape is dead, having been hacked to bits by the twin forces of AOL's complete lack of caring about the company's technology (and incompetence in this area) and Microsoft's monopoly leveraging moves of 3 years ago. Who would go to the effort of removing IE from Windows XP? The kind of people that are likely to use alternatives such as Mozilla, Netscape 6, or Opera in the first place. For those reasons, this is a very "safe" move for Microsoft to make when it comes to protecting its own franchise.

So why is Microsoft making this about face before being forced to? After all, the appeals process is hardly over, and it would be relatively easy for the company to not make any changes to its business practices for another couple of years without breaking a sweat. Perhaps Microsoft has had a change of heart and realizes the errors of its ways? Yeah, right. I don't believe that any more than you do, but it's always a possibility. It is more likely, however, that Microsoft really wants to come to a settlement on this case without having to risk what the second lower court will decide to do to the company. Microsoft still faces the prospect of being broken up, despite its claims to the contrary, and if it can show the forces arrayed against it that things are changing within the company, the chances of such a settlement are much higher. Look at the development yesterday from New Mexico when that state's Attorney General announced she had settled with Redmond. Combined with the fact that allowing vendors to remove the IE icon is NOT likely to result in that actually happening, this is not only a safe move for Microsoft, it is a smart move for the company.

Lastly, should Microsoft actually be forced to debundle IE from Windows XP in totality, that would be a much more serious blow to the company's plans for Internet domination. If forced to do that, Microsoft will also likely be forced to not build other services such as Instant Messaging and other Internet technologies into its OSs. Microsoft has said again and again that leveraging its market share in the OS market is the key to ensuring its other products are used, and at this point any sacrifice that would keep that from happening will be worth it to the company. Again we come back to the fact that sacrificing IE on the altar of capitulation is a safe move for the company because Netscape is already dead. Seems like a central theme, eh?

What does this mean for Apple and Mac users? Not much, unless this clever move by Microsoft concludes with the lack of any significant changes in Microsoft's other business dealings. For instance, there is still the claim by Apple that Microsoft deliberately broke QuickTime in earlier versions of Windows (a claim that Microsoft dismissed as silly, instead blaming problems with QuickTime on incompetent Windows programmers at Apple). If there are no structural remedies put in place, meaning a breakup (which I support) or regulation of Microsoft's practices (which I do NOT support), the company will still be free to leverage its monopoly power wherever it can. The real question is whether the 18 remaining states' Attorneys General and the US DoJ will recognize the sacrificial wolf for the dead sheep that it really is. Check out the very interesting discussion of this issue in our forums.

One more note: I respect Microsoft's Mac Business Unit, and criticism of Microsoft's business practices is not to be confused with condemnation for the company's current Mac offerings, which I think are outstanding.