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Microsoft hits a few hurdles

The Justice Department's antitrust probe into Microsoft's business practices has made it tougher to buy other companies, chief executive Bill Gates acknowledged Monday.

But industry experts say the No. 1 maker of personal computer soft-ware continues to use other aggressive tactics against rivals that provoke scrutiny.Microsoft Corp. now thinks twice about big outright acquisitions, particularly after the Justice Department sued to block Micro-soft's $2 billion purchase of Intuit Inc. two years ago, killing the deal. Antitrust officials had said buying the maker of the popular Quicken personal finance software would stifle competition and likely lead to higher prices.

The ongoing federal scrutiny "makes it a little tougher," Gates said during a keynote talk to about 6,000 corporate technology executives and analysts at an annual conference sponsored by Gartner Group, a consulting and research company.

"We have to say, `Is this something we are going to get through quickly?' " Gates said.

Microsoft's strategy reflects a balancing act. The company is trying to keep government regulators assuaged while it expands into new markets, going beyond software that controls the basic functions of desktop machines amid a slowdown in demand for PCs.

In addition, Microsoft is protecting its home turf, which is threatened by the emergence of the Inter-net as an alternate way for getting and sending electronic information.

For instance, Microsoft this year bought only minority stakes in companies like cable giant Com-cast Corp. and Apple Computer Inc. While it bought all of Web TV last spring, the deal was worth only $450 million, a pittance for a company Microsoft's size.

And many deals aim to jump-start new industries, not corner markets. Consider Microsoft's $1 billion stake in Comcast, the fourth-largest cable company, and its purchase of Web TV, a maker of TV set-top Internet devices. They are largely aimed at bringing high-speed World Wide Web access to people via their television sets, circumventing network bottlenecks that may be deterring potential Web surfers from buying computers and using Microsoft software.

The federal scrutiny "clearly alters the way they do acquisitions," said Scott Winkler, director of research at Gartner Group. But "they are still aggressive."

Microsoft continues to keep its gloves off. With a broad-ranging deal with Apple this past summer, Microsoft now has arrangements with nearly every major PC maker to make Microsoft's browser software, Internet Explorer, easier for Web surfers to use than rival Net-scape's Navigator.

The Justice Department is looking into the Microsoft-Apple arrangement, as well as Microsoft's recent investments in three smaller companies.

The concern is that Microsoft could squeeze out rival software and computer makers, stifling technological innovation and reducing the choices that consumers have.

But Gates made no apology for the company's aggressiveness, saying that in the end customers are benefiting.

For example, Microsoft gives away its Internet Explorer browser and has forced Netscape to make it easy for people to down-load its Navigator browser without paying.

"It's a heck of a good deal for users," Gates said.

Microsoft became the leader of the PC software industry after being chosen in 1980 to design the operating system for IBM's original PC. The company's operating system MS-DOS and its successor Windows are now the programming foundation for more than 80 percent of the world's PCs.