The settlement talks are creeping along, perhaps heading towards a conclusion. Lots of potholes on that road. But let me suggest something that’s occurred to me about the proposed settlement.

One settlement demand is that Windows be offered in a stripped-down version without the allegedly “anticompetitive” addons – Media Player, Windows Messenger, and the like. Let’s imagine that Microsoft agrees to that. But add two more things to your evaluation of that: (1) the people at Microsoft are very smart and very savvy about the marketplace; and (2) there won’t be any requirement that Microsoft be shy about promoting that stripped-down version.

I think the result will backfire. Many people complain that Windows is bloated by all the addons. The Linux community boasts that Linux is more stable than Windows – which in large part is because Linux doesn’t do very much. Imagine that Microsoft develops a version of Windows that is lean, rock-solid, and 100% compatible with all Windows applications. The appearance on screen is streamlined and easy to use. It has hooks for developers and programmers to create solid, compatible applications. And now imagine that Microsoft promotes it with all its muscle. Perhaps it’s marketed as the right choice for office workstations where employees primarily use a handful of applications and don’t need access to multimedia tools. Perhaps it’s marketed as the answer for elderly or disabled computer users who will appreciate simplicity. Maybe Microsoft builds a limited version of Windows 2000 Server and focuses on the “security” of a server that doesn’t do very much. See what I mean?

It fills a hole in the Windows line. It answers the critics who say Windows is “bloated.” It removes any possibility whatsoever that Linux could occupy a space on the desktop. It solidifies Microsoft’s hold on the operating systems market. Competition will decrease. The only thing it changes is to reduce Microsoft’s ability to direct traffic to its web sites and Internet services – which is meaningful but not a huge advance in the world of open competition.

In other words, I think this settlement term could be turned into a win for Microsoft and further erode any chance of competition in the market for operating systems.