InformationWeek
Defining The Business Value Of Technology
August 16, 1999
Microsoft's FutureAt Long Last, The Government Settles Its Score With Microsoft
By Rusty Weston
WASHINGTON, D.C. Sept. 1, 2005--U.S. Attorney General Mary Bono today announced the Justice Department would immediately end its 10-year probe of media conglomerate Microsoft's business practices.
After a decade of frequently acrimonious talks, a legal settlement was reached late Monday night, sources said. Under the terms of the pact, Microsoft would refund to all American citizens 2% of the transaction fees it collects on every electronic purchase on the World Wide Web. "This is the settlement that has eluded Democratic administrations for 12 years running," Bono boasted.
The rebate is said to run into the trillions of dollars, sources said.
Microsoft Chairman William Gates was unavailable for comment. A Microsoft spokesman, Albert Gore, Jr., would neither confirm nor deny the estimates. Gore, the former Vice President and defeated presidential candidate, called the agreement "a snake with legs, but a welcome relief."
Justice officials conceded they had spent more than $325 million on the investigation, much of which covered the severance package for Special Prosecutor Darth Sidius in Dec. 2001. The federal government steadily pursued its unpopular case against Microsoft even after 11 states withdrew their support in 1999 when it became apparent their case was foundering over the issue of collecting Internet taxes. Government officials were split over the "Microsoft exemption" that was signed into law in May, 2000.
Still, Microsoft was forced to finally reach a settlement after Justice Officials released the so-called "smoking gun" MP3 recording of Gates and Steve Ballmer dividing up exhibition space at the Fall Comdex in Las Vegas last year.
What Gives
Apple Computer's acting CEO Steve Jobs, a long-time Gates partner and competitor, immediately hailed the agreement. "Something had to give," he said, "this was insane." The agreement is considered crucial to Apple's future because it clears the way for Jobs' Macintosh operating system OS15 to run as a single-tasking process inside Windows 2005. The federal Office of Operating System Standards (OOSS) is yet to issue its formal rubber stamp on the matter, however, pending further offshore tests.
Microsoft's stock closed down 47 points to 457 in heavy volume Tuesday amid investor fears that the agreement would bankrupt the company and cause thousands of layoffs. To calm investor fears, Microsoft immediately declared a thirteen to eight reverse split effective Friday.
Silicon Valley Street analysts sounded a cautionary note. "I wouldn't bet all my chips on Microsoft now," said one. A mutual fund manager at Fidelity Investments was later overhead saying he's thinking of diversifying his portfolio to include other equities.
Red Hat Software CEO Scott McNealy, long a critic of Microsoft's business practices, immediately announced his resignation from the California Republican Party. Red Hat's software closed up 1% on the news, in light trading on the Palo Alto Stock Exchange.
Rusty Weston is managing editor of InformationWeek Research.
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