InformationWeek

Unquestionably, Microsoft has bungled this historic case, acting with the sort of grand hubris that business students will scrutinize hundreds of years from now. This past week a defiant Steve Ballmer E-blasted these words: "This company, which has done so many great things for consumers and the American economy over the last 25 years, will not be broken up." Whatever you say, Steve.

Imagine a civics quiz in the year 2600: Describe in 500 words or less what prompted a federal judge in 2000 to "break up" the world's most successful company--and was it the right thing to do? One good answer would undoubtedly cover these two points: Sherman Antitrust Act violations and a 20th-century perspective of the information economy.

And just how elevated is our understanding of the information economy? It's probably better than our understanding of the shape of the solar system, which experts now contend is flat. Realistically we'd have to rate our knowledge of the forces driving the "new economy" as "impressionistic." For instance, we know from recent studies that IT is driving productivity improvements. But economists are split over the issue of whether the economy has changed structurally. And the recent stock market turmoil has finally pierced the Internet stock bubble, causing some observers to second-guess the impact of the information economy.

Is the Justice Department's quest to cleave Microsoft into two monopolies instead of one an enlightened idea? If you believe, as I do, that many of its competitors helped make it the monopoly we know and use today by simply making more wrong moves than Microsoft, it's hard to see how a breakup helps anyone.

Examine the history: Microsoft's business practices didn't prevent Novell from launching a decent desktop operating system or Apple Computer from licensing the Mac OS. Microsoft didn't prevent IBM from doing a better job with OS/2. Microsoft didn't prevent Sun Microsystems from successfully tackling the corporate desktop or even writing an easy-to-use version of Unix (which still hasn't happened--although Next came fairly close).

Microsoft's monopoly didn't help Lotus or WordPerfect compete against Office--but these competitors generally produced inferior products. I'll concede that Microsoft's tactics harmed Netscape and a few other companies that made PC utilities (remember DoubleSpace?). But does that justify a breakup?

Certainly some draconian restraints on Microsoft's predatory business practices are justified. But a breakup? If consumers and businesses have been seriously damaged by Microsoft's predatory tactics, it's not evident to me. Windows may not be the best operating system around, but it's fairly inexpensive.

A breakup would have been a marvelous idea about a decade ago. But in a few years, Microsoft's operating-system monopoly might not mean much. By then, many of us will do most of our computing over the Internet or via Internet-capable wireless devices--and for that form of computing, who needs Windows?

For its part, Microsoft maintains that consumers will be hurt by the breakup. This argument is not without merit. Breaking the company in two does nothing to improve software pricing--if only because the new entities will have increased administrative costs. And if one company has desktop software and the other has operating systems, IT managers can expect to encounter service issues left unresolved between the two entities.

What about shareholders? Should the courts take them into consideration? Some experts believe that Microsoft investors, who had depressed the stock more than 40% at press time, stand to greatly benefit from a breakup. These experts cite the breakup of the Bell System into Baby Bells as proof that Baby Bills will unlock hidden stock value. Perhaps, but it's beside the point. Microsoft itself will survive a breakup even if it's not necessarily in the company's best interests or--more important--our best interests. The company has $21 billion in cash and another $20 billion-plus in investments. The interest alone practically guarantees sustained profitability.

Breaking up, as they say, is hard to do. But what the government must realize is that two Baby Bills won't be easier to handle than one.