Feds Want Microsoft Broken In Two



The U.S. government today asked a federal judge to split Microsoft in two as compensation for its violation of antitrust law, setting the stage for a court hearing later this month and a potentially lengthy appeals process.

Under the proposal submitted to District Court Judge Thomas Penfield Jackson by the Department of Justice and 19 states suing Microsoft, the world's largest software company would be divided along product lines. One company would sell the Windows operating system, and the other would sell applications, including Office and Internet Explorer. That move is intended to spur competition in the Web-browser market, though the proposed application company could license Explorer to the Windows organization. The two companies wouldn't be able to recombine or form joint ventures for 10 years.

Furthermore, Bill Gates, Microsoft's chairman and chief software architect, and other top executives could only own stock in one of the companies, though outside shareholders could own equity in both, according to the 17-page proposal.

A Microsoft spokesman immediately characterized the recommendation as "extreme remedies that would hurt consumers and reduce innovations," according to wire reports.

Microsoft is due to file a reply to the court by May 10; the government will file again May 17, and Jackson has set a May 24 hearing in preparation for a ruling on what sanctions should be imposed on Microsoft. Jackson ruled April 3 that Microsoft violated U.S. antitrust laws. He is expected to rule on remedies sometime between June and October.

Microsoft has said it will appeal the ruling, which could keep the case in the courts for a year or longer. "In some ways, that appeals court ruling will make all of this moot," Gates said in an interview this week. Jackson has already been overruled once in the Microsoft case, when an appeals court in June 1998 overturned a preliminary injunction that ordered Microsoft to ship a version of Windows without a Web browser.

Gates says it's imperative the company remain together as it designs new products. "We wouldn't have Windows today if we hadn't had the Office and Windows groups in one company working on the user interface, working on the features," he says. "I would say the same thing about this next phase."

The government proposes that Microsoft be required to file a breakup plan within four months of Jackson's ruling, which would be implemented one year after all appeals in the case end. In addition, the Justice Department and the states asked Jackson to impose immediate restrictions on Microsoft's conduct, including disclosure of its Windows application program interfaces, and free PC makers to configure the startup screen of machines as they see fit.

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