US Judge orders split of Microsoft

The Microsoft case is one of the biggest antitrust battles in history, often compared with the breakup of oil baron John D Rockefeller’s Standard Oil in 1911. Judge Jackson said one of the new Microsoft companies would develop and sell operating systems such as Windows for personal computers and the other would own Microsoft’s remaining software and online businesses.

"Microsoft, as it is presently organised and led, is unwilling to accept the notion that it broke the law or accede to an order amending its conduct," Jackson said in his 23-page remedy order. Microsoft’s stock, which had closed up 7/8 at 70-1/2 on the Nasdaq market, was halted in after-hours trading following the judge’s order.

Microsoft Chairman Bill Gates said immediately after the ruling that, as expected, the company would appeal. "We have a very strong appeal," Gates said. Since its 1975 founding, Microsoft has grown to become the world’s most valuable software company with annual revenues of over $20 billion a year. It has made chairman Bill Gates one of the world’s richest men and helped keep the United States at the forefront of the digital age.

With 60 foreign offices and its software used from Argentina to Zimbabwe, a breakup would eventually affect computer users worldwide. The US Justice Department and 17 of the states that sued Microsoft proposed the split after Jackson concluded April 3 that the firm broke US Antitrust law.

The government says that splitting Microsoft would prevent the Windows system, that runs on over 80 percent of personal computers, from being used to force companies and consumers to use other Microsoft products.

Cleaving the company in two could also encourage development of alternative operating systems and prompt versions of programmes like Microsoft Office to run on those systems.

Microsoft, which expects to win on appeal, says a breakup would harm consumers by preventing it from developing integrated products. The firm also says it would damage employee moral and hurt investors.

The US Justice Department and 20 states brought the case against Microsoft in May 1998, accusing the software giant of using its monopoly in the Windows personal computer operating system to leverage market share for its Internet browser software.

The trial began Oct 19, 1998, featuring efforts by the government to contrast company emails with the videotaped testimony of Gates. In November last year, Jackson found Microsoft had monopoly power in the market for personal computer operating systems and had used that dominance to harm consumers and other companies. Efforts to settle the case using a special mediator proved fruitless and Jackson ruled April 3 that Microsoft had broken the law.

Microsoft’s appeal could bypass the normal appeals court process and go straight to the Supreme Court under a mechanism available in major antitrust cases. But several legal experts said they believed the high court would decline to receive the case on an expedited basis.

It appears unlikely the case will be fully resolved before swearing in of a new president in January – either Republican George W Bush or Democrat Al Gore. There is speculation in Washington that Bush would be more sceptical of the government case.