A rchive Date
[ 24-05-2000 ]
Category
[ International Relations ]
sub-Categoy
[ U.S ]
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[Microsoft Verdict
Microsoft three-way split seen as unlikely
Wednesday, May 24, 2000
The Outcome
Microsoft to appeal antitrust verdict
SAN FRANCISCO, May 24 (Reuters) - Judge Thomas Penfield Jackson stunned courtroom observers on Wednesday by suggesting that it might not be enough to split Microsoft Corp. (MSFT-O ) into two parts, and that a three-way division could be required in the landmark anti-trust case.
But industry and legal sources said that such a move would be unlikely, since it would require the software giant to set up a stand-alone browser company whose prospects would be doubtful. In addition, the judge is not likely to override the government prosecutor's extensive work in proposing a remedy involving a two-way split.
Jackson ruled last March that Microsoft abused its monopoly power and he is now considering the government's breakup plan, along with other alternatives remedies. The judge can propose his own plan or follow the prosecutors' proposal.
"Perhaps what he was signalling that he is ready to accept a breakup," said Jonathan Baker, a law professor at American University and a former Federal Trade Commission chief economist.
During the hearing, though, Jackson criticised the government proposal to separate Microsoft into an operating system company and application software company, saying, "A bisection will in effect create two separate monopolies."
He cited as an "excellent brief" a 65-page friend-of-the-court filing submitted by the Software and Information Industry Association in February calling for the browser business to be separated as well. That proposal led to Microsoft quitting as a longtime member of the trade group in protest.
But the Industry group's proposal had been considered a more draconian solution, and the government said in the hearings that it had avoided that solution because such a plan might not work.
"It's completely nonsensical from a business and a technology perspective," agreed Harry Fenick, an industry analyst with Zona Research. "There is no business model for a browser as a standalone entity."
Fenick said that the browser company, severed from Microsoft, would be "forced out of business."
The browser, the essential piece of software for navigating on the Internet, is central to the Microsoft case. Microsoft launched its Internet Explorer browser and overtook the Netscape's Navigator as the industry leader, allegedly by using its monopoly position.
But in the fierce competition, Netscape and Microsoft both have struggled to make their browser units profitable, since the software is mostly given away free or at very low cost.
The struggling Netscape was acquired by America Online Inc (AOL-N ) last year, as its market share dwindled under the Microsoft assault. Putting Internet Explorer into its own unit, Fenick said, would almost immediately turn AOL into the dominant Internet software provider.
Analysts saw the day's proceedings as reinforcing the view that the breakup would be ordered by Jackson, possibly early next week, leading to a quick appeal by Microsoft. Jackson denied Microsoft's motions for more hearings and put the final proceedings on a fast track toward conclusion. "I don't think anybody would be shocked if Jackson ordered a breakup," said Zona's Fenick.
 World Fact Book (CIA)]
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