DoJ will demand breakup of Microsoft – report

But maybe Microsoft will agree...


Updated The Department of Justice has decided to push for the breakup of Microsoft, according to a report in today's edition of USA Today. According to the paper, which cites "sources," this represents a consensus view between the DoJ itself and the group of US states which is its partner in the antitrust action. The report was however hotly disputed by the DoJ later today. Or at least it was disputed to some, indeterminate extent. A DoJ spokeswoman said: "The story is inaccurate in several important respects. It does not accurately represent our views." Interesting this - by implication, she's suggesting it's not wholly inaccurate, and she's not specifying the areas of inaccuracy, either. Clearly the options floated in the story must have been, and quite possibly still are being, considered, and equally clearly there would have to be a lot more to any settlement. There's also the small matter of the settlement mediator being likely to go ballistic in the event of leaks. So maybe the denial isn't as solid as you might initially think. The DoJ and the states have tended to be at variance over the remedies that should be demanded. The DoJ made most of the running in the trial itself, with the states largely on the sidelines, but the states have been considerably more hawkish than the DoJ. Today's report suggests that they will now call for Microsoft to be broken into separate companies, one dealing with the Windows operating systems, and one with applications. If the DoJ has a view as to what should be done with Microsoft's Internet operations, however, that doesn't seem to have leaked yet. Structurally, if a breakup is deemed to be the best solution, the logical fault lines take Microsoft into three companies, OS, apps, and Web, not two, with Rick Belluzzo's Consumer Group looking like a natural third leg. If the DoJ really has firmed up on what it's going to demand, it may help push Microsoft closer to negotiating a settlement before the judge looses off his next volley. Microsoft isn't generally thought likely to agree to something as drastic as a breakup, but if you think about it, it's not entirely beyond the bounds of belief that the company could go for a simple split into two or maybe three operations. Other suggested remedies have been a lot more drastic. Forcing Microsoft into some kind of partial open sourcing solution whereby it had to freely license Windows and open up the code, for example, would be far nastier from the company's point of view. Nor would the nightmare scenario of setting up multiple Baby Bills, all competing with one another over Windows development, play well in Redmond. Microsoft has however been reorganising itself along lines that do seem to point to a split, with a platforms group running Windows, Business Productivity dealing with apps and Consumer handling Internet and general cheap stuff. Making these into separate companies needn't hurt too much, and could be seen as a bargain by Microsoft, if other remedies could be minimised. These other measures could include price controls, open pricing and discount schedules, and severe limitations on and scrutiny of Microsoft's contracts with the PC companies. Imposition of this kind of stuff would severely limit Microsoft's ability to operate (misbehave, as some might say) in the OEM market, so an attempt to trade off an apparently drastic breakup against these mightn't be entirely out of the question. ®


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