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Judge Considers Three-Way Microsoft Split

A breakup of the software giant now looks likely, experts say.

By Jack McCarthy, PCWorld   

Following the day's hearings, legal experts and industry analysts noted that U.S. District Judge Thomas Penfield Jackson seems determined to make sure the software giant does not continue as one entity. In fact, the judge surprised many observers with his interest in a recommendation to split Microsoft into three companies instead of two as previously suggested by the U.S. Department of Justice (DOJ).

"It seems clear the judge was very supportive of the government's claims for a significant remedy," says Daniel Rubinfeld, a professor of law and economics at the University of California at Berkeley. "The talk now seems to be not whether there is a breakup, but what form it will take."

During Wednesday's hearing, Jackson told the DOJ to submit a revised remedy proposal by Friday that could involve the three-way breakup of Microsoft. Despite pleas from Microsoft's lawyer for more time, Jackson gave the software company 48 hours until Tuesday to file a response.

Jackson's Judgement

Jackson does not have to rely on recommendations of any of the parties in the antitrust lawsuit, and instead can use his own judgment to take whatever action he sees fit, Rubinfeld says.

"The judge's job is to find the best remedy that is appropriate in light of the harm caused," Rubinfeld says. "He could say he doesn't like any of the proposals [from the parties to the lawsuit]."

In fact, Jackson said he wondered why the DOJ had not recommended creating three instead of two new companies from Microsoft, saying the DOJ proposal might merely result in two separate monopolies.

One industry analyst says the separation of the software giant's Internet business would be a positive step toward ending Microsoft's monopoly.

"Microsoft ties their operating systems to Internet portals, so when they do business with content vendors like sports channels or tickets services, they would force them to use Microsoft NT servers and the like, and that confers a monopoly power," says Tony Picardi, an analyst with International Data Corp(IDC).

Strong Stance

By all accounts, Wednesday was not a good day for Microsoft. The company's stance of stiff opposition to all government claims in the antitrust case has resulted in little leeway from Jackson, one legal expert says.

"Microsoft is not buddy-buddy with Judge Jackson and the relationship hasn't warmed up over time," says Randal Picker, a law professor at the University of Chicago Law School. "There is something in their bones that prevents them from saying 'We'll do things like everybody else.'

Still, Picker says he is surprised with the judge's apparent willingness to split up the software giant into two or three companies. "It's fairly surprising," Picker says. "It [the breakup] is a strong remedy."