Supporters, Oponents Fired Up Over Microsoft Breakup Order
5:45 PM EDT Wed. Jun. 07, 2000
From the June 07, 2000 issue of VARBusiness
U.S. District Judge Thomas Penfield Jackson, ruling in the Department of Justice's ongoing antitrust case against Microsoft, closely followed recommendations made by the government and 17 states, calling for a two-way breakup of the software firm.
The judge also harshly criticized the software company for closing out its competition in the high-tech sector, despite Microsoft's assertions that no antitrust laws were broken.
"Following a full trial Microsoft has been found guilty of antitrust violations, notwithstanding its protests to this day that it has committed none," wrote Judge Jackson in Memorandum and Order. "The Court is convinced for several reasons that a final - and appealable - judgment should be entered quickly. It has also reluctantly come to the conclusion, for the same reasons, that a structural remedy has become imperative: Microsoft as it is presently organized and led is unwilling to accept the notion that it broke the law or accede to an order amending its conduct."
The ruling came one day after Microsoft filed its response to the Justice Department's plan to divide the corporation into two companies. Microsoft Chairman Bill gates in a videotaped statement said the company would appeal the decision and said, "this is the beginning of a new chapter in this case."
Among the key points in Jackson's ruling:
As part of the ruling, Microsoft will have 90 days to establish an internal compliance committee (with no less than three members of the Board of Directors who are not present or former employees of Microsoft) and hire a chief compliance officer to develop and supervise internal programs to ensure compliance with the antitrust laws and the judgment.
Last week, Judge Jackson extended the case, giving both parties the chance to file additional briefs after government attorneys said they wanted to respond points Microsoft had made about government's recommendations to split up the software giant. In its most recent brief, filed Tuesday afternoon, Microsoft called the most recent changes made by the Department of Justice to its filing "cosmetic."
Cosmetic or not, the definitive decision to break-up the company was not made in a vacuum. In addition to the U.S. government, 19 states, plus the District of Columbia, aligned against Microsoft. Wayne Klein, assistant attorney general for the State of Utah, home to Caldera, the then WordPerfect Corp., and other software concerns hurt by Microsoft's behavior, was one of several point people actively involved in the case. One-quarter of his time over the past two years has been devoted to the case.
"Did the decision go far enough? We'll know in two years," he says. "Remember, this is not about punishing Microsoft, but rather a remedy to prevent any one company from illegally controlling software again."
Klein concedes that it could be a decade or more before the world will know if the Judge's decision, should it be adopted, was ultimately correct. Klein says prices have certainly come down in the past few years while choices for consumers have gone up. But we could be in a better position today had Microsoft not controlled so much, he added.
Microsoft, he pointed out, lost the case on points of law, but wasn't helped by some of its behavior during the legal proceedings. The company demonstrated a "hautiness" and "hubris," he said that ultimately did not serve it well.
Web integrators and solution providers were mixed in their reaction to the Microsoft breakup decision, with many foreseeing little immediate impact to their overall businesses.
Mike Szot, president-elect of the Association of Microsoft Solution Providers, and president of CGS Computer Associates, Inc., expects the case to go to appeal. He is expecting no adverse effect on his business--many clients, he adds, are asking for help with Windows 2000 pilot projects--and ultimately, a Microsoft victory. Clients want a cross platform solution and no one else offers as broad a suite of products, he says.
"It could be tied up for years and that bodes well for Microsoft to ultimately prevail," says Szot.
In the near term, Szot says the decision could have an impact on the upcoming president election. "Bush has a free ride on this one while Gore will have to live with hundreds of thousands of angry people whose livelihood is tied to Microsoft."
"It's probably not going to be good for business because it's going to complicate matters," said Leon McDowell, co-founder of Dataforge.net, a Houston-based Web integrator and Microsoft solution provider. "But my opinion is they sort of did it to themselves with some of their practices. The fact that they were overly aggressive got them into trouble." McDowell said he is waiting to see precisely what the breakup would mean--and how "clean" the break between operating systems and applications parts of Microsoft's business will tun out to be--before assessing what the impact will be on his own Web development business.
"We tend to work on the operating system and development side, so if it splits fairly clean, it would probably be okay," McDowell said. "Most of our customers are small, so they won't be affected."
Stephanie Trevino, an executive with Broadreach Consulting, Raleigh, N.C., said many of her end users benefit from the integrated approach Microsoft brings to the software industry. "Being a consulting firm, we have to stay vendor-neutral," Trevino said. "But a lot of my core business in [Web] infrastructure is Microsoft and Cisco. I'm not getting a reading from my clients that [the breakup] is going to have a large impact. But it helps a lot of these businesses so much just to have that level of [software] integration. And from the training perspective, it's easy to train an end user [because interfaces are similar]. I guess nobody believes [the breakup] is going to come to fruition."
Investors, apparently, see it that way. Although the company's stock has taken a beating in recent weeks, Microsoft stock closed Wednesday on a positive note, up a little more than a point to $70.50 per share.
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