3-way split of Microsoft ruled out

Lawyers for the United States Department of Justice have stuck with their

plan to break up Microsoft into two companies. In their argument before Federal

Judge Thomas Penfield Jackson, they said a 3-way split would be disruptive to

the industry and potentially harmful to the interests of both Microsoft

shareholders and the overall economy.

Government lawyers did modify some of the terms of their original proposal,

including allowing all current Microsoft shareholders, except Bill Gates to own

stock in both companies. Previously, President Steve Ballmer and co-founder Paul

Allen had also been excluded from mutual ownership and involvement. Jackson

indicated he would render his final verdict within as little as one or two weeks

after giving Microsoft only until June 1 to respond to the latest government

mandate. Although the break-up of Microsoft could be announced as early as this

week, the break-up procedure will be on hold until Microsoft has exhausted the

legal Appeals process.

But Jackson also indicated he is likely send the case straight to the US

Supreme Court for review to help speed up the Appeals process. Already, the

latest developments in the antitrust case are having an impact on Microsoft,

which has canceled this week’s scheduled announcement of a major new long-term

operating systems strategy known as the "Next Generation Windows

Services" (NGWS) initiative. Until the case is legally concluded, Jackson

will order Microsoft to abide by a series of operating restrictions aimed at

curbing any further anti-competitive behavior as well as providing an incentive

to work out a settlement. Those restrictions will come into effect 90 days after

Jackson issues his judgement.

Microsoft is likely to ask the Appeals Court to suspend any of Jackson’s

temporary orders. The company is expected to argue that it was denied due

process when Jackson said last week that he would not provide the company an

opportunity for a new trial around the issue of whether a break-up is justified.

If Microsoft wins that part of the Appeals process, Jackson will have to allow

Microsoft to present evidence and testimony against the break-up. "We are

confident the law and the facts are on our side,'' said Microsoft spokesman Mark

Murray.

Government lawyers noted that to the very end, Microsoft kept up its phony

act. When Jackson asked Microsoft lawyers last week which witnesses the company

wanted to present at the subsequent break-up hearings the company had asked for,

Microsoft lawyers refused to provide any names. But just hours after Jackson

ruled that no such hearings would be held, Microsoft announced it had planned to

call on Bill Gates and Steve Ballmer to testify. Government lawyer David Boies

called Microsoft’s moves "a cynical ploy calculated to raise diversionary

issues. Microsoft was not forthright even at as late a stage as this week's

hearing." He added that if Gates and Ballmer had appeared as witnesses,

they would have been subject to cross examination and the government could have

obtained more e-mails and other materials they had written.