Proposal calls for Microsoft breakup; U.S., most states back plan after restrictions on company are added; Antitrust suit


WASHINGTON -- The state and federal governments that are partners in the antitrust lawsuit against Microsoft Corp. agreed yesterday to file a joint proposal on remedies in the case and back a plan to break Microsoft into two companies, officials said.

The joint state-federal plan calls for breaking Microsoft roughly in half. One-half would be the operating system company, the other would hold everything else, including Microsoft's applications software, such as the word processor Word and spreadsheet program Excel, and Internet properties.

The joint proposal had been in doubt earlier in the day but by evening it included elements that state officials had proposed to strengthen interim restrictions on Microsoft's conduct.

A federal official said the states had made useful suggestions "that have been incorporated in the draft." Some details were being negotiated.

A state official said that a majority of the 19 state's attorneys general involved had signed on to the plan but that a few holdouts remained.

Some were saying they may file minority opinions -- something the trial judge, Thomas Penfield Jackson, has said he does not want. But with a deadline tomorrow for the proposal to be filed with Jackson, some may be persuaded to join the majority.

A state official said remarks by Microsoft's leaders again helped harden opinions among some attorneys general and rallied support around the breakup plan. Bill Gates, Microsoft's chairman, went further this week than other company executives have in defending Microsoft's conduct, which Jackson called "predatory" and illegal in his ruling this month.

In an interview on the public television program "Nightly Business Report," on Tuesday, Gates said, "It's important to understand that Microsoft is very clear that it has done absolutely nothing wrong."

The state official said "the text of Bill Gates' remarks has been carefully read today, and he makes it hard for people to be trusting." But Microsoft asserts that it has every right to state its convictions. Since it is likely that a breakup plan, if approved by the judge, would be stayed during legal appeals, the proposal includes a range of interim restrictions on Microsoft's conduct.

Among them are a plan to publish a uniform price list for Windows and to give companies free access to the software interface codes for Windows.

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