Final filing urges split of Microsoft


WASHINGTON - The Justice Department and 17 states renewed their request to break Microsoft Corp. into two new companies yesterday, leaving to a federal judge the option of taking a different approach if he wishes.

Federal and state government lawyers kept intact their two-company version of a divided Microsoft as they made their final filing before U.S. District Judge Thomas Penfield Jackson hands down a remedy for antitrust violations by the software giant.

Though Judge Jackson made clear Wednesday that he was impressed by a suggestion from Microsoft's industry rivals that three new companies, not two, be carved out of the company, the government lawyers' last proposal made no mention of that idea.

Justice Department officials who worked on the plan were not available to explain it. The final version proposed no major changes in the breakup plan the governments had filed a month ago.

The judge, however, retains full control of the details of a final order against Microsoft. He could revise the governments' proposal in any way he thinks necessary to bolster competition in the software industry.

Jackson will finish writing his order next week, after Microsoft files its response Wednesday to the governments' proposed "final judgment" that would bring to a close the 2-year-old antitrust case.

If the judge makes no major modifications in the suggested order given to him yesterday, he could have his final order written by the end of the week. He has made it clear that he wants to move rapidly, setting an early stage for Microsoft's challenges on appeal. The appeals process could last months, perhaps going directly to the Supreme Court, and any breakup would be postponed in the meantime.

The judge has ruled that Microsoft violated federal antitrust law by misusing its monopoly over its Windows operating systems for personal computers. The company used that dominance, Jackson found, to try to kill off competing operating systems - actual or potential - and to try to gain a dominant position in the market for Web browsers.

The judge will now fashion a remedy that he thinks will stop anti-competitive behavior by Microsoft and create opportunities for rivals to compete effectively with Microsoft.

So far, Jackson has not said explicitly that one way to achieve both goals is to split up Microsoft. But he has appeared to be leaning strongly toward that step as the main remedy, coupled with a strict regimen of controls on how the two new companies could deal with each other and with competitors.

If the judge imposes a breakup plan, he has before him three suggested scenarios:

The governments' proposal for two new companies: one to have the Windows operating system, and a second to have everything else - including the Internet Explorer browser and all of Microsoft's other software programs.

A proposal by Microsoft's rivals for three new companies: one with Windows, one with the Explorer browser and one with the remaining software.

A proposal by several economists for four companies: the existing Microsoft, but without any of its Windows operating system software, and three identical companies, each of which would own and sell Windows products.

The judge mentioned on Wednesday the objections of the Microsoft rivals and the economists to a two-company division but did not rule out endorsing that approach.

The Justice Department and the states, in their final filing, lambasted Microsoft for waiting until the last minute Wednesday to detail its proposal for a prolonged review by Jackson of the remedy alternatives. That was a "cynical ploy," the governments said, to raise new issues for its appeal.

Microsoft did not respond to that new accusation but expressed its confidence that it would win an appeal.

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