http://www.infobeat.com/stories/cgi/story.cgi?id=2556619927-079 03:47 PM ET 10/16/98 Microsoft trial revives prospect of forced breakup (Stands for INTERNET-MICROSOFT on Bizschedule) By Martin Wolk SEATTLE (Reuters) - The beginning of the government's landmark antitrust trial against Microsoft Corp. Monday raises the prospect that if the government wins it could seek the ultimate remedy of breaking up the software giant While that is still little more than a remote possibility, the trial has revived discussion of what would happen if the government won and sought the ultimate remedy of a court-ordered breakup. ``I think that the chances of a court ultimately imposing a structural breakup are less than one in five, but the consequences would be so severe the company has to take it very seriously,'' said William Kovacic, an antitrust specialist at George Washington University Law School. The U.S. Justice Department and 20 states have brought the suit against Microsoft, accusing it of using its monopoly in operating software for personal computers to to muscle aside its competition in other areas. Clearly Microsoft executives, including founder and Chairman Bill Gates, expect to win the case, and the company's defenders dismiss the idea of an AT&T Corp.-style breakup as wishful thinking by leaders of rival companies such as Oracle Corp. and Netscape Communications Corp. ``Any court is going to have a hard time breaking up the second-largest company in the country (by market capitalization) and one of the truly phenomenal success stories of the past 20 years,'' said Rick Rule, an adviser to Microsoft and former chief of the Justice Department's antitrust division. ``I just don't think it's in the cards.'' Advocates of a breakup were heartened, however, by one of the government's final pretrial filings, in which regulators said that if they prevailed at trial they would seek a further hearing to determine ``additional permanent relief as is necessary to restore competitive conditions.'' Any order to break up Microsoft would depend on the government not just winning at trial but winning big, said Kovacic, because a judge would not act unless persuaded that Microsoft was clearly predatory and that the need for a breakup outweighed any possible harm to market efficiencies. Current Justice Department antitrust chief Joel Klein would have to be certain of political support if he were to go ''nuclear'' and seek a breakup, said Kovacic. ``That's why you're seeing both sides fighting this case in venues far outside the courtroom,'' he said. Many economists believe the idea of a breakup founders on the question of just how to divide Microsoft, which has few physical assets, unlike previous antitrust targets that have been split, such as Standard Oil and AT&T. ``I can't see any logical breakup lines,'' said Kenneth Arrow, a Stanford University economist and Nobel laureate. The traditional argument of Microsoft opponents has been that the company should be split in two, with one unit for operating systems and the other for applications and content. Microsoft internally is organized around these two broad businesses, each of which accounted for roughly half the company's $14.5 billion in revenue in its latest fiscal year. But the operating system company would retain its iron grip over the industry by providing the essential software for more than 90 percent of the world's new personal computers, and the applications company would start life with a similar share of the lucrative market for basic business software. An emerging theory holds that the government should break Microsoft into two or more ``Baby Bills,'' each of which would get the right to market -- and presumably modify -- Microsoft's core Windows operating systems. But that raises a host of new questions, including how to divide the ``human capital'' of 27,000 software engineers, programmers, researchers and other employees. Federal antitrust regulators considered but rejected the idea of seeking a breakup of Microsoft in the early 1990s, settling instead for a narrowly fashioned 1995 consent decree that was denounced widely as ineffective. ``It's hard to conceive of what the solution is,'' said Kovacic. ``And this is the DOJ's dilemma. I'm not sure they know what to do.'' ^REUTERS@ ____________________________________________________________________ -------------------------------------------------------------------- Join The Web Consultants Association : Register on our web site Now Web Consultants Web Site : http://just4u.com/webconsultants If you lose the instructions All subscription/unsubscribing can be done directly from our website for all our lists. ---------------------------------------------------------------------
