From the WSJ:
November 10, 1999
Breaking Up Can Be Hard to Do:
Outsiders Regard Microsoft's Options
By JOHN R. WILKE and DAVID BANK
Staff Reporters of THE WALL STREET JOURNAL
It was 1981, and in the historic antitrust case of the moment, a federal
judge in Washington issued a preliminary ruling signaling that the defendant
would lose. Shortly after Harold Greene's ruling, AT&T Corp. offered to
settle, and eventually agreed to break itself apart.
In the very same courthouse last week,
Microsoft Corp. suffered a blow when Judge
Thomas Penfield Jackson found the software
giant to be a predatory monopolist. So now
what should Microsoft and the government do?
The Wall Street Journal asked executives, lawmakers and lawyers what a
settlement -- or a court-ordered remedy -- might look like. The Justice
Department says it isn't ruling anything out; some states say they may seek
a breakup. Microsoft officials themselves reject such talk and say it's
premature to propose remedies before a final ruling.
Eric Schmidt, chief executive of Novell Inc., doesn't like his rival's business
practices, but doesn't like the idea of an AT&T-style breakup of
Microsoft, either.
"The likely consequence is a lot of confusion," he says. "And there is
nothing in either the law or the facts of the case to justify it. A lot of people
want to use the court case to drive Microsoft into the ground."
Instead, he says, Microsoft should be forced to publish all of the
specifications for the inner workings of its software, known as applications
programming interface, or APIs. He also thinks Microsoft should be
required to have consistent published prices and terms for its software -- in
contrast to the secret individual deals it now makes with companies that
pre-load Windows on PCs.
Sam Miller says Microsoft should indeed split itself up. "I'm not an
advocate of the government's imposing a breakup," says Mr. Miller, who
would have been the government's lead counsel had an earlier Microsoft
antitrust investigation gone to trial. (That case was settled in 1995). "But if
Bill Gates decides to do it, that would be a different matter."
Mr. Miller favors a division between the Windows division, the
applications group, and Microsoft's Internet or "services" unit. A
stand-alone Windows company would have incentives to make some of its
technical details openly available to outside software makers, for one thing.
Courts have been loathe to order corporate breakups, Mr. Miller says.
"General Electric was found to have monopolized the light-bulb market for
decades. The government sought a breakup. The district court said, in
effect, 'Though I could do this, I'm not going to.' "
Barney Frank, the veteran Democratic congressman from Massachusetts
and a member of the House Judiciary Committee, says the penalty need
not be so Draconian.
"Breaking them up would be a great mistake,
and unduly disruptive," he says. "The remedy
ought to be tied to what they did. They ought
to be required to untie the Internet browser,
for one thing, and then have other restrictions placed on their conduct, such
as not being allowed to use different pricing to punish or reward PC
makers -- something that the judge clearly highlighted in his ruling."
Reed Hundt thinks the idea of Microsoft's offering to break itself up might
make sense.
The former Federal Communications Commission chairman, who is now a
senior advisor at consultants McKinsey & Co., is also a director of Novell
Inc., a Microsoft rival. He envisions that a negotiated breakup of Microsoft
might originate with the company and its own desire to streamline
operations. "There are breakups of Microsoft that could greatly increase
shareholder value -- and not disturb the operating-system monopoly," Mr.
Hundt says. "I can imagine Microsoft proposing such plans."
Richard Stallman, an advocate of free software for most of the 1990s,
helped lay the groundwork for the current popularity of the free Linux
operating system.
He suggests making all of Microsoft's proprietary protocols and
specifications public, and says Microsoft should be restricted in its use of
patent litigation.
Last year, leaked internal Microsoft documents described the growing
threat of Linux, and said Microsoft could use proprietary protocols and
patent litigation to fight Linux. The best way to make sure that free
software can compete with Microsoft, says Mr. Stallman, "is to remove the
weapons the company has talked about using against us."
James Barksdale, who led Netscape Communications during Microsoft's
attack on its Web-browser business, has been consistent about what he
thinks should be done to the software giant since he testified as the first
government witness in the antitrust trial: a break up. "I am more adamant
now than when I testified," Mr. Barksdale says. "A structural remedy is
most workable."
He sees three lesser Microsofts -- an operating system company, a maker
of applications programs and a services company. Most other solutions
would require more continuing government oversight of Microsoft, he
argues.
Mr. Barksdale, who still professes to be an admirer of Microsoft
co-founder Bill Gates, sees positive prospects for a divided Microsoft
based on the past history of U.S. oil companies and AT&T. "A breakup is
not necessarily bad for Microsoft," Mr. Barksdale says. "The companies
that have been broken up in the past have done better for their
shareholders."
--Don Clark and Lee Gomes contributed to this story. |
