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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: PMS Witch who wrote (43291)	4/25/2000 1:24:00 AM
From: Jacob Snyder	Read Replies (2) \| Respond to of 74651

White House Will Be Briefed On Plan to Break Up Microsoft By BOB DAVIS and TED BRIDIS Staff Reporters of THE WALL STREET JOURNAL April 25, 2000 WASHINGTON -- Top Justice Department antitrust officials plan to brief the White House Tuesday on their proposal to divide Microsoft Corp. into different parts as a way to foster competition in the high-technology industry. A White House spokesman described the briefing as "informational" only and said he didn't expect administration officials would try to reshape the proposed remedy. Nevertheless, the development represents the first time the White House has been directly involved in the Microsoft litigation since White House analysts last year reviewed the case's economic significance. The White House has taken a hands-off stance because it was generally convinced that the Justice Department was acting in an economically responsible fashion and because the White House didn't want to be accused of interfering politically. Antitrust chief Joel Klein will lead the briefing, which will include Treasury Secretary Lawrence Summers, National Economic Council Director Gene Sperling and Chairman of the Council of Economic Advisers Martin Baily, along with White House lawyers. Neither President Clinton nor Vice President Al Gore will take part in the meeting. Mr. Gore, in particular, has kept his distance from the case, which divides his supporters in the high-technology industry. The White House hasn't determined whether it should undertake another review of the economic consequences in light of the latest proposal. A second review is unlikely because the Justice Department and states must file their recommendations on Friday with the judge overseeing the case. A Stand-Alone Office Company The federal proposal would carve the software concern into two companies, one that sells Microsoft's dominant Windows operating system and another that sells its widely used Office software. A stand-alone Office company would be inclined to create versions of its products for computers that aren't using Windows, officials believe. That would eliminate a central hurdle -- known in antitrust circles as the "applications barrier to entry" -- to the success of fledgling operating systems, such as Linux, or BeOS from Be Inc., federal officials believe. Microsoft blasted the proposal Monday. State attorneys general from the 19 states involved in the case debated the merits of the plan for the first time in a conference call Monday, participants said. The proposal marks a shift by Mr. Klein, the antitrust chief, who during earlier settlement talks didn't push aggressively for sanctions that included a breakup. Mr. Klein first notified states about the remedy proposal in a conference call after financial markets closed Thursday for the holiday weekend, then faxed supporting paperwork Friday. Some states previously discussed similar sanctions. Government officials acknowledge that such a remedy would be imposed only if U.S. District Judge Thomas Penfield Jackson agrees -- and only after a U.S. appeals-court review, which could take years. They are optimistic that some restrictions on Microsoft's business practices, such as limits on ways the company prices Windows for computer makers, could take effect sooner. Fears of Breakup, Slower Profit Growth Send Stock of Microsoft Down by 16% For the Chinese Government, Linux Is Microsoft Surrogate "No irreversible measure will be put in place until after all the appeals are done," said William Kovacic, an antitrust expert at George Washington University here who has followed the case closely. "The timetable for a breakup, if it's approved, is 2001 at the earliest, and more likely in the middle of 2002." Microsoft Blasts the Proposal Microsoft spokesman Mark Murray said the government's proposal about Office "seems to come out of left field. "If these leaks and rumors are accurate, this would represent radical and extreme government regulation of one of the most dynamic and competitive industries in the world," he said. "We don't believe there is anything in the case that would support the dismemberment of Microsoft or the other excessive actions the government is rumored to be considering." Microsoft's shares dropped sharply on the news about its court case and on investor fears that earnings growth is slowing. The stock fell $12.3125, or 16%, to $66.625 in 4 p.m. trading Monday on the Nasdaq Stock Market. Microsoft's Office suite, which includes programs for word processing, spreadsheets and e-mail, wasn't a central focus of the 77-day trial. Government lawyers said the problems facing rival operating systems -- such as the ill-fated OS/2 of International Business Machines Corp. -- stemmed from a lack of software applications available to run on them. Microsoft's formal response to the government's final proposal may delay the case further. Judge Jackson has set a rapid schedule to decide on remedies to apply against Microsoft, but the company's lawyers have told the judge privately they almost certainly will argue for a full hearing -- complete with exhibits, witnesses and cross-examinations -- that would take months. Microsoft's lawyers indicated they would agree to an expedited process only if the government were to propose narrow restrictions on its business practices related to its Internet-browser software and Windows 98, its current consumer-level operating system that within months will be succeeded by a new version. "Microsoft may have a good argument, saying you need expert economic opinion on the effect of such an order" involving an Office breakup, said Marc Schildkraut, a Washington antitrust lawyer who predicted the judge will reject such a request. Judge Jackson "thinks these things need to be moved along as quickly as possible," he said, adding: "At the end of the day, if you don't do it right, it just gets bounced back into your own backyard."