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To: Daniel Schuh who wrote (23974)	5/27/2000 3:15:00 PM
From: Exciton	Read Replies (1) \| Respond to of 24154

Thread: Might MSFT break itself up before the USG does? Although I am philosophically opposed to the kind of market intervention undertaken in this case by the Justice Department, I think that the landscape of MSFTs market has changed so much since the beginning of the trial, that it might actually be in MSFT's best interest to break itself up. It seems to me that the tremendous leverage that the Windows platform has given MSFT is peaking as consumers and business have now either standardized on the platform or if they haven't by now, probably aren't going to. There, of course, is the continual upgrade cycle, but that may not be enough to achieve the kind of growth rates that MSFT and its shareholders are accustomed to. If MSFT broke itself up, before Uncle Sam gets the chance, it could do it on its own terms. A breakup into an operating systems and an applications company would free up the applications developers to develop innovative applications for multiple new platforms perhaps spurring the company on to new heights. I wonder if MSFT is red/blue teaming such a scenario at this moment. It would also be very satisfying to see MSFT just announce that such a proposal would be considered at the next stockholders meeting without even vetting it with the Justice Department. What would Justice do? Tell them they aren't allowed to break up?

To: Daniel Schuh who wrote (23974)	5/27/2000 3:29:00 PM
From: Harvey Allen	Respond to of 24154

>``Microsoft has held that 1998 appeals court decision up during this entire proceeding like a `Get Out of Jail Free' card,'' U.S. sticks to its guns on Microsoft breakup BY DAVID L. WILSON Mercury News WASHINGTON -- In what is likely to be their last filing before the judge who will decide whether to break up Microsoft, government lawyers Friday stuck with their original proposal to split the software giant into two parts. Under the government plan, one company would sell Microsoft's operating system -- the source of Microsoft's power -- and the other would sell everything else, including the Internet Explorer Web browsing software. This latest filing comes two days after oral arguments on proposed remedies, during which Judge Thomas Penfield Jackson praised a friend-of-the-court brief that suggested breaking up Microsoft into three companies, with the third company selling the Web browser. The government had actually considered submitting such a plan, but lead attorney David Boies told Jackson the government team had settled on a two-way split as the least complicated way of restoring competition to the operating system market. Government lawyers, who were given two days to revise their proposal when Jackson adjourned Wednesday, interpreted his directive -- ``present a clean copy of a form of final judgment that reflects today's proceedings'' -- as an order to leave their basic proposal intact. Jackson can completely accept the government's breakup plan, tinker with it, accept Microsoft's proposed remedies, or submit his own remedy. No one knows what he will do or when he will do it, though Jackson does seem to be leaning toward a breakup of some kind, and his decision could come as early as Thursday. The government's filing on Friday reflects how the trial has gotten progressively more venomous. In a memorandum accompanying the latest breakup proposal, government lawyers denounced the company's trial behavior, declaring, ``Microsoft has not been forthright.'' The criticism addressed complaints by Microsoft that Jackson was unfair to the company by refusing to hold what would basically be a separate trial on the breakup issue. Jackson declared the trial all but over on Wednesday, saying there would be no more hearings. The official statement by the government that it believes Microsoft has essentially lied to the court is unusually venomous for a filing of this nature, but that reflects a process in which neither side can find common ground. ``We think that statement by the government is a little disingenuous,'' said an apparently angry Jim Cullinan, a Microsoft spokesman. Speaking of the government's proposal to break the company up, he said, ``It is clear that this remedy is extreme. We believe we needed additional time to come up with the necessary information to give the court before deciding on the remedy.'' Jackson found that Microsoft has monopoly power in the market for personal computer operating systems, and had illegally used that power to attack other companies, thereby stifling competition and harming consumers. Microsoft insists that it is a tough but fair competitor, does not have monopoly power, and has not violated antitrust law. If it has broken the law, company lawyers say, the proper remedy would be minor restrictions on the company's behavior, not a breakup. The government has dismissed Microsoft's proposed ``conduct remedies,'' arguing that only a structural remedy like a breakup will be effective and enforceable. Jackson himself seems to view the remedy phase as something of a distraction. Indeed, Jackson asked Boies on Wednesday if Jackson could simply ask for an appellate review of his conclusion that Microsoft is a predacious monopolist that has violated antitrust law. Boies had to refer to a law book to say that an appeal can only proceed once Jackson has completed the trial, which can't happen until he decides on an appropriate remedy. Any decision to break up the company wouldn't go into effect until after an appeal. Under antitrust law, the appeals process could start directly with the Supreme Court -- skipping over the Court of Appeals, which is normally the first stop -- though there's no indication of whether that will actually happen. Any appellate review body could conceivably approve of Jackson's trial work, but bounce it back to him for a full examination of possible remedies. The judge appears to be eager for an appellate review of his work thus far, at least in part because of a 1998 decision by a three-judge appeals panel in a related Microsoft case that struck down a judge's decision that the company couldn't ``weld'' its Web browser to the operating system. The judge in that case? Jackson. ``Microsoft has held that 1998 appeals court decision up during this entire proceeding like a `Get Out of Jail Free' card,'' said one individual who has worked with the government on the case and agreed to comment on condition of anonymity. ``They have not taken Jackson or the government seriously, and they are convinced they're going to win on appeal. Jackson may want rapid review of his conclusions of law just to get Microsoft to accept the fact that they've broken the law.'' Rich Gray, an antitrust lawyer with Outside General Counsel Silicon Valley who has been following the case closely, said the company has clearly angered Jackson with its behavior. ``I think he's convinced Microsoft still doesn't get it.'' Gray was particularly critical of the company's high-profile public relations campaign that sings the company's praises. ``In words and in style, they're saying there's no legitimacy to what's been happening in Judge Jackson's court. That's got to grate on him. And they're going to reap the whirlwind.'' sjmercury.com