EDITORIAL : THE MICROSOFT PROBLEM; REMEDIES FOR ITS MONOPOLISTIC PRACTICES NEED TO BE CAREFULLY THOUGHT OUT.

NOW that a federal judge has ruled that Microsoft and Godzilla are one and the same, is the world as we know it about to end?

Is Bill Gates in need of a rebate from his philanthropic foundations?

Ironically, the marketplace may be the final arbiter in the case. And hang on to your stocks - the breakup of Microsoft is anything but inevitable.

U.S. District Judge Thomas Penfield Jackson's 207-page ruling issued on Friday was an epic antitrust ruling, shocking everyone, including Microsoft.

Jackson all but branded Microsoft the evil empire. In a harsh indictment of its business practices, he ruled the company stomped on its competitors, stifled innovation and hurt consumers by limiting their choices and charging them unfair prices.

The ruling was the first phase of a lengthy court process that started two years ago.

And even though both sides hinted in talk show appearances and in newspaper ads over the weekend that a settlement is possible, the case could drag on for months or years to come.

But the Internet isn't waiting for government intervention to power ahead with dramatic changes challenging Microsoft where it hurts: software as Web-based services, not programs that come in a box.

Even before the ruling was issued, the case forced Microsoft to reprogram its more aggressive tactics, such as dropping plans to implement an automatic sign-up to Hotmail e-mail for Windows 98 purchasers.

In short, the penalty will not be as easy for the judge to resolve as the crime.

Acting with a heavy hand could seriously impact the market where Microsoft is the world's largest company in terms of market capitalization. It is listed on the Nasdaq, and since last week, has been a component of the Dow. Its drop Monday was equivalent to a loss of about 15 points for the Dow.

People who hate the competition-smashing gorilla also hate the idea of government intervening and quashing innovation rather than promoting it.

Years ago, the government sued IBM in an antitrust case, and by the time the case worked its way through the courts, it was dropped because competition caught up.

And on the Internet, competition is quickly catching up with Microsoft. In the end, the antitrust case may prove irrelevant.

Whatever else happens, the Justice Department should proceed cautiously in seeking remedies. A stiff penalty that ends up eroding the Internet, sapping the strength of the nation's high-tech industry and stifling startup ventures would be worse than Godzilla itself.