MICROSOFT: BOTH SHOES DROP - MAYBE!

In the long expected, but still traumatic ruling, Federal Court Judge Thomas Penfield Jackson at 4:30 p.m. on Wed. June 7, ordered the breakup of Microsoft into two companies, one owning the operating systems, and the other applications and everything else.

At the heart of Judge Jackson's decision is not only the conclusion that the company has acted in anti-competitive fashion in its bundling of its products, but the more subtle finding which underlies the decision that Microsoft has operated in an extremely arrogant fashion from the beginning. Arrogance seems to be imbedded in the company's culture, and might even be perceived as an extension of the Gates personality as well as top management.

The arrogance factor is also demonstrated in the court's finding that there is credible evidence on the record to suggest that Microsoft continues to do business as it has in the past which suggests clearly that it will continue to operate in an "anti-competitive" fashion in violation of the nation's antitrust laws.

Despite these findings it is by no means certain that Microsoft can or will be broken up, since the appellate process has a significant potential to set aside the court's ruling. Judge Jackson apparently observed in non-record comments to media that he hoped the litigation could yet be settled, a remarkable observation, with significance to the appeal.

The government will seek to directly appeal the case to the Supreme Court, while Microsoft will seek to bring the matter before the U.S. Court of Appeals. The U.S. Court of Appeals has differed extensively with Judge Jackson in its view as to the legality of bundling products. Indeed, Jackson himself appeared more interested in seeing the matter appealed directly to the Supreme Court.

The breakup plan is stayed pending the appellate process, but restrictions on Microsoft's conduct are effective immediately. Microsoft will inevitably seek to have those restrictions stayed along with the other break-up elements of the decision.

Without a stay Microsoft must begin compliance with restrictions by September 7 and submit a breakup plan by October 7.

On balance, Microsoft critics are delighted, and its supporters largely silent. However the war is far from over although the continued pendancy of the battle will certainly have a significant impact on the ongoing revolution of technology. The environment is so dynamic that this battle may divert Microsoft's attention (and its people) to an extent that it threatens the company's ability to compete effectively. This is an odd consequence of an anti-competitive law suit which argues that it needs a break-up to restore competition in the market place.