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Microsoft Friday, 18 February, 2000, 14:09 GMT
Split may help Microsoft
The computer giant's future is uncertain
By Martin Veitch, Editor of IT Week

Microsoft's reported statement that any break-up of the company by US anti-monopoly bodies would be a "regulatory death sentence" will chime with its many adversaries - that is exactly what they believe Microsoft deserves.

As one contributor to a chat room on the ZDNet computing web site wrote: "A 'regulatory death sentence'. Gee, we can hope."

However, of the various possible penalties Microsoft may incur as a result of the judgement that it is a monopolist and that it unfairly used its leadership position to gain an unfair advantage over competitors, a split-up is potentially the least harmful.

Splitting up companies has a powerful redolence in the US where AT&T's division into the so-called Baby Bells is classic business case-study fodder.

However, Microsoft is already splitting itself up to improve stockholder value and increase its chances to compete against smaller, theoretically more nimble, competitors.

Split a decade too late

The firm recently spun off its successful Expedia Internet travel booking site and more of the same is likely to follow - the Microsoft Network (MSN) portal site is a prime candidate.

Dividing itself up into autonomous parts could even be Microsoft's best strategy for competing with the 'turn on a dime' web start-ups and it gives the firm the opportunity to create pseudo start-ups which can command huge market capitalisation without first realising profits or consistent revenue streams.

Besides, the old argument for splitting up Microsoft was that the the part of the company that created operating system software such as the DOS and Windows lines had given the company a lever to quickly build superior desktop productivity application software such as the Word processor and the Excel spreadsheet.

That was almost certainly true and a division ten years ago could have changed Microsoft history.

But with Microsoft applications established in most companies, customers are now unlikely to change their choice of supplier.

Other options

If the view were taken that splitting up Microsoft would stop it building software 'hooks' into its operating systems that favour add-ins - as many believe it did with the Internet Explorer web browser - then Microsoft would still be able to argue that such features were operating system functions rather than additions aimed at building market share and hurting rivals.

And then, one presumes, more legal cases would follow.

One other possibility is that Microsoft be ordered to change the way that it sells Windows.

This would mean any PC vendor having access to the product at the same basic price, with Microsoft told in no uncertain terms that it was not allowed to make buyers favour associated Microsoft campaigns in the ways in which it has in the past.

These have in the past included keeping the Microsoft logo prominently displayed in the boot sequence (when the software starts up) and making PC vendors use Internet Explorer as the default Web browser in order to take market share from Netscape's Navigator.

Little pain felt

Another possibility is that Microsoft must publish more of the underlying Windows code so that competitors have an equal chance to develop products around it.

Andrew Schulman's classic book 'Undocumented Windows' showed how Microsoft had used 'hidden' code to gain a competitive advantage.

However, Microsoft has already discussed the possibility of publishing elements of its source code to combat one of the key attractions of Linux, a rapidly advancing operating system that is beloved of technical experts.

A final, more off-the-wall suggestion is that Microsoft be forced to limit the price of Windows.

However, like the idea of splitting up the company and publishing source code, this makes little sense against the reality that the trend towards operating systems that are virtually given away like Linux, will mean that a cut-price Windows could help rather than hinder Microsoft's progress.

So what would be an appropriate penalty for Microsoft? Only a huge financial demand - and that is impossible.

While Microsoft rightly notes that it has plenty of competition in many technology areas that could cause it trouble, it is unlikely to feel much pain when Judge Jackson delivers his statement.

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