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Thursday, 13 January, 2000, 06:40 GMT
Software giant 'faces split'

Bill Gates
Bill Gates may be ready to settle with the government

US government lawyers in the Microsoft antitrust case want to break up the software giant, reports say.

Justice Department lawyers laid out the proposal during a secret meeting last week, according to US newspaper and agency reports.

The Microsoft Trial
Mediation talks in the antitrust case, brought by the Justice Department and 19 states, began late last year.

The talks follow Judge Thomas Penfield Jackson's findings in November that Microsoft used monopoly power to harm consumers, competitors and other companies.

"Unwarranted" move

A Microsoft spokesman said that talk of a break up is "completely unwarranted".

"There's nothing in this case that would support such a step," he said.

A Justice Department official dismissed a report in USA Today as "inaccurate in several important respects".

But other sources say that the US Government does want to break up the company, but the two-way split described in USA Today is inaccurate.

Options for split

There are several ways in which Microsoft could be divided.

One option would be to split Microsoft horizontally into three parts. One company would sell the Windows operating system, another would sell software applications such as the Office software suite, and the third would sell internet-related software and services.

The second option is to split the company vertically into two or three identical units.

The third option combines the previous two. Some antitrust experts say the government favours splitting the applications unit from the operating system unit and then splitting the operating system unit into two competing companies.

At this stage, it is unclear how Microsoft will react to a formal suggestion to split.

It may encourage the company to seek a lesser sanction during the ongoing settlement talks or it may prompt the software giant to battle the case through the courts.

At this stage, the government believes lesser sanctions would not be enough to rein in Microsoft.

These softer sanctions could include prohibiting the company from abusing its influence or demanding that it publish its wholesale prices.

Caldera settlement

Earlier this week, Microsoft reached an out-of-court settlement with software company Caldera.

The settlement is expected to cost Microsoft $155m and allows it to avoid an antitrust trial, which was due to start on 1 February.

For the past four years, Caldera has tried to prove that the software giant used anti-competitive tactics, in an attempt to damage sales of Caldera's software.

Caldera claimed that Microsoft built incompatibilities into Windows, to discourage computer users from buying its product.

Microsoft claimed that its software had better sales because it was a superior product.

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See also:
11 Jan 00 |  Business
Microsoft settles Caldera antitrust case
05 Nov 99 |  The Company File
Monopoly blow for Microsoft
06 Nov 99 |  The Company File
How much will it hurt Microsoft?
22 Sep 99 |  The Company File
Microsoft knows "no limits"

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