Microsoft shares plunge

Judge Jackson, left, may be asked to split Microsoft

Shares in Microsoft plunged on Monday, following reports that US government lawyers are to push for Microsoft to be split up.

Microsoft shares closed more than 15% or $12 lower at just over $66, wiping tens of billions of dollars from its market value.

Its shares were near $120 at the end of 1999, hence the company's value has fallen in total by about $240bn - or 44.45%.

As speculation grows that the company will be split, the software giant said on Monday that none of its business practices justify "such an extreme and radical" remedy.

Stocks fall-out

There is nothing in the trial record or in this case that would justify such an extreme and radical remedy.

Jim Cullinan, Microsoft

The fall in the Microsoft stock was the result of both the break-up reports and the less exceptional than hoped for results it posted after trading stopped for Easter on Thursday.

But the impact was felt by other tech stocks with the Nasdaq index down 160 points or 4.4% at 3,482 points.

The more heavyweight Dow Jones Industrial Average was better able to brush off the Microsoft fall out and it closed up 62 points at 10,904 points.

The break-up reports follow the court ruling that Microsoft had illegally used its dominance of the computer operating system market to maintain its monopoly.

Remedies hearing approaches

The reports in the Wall Street Journal, Washington Post and USA Today, helped send Microsoft shares plunging even before New York stock markets opened on Monday.

The case had been brought by the US Justice Department and 19 states.

They have been asked to present their case for remedies (sentence) to the judge in the anti-trust case, Thomas Penfield Jackson, by the end of this week.

According to the Washington Post and USA Today newspapers they are close to agreeing to ask the judge to split Microsoft up, probably into three pieces.

The proposal would see Microsoft forced to spin off the Windows operating system from the rest of the company, the papers said.

A Microsoft spokesman said any proposal to break the company up was outside the scope of the trial and would require extra time for the company to respond.

The company said nothing in its past behaviour would merit such a remedy.

"There is nothing in the trial record or in this case that would justify such an extreme and radical remedy, " Microsoft spokesman Jim Cullinan said. "This would be bad for Microsoft, consumers and the entire industry."

First since AT&T

The Windows company would be permitted to include internet browsing functions.

Microsoft would then be forced to spin off a second company that sells its software applications, such as a word processor and the Excel spreadsheet programs.

That company might also get parts of the company that make the internet browser.

The plan to dismantle Microsoft is a bid to end the software giant's monopoly in the US computer industry.

It is the first time a break-up plan has been drafted by the federal government since the 1974 anti-trust lawsuit against AT&T Corporation.

Microsoft has consistently opposed a break-up, a view repeated to the Washington Post.

Sentencing timetable

Judge Jackson will hear arguments for and against proposed remedies, which could range from a promise of future good behaviour to a break-up, on 24 May.

The federal judge gave the parties, including the 19 states that joined the Federal Government's case, until 28 April to file their views on proposed remedies.

Microsoft will then have until 10 May to reply with its own proposals, and the government will respond with its final rebuttal a week later.

The Seattle based firm, whose operating systems make more than three quarter of the world's computers run, has already said it intends to appeal against the ruling that it broke anti-trust laws.