BBC News Online: Business

Microsoft fights break-up

Bill Gates, founder and chairman of the software giant, said the firm had a strong case.

Judge Thomas Penfield Jackson ruled that Microsoft had violated its dominant market position and must be broken up to prevent it acting as a monopoly.

"This is the beginning of a new chapter in this case," Mr Gates said.

"We look forward to resolving these issues through the appeals process and putting this case behind us once and for all."

The implementation of the break-up order is likely to be delayed until the higher courts reach a decision.

The US Justice Department has proposed that the appeal should go straight to the Supreme Court - which, if accepted, would significantly shorten the legal process.

The case has already lasted 10 years.

Abuse

Judge Jackson had previously ruled that Microsoft had broken anti-trust laws, abusing its dominant position in the computer operating system market.

"Microsoft, as it is presently organised and led, is unwilling to accept the notion that it broke the law," Judge Jackson said.

The US Government charged - and the court accepted - that Microsoft had forced its customers to adopt its own browser by discounting and putting pressure on computer makers, to the detriment of rival software maker Netscape.

The judge has since admitted his reluctance to make this ruling. "Given my personal preferences, I'd much prefer to have market forces to accomplish as much as the remedy as could be done," Judge Jackson said in the Washington Post.

Microsoft argues that any break-up would reduce innovation and consumer choice.

"This ruling is unfair ... Consumers every day see lower prices and an economy full of competition," Mr Gates said. "We are confident that we will win our appeal."

So far, legal opinion is mixed as to how strong Microsoft's chances are on appeal.

"Their evidence was awful. They are guilty as sin. Their best argument is that this is just too severe," international barrister Michael MacParland told BBC Radio 4's Today programme.

The ruling has had little impact on share prices, despite earlier fears that it could prompt a slump.

Profound impact

Attorney-General Eliot Spitzer of New York called the decision a "pretty scathing assault on Microsoft".

"For a cautious judge to reach this decision, it says a great deal about Microsoft's record of recent years."

But members of Congress from Washington state, where Microsoft has its headquarters, gave the company bipartisan support.

"This proposed break-up would not only cleave a creative team down the middle, but it would prevent those two halves from working together," said Democratic Representative Jay Inslee, whose district includes Microsoft's headquarters.

Windows and the rest

Judge Jackson said the company should be split into two separate businesses:

• One to market and produce Windows
• The other to handle Microsoft Office and other applications software, including the Internet Explorer web browser.

He also said that "Microsoft has proved untrustworthy in the past" and gave the company three months to modify its business practices.

The court ordered Microsoft to modify its behaviour in the following areas:

• Give computer makers more flexibility in configuring their systems and in selling and promoting non-Microsoft software
• Release technical information at the same time and equally to other software vendors as it does to its own personnel
• Charge a uniform price for the Windows operating system to the top 20 computer makers
• And to charge the same price for past supported versions of Windows as it does for the most current version of the operating system.