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April 24th, 2000

[12:00 PM Follow-Up: DOJ Will Force Microsoft to Divest MS Office
by Wes George

[Editor's Note: This is a follow-up on our report of early morning breaking news regarding the DOJ seeking a breakup of Microsoft.]

The Wall Street Journal's spin on the Microsoft breakup story is a bit different than earlier reports out today. According to John Wilke of the WSJ, who has a record of being on the inside track with this case:

"Federal antitrust enforcers favor a forced divestiture of Microsoft Corp.'s Office software business as a way to restore competition in the software industry, said people who have been briefed on the proposal. Microsoft also would be subject to sweeping restrictions on its conduct for a limited time until the unit could be spun off and while any court appeal of the breakup is pending."

Such a divestiture plan would be vigorous challenged by Microsoft and could take years to wind it's way through the court systems. Also, there exists the chance that the executive branch, read President Clinton, could step up to the plate with some type of compromise offer later this week.

Steve Jobs Consulted?

According to the WSJ article Federal officials are soliciting input from "personal-computer makers and others" on how to proceed with a divestiture of MS Office from Microsoft. This could mean that the Feds are consulting with the likes of Sun Microsystems, Oracle and even Apple as to what would be the most desirable way to proceed.

The Wall Street Journal article further reports, "Joel Klein, the Justice Department antitrust chief, hasn't made a final decision and hasn't said whether he favors a tough conduct remedy alone or combined with a divestiture, people close to the case said. He is expected to make his decision known by Tuesday, and draft a recommendation to the court if it wins Attorney General Janet Reno's approval, they said."

The article suggests that the Feds believe a divestiture of MS Office would be the least radical form of ending the Microsoft monopoly and would fall far short of some of the other remedies under consideration including a totally break up of the company into the so-called "baby-Bills".

Federal officials reason a complete break up of Microsoft would, "create enormous inefficiencies and possibly fragment the Windows standard to the detriment of consumers."

By spinning off MS Office as a separate company the Feds hope to "launch an alternative platform for software developers and create incentives for the new company to tailor Office to Linux and other alternative operating systems."

Microsoft Office software group is the most profitable of the company three units raking in about 40% of Microsoft's total revenue. The other two units are the Windows OS group and Microsoft's Internet business. Microsoft's shareholders can expect to receive shares of the newly formed company and if the past history of such forced divestitures is any guide, Microsoft shareholders are likely to benefit substantial from the spin-off of MS Office.

Busy Calendar

US District Judge Thomas Penfield Jackson wants remedy proposals to be submitted by this Friday. On May 10th Microsoft is scheduled to respond to the remedy proposals. Then on May 17th the Department of Justice will present a rebuttal to Microsoft's respond. May 28th all parties will convene for a final remedy hearing.


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