Microsoft Scorns Think-Tank's Breakup Idea

The Progress & Freedom Foundation in its report recommends that Judge
Thomas Penfield Jackson fracture Microsoft into one applications
company and three operating systems companies.

The PFF suggested that of all the options available to Microsoft at
this juncture in its ongoing legal battle with the Justice
Department, this plan is as good as it gets.

"(Ours is) a hybrid remedy, whereby first the operating systems and
applications companies are divided, and then the operating system
portion is divided into three identical competitors, each of which
would have full rights to all the operating system intellectual
property," said PFF Vice President for Research Thomas Lenard,
adding that Microsoft's employee base would be split equally.

PFF President Jeffrey Eisenach told Newsbytes during a conference
call that the four companies would be subject to strict separations
over a temporary period of time, preferably three to five years.
The companies would be limited in their participation in joint
marketing agreements, standards-setting bodies and similar ventures.

Eisenach stressed that the companies only would be prohibited from
engaging in ventures that would undo the spirit of the decree.

He joked that it would be interesting to see Microsoft's legendarily
aggressive corporate managers "go after each other" in several
different companies "instead of trying to screw the rest of us."

Microsoft for its part responded to the plan with the stance it has
taken so far through the entire series of settlement discussions
with Judge Richard Posner since Jackson's findings of fact in
November.

"The idea of breaking up a company like Microsoft is irresponsible
and reckless," said Spokesman Jim Cullinan. "It's harmful to the
industry, customers and consumers."

Lenard said that Microsoft fully deserves to pay some kind of price
for its behavior, which Jackson in November ruled constituted an
illegal use of its monopoly in the operating systems market.

"This is not an issue of a couple of practices that have strayed
over the line," he said. "Nobody felt comfortable trying to
innovate in any areas Microsoft might find of interest."

Lenard also said that both conduct and structural remedies by
themselves prove ineffective because they do not solve the
problem of at once busting Microsoft monopolies and creating
competition.

"Conduct remedies don't change structure - they are very regulatory,"
he said. "...Structural remedies... separating operating systems
products from the applications products... just leaves the operating
system monopoly in place, and we are left with the worst of both
worlds."

Lenard also said that an even split of all the companies into
"baby Bills," regardless of what they are producing, would
split up many different products needlessly, and potentially
diminish competition in some areas of the high-tech industry.

Microsoft and the Justice Department have been engaged in a
salvo of briefs rebutting each other in their attempts to
persuade Judge Jackson that alternately, Microsoft should
essentially be set free versus the government stance that
Microsoft should face stiff penalties for illegally dominating
segments of the high-tech industry, possibly up to breakup
remedies.

Jackson next is expected to issue his conclusions of law at the end
of this month, with potential remedy arguments to take place
through late winter and early spring.

The PFF Web site is http://www.pff.org.

Reported by Newsbytes.com, http://www.newsbytes.com.