Microsoft's Open Letter Regarding Possible Breakup

As you’ve no doubt heard, the Department of Justice and a number of State Attorneys General have proposed breaking up Microsoft into two separate, heavily regulated companies, as well as imposing unprecedented restrictions on Microsoft’s ability to design software products.

We believe the government’s extreme regulations would be a major setback for consumers, the high-technology industry and the American economy. Nothing in the lawsuit against Microsoft justifies the harsh restrictions that the government is now seeking to place on Microsoft’s innovation and product design.

For 25 years, Microsoft has worked in partnership with thousands of other technology companies to provide consumers with products that work well together and are innovative, easy to use and affordable. Now the government wants to tear Microsoft apart, depriving the company of its flagship Windows operating system products, and denying Windows users of exciting new technologies now under development at Microsoft, such as speech and gesture recognition. The government even wants to ban any further improvements to the Internet Explorer software in Windows—software that has made access to the Web easy for tens of millions of people around the world. Restrictions such as these would stifle innovation, make computers less capable and more expensive.

Microsoft’s efforts to develop a full range of software products have given consumers what they want most: computers that just work. Microsoft never could have created Windows or Microsoft Office under the break-up plan and heavy regulation now proposed by the government. Innovations that were first developed for Microsoft Office, for example, were later integrated into Windows so that all software developers could make use of them. Microsoft’s current structure has been central to providing customers with well-integrated and easy-to-use PC technologies – and a platform that benefits thousands of other software companies.

The dismantling of Microsoft also would send a signal that companies in America that are "too" successful will be punished harshly – a signal that will be welcomed by foreign competitors seeking to overtake America’s global leadership in technology.

Because the government seeks to impose severe limits on Microsoft’s ability to work cooperatively with other companies, the government’s proposal would affect not only Microsoft, but also a broad swath of the high-tech industry. Such cooperative efforts among high-tech firms are vitally important to the creative process that results in new innovations and product choices for consumers.

We believe that the government’s efforts to intervene so intrusively in the flourishing software industry are unnecessary and misguided. Microsoft has a strong case on appeal. The U.S. Court of Appeals has already rejected the central argument in the government’s case, ruling in 1998 that Microsoft’s support for the Internet in Windows 95 was legal because it benefited consumers. Indeed, the Appeals Court commented on the "undesirability of having courts oversee product design," stating that "any dampening of technological innovation would be at cross-purposes with antitrust law."

Microsoft has worked hard to try to settle this case without the need for further litigation. In the meantime, we have not only a right, but also an obligation to our shareholders, partners, customers and employees to defend the company through the judicial process; and to stand up for the principles we believe in, including the right of every company to improve its products.

We’re proud of the role Microsoft has played, in partnership with thousands of technology companies, to help transform the American economy, improve people’s lives and enhance education. Continued healthy competition, innovation and consumer choice – not government intervention – are the most effective tools to ensure that these benefits will continue for years to come.

We appreciate the continuing support of our customers, partners and shareholders.

Sincerely,