Article 114 of 200
Analysts cool to breakup remedy
Some industry analysts yesterday blasted the U.S. Justice
Department's reported plans to bust up Microsoft Corp. along product
lines, saying such a move would only create confusion for consumers
and the technology-dependent economy.
After a three-day holiday from trading, Wall Street yesterday
quickly punished shares of Microsoft amid light March-quarter revenue
growth and newspaper reports that the Justice Department will ask a
federal judge to split the world's largest software maker in two.
Shares of Microsoft plunged $12.31, or 16 percent, to a close of
$66.63 on a widespread sell-off among panicked investors.
Under the Justice Department's reported recommendations, one part
of Microsoft would manufacture the Windows operating system,
including functions to browse the Internet. The second company would
market everything else - including the Microsoft Office programs -
and would also be allowed to sell Internet software.
The Justice Department and 19 other states including Massachusetts
also would likely seek to curb Microsoft's conduct while the case is
"Breaking up Microsoft isn't good for anybody," said Michael
Cusumano, a professor at MIT's Sloan School of Management. "We've
already seen enormous confusion in the stock market, which has
contributed to the collapse of the Internet bubble."
Cusumano said the reported remedy also doesn't address what the
Microsoft case is about.
"The case is not about Microsoft unfairly leveraging Office with
Windows," he said. "They haven't done that for six years. Under this
proposal, the Windows monopoly is left intact."
In a recent opinion piece, Cusumano, co-author of "Competing on
Internet Time: Lessons from Netscape and Its Battle with Microsoft,"
blasted Bill Gates, Microsoft's chairman, for not settling the case.
Some bad luck and a few wrong turns in the marketplace could turn
Microsoft into a once-great company that failed to sustain its
advantage, he wrote.
"They could have negotiated their fate," Cusumano said.
Massachusetts Attorney General Tom Reilly said he could offer no
reaction to newspaper reports about possible moves by justice
"The remedy I would support would be the remedy that best protects
consumers," Reilly said. "... We're certainly aware of the
implications of this case."
U.S. District Judge Thomas Penfield Jackson ruled earlier this
month that Microsoft had violated the nation's antitrust laws, saying
it abused its monopoly in the Windows operating system, harming
competitors, consumers and other companies.
The Justice Department and the 19 states are expected to file
their remedy plans with Jackson by Friday. Once the government files,
Microsoft will reply on May 10 and the government will file once more
on May 17.
Jackson will hear oral arguments on a penalty on May 24.
Meanwhile, Microsoft executives continue to publicly express their
defiance to any remedy calling for a break up of the company. Bob
Herbold, Microsoft's chief operating officer, told the CNBC financial
network that such talk is inappropriate.
Microsoft third-quarter earnings beat Wall Street estimates by 2
cents a share, but analysts said 5 cents of that came from non-
operating investment gains. Revenue increased 23 percent to $5.6
billion, but Microsoft conceded light demand for business PCs slowed
growth for its software products.
While many of Microsoft's competitors have strong opinions about
what should be done, they also are careful not to tread on a
Paul D. LaBelle, a spokesman for Lotus Development Corp., said the
company's policy is not to comment on the lawsuit.
"They are as much a partner as they are a competitor," LaBelle
Nicholas Economides , an economics professor at New York
University's Stern business school, said any break-up ordered by
Jackson, however, wouldn't be upheld by a federal appeals court or
the U.S. Supreme Court.
"It's an extreme remedy," Economides said. "There are other ways
to fix the problem without going that far."