SAN MATEO (05/31/2000) - Microsoft Corp. took its final shot Wednesday before a federal judge releases his plan to punish the software giant for its antitrust transgressions -- punishment that likely will include a breakup of the company.
Microsoft said in a court filing submitted Wednesday that the U.S. Department of Justice's request that the company be split in two was "defective" and goes far beyond the scope of the antitrust trial, which ended April 3 with a guilty verdict from U.S. District Judge Thomas Penfield Jackson.
"The timetable proposed by the government for the divestiture is unrealistic," the company argued in the filing. "As Microsoft has previously explained, the forced breakup of a unitary company like Microsoft is unprecedented, and dividing the company in half would be an enormously difficult task. Four months is not remotely enough time to formulate a plan for attempting such an undertaking."
Jackson is expected to rule as soon as Thursday. That will not be the end of the case, however, as Microsoft already has promised to appeal the verdict and proposed remedies. The appeals process could last years.
Last week, the Justice Department submitted its final recommendation that Microsoft be split into two separate companies: one that builds the Windows operating systems and another that would get the company's other offerings. The government also proposed a strict set of business regulations that would take effect while the breakup was plotted and implemented.
The Justice Department stuck to its recommendation of a two-way split despite Jackson's apparent interest during court proceedings of an alternate plan to break Microsoft into three, with companies building Windows, applications, and Internet offerings. That plan was submitted to Jackson in a friend-of-the-court brief filed by the Computer and Communications Industry Association and the Software and Information Industry Association, a high-tech trade group.
"The number of remaining companies doesn't matter as much as just the fact that there will be a breakup at all, and that there will be [regulatory] remedies," said David Smith, an analyst at Stamford, Connecticut-based Gartner Group Inc.
In addition to arguing that the government had not allocated enough time to draw up an effective breakup, Microsoft also argued Wednesday that the Justice Department had not taken several important factors into account, such as tax implications and foreign legal issues.
Microsoft also offered a supplemental offer of proof, which included testimony from several witnesses who opposed the Justice Department's breakup proposal.
They included Compaq Computer Corp. CEO Michael Capellas; Jeffrey Katzenberg, a co-founder of DreamWorks SKG; Edward McVaney, Chairman and CEO of J.D. Edwards & Co.; Tony Nicely, chairman of auto insurance company Geico; Nordstrom Inc.
CEO John Whitacre; Dr. Steven Davis, economics professor at the University of Chicago Graduate School of Business; and Richard Schmalensee, dean of the Sloan School of Management at MIT.
"Nordstrom highly values the fact that Microsoft's products are designed, developed, and tested to work well together," Whitacre testified. "Features like a common interface make a big difference in terms of ease of administration, ease of use and, ultimately, in the total cost of ownership."
Microsoft Corp., in Redmond, Washington, is at www.microsoft.com. The Department of Justice is at www.usdoj.gov.