Final Judgment: Two Microsofts

WASHINGTON (06/07/2000) - U.S. District Judge Thomas Penfield Jackson today ordered Microsoft Corp. (MSFT) to break itself into two companies to remedy the company's multiple violations of federal and state antitrust law.

Jackson's final judgment accepted the breakup proposal offered by the U.S.

Department of Justice, the District of Columbia and 17 of 19 state attorneys general who brought suit against the software giant. The judge ordered Microsoft to be split into two companies, one that owns the Windows operating systems, subject to various conduct restrictions, and one that owns all the company's other product lines, including the Office software suite and the Internet Explorer Web browser. Under the terms of the order, the two companies are barred from exclusive dealings with each other for 10 years. Microsoft now has four months to decide how to allocate its assets between the two companies.

The software giant is expected to quickly ask Jackson to stay his order pending legal appeals.

"This is the beginning of a new chapter in this lawsuit," said Bill Gates, Microsoft's chairman and chief software architect. "We have a very strong case on appeal, and we look forward to resolving these issues through the appeals process and putting this case behind us once and for all."

Since the government proposed a breakup on April 28, Microsoft has protested that such a structural remedy is excessive and unwarranted by the facts of the case. Furthermore, Microsoft has argued that it needed at least several more months to defend itself against the proposal. Jackson sharply dismissed all of those arguments in a memorandum attached to today's order.

"Microsoft's profession of surprise is not credible," Jackson stated. "From the inception of this case, Microsoft knew … that mandated divestiture was a possibility." He said it is time to put Microsoft's continued assertion of innocence "to the test."

Throughout his memo, Jackson took Microsoft to task, indicating that the company never took him seriously.

"Microsoft as it is presently organized and led is unwilling to accept the notion that it broke the law or accede to an order amending its conduct," Jackson wrote. By contrast, the judge smiled upon the arguments put forward by the government, which he said is "by reason of office obliged and expected to consider - and to act in - the public interest; Microsoft is not."

"Microsoft itself is responsible for where things stand today," said Justice Department antitrust chief Joel Klein, adding that Microsoft's legal misfortune is due to decisions made at the highest levels."

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