UPDATE: AGs Advocate Two Microsofts

SAN FRANCISCO (04/28/2000) - State attorneys general who, along with the U.S.

Department of Justice (DOJ) today asked for the breakup of Microsoft Corp. into two separate companies, said their proposal represents the "least instrusive" action necessary to stop the software behemoth's anticompetitive behavior, while benefiting consumers.

Other options considered by the states, Iowa Attorney general Tom MiIler said in a teleconference following the filing of the proposal, included breaking up Microsoft into a series of "Baby Bills." That would have resulted in more confusion and less value for consumers and Microsoft shareholders, he said.

"We believe consumers will benefit from enhanced competition and innovators will be encouraged to develop new software products and services and prices will come down for businesses that rely on these products," Miller said.

The proposal was supported by 17 of 19 states who joined with the DOJ in the suit against Microsoft. Ohio and Illinois filed an additional statement with the DOJ court brief recommending that a three-year time frame be extended to see if Microsoft would restrain its anticompetitive conduct, Miller said.

The attorneys general also commented on speculation that Microsoft was waiting for more favorable treatment from the administration of the next U.S. president, saying such a tactic would be foolhardy.

"The idea that a new administration will allow Microsoft to get a free ride is totally intolerable," California Attorney General Bill Lockyer said. "The findings of fact in this case are so strong, it would be impossible for the next administration to walk away from it."

The attorneys general also said concerns about conflict of interest led them to place restrictions on dual ownership of the companies, Miller said. An investor in one of the companies could not own more than 3 percent of the other.

"One of the keys (of the proposal) is these two companies should compete with each other," he said.

Lockyer and Miller disagreed over whether recent defiant statements by Microsoft President and Chief Executive Officer Steve Ballmer led to the decision by the attorneys general to advocate a breakup. Lockyer said the statements were considered, but MiIler said Microsoft's aggressive defense and unwillingness to admit to blame were well documented in court filings.

"We had known about that for quite a while," Miller said.

Still, there was some reluctance to advocate a breakup of such a successful company, Lockyer said.

"Microsoft creates products that are extraordinarily innovative in our economy," Lockyer said. "Nobody is denying that. The problem resulted from them doing it so successfully and aggressively that they inhibited the ability of new companies to compete."

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