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Government defends Microsoft breakup

The prosecution says the software giant has failed to support its claim that a breakup would be damaging.

Defending its plan to break up Microsoft Corp., the government filed documents with a federal judge Wednesday night that disparaged Microsoft's alternative proposal as "a cosmetic remedy that would have virtually no competitive significance."

The brief, from the Justice Department and 17 state attorneys general, is the last written filing in the case before remedy hearings begin May 24. It is a response to the brief Microsoft filed last week in which the company proposed several narrow restrictions on its behavior that it said would be more appropriate remedies than breaking up the company.

But the government brief said Microsoft's proposal "does not address some of the most important violations found by the court," including the finding that the company had illegally tied its Web browser to the Windows operating system.

The document also belittled Microsoft's contention that interaction between its product groups was crucial for continued innovation. It cited several recent instances when company leaders, including its chairman, Bill Gates, said exactly the opposite _ that clear divisions between groups was important for the company's success.

In response, Microsoft said, "The government filing is long on rhetoric but short on economic analysis or factual support for its overreaching proposals."

On April 3, Judge Thomas Penfield Jackson ruled that Microsoft was in wide violation of federal and state antitrust laws, and a few days later he told lawyers for both sides that he wanted to complete the penalty phase of the case quickly _ preferably within 60 days.

Then, on April 20, the federal and state governments proposed breaking Microsoft in two and imposing restrictions on the company's behavior while the breakup was being carried out. Two states, Illinois and Ohio, declined to go along with the others, saying a breakup was too extreme a remedy.

Under the government plan, one company would hold the Windows operating system and the other would keep everything else, including the Office package of applications programs that includes Word, the word processor, and Excel, the spreadsheet program.

In its brief last week, Microsoft decried the idea of a breakup and said "cross-pollination between engineers working on different products such as Windows and Office has led to numerous innovations."

But Wednesday's government brief says: "The story Microsoft now tells of dependency between the operating systems and applications is, at the very least, greatly exaggerated." It goes on to quote company leaders who appear to support that assertion.

In an e-mail last year in which two company executives, Ben Slivka and Brad Silverberg, were discussing a forthcoming corporate reorganization, Silverberg wrote that Steven Ballmer, Microsoft's president, "needs to do something so that the company ends up with an organization that essentially is a separate company within the company."

"It has to be free to do what it thinks best," he continued, because "the company is so wrapped up in its shorts that it can't get anything done."

Microsoft, in its brief filed last week, insisted that it would need six months to prepare for remedy hearings should the judge decide to consider the government's breakup plan. That would push the end of the trial well into the next presidential administration.

And though Microsoft denies it, many analysts say they think the company hopes a Republican administration will drop the breakup idea. Gov. George W. Bush already has suggested he opposes a breakup of the company.