WASHINGTON (AP) _ A federal judge today ordered Microsoft Corp. split into two companies, prescribing the biggest corporate breakup since AT&T while harshly rebuking the software giant for stifling computer-age competition.
Potentially monumental, the ruling by U.S. District Judge Thomas Penfield Jackson was not the last word in a case that could define the limits of companies operating in a high tech economy.
Microsoft has promised to appeal in the case, which had been pressed by the Justice Department and 19 states. The case could go to the U.S. Court of Appeals or directly to the Supreme Court.
Jackson, who concluded two months ago that Microsoft had violated antitrust law, ordered the company to be split into these parts:
_ One that would oversee the Windows operating system.
_ A second that would handle all other Microsoft software, such as its "Word" program.
The Justice Department and 17 of the 19 states recommended that the company be broken into two pieces _ one to own and market Windows, source of the company's monopoly position, and another to control other software and the company's Internet business.
Jackson's ruling also forbids the company from entering into "exclusive dealing" that would restrict the development of competitors' products.
"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," Jakcson, explaining why he believed the breakup was necessary.
"Microsoft has proved untrustworthy in the past," Jackson said, citing its failure to comply with a court ruling earlier in the 1990s that preceded the antitrust case.
The judge had ruled April 3 that Microsoft had violated federal antitrust law by using illegal methods to protect a monopoly in computer operating systems. He found the company tried illegally to expand its dominance into the market for Internet browsers.
Federal antitrust law allows for cases of broad public importance to go directly to the Supreme Court, but the justices do not have to accept the fast-track system. If Microsoft appeals directly to the Supreme Court, it can send the appeal to the U.S. Court of Appeals for the District of Columbia, where it would be handled like virtually all other appeals from U.S. District Court rulings.
The only previous time the appellate court was bypassed in an antitrust lawsuit was the last case of this magnitude: the AT&T breakup.
Microsoft contended in a May 31 court filing that a breakup would have "significant and damaging" consequences. The corporation sought a year to submit its own breakup plan, compared with the four months sought by the government.
As Microsoft was filing the final legal papers before Jackson's ruling, Gates appeared Tuesday at a congressional hearing on the future of high technology in the United States and around the world.
In its filing, Microsoft, disdainful of the department's response to the company's earlier concerns, asked Jackson to include previously suggested language that would give a broken-up Microsoft more freedom to enter into agreements with software developers and computer makers.
"Instead of agreeing to correct the many defects in the revised proposed final judgment, and thereby minimize the damage that its entry would inflict on a wide range of participants in the computer industry, the government has agreed to only a few cosmetic changes," Microsoft's lawyers wrote.
In the brief, Microsoft also said the Justice Department was, in its recent filing, "confirming that certain provisions are more extreme than they might appear at first blush" and "blithely ignoring substantial problems Microsoft identified regarding the feasibility of complying with many of the provisions as drafted."
In Washington, Justice Department spokeswoman Gina Talamona dismissed Microsoft's response. "The filing rehashes Microsoft's old arguments, ignores the extensive violations found by the court, denies the need for serious relief and grossly distorts our proposed remedy," she said.
Microsoft had been due to file the brief today. But company spokesman Jim Cullinan said the "cosmetic" filing by the government made it easier to reply quickly.
Jackson had been set to rule on the case _ including whether to split the company into two parts _ last week, but the Justice Department asked for more time so it could address clarifications brought up by the company.
In Monday's court filing, the Justice Department agreed to grammatical and semantic changes, but refused to concede to the company on major points such as giving Microsoft additional time to nail down details on how the breakup should occur, or more freedom in licensing and marketing its products.
The department and 17 states have pushed to have Microsoft broken into two separate companies _ one to market and produce Windows, and the other to handle Microsoft Office and other applications software, along with the Internet Explorer Web browser.
In a ruling that shook the company, the industry and the financial markets, Jackson held April 3 that Microsoft engaged in anticompetitive conduct in violation of antitrust laws.
Microsoft has said it will appeal the entire case after Jackson issues his final ruling.
Shares of Microsoft were down 62.5 cents to $69 in late morning trading on the Nasdaq Stock Market.
__
(Copyright 2000 by The Associated Press. All Rights Reserved.)
APTV-06-07-00 1445MDT
