Government Calls for Microsoft Breakup

A proposed breakup of Microsoft into two companies and strict controls on its marketing and development efforts have cast a cloud over the company’s future-and that of the American software industry. Calling the proposed remedy “draconian” and “unwarranted,” Microsoft says the remedy far exceeds any crime the company has been accused of and would stifle innovation. The U.S. Department of Justice (DoJ) argues that the breakup will give the company the “ability and incentive” to compete, and will foster innovation and lower prices for consumers. Reactions are widely varied, even within groups: while some shareholders see opportunity, others see catastrophe, and while some competitors reacted with delight, others said the DoJ dropped the ball.

Breakup and Disclosure

The remedy, outlined in a 17-page proposed final judgment submitted by the DoJ on Apr. 28, calls for the following:

Two companies. Microsoft would be split into an operating systems company and an applications company. The operating systems company (dubbed “Ops Co” in a memorandum from the DoJ) would have the Windows 9x and Windows 2000 operating systems. The applications company (“Apps Co”) would get Microsoft’s applications, middleware, and other properties, including Office, Back Office, Internet Information Server, SQL Server, developer tools, MSN and related Web sites, transaction server software, indexing server software, and BizTalk.