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MS may cut a deal to avoid antitrust break-up

But if it does, that's a big camel it has to swallow...

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MS on Trial Following Intel's shock deal with the FTC, Microsoft and the Department of Justice are considering a possible settlement, according to Bill Gates' local newspaper, The Seattle Times. But although Microsoft's share price kicked upwards on the news, from what the paper has to say talks seem to be in decidedly pre-talks mode. It's possible something may happen next week, but both parties have at least until 12 April, when the trial is currently scheduled to resume, to thrash out a deal. Whether or not they're capable of doing so is another matter. Microsoft is generally held (by practically everybody bar Microsoft) to have taken a massive beating in the trial so far, and the judge could well find himself absent-mindedly stroking the noose as the rebuttals and closing arguments go ahead. But Microsoft has been insisting that there's clearly no substance to the prosecution case, and boasting about how well its defence has been going. If Redmond genuinely believes this, rather than just putting the best spin it can on a seriously holed case, it's not going to want to comply with any of the DoJ's demands for remedies. Even if wise heads at Microsoft know the score, it may also take a bunch of them to take Bill aside and tell him the truth - 'We're losing, Bill.' The two parties did, you'll recall, try to cut a deal ahead of the DoJ filing its case last year, but that broke down. Microsoft probably wanted something similar to the toothless consent decree, which the DoJ had screwed-up in its attempt to de-fang Microsoft back in 1995, while the DoJ wasn't about to repeat that mistake. Now, it must be so sure of victory that it will want to exact a heavy price. Has Microsoft been hurt badly enough to be willing to pay it? The price will be a lot larger than simply getting Microsoft to sign up for some code of business ethics. Other moderate (from the DoJ's point of view) requirements would likely include fixed, public prices and contracts for Windows licences, and linking these with some kind of policing (or outlawing) of 'co-marketing' deals and linkage between applications and OS sales. Which takes us straight into the browser question. Microsoft could be forced to decouple Internet Explorer from Windows, but if this doesn't happen it's difficult to see how the DoJ could be satisfied. Technically it might be possible to level the playing field for other browsers by opening up the APIs while leaving some browser functionality in the OS, but if you didn't decouple at least some of IE, that would still be the default that shipped with the OS. You could maybe decouple it sufficiently to allow OEMs to make a clear choice, but you can see why Bill wouldn't want to agree that. These remedies are minimal, probably well below anything the DoJ would agree, but still obviously unpalatable to Microsoft. Other likely demands are of the sort Microsoft would only accept at gunpoint. It might accept being forced to licence Windows on demand, but it will resist efforts to open up Windows sufficiently to allow OEMs to modify it significantly. Microsoft has made some noises about donning some open source clothes, but it won't voluntarily introduce anything that anybody outside Redmond could even begin to recognise as open source. The one big stick that might make Microsoft deal is the threat of break-up. If the company is convinced it's going to lose, and that its chances of reversing the verdict on appeal are scant, then it could conceivably try to deal its way out of one of the nuclear options. The tamest of these is a split into two operations, one dealing with applications and one with operating systems. The effect of this would probably be catastrophic for Microsoft, for the simple reason that disentangling Redmond's development and administrative systems into two free-standing operations would be a nightmare. Exactly what is an application and what is operating software code? Take a buzz saw to it and there will be disconnected bits lying all over the place. The other nuclear option, the Baby Bills approach, is probably too bizarre and extreme to be pushed for by the prosecution. It would follow the AT&T approach by breaking Microsoft up into a clutch of mini-Microsofts, all competing with one another on level terms. It is however difficult to see how that one would work, and if you're going to go that far, why not just put Windows into the public domain and turn it into open source? But as we say, Bill and his merry men really have to be worried that one of the nuclear options is possible if they're going to cut a deal. And it's probably too early for that still. ® Complete Register trial coverage

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