DoJ to propose MS breakup next week

Yesterday's denial spawns widespread disbelief

MS on Trial The Department of Justice has given up on rumour-swatting, after a partial rebuttal of yesterday's claims that it was pushing for a breakup of Microsoft. The "inaccurate in several important aspects" story published in yesterday's US Today was promptly followed up by a clutch of claims that the DoJ and the states were indeed reaching a consensus, and intended to push for a breakup. And backing this up, an IDC report published last month, and arguing that it was in Microsoft's interest to split into several companies, started hitting the headlines too. Faced with this little lot the DoJ is taking the view that it's not going to comment on every single press report that appears, while Microsoft spokesman Mark Murray described the breakup solution as "extreme and radical," and not justified by the facts of the case. But it's now possible to piece together what's happening, with a reasonable probability of accuracy. AP writer Ted Bridis reports that last week the DoJ and the 19 states who're partnering it in the antitrust action held a secret meeting in Washington where the DoJ laid out a plan to break up Microsoft into three parts. This plan, says Bridis, is now being considered by the states' attorneys general, and if accepted will be put forward at the next round of mediator Judge Richard Posner's settlement talks next week. These claims fit into the picture nicely. The US Today story leaned towards the conclusion that the proposal was for Microsoft to be broken into two parts, not three, and said that a consensus had already been reached - so we've got two possible areas which could justify a DoJ claim of "inaccurate in several important aspects." Meanwhile it will have been entirely impossible to plug all possible leaks from a DoJ-states summit. The states attorneys general have been a lot leakier than the DoJ anyway, and The Register therefore reckons the mouthier ones have let the proposal escape this time. Faced with this yesterday, and the likely wrath of Judge Posner, the DoJ rebutted a little, but did not specifically deny that breakup was being considered. But whether or not the DoJ and states unite to propose a break up in the mediation talks matters not one jot, if Microsoft itself won't go for it. Murray's soundbites certainly indicate that it won't - or do they? Remember that the very busy Mr Murray is a rapid rebuttal facility whose role is to shoot first and do the reality check later. If a week ago anybody had suggested to him that Microsoft was going to pay up to settle the Caldera antitrust action out of court, it's quite likely he'd have insisted that Microsoft was entirely confident in its case, and expected to be completely vindicated. Likewise, Murray now says that a breakup "is not justified by anything in this case or in this industry." But what, friends, was he supposed to say? As Microsoft spokesman it's his job to keep saying Microsoft hasn't done anything wrong, in which case he's got to keep saying any remedies are unjustified, right up until a deal is agreed or the judge (Jackson, the other one) throws them all in the slammer. If Microsoft did cut a deal Murray would then still be saying the company hadn't done anything wrong, but that in order to move forward and get back to 'writing great software' it had magnanimously agreed a settlement. That leaves the big question of whether Microsoft could bring itself to deal. As we said yesterday, and as IDC recommends, a split into three companies wouldn't necessarily hurt the company, and it might even help. It seems pretty likely now that breakup will be the DoJ-states proposal for the mediation talks, and given the difficulty in getting the prosecution alliance to face in the one direction, and keep facing that way, it will be tricky to change the proposal radically later. Which puts the ball into Microsoft's court. If the company says no, then the trial looks like going to the wire. But it'll come under increasing pressure from analysts, commentators and quite possibly its own shareholders to say yes - the breadheads must be starting to note the advantages of leaving the antitrust actions behind, speculating on the AT&T precedent, and musing on how much more their stock might be worth if it were invested in three Microsofts instead of just the one. ® See also: DoJ will demand breakup of Microsoft - report

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