Gates, Ballmer defiance clinches DoJ break-up resolve

Leaks thought to be from the DoJ and the plaintiff states suggest that there will be a joint filing DoJ/states tomorrow calling for the breakup of Microsoft into two or three parts - OS, applications, and Internet - depending on which rumours you believe. Defiant remarks by both Bill Gates and Steve Ballmer this week are thought to have been the clincher in deciding for breakup. Gates claimed on Tuesday that "Microsoft is very clear that it has done absolutely nothing wrong", which directly contradicts Judge Jackson's conclusions of fact and law. COO Bob Herbold's presence in Washington lobbying also may not have had the positive effect he had expected. The Washington Post reports today that there is some dissension amongst the states, with Ohio attorney general, Republican Betty Montgomery, said to be against breaking up Microsoft. Although Judge Jackson said he hoped not "to have to deal with divergent points of view", it may well turn out that there is a dissenting view presented. Last month, Kansas, Illinois, Florida and Maryland told the Post that they had reservations about breakup, but there is no further information other than the breakers-up appear to be comfortably in the majority. California, and some industry competitors, are thought to be lobbying for breakup into three companies, but there may be a compromise on two parts. The New York Times reckons the brief will propose there be a break into two companies. It was also suggested that the states have inserted some stiffeners, as we suggested would happen when the trial first opened. The NYT says that the Internet part of Microsoft would be included with the applications, and that there are conduct remedies as well that would be in force during an appeal, since breakup would be stayed until an appeal was decided. It is likely that there would be a special master appointed to supervise Microsoft. Clearly Microsoft does not like the idea of a breakup, but there is a serious danger that the remedy is being used as a punishment rather than a solution to Microsoft's anticompetitive actions. All should be revealed tomorrow. Do not be surprised if next week, Microsoft asks for extra time to file its response, which is due on 10 May. ®