So What Happens If Microsoft Loses?

By Chris Taylor

--Split Microsoft into several companies, along product lines

As the Microsoft defense sputters, many expect it to lose its court fight. Attention is turning to steps that Judge Thomas P. Jackson might take to promote more competition. Under one option, you'd get your operating system from one successor to Microsoft, your Internet browser from a second company, and word processors and computer games from a third.

--Split it vertically into identical rival businesses

This would create two or three "Baby Bills," similar to the Baby Bells spawned by the court-ordered breakup of AT&T. Each of these mini-Microsofts would be nearly identical, selling the same software but in competition with one another. George Washington University law professor Bill Kovacic, an antitrust expert, calls this a "radical chemo-therapy" option. Notwithstanding the AT&T and Standard Oil cases, he says, judges are often reluctant to go this far in restructuring an errant monopolist.

Still, government lawyers refuse to rule out the possibility that they will recommend this extreme remedy. Microsoft could be divided regionally, as Big Oil and Ma Bell were. But which one would Gates run? And how long would it take this consummate businessman to reacquire his "babies"?

--Force Bill Gates to share his Windows with the world

The option favored by most state attorneys general would require Microsoft to divulge its Windows source code--its most valuable piece of intellectual property--to other tech firms. This would allow Microsoft's rivals to develop their own versions of the world's dominant computer operating system. The government could auction off the license to the highest bidders, or Judge Jackson could find Microsoft guilty of "copyright abuse"--giving just about anyone access to adapt and sell Windows.

Under this plan, Microsoft would get to stay in one piece and still profit from sales of "classic" Windows. More competition might mean cheaper operating systems and, in the long run, cheaper PCs. On the minus side, however, "You would end up with an ever diverging standard that would have a dramatic impact on everyone whose business involves Windows," says Jonathan Zuck of the Association for Competitive Technology.

--Weaken the company with lots of restrictions

In this scenario, Judge Jackson would force Microsoft to sign a consent decree containing a list of dos and don'ts--no more arm twisting for exclusive deals with computer manufacturers, no more inviting competitors to divide markets. This is the remedy given the least serious consideration by the attorneys general, who say Microsoft has a history of violating consent decrees.

--By Chris Taylor