Govt. May Seek Breakup of Microsoft

WASHINGTON (AP) - The Justice Department and 19 states are leaning toward asking a federal judge to split Microsoft Corp. (NasdaqNM:MSFT - news) into two or three separate companies, according to published reports.

Citing people familiar with the discussions, The Washington Post and USA Today said in Monday's editions that a Justice Department plan being shared with states and industry executives envisions Microsoft being forced to split off its Windows operating system from the rest of the company.

The rest of the company possibly then would be split in two, with one company handling applications software and the other the company's Internet business, including browser software.

The browser software would be left with the operating system company if the parent company was split into only two parts, the Post said.

The Post noted that a call for a company breakup would be the first such action taken by the Justice Department since it a 1974 antitrust suit against AT&T Corp. (NYSE:AWE - news), which led to the breakup of the telephone giant.

The government is to present its proposed remedies this week to a federal judge in Washington who has already ruled that Microsoft engaged in illegal activity to perpetuate a monopoly.

``There is nothing in the case that was brought that would merit such an unfounded remedy and one that is not in the interest of the industry or of consumers,'' Microsoft spokesman Greg Shaw told the Post. ``It is difficult to know what's being floated as a trial balloon and what is something that all the parties will agree upon.''

Microsoft has already made clear that it will appeal the ruling against it and the case is considered likely to be ultimately resolved by the Supreme Court.

USA Today said that prosecutors believe that just restraining Microsoft's conduct - which was the focus of the failed settlement talks - might not be effective and could be more intrusive than a breakup.