A US judge found Microsoft guilty of violating anti-monopoly laws last night in a historic legal decision that could change the landscape of the computer industry and end in the world's largest software company being broken up.
Fears that Microsoft would be found liable for its anti-competitive behaviour had already wiped about £50bn from the company's market value before Judge Thomas Penfield Jackson delivered his verdict late yesterday.
The 15 per cent decline in the company's share price also cut about £12bn from the personal wealth of Bill Gates, the company founder. Such a steep decline in what had been the world's most highly valued company had a seismic effect on US technology shares. The Nasdaq composite index fell 349 points, its fifth biggest percentage loss ever, as investors worried about further lawsuits and uncertainty.
Mr Gates, who had led efforts to settle the dispute with the US government and 19 US states, said he believed Microsoft had "a strong case for an appeal". He said: "The principle at the centre of this case is very important for the economy. The lack of [government] regulation of the software industry has been key to its success to date."
Joel Klein, the head of the Justice department's anti-trust division, described the ruling that Microsoft violated the Sherman Act as a "landmark" in the history of US anti-monopoly powers. The ruling, he said, demonstrated "that no company, no matter how powerful or how successful, can refuse to play by the rules."
Yesterday's ruling offered little comment on potential penalties for Microsoft's behaviour. The settlement talks broke down largely because of a lack of trust on the government's side over whether Microsoft would comply with any remedy short of a break-up.
Mr Klein said the department was committed to finding a remedy that put an end to Microsoft's "widespread and persistent abuse of monopoly power".
Judge Jackson is expected to call for further court evidence before ruling on a penalty in several months' time. Microsoft will then appeal. Judge Jackson yesterday found that Microsoft had violated the law by using anti-competitive means to maintain its stranglehold on the personal computer industry.
He also found that the company had unlawfully bundled its Internet Explorer to Windows, the company's software which is used on more than 90 per cent of the world's computers. Microsoft had broken state, as well as federal, laws.
He wrote: "Only when the separate categories of conduct are viewed, as they should be, as a single, well-coordinated course of action does the full extent of the violence that Microsoft has done to the competitive process reveal itself.
"Microsoft placed an oppressive thumb on the scale of competitive fortune, thereby effectively guaranteeing its continued dominance in the relevant market."
Microsoft said most of the ruling was not unexpected and pointed out that the government had failed to convince the judge that its marketing arrangements with computer manufacturers constituted unlawful dealing.
Yesterday's ruling, by finding Microsoft to have abused its monopoly position, will be used by more than 100 lawsuits already filed against the company which allege that Microsoft overcharged individuals. Damages from such lawsuits can be punitive, or three times their actual value.
Several Wall Street analysts sought to ease investor fears yesterday. Rick Sherlund, an analyst at Goldman Sachs, the investment bank, warned investors that they would need to have a "thick skin" to deal with the fallout. "Any good news on the suit may be a year away as a result of the appeals process," he said.
