The decision to break up Microsoft into two parts - one company owning the Windows operating system and the other the software applications and browser - is good for the computer industry and, quite likely, for Microsoft itself in the long run. But it won't have any immediate impact on the real world. This is because of the company's decision to appeal not only against the breakup decision but also against the restraints on its behaviour that the judge imposed while the substantive issue was being finally resolved.
And then? The success of a split will critically depend on human behaviour. If it merely produces two Siamese twins, or parallel monopolies, each instinctively - one might almost say genetically - knowing what the other will do then the monopoly situation could worsen.
In the short run Microsoft's operating system will still reside on well over 90% of the world's personal computers and software packages such as the Excel spreadsheet and Word word processor will still have a similar market share. The system and the software will create demand for each other's products. Being two corporate units rather than one might tempt them to raise their prices faster (or reduce them less fast) than if they remained one integrated whole with the justice department breathing down its neck.
If Bill Gates decided to run the applications company, it is difficult to imagine him trying to undermine the Windows operating system he built up and protected for so long by trying aggressively to sell products to other emerging platforms such as the free alternative, Linux. And will the two companies still be based on the same campus at Redmond with the same or adjacent canteens?
Yet, properly handled, this judgment could unleash submerged creative forces among the thousands of highly skilled Microsoft employees. As Walter Mossberg of the Wall Street Journal has pointed out, some of Microsoft's best products, such as Internet Explorer and Money, have emerged when the company has faced real competitive pressures.
The breakup of Microsoft would open countless new opportunities for software developers all over the world. At the moment no venture capitalist is going fund startups trying to sell rival spreadsheets, word processors or browsers against the might of Microsoft's integrated monopoly. New products in these areas have very little chance against the integrated packages that Microsoft offers locked into its own operating system.
What beggars belief is Microsoft's almost total inability to see, let alone admit, that it has done anything wrong despite the devastating catalogue of uncompetitive practices that the department of justice has unearthed.
Microsoft's self-interest dictates that it will oppose this judgment. The longer it delays the start of the split, the longer it will take to finish it. And even when the split is completed it will be years before effective competition can undermine the armlock that both new companies will have on their customers. It will be a major decision for companies to abandon the Windows system they are locked into. During this time, the industry Microsoft has dominated for so long will be shifting its field of battle to the internet, which Microsoft hopes will strengthen its argument that the justice department does not understand the dynamics of the industry.
Above all, Microsoft has reason to stall because the longer it does the longer it hangs on to its monopoly profits. Remember, the bottom line of all this is that Microsoft has been earning far higher profits than it should have been in virtue of its monopoly position. Should some of them not be handed back so they do not continue to give the two companies an advantageous war chest?
If the judge started to threaten huge backdated fines based on the scale of its monopoly profits Microsoft might have a vested interest in taking the judgment of the court more seriously.
