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Judge Orders Microsoft Breakup

In a decisive victory for the Justice Department, a federal court today ordered Microsoft Corp. to split into two separate companies as a remedy for what the court previously ruled were “predatory” and anti-competitive business practices.

Executives at the software giant immediately announced plans to appeal the decision, which they called extreme and unfeasible. An appeal could take a year or longer. Company officials said they will seek a court-ordered stay of the remedies pending appeal.

The Justice Department said it plans to send the case directly to the Supreme Court.

The harshly worded breakup order issued by U.S. District Court Judge Thomas Penfield Jackson makes only cosmetic modifications to a previous proposal from the Department of Justice, which sued Microsoft for anti-trust violations along with 17 state attorneys general.

The order splits Microsoft into two companies: one to make and sell operating systems for personal computers such as Windows and another firm that would market Microsoft’s other software and online businesses. The two companies could do business with each other, the court said, as long as outside companies were not disadvantaged.

Jackson’s order and final ruling also include restrictions on Microsoft’s corporate behavior. These remedies include publishing the so-called source code used by programmers to design software applications for Windows.

Other behavioral remedies regulate Microsoft’s relations with computer makers and software companies. The conduct remedies are scheduled to go into effect in 90 days, but both the breakup and the remedies could be stayed by the court pending appeal.

Jackson gave Microsoft four months to submit a breakup plan.

“Microsoft, as it is presently organized and led, is unwilling to accept the notion that it broke the law or accede to an order amending its conduct,” Jackson wrote, explaining why he believed the breakup was necessary.

“Microsoft has proved untrustworthy in the past,” Jackson said, citing its failure to comply with a court ruling earlier in the 1990s that preceded the antitrust case.

Microsoft CEO and founder Bill Gates immediately criticized the decision as unwarranted government intervention.

“This is clearly the most massive attempt at government regulation of the technology industry ever, and it was conceived by the government and imposed by this ruling without a single day of testimony or scrutiny,” Gates said in a statement.

“This plan would undermine our high-tech economy, hurt consumers, make computers harder to use, and impact thousands of other companies and employees throughout the high-tech industry.”

Joel Klein, assistant attorney general for the Justice Department, released a one-sentence statement praising the verdict.

“The court’s order is the right remedy for Microsoft’s serious and repeated violations of the anti-trust laws,” he wrote.

Gates was expected to address Microsoft employees via email later today.

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