Microsoft Gets A Breather

Every one at Microsoft is in a rejoicing mood because the immediate fear of a break-up of the company is no more there. But this rejoicing may not last long. The appeals court will soon appoint a new judge to decide on the appropriate penalty on the company.

The penalty will have to be paid because the appeals court has upheld that the company operated an illegal monopoly. The breather has come for Microsoft because the appeals court ruled that the software giant was not given a proper chance to present evidence to argue against Judge Jackson's break-up order. 

The penalty that would be decided by the new judge could very well be another break-up order. Of course, this thinking represents one side of the coin. The other side is that the changed political equations in Washington may ensure that Microsoft may not break-up after all.

The hope is very much alive as President Bush and his legal advisors are said to be looking for an out-of-court settlement. This goes very much in line with the tradition where Republicans have been soft to big business.

But the Republication softness may not be bought by the 19 states of the US that are supporting the government's case. Many of these may remain firm in their stand that a structural change in Microsoft alone would be the right remedy. Of course, Microsoft will use all its lobbying skills to ensure that the states soften their stand and don't insist on a break-up.

A firm stand on the part of the states and the ruling of the appeals court would actually strengthen the negotiating position of the government because until now Microsoft was unwilling to accept the fact that it was a monopoly. The appeals court has unanimously held that Microsoft is not only a monopoly but also an illegally operating one. 

The unanimous ruling should push Microsoft also to the negotiating table rather than go for a legal remedy at the Supreme Court. There are less chances that the apex court will rule in favor of the software giant going against the appeals court.

In fact, the appeals court ruling has opened the Pandora's box for Microsoft. Emboldened by the court's ruling, America Online which owns Netscape and Sun Microsystems originator of Java, can drag Microsoft to the courts with civil antitrust lawsuits. 

If these companies can prove that they were financially damaged by Microsoft's business practices, then the software giant will have to shell out huge amounts as damages. Whether Microsoft will negotiate with these companies to reach an out-of-court settlement or go for a legal battle is yet to be seen.

So, its only a breather for Microsoft for the moment. Of course, things look much brighter than what they used to when Judge Jackson was around and the political environment was different. With the changed scenario, Microsoft will approach the legal battle with a greater hope.

sylvesterl@cmil.com