The US Department of Justice and 19 states have formally requested the break up of Microsoft into two competing companies as the remedy for violating anti-competitive laws.
The proposal submitted yesterday to Judge Thomas Penfield Jackson, who had found the giant computer software company guilty, also asks that the two companies be barred from reuniting for at least 10 years, even in joint ventures.
Microsoft immediately labelled the proposal "extreme" and said it would hurt consumers and stifle innovation. It added that the proposal was unlikely to be upheld by the judicial system.
Microsoft stock, which has lost a third of its value in the past four months, fell further yesterday on Wall Street in anticipation of the proposal which was submitted after the close of trading. But it rose $1.25 to $71 just before the widely anticipated news was announced. Microsoft has until May 10th to respond to the proposal for its break-up but is expected to ask for more time. The judge's decision on an appropriate penalty will not be given until later.
Microsoft has already said it is appealing the ruling that it violated antitrust laws by abusing its virtual monopoly position as the manufacturer of the Windows operating system for personal computers.
Under the Justice Department proposal, one company would sell the Windows operating system and the other would market the applications software, notably the Office programme which includes the word processing system, Word, and the spreadsheet Excel.
Microsoft's browser, Internet Explorer, would be owned by the applications company but the Windows company could license the rights to use the browser.
Mr Gates and his senior executives would receive stock in only one of the companies, the boards of which would be separate, but ordinary shareholders would get stock in both. Some observers believe that shareholders would eventually gain from the split as they would have stock in two likely successful companies.
The Justice Department has also asked the judge to enforce immediate restrictions on Micro soft lasting three years and thus protect competition during any appeal. These include forcing the company to disclose the secret coding that links Windows to software applications.
Microsoft has already mounted a vigorous counter-attack through its online lobbying scheme, the "Freedom to Innovate Network".
The Justice Department antitrust chief, Mr Joel Klein, said yesterday: "Under our proposal filed today, neither the heavy hand of ongoing government regulation nor the self-interest of an entrenched monopolist will decide what is in the best interests of consumers. Rather, consumers will be able to choose for themselves the products they want in a free and competitive marketplace."
The Republican Presidential candidate, Governor George W. Bush of Texas, has said he hopes the Government does not "ruin this company" in seeking a break-up.
"I hope the judge would keep in mind that this company is an important part of the technological revolution taking place in America," Mr Bush said.
