Microsoft is fighting for its life. Last Friday, US government antitrust regulators proposed breaking up the world's biggest software company, and Mr Bill Gates is not a happy man.
In a display of defiance, tinged with anger and bitterness, the software billionaire who founded the company in 1975 describes the proposal as "random" and "out of bounds". It shows, he claims, regulators' ignorance of how the software industry works.
"Rather than be reasonable and try to resolve the case or come up with a focused remedy, what they have got here is something that is not supported by the facts, would be greatly harmful to consumers, and we don't believe will be sustained by the courts," says Mr Gates. "These regulations would not help the software industry but simply retard the speed at which it moves ahead."
Others applauded the department's proposal, however.
Consumer activist Mr James Love, director of the US-based Consumer Project on Technology said that breaking up Microsoft will benefit consumers. "One need only look at the explosion of innovation in Internet-based applications, where there is no single company setting standards, and where competition is intense for evidence that private monopolies are not necessary for standard setting and interoperability."
Last Friday may have been a bad day for supporters of Microsoft. Yet in a strange twist, the company is setting the agenda for public debate for the first time since the Justice Department joined 19 state attorneys general to file its landmark antitrust lawsuit two years ago.
The issue is no longer whether Mr Gates and his colleagues stepped over the line in violation of US antitrust laws with their aggressive business tactics. Disputes over whether antitrust laws crafted in an era of oil barons are applicable to a rapidly changing industry are also moot.
Now the burning questions are whether a break-up of Microsoft could provide benefits that would offset the risks. Would it spur healthy competition? Would consumers be better off? And what about Microsoft's millions of shareholders and its tens of thousands of business partners?
These issues are set to be addressed in the Washington courtroom of Judge Thomas Penfield Jackson, who has presided over the case and ruled that Microsoft has abused its monopoly power, to the detriment of consumers. Microsoft is pinning its hopes on the Appeals Court, which has previously set aside harsh restrictions on the company's activities. But before it can begin an appeal, the law requires that Judge Jackson must determine what measures should be taken to "remedy" the damage that Microsoft has done to competition in the software market.
This raises the immediate prospect of yet more courtroom drama, perhaps stretching on for months, in which testimony and evidence may be presented by both sides as lawyers argue for and against breaking up one of the world's most successful and largest companies.
Under the terms of the Justice Department's proposal, Microsoft would be split into two companies. One would retain ownership of all forms of the Windows operating system. The other would own Microsoft Office, the widely used suite of desktop application programs, as well as the remaining parts of Microsoft's business, including its Internet services and applications such as database programs.
Before the break-up, Microsoft would be forced to offer Windows to all computer companies on the same terms, and to allow PC manufacturers to modify the software or offer alternative products without redress. Other restrictions would force Microsoft to provide third-party applications developers with "timely" access to technical details of new products to remove any advantage that its own applications' developers might have.
Antitrust officials believe that breaking up Microsoft will kickstart competition in the market for computer operating systems. The only company that could really challenge Windows, they argue, is a business with as many customers.
"Because Office is an enormously popular product with over 100 million copies in use around the world, its availability on other operating systems would give those operating systems a real opportunity to compete with Windows," says Mr Joel Klein, head of the antitrust division of the US Justice Department.
His assumption is that the Windows company would rush to replace Office with a new set of applications programs, and that the applications company would form new alliances with rival operating systems companies to attack Windows.
Mr Klein argues that consumers would benefit from the opportunity to choose among software products from the two competing companies formed by the breakup, as well as from new competitors that would emerge.
However, in the short term software prices are likely to rise, even supporters of the US government proposal acknowledge, as the new companies regroup. Moreover, restrictions on the terms that Microsoft can offer to PC manufacturers point to a rise in the average price of Windows, and thus PCs.
"There might be some immediate consumer impact on prices, but the more profound impact will be more choice and innovation. That is the theory," says a lawyer who has represented some of Microsoft's rivals.
Yet as Mr Gates was quick to point out, development of new products by Microsoft's successor companies would almost certainly be delayed. He was particularly annoyed that the US government's proposal would give Microsoft's voice recognition technology, for example, to the applications company. Microsoft had been planning to build voice recognition into a future version of Windows.
However, officials at the antitrust department may find that hard to get used to. They have long been accustomed to broad compatibility among PC products and the advantages of ubiquitous PC software standards.
If the government's proposals offer mixed blessings to consumers, then Microsoft's business partners in the computer industry face tougher challenges. For the tens of thousands of small businesses that have hitched their wagons to the Windows operating system - as computer sellers or service providers, systems integrators, PC components suppliers and the like - the prospect of a break-up is particularly disturbing, according to industry trade groups.
Analysts have also expressed concerns that software companies, long accustomed to Microsoft's dominance, have fashioned their strategies to avoid direct confrontation with the industry giant, so it may take a long time for them to adjust.
Microsoft's rivals who are most likely to benefit from a break-up seem to be distancing themselves from the US government's plan. Mr Larry Ellison, chairman and chief executive of Oracle, who has often called for a break-up of Microsoft, was notably silent in the immediate aftermath of the announcement. Sun Microsystems, which has filed a complaint against Microsoft with the European Commission and is widely believed to have encouraged the Justice Department in its investigation and prosecution of Microsoft, issued a terse statement saying that the proposed remedy was an "appropriately serious response to the serious harms caused by Microsoft's violation of the antitrust laws".
Microsoft's millions of shareholders are likely to take a dim view of the US government's plans if the share price, already depressed by concerns about the antitrust case, takes another dive - it has already fallen more than 40 per cent this year.
Ironically, the tables may now be turned in Judge Jackson's courtroom, with the government taking on the mantle of "big brother" interfering in the marketplace and Microsoft cast in the unfamiliar role of underdog.
