Now that Microsoft has been convicted as a monopolist, breaking up the company will be a boon to consumers, right?
Not necessarily.Software industry analysts and consumer advocates are sharply divided over whether a breakup, as proposed Friday by the federal government and 19 state attorneys general, would lead to lower prices or better software for users any time soon.
In part that is because the company is likely to fight such a penalty ferociously. Microsoft's formal response to the government proposal is due next month, but it has asked for more time to prepare a response. The company has said, in any event, that it will appeal U.S. District Judge Thomas Penfield Jackson's April 3 ruling that it engaged in illegal monopolistic acts.
Generally speaking, the breakup proposal is designed to create two new companies: One developing and marketing the Windows operating systems, and the other responsible for everything else, including its market-leading Office applications software.
"It's hard for me to figure out how this ends up being positive for consumers," said W. Christopher Mortenson, industry analyst for Deutsche Bank in New York. "The big benefit of the combination is that Office works really well with Windows," a level of integration that would not be assured if they were manufactured by separate outfits.
But several consumer activists said dividing Microsoft would help eliminate its incentives to inhibit other company's products, an impulse noted numerous times in Jackson's ruling.
"Consumers will get the one thing they haven't had: choice," said Mark Cooper, director of research at the Consumer Federation of America in Washington, D.C. "If you walk down the computer aisle at an electronics store today, you will find 25 combinations of hardware, but the only thing you don't have a choice on is software."
Whether the breakup will encourage other companies to manufacture competing operating systems or strengthen their hand against Microsoft Office -- which includes a word processor, spreadsheet, address book and scheduler, and other programs -- is uncertain.
Among desktop computer buyers, only Apple Computer Corp.'s Macintosh operating system has earned even a 10 percent market share, and in that case only among home users. The operating system Linux, which is available for free, has yet to find a proven market among nonprofessional computer buyers.
Microsoft critics argue, however, that one reason Linux has not been more popular is the dearth of applications available to run on it. The applications side of the company would no longer be forced to favor Windows, the theory goes, and could only maximize its market share by making sure its products are compatible with Linus and all other operating systems. In turn that would enhance Linux's appeal.
Several consumer groups also predicted software prices would tumble if Microsoft loses the leverage it has by controlling the market for both products.
"Microsoft has been pushing the consumer price for its operating system close to $100," said Jamie Love, director of the Ralph Nader-affiliated Consumer Project on Technology, said. "The competitive price for operating systms is probably closer to $10. I'm sure that Be (a rival operating system) would be pretty happy to get 10 percent of the market for $10 to $15 a seat."
Some say consumers will benefit because Micosoft's power to impose consumer-unfriendly restrictions on computer makers will be curbed. Jackson made explicit reference to that behavior in his ruling. He cited a Hewlett-Packard executive's complaint that Microsoft had forced his company to remove installation and registration aids it had installed on its machines.
The most important long-term impact of the proposed breakup, activists said, is sure to be the diminution of Microsoft's ability to thwart new products and companies it considers a competitive threat.
Industry observers agree that a split-up Microsoft would find it harder to compete in new markets -- a critical issue, given that some of the fastest growth in the future is likely to be in specialized computing applications such as hand-held computers and cellular phones.