Gates seeks deal to keep Microsoft in one piece

BILL GATES is under strong pressure to broker a deal with the US government after a judge slammed his company as a monopolist which has abused its position to crush the competition.

Microsoft's shares fell heavily in after-hours trading on Friday night, as huge questions opened up about its future. It was clear from the ruling delivered by Judge Penfield Jackson on Friday night that Microsoft has lost the argument about the competition case brought by the federal government and 19 US states.

The court's findings will embolden potential rivals which have long been stifled by Microsoft's global domination.

"The aura that surrounded Microsoft as this all-powerful, inexorable force that always won has now been significantly diminished," said Michael Morris, chief lawyer for Microsoft's arch-rival Sun Microsystems.

"To the degree that people in this business take heart from that ... I think they will be more likely to make their business decisions and innovation decisions more on what's best for their customers and less with respect to what Microsoft will say or do in response," he added.

It will be some weeks before the judge delivers a decision about whether or not the company broke the law, and longer still until he decides on the remedy. Until then, Microsoft will be in a sort of limbo, waiting to see whether the judge wants the company to be broken up or to sell off the rights to use Windows, its operating system.

Mr Gates has opened the door a little to a settlement, though previous talks between the company and the US Department of Justice have proved abortive. "From the very beginning, we've said we would like nothing better than to settle this case," he said after Friday's shock defeat.

If the company does not settle, then the judge's statement can be used as the basis for civil lawsuits against Microsoft which could be brought by everyone from competitors and large corporate customers to consumers. "One benefit to consumers of pursuing this case to a final judgment is that these findings then have a legal effect that they wouldn't otherwise. They can then be used in other cases by consumers to pursue remedies on their own," said Connecticut Attorney General Richard Blumenthal, who speaks for the 19 states.

Joel Klein, the US official who has led the onslaught on Microsoft, said he was also prepared to deal, but on his terms. "We have always said we are prepared to discuss settlement so long as the important competition issues are fully addressed," he said. With the judge's statement so clearly backing the government's case, there is less impetus for Mr Klein to compromise.

Microsoft was charged with abusing its monopoly power over computer operating systems to crush competition in the market for browsers, the software used to access the internet. It denied that it had a monopoly, or that it had acted improperly. But Judge Jackson clearly supported the government's accusations.

He has now asked the government to file a brief on 6 December specifying how it believes that antitrust laws should be applied. Microsoft will answer with its version on 17 January. The government could then respond on 24 January, and Microsoft would follow on 31 January, after which the judge would make his decision on the legal position. His specification of remedies would come months after that, and an appeal to the US Supreme Court would almost certainly follow, taking the case into 2001.

The fall in the company's stock will have little impact on Mr Gates, 44. He is worth $85bn (pounds 54bn), according to Forbes magazine, with his personal fortune having increased by $25bn in the last year alone, about $3m dollars an hour. In those terms, even if the fall in the company's stock reduces his wealth by $30m, this amounts to little more than one day's income.