Feds consider Microsoft trial 'what ifs'
- By Dan Verton
- Nov 14, 1999
Should the government's antitrust case lead to a breakup of Microsoft Corp., some fear the world's leading software company may find it difficult, if not impossible, to lend direct support to federal agencies during times of crisis.
The "findings of fact" handed down Nov. 5 by District Judge Thomas Penfield Jackson cast Microsoft as a monopoly-wielding behemoth bent on eliminating competition in the high-tech software market. Microsoft has enjoyed a 90 percent to 95 percent market share during the past 10 years.
Sanctions against the company, which would come with a final judgment on the case sometime in July, could range from forcing Microsoft to change its business practices to breaking it apart into separate companies.
Some in the Microsoft camp believe a breakup would be particularly troubling to agencies such as the Defense Department, which spends an estimated $300 million to $500 million each year on Microsoft products and relies heavily on the company to provide technical support for mission-critical applications. In fact, the company recently held a series of high-level meetings with Pentagon brass to work out tailored support packages that could be relied on during times of war.
The problem, according to a well-placed source in the Redmond, Wash., company, could come into play if the government sought to separate the software applications business from the operating system business. That is because Microsoft's applications are woven so tightly into the operating system that any separation of the two businesses would spawn havoc for a coordinated trouble-shooting operation, the source said.
"There could be huge national security implications" if the company is broken up, the source said. "We have around a million [Microsoft] Exchange accounts in DOD." In addition, the CIA, the National Security Agency and the Defense Intelligence Agency are all big Microsoft customers, the source said.
"If they do separate applications from the [operating system] part of the company, it will be a lot tougher to support anyone, much less DOD in wartime. I don't see how you could coordinate support and do effective trouble-shooting if you had two independent, autonomous groups," the source said.
A Pentagon spokeswoman said she is not aware of any DOD analysis into the ramifications of a potential breakup. Other DOD organizations in the Army and the Air Force declined to comment on the case.
But Pete Hayes, general manager for Microsoft Federal Systems, said it is premature to say what specific remedies might be sought in the case. He said Microsoft intends to remain a single entity. "We've doubled the number of people supporting the federal government over the last year and current plans [are] to continue that same kind of growth," he said. "We intend to provide great support to the government as one of Microsoft's top customers."
William Kovacic, a law professor at George Washington University specializing in antitrust law, said it would not be surprising if DOD lobbied the Justice Department against a breakup of Microsoft, as it did in 1984 during the government's antitrust case against AT&T.
During the AT&T case, Kovacic said, the Pentagon argued behind the scenes that a breakup of the company would undermine the integrity and reliability of critical communications networks. In a similar case against IBM Corp. in 1982, the legal team that defended IBM - which then included the government's chief Microsoft prosecutor, David Boies - also relied on the national security argument to defeat the government's case. Boies and IBM prevailed in that case after a 13-year battle.
Kovacic said, agencies may "[step] forward to oppose the remedy requested by...Justice." However, Justice "would have to be sold on the idea that a breakup would impair their missions," Kovacic said. "It's got to be a credible threat," and the users have to be able to communicate that effectively, he said.
While some federal agencies might oppose the remedy sought by Justice, "the likelihood of a breakup of the company is 10 percent or less," Kovacic said. "It's a remote possibility" but serious enough that Microsoft must address it, he said.
People outside the Defense Department are less concerned about a breakup, expecting that support for key products would continue. Michael Gartenberg, vice president and research area director for the Gartner Group, said that even if the government succeeded in breaking up Microsoft, the company still would be dominant. "The companies that emerge should still be able to compete and do business, and supporting the federal government would be part of that," he said.
Mark Haggerty, program manager for the Outsourcing Desktop Initiative for NASA, said that although his organization does not anticipate any major service disruptions if Microsoft is broken up, it's keeping a watchful eye on developments.
"I'm making the assumption that the companies we're dealing with are a little more nimble when it comes to dealing with Microsoft and changes, not being bound by the regulations that we are," Haggerty said. "That's not to say we're not keeping our eye on it," he said. "I'm not totally naive to believe that there won't be any fallout [from the Justice decision], but at first blush there doesn't seem to be anything to be concerned about."
About 93 percent of the Transportation Department's installation base of desktops and servers also are based on Microsoft products. But George Molaski, DOT's chief information officer, said his agency is not concerned about the impact of the potential breakup.
"That ruling changed nothing about the products; it changed the practices," Molaski said.Chip Mather, senior vice president of Acquisition Solutions Inc., said a breakup might enhance Microsoft's focus on services and support.
"I would see an improved focus on service and support because they're going to have more competition," Mather said. "I remember having to get source code for IBM mainframes in case IBM ever went under.... There are alternatives. Competition is a wonderful thing."
***Milestones for Microsoft*
Dec. 6, 1999 Govt. submits conclusions of law*
Jan. 17, 2000 Microsoft issues response*
Jan. 24, 2000 Government responds to Microsoft*
Jan. 30, 2000 Microsoft issues "final volley"*
Mid-February 2000 Oral arguments commence*
Mid-March 2000 Opinion on conclusions of law*
Remedies Phase 2-3 months to decide sanctions*
July 4, 2000 Final judgment*
June 2002 Final resolution if appeals are filed