Are 'Baby Bills' in your future?

Would standalone Microsoft Windows and Microsoft Office companies be less monopolistic threats in their respective markets?
Written by Mary Jo Foley, Contributor on

That seems to be the contention of the government. According to several published reports, the U.S. Department of Justice and some of the 19 state attorneys general suing the company for antitrust violations are leaning toward advocating for a breakup of Microsoft. Reports claim that the government -- which is due to submit to Judge Thomas Penfield Jackson this week its proposed remedies in the Microsoft case -- is now favouring structural remedies, which, if enacted, would break Microsoft into two or three different companies.

While structural remedies like a breakup had been almost considered out of the picture until this week, they are now possibly at the forefront of the DoJ/states' expected short list of remedy proposals. The Wall Street Journal reported Monday that government remedy proposals would require Microsoft to divest itself of its Office division, leaving the company holding its operating system and consumer/Internet divisions.

The Washington Post and USA Today reported the government is seeking to require Microsoft to split itself into two or three "Baby Bills," a proposal allegedly suggested by some of the states and other non-Microsoft sympathisers throughout the current antitrust case. A Windows company, an applications company and an Internet company would be created in such a breakup, according to these latter accounts.

But just how easy it would prove to divide up Microsoft along these lines is up for debate. As a result of several recent reorganisations, the company is not as readily diceable as it once was.

Microsoft's Platforms Group, for example, is the central repository for all things Windows-related. But as a result of a late March reshuffling, Microsoft added its Developer division employees and products into the Platforms unit. It is unclear if the government would seek for Microsoft to divest itself of its entire Platforms Group or only the operating-system component of it.

The so-called Office Group, whose official name is the Business Productivity Group, likewise, is responsible for a lot more than just Office. The unit handles the Office desktop suite; BackOffice server suite; Visio drawing/design products acquired by Microsoft late last year; Pocket PC, bCentral small business portal and Small Business Server (a Windows NT-based BackOffice bundle); and ebook and tablet PC software.

Again, it's unclear whether the DoJ and states are seeking Microsoft to split off just Office or the entire Business Productivity Group. And neither the DoJ nor Microsoft is commenting on remedy proposals. In reporting revenues, Microsoft breaks out its Windows numbers separately. It lumps together its desktop applications and developer tools numbers. For its fiscal third quarter, ending March 31, Microsoft's Windows division reported $2.3bn (£1.4bn) in revenues, with the Productivity Applications and Developer business unit pulling in $2.6bn. The remaining Consumer and Other unit is far smaller and less significant to Microsoft's bottom line. In Q3 2000, that unit contributed $756m in revenues.


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