http://news.independent.co.uk/digital/update/story.jsp?story=80807The Independent
US appeal court overturns decision to split 'anti-competitive' Microsoft
By Charles Arthur, Technology Editor
29 June 2001
Wall Street reacted optimistically yesterday as Bill Gates's Microsoft won a
US appeal court decision that prevented it being broken up. The court also
agreed that the company could tie together previously unrelated pieces of
software - while noting that Microsoft has acted as an illegal monopoly.
Shares in the Redmond, Washington-based company, which makes the Windows
software that runs on the vast majority of PCs, leapt by $3.82 to $74.96 on
Nasdaq before trading was halted. The ruling followed a two-year trial in
which the US Justice Department and 19 US states accused Microsoft of using
its PC dominance to crush nascent rivals in other fields. The company
maintained that it was simply competing in a fast-moving marketplace - a
stance with which the appeal judges agreed yesterday.
Some traders suggested that the decision might help technology shares, which
have been depressed for the past year. "It will help technology stocks in
general," said Owen Fitzpatrick, joint head of Bankers Trust private
banking. "It eliminates the possibility of interference on behalf of the
government."
Others felt that any possibility of a revival in share prices was overdone
because the market had already allowed for the result of the appeal. Debra
McNeill, manager of the $100m Fremont Structured Core fund, said: "I think
that this was totally expected after [President George] Bush was elected.
Bush is not supporting the Justice Department in this case."
By agreeing that Microsoft did not try to monopolise the market for web
browsers by bundling its Explorer software into the Windows operating
system, the judges knocked away a key plank in the Justice Department's
case, and the essence of its argument.
Yet they did agree that Microsoft's contracts with internet service
providers, requiring them to feature the company's Internet Explorer
browser, were designed to protect illegally the Windows monopoly.
The court said those deals had "a significant effect in preserving its
monopoly" because they helped keep the usage of Netscape's Navigator browser
below the critical level necessary for it, or any other rival, to pose a
real threat to Microsoft.
The decision will embolden Microsoft, which is preparing to introduce a new
version of Windows in the autumn, and to extend its presence across the
internet. The company had no immediate comment.
Though the seven judges in the appeals court unanimously allowed Microsoft's
plea that it should not be broken into two companies - one writing
"operating systems" (like Windows) and another writing "applications" (such
as its Office product, the company's principal cash cow) - they also
confirmed many of Judge Penfield Jackson's findings of fact.
Those said that Mr Gates's company had indeed acted as an illegal monopoly
in the mid-1990s in using its dominance in PC operating systems to exclude
rivals offering web browser software, in particular Netscape.
Jackson concluded the company was an illegal monopoly and ordered the
software giant broken into two as a penalty.
But the appeals judges overruled that remedy because it depended on a number
of "findings of illegal conduct" which they reversed. They instead sent the
case back to the lower court, where a new remedy will be decided.
But they also ordered that a different judge should decide Microsoft's
punishment, a decision prompted by off-the-record interviews given by Judge
Jackson to the New York Daily News during the case.
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