Outlook: Settle Bill, it's Microsoft's best option

IT MUST gall Bill Gates to watch the trust busters ganging up on a business that has got where it is by virtue of sheer brain power and commercial acumen and not through brute force and ruthless acquisitions. But he, along with everyone else concerned, must realise that the best way out of the Microsoft antitrust suit is a deal.

The company saw its stock rocket when the first rumours of a possible settlement emerged; the government knows that despite its strong courtroom performance, its case is far from legally watertight; and consumers and the rest of the industry have a stake in a stable future for the software market.

So the talks that started yesterday in Washington on a settlement must have a fair wind behind them. Microsoft has put up its own framework for a deal that would loosen its contracts with personal computer makers, though it has been received sniffily by the government.

The nuclear option is, of course, break-up, Standard Oil or AT&T style. Under this scenario the company would be split into a number of "Baby Bills", each of which retains one or more product lines from the original behemoth. Another remedy, suggested by the state attorneys-general, would be to auction off the rights to Windows, preventing Microsoft from using it as leverage in other markets.

All three aim to tackle the central problem - the operating system. It is Microsoft's use of its virtual monopoly in Windows that has, the government alleges, enabled it to muscle in on the internet browser market. Each tries to dilute that power; Microsoft's is a form of arms control, while the other two approaches are more like the division of Germany into different zones at the end of the Second World War.

Time is of the essence here, and time, in the world of software, moves very quickly. Even while the trial was underway, AOL's linkup with Netscape changed the competitive landscape. Microsoft is arguing from this that it is in a competitive market, and that it is not guilty as charged. But if it does not start giving ground, then the case could drag on for months, years even. At a time when Microsoft faces some very tricky strategic issues, that cannot be in Bill Gates' interest.