Judge deals blow to Gates by ruling Microsoft a monopoly US court rules Microsoft a monopoly in blow to Gates

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AMERICAN SOFTWARE giant Microsoft has abused its monopoly over computer operating systems, a US judge ruled yesterday. The decision is a massive blow for Bill Gates and his company, which are defending themselves against charges of breaching US competition policy.

"Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products," the judge wrote.

US District Court Judge Thomas Penfield Jackson released the findings last night, the first, highly anticipated stage in his judgment on serious charges against Microsoft. The decision does not mean that the company has broken any laws and it will be months, if not years, before the final decision is reached. But it blows a big hole in the company's defence, making it more likely that it will be punished and perhaps even broken up.

The US Justice Department and 19 individual states charged that Microsoft had used its monopoly position in the market for computer operating systems to destroy Netscape, a company that makes Internet browsers. Though the judge has not ruled on the legal aspects, he has supported many of the claims that were made in open court.

Microsoft's Windows is the most widely used operating system in the world, and its Internet Explorer has achieved a similarly dominant position. But Microsoft argues that it did not have a monopoly, that Netscape was the victim of its own commercial mistakes, and that it did nothing more than any competitive company.

In any case, it has argued, since the issue was first raised the market for computer software has changed enormously. Netscape was acquired by AOL in March this year.

The US government acclaimed the judge's conclusions as a massive victory. "This is a great day for American consumers," said Janet Reno, the US attorney general. "We are enormously pleased with the decision today," said Joel Klein, the head of the Justice Department's anti-trust section and the man who has laboured long and hard against the software company. And he warned: "We do not rule out any of the remedies available to us."

Microsoft itself sought to play down the results of the judge's deliberations, calling the findings "just one step in an ongoing process, with many more steps remaining." And it added: "We're confident the American legal system will ultimately support our position and that our actions have benefited consumers."

But the findings are a substantial defeat. They are also a personal blow to Mr Gates, the richest man in the world, who gave testimony on behalf of his company. His personal reputation is at stake as much of that of his company.

The decision is only the first in a series from the judge. The next step is the conclusions of law, which clarify what legal infractions, if any, have been committed, and this would be followed by the remedies. These have been the subject of widespread speculation, ranging from the break- up of the company into "Baby Bills" to a decision that would force Microsoft to share its computer code more widely. In any case, there will almost certainly be an appeal to take the case to the US Supreme Court, and its final denouement is unlikely to be resolved for years.

Shares of the software behemoth had traded down slightly in advance of the ruling, but traders were waiting for the decision. After the findings of fact were released, the shares were down two dollars in after-hours trading as the first reaction to the damning comments.

A link to a website with the text of the judge's report is on The Independent's news site: www.independent.co.uk