Microsoft and US government in talks

THE US JUSTICE Department and Microsoft were locked in talks yesterday as they tried to work out the way to an eventual settlement in their historic anti-trust case.

The department has not ruled out the possibility of breaking up the world's largest software company, but insisted that many other "remedies" were being considered.

The talks - coming so soon after Friday's devastating ruling from Judge Thomas Penfield Jackson that Bill Gates's company had used monopoly power to hurt consumers - will put added pressure on Microsoft shares when trading restarts today. Its stock fell $4.81 (pounds 2.97) to $863/4 in after-hours trading late on Friday.

There is a widespread expectation that the judge's words will inspire a raft of lawsuits from competitors in the computing industry.

Meanwhile, both Republican and Democrat senators on the judiciary committee warned Microsoft to seek a settlement. Committee chairman Orrin Hatch said: "There are going to have to be some very serious negotiations by Microsoft or they will be in some very difficult straits."

As both parties went on a public-relations offensive with a round of appearances on talk shows, their comments on Judge Jackson's ruling underscored the vast chasm between them. Joel Klein, the Justice Department's top anti-trust enforcer, said the Jackson ruling would have to be the foundation for any settlement. "We would need a settlement that deals with the very findings that the court made in this case - a settlement that protects consumer choice, innovation and competition," he said.

Mr Gates, Microsoft's chairman and chief executive, in turn took out a full-page advertisement in The Washington Post, addressing the company's customers, partners and shareholders on the ruling.

"As this case moves toward resolution, Microsoft's 30,000 employees are focused on creating the next generation of products that will deliver the benefits of the Information Age - anytime, anywhere and on any device," he wrote.

"Microsoft is committed to resolving this matter in a fair and responsible manner, while ensuring that the fundamental principles of consumer benefit and innovation are protected."

His chief operating officer, Bob Herbold, told a talk show that he looked toward a possible vindication in an appeal court. The company had experienced earlier setbacks, but "eventually the courts came out on the side" of Microsoft.

Judge Jackson ruled that Microsoft had been active in "stifling innovation" to deter "investment in technologies and businesses that exhibit the potential to threaten Microsoft".

The next phase of the case will be to decide if Microsoft has liability. If so, the court would decide how to remedy the problem - possibly even breaking up the Redmond, Washington-based company.

Meanwhile, in Britain, it was announced yesterday that a foundation set up by Mr Gates and his wife, Melinda, had donated pounds 2.5m to help install computers in 47 libraries.

IBM revamp, page 17

Network, Review, page 12