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When Microsoft Almost Split...

Thomas Penfield Jackson, the outspoken federal judge who oversaw Microsoft's antitrust trial in 1998 and ordered the company to divest its Windows business, died Saturday of cancer at the age of 76.

After finding Microsoft guilty of breaching U.S. antitrust laws and violating the 1994 consent decree in which it had agreed not to tie the sale of products to the sale of Windows, Jackson ordered that Microsoft split itself into two companies -- one focused on Windows and the other on the remaining software.

As we all know, that never came to pass. Microsoft is still one very large company -- in fact, larger. But that may be thanks to unusual behavior by the judge. During the dramatic trial, Jackson, a technology neophyte himself was able to disprove testimony of key Microsoft execs including founder, chairman and then-CEO Bill Gates that Internet Explorer was inextricably tied to Windows by decoupling the browser himself.

Jackson's split-up order was overturned on appeal only because he had discussed his thinking during the trial with a few select journalists under the condition that they not publish his views until after he rendered the verdict. While the appeals court found Jackson was biased, it didn't overturn the verdict, just the divestiture order.

Jackson famously compared Gates to Napoleon and the company's executive team to "drug traffickers." Gates had "a Napoleonic concept of himself and his company, an arrogance that derives from power and unalloyed success, with no leavening hard experiences, no reverses," Jackson said in 2001. Jackson also described Gates' testimony as "inherently without credibility."     

The fact that Jackson unabashedly shared his opinions gave the appeals court latitude to overturn his ruling that Microsoft split itself into two companies. But for several years, Microsoft faced a significant risk that it might have to split into at least two companies, and perhaps even more. Many, myself included, believed that wouldn't happen. But the possibility weighted heavily on Microsoft.

While customers and investors watched closely, along with lawsuits by 20 states attorney generals, there was little evidence that it affected major decisions by IT pros and investors alike to support their investments in Microsoft. Of course we always hypothesized what a divested Microsoft would look like. After all, many of us lived through the divestiture of AT&T in 1984, a move which reshaped the telecommunications industry.

Microsoft detractors argued vigorously that a Windows company and one that produces Office, for example, would foster more competition because they would have more freedom to align with parties that the combined company couldn't-- thereby offering customers more choice. While others feared a divested Microsoft would result in fragmentation and interoperability tissues, the counterargument was that market forces would require players to make things work together.

As it turned out, market forces did diminish Microsoft's dominance. These days, it would be hard to call Microsoft a monopoly despite its strong presence on PCs today. While there are still plenty of critics who may beg to differ, Forrester Research is predicting only 30 percent of client devices will run Windows in 2017 thanks to the proliferation of iOS- and Android-based smartphones and tablets. Nevertheless Forrester does believe Microsoft's new Windows 8 will start to take hold in 2013.

Despite the diminished influence of PCs, 69 percent of Redmond magazine readers say they plan to upgrade their Windows PCs to Windows 7-based systems and 18 percent to Windows 8, according to our 2013 Reader Survey.

But if Jackson was more discrete and Microsoft had exhausted all appeals (likely to the Supreme Court) there may have been a very different outcome. What would the IT picture look like today?

Posted by Jeffrey Schwartz on 06/17/2013 at 1:15 PM


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