Microsoft Likely to Survive Call for Breakup

Government lawyers may want Microsoft cut to pieces, but that doesn't mean it'll happen. Justice Department sources confirmed Wednesday that they've proposed splitting the corporation as a remedy for the finding by Judge Thomas Penfield Jackson that the corporation had engaged in anticompetitive practices. Microsoft and Justice Department lawyers are meeting weekly with federal mediator Richard Posner, to whom the Justice proposal has been forwarded. "Given the breadth of Judge Jackson's ruling and the nature of the harm he found that Microsoft had done, it's not at all surprising that Justice would recommend breaking up the company," says TIME correspondent Adam Cohen. "But Microsoft would fiercely resist that option, and they're dealing with a mediator who is somewhat conservative on antitrust issues and may therefore be a little skeptical of recommending such a strong remedy."

The mediation phase is a precursor to a final ruling in the case, which is expected next month, and both sides are playing their cards close to their chests. "Nobody really knows how the dynamics of mediation will go," says Cohen. "It's hard to predict what either side will give up, and whether they'll reach a settlement at all." After all, if the government insists on a harsh remedy, Microsoft might be backed into a corner and forced to fight, dragging out the process of reaching a settlement for years. "And the landscape keeps changing," adds Cohen. "Microsoft lawyers are already pointing to the merger between AOL and Time Warner as another reason Microsoft shouldn't be treated very harshly in this case." (Time Daily is owned by Time Warner.)