Time Is Now for Microsoft Settlement

It was reported late last week that the U.S. government and Microsoft were finally ready to lay down the gloves and craft a compromise that would bring one of America’s longest-running soap operas to an end.

By Monday, however, hopes for a settlement seemed to die as it was reported that government lawyers rejected Microsoft’s last minute settlement attempts.

Investors reacted to the speculation of a settlement with unbridled enthusiasm, pumping the software giant’s recently stagnant stock up 8 5/8 to 111 7/8 by mid-afternoon Friday. On Monday, Microsoft’s stock was back down to $105.87 in midday trading.

A Climate Change

While it now seems likely that U.S. District Judge Thomas Penfield Jackson will come down hard on Microsoft when he issues his ruling Tuesday — unless he delays the ruling to allow both sides more time to revive settlement talks — both sides of this bitter battle still have a chance to benefit from an 11th hour settlement.

The breakup of Microsoft might play well with Attorneys General and executives of companies that have been strangled by the software giant, but the average citizen views Microsoft far more favorably. There is no question, for example, that a Microsoft breakup would not sit well with Wall Street.

By settling now, the government would eliminate a potential political powder keg. The DOJ could hardly relish the thought of being dissected by one or more of the presidential candidates when the campaign kicks off in earnest this summer.

Broad Market Sanctions

Another reason for settling now is that government lawyers might be able to negotiate some broad sanctions to deal across the board with Microsoft’s computer products. Since the government’s case deals primarily with Microsoft’s attempt to bundle its Internet Explorer browser with its operating system, it is unclear whether a court ruling could apply sanctions that deal with any other issues.

By reaching a settlement now, the government might get Microsoft to agree to a permanent separation of its operating system from its application software. An agreement might specify that Microsoft keep its client and server operating systems separate as well.

Why Should Microsoft Settle?

Microsoft now faces serious threats to its dominance in many of the most important technology growth markets. Instead of spending its resources to avoid being broken up by the government, the company would do well to just settle and move ahead.

Microsoft may as well accept sanctions in the PC arena — where it still dominates — in order to be a more viable competitor in such new markets as interactive digital TV and wireless computing.

I recently had the opportunity to speak with several people who are close to Microsoft, and they all told me that the antitrust case has taken a significant toll on its personnel. Many employees now believe that it is time for Microsoft to cut its losses — and refocus its attention on strengthening the corporation for the long haul.

Good for Everyone

There is, of course, another interest in this entire mess that should matter most to both sides — the public. In the end, the public wants quality products at a reasonable price — and does not especially care about the rest.

By settling now and putting this baby to bed, both sides can serve the greater good and get back to doing what each does best.