DOJ and U.S. States Unite Against Microsoft

Contrary to widespread rumors that the U.S. Department of Justice and the 19 states suing Microsoft Corp. would seek separate remedies in the antitrust case, all parties concerned are expected to proceed Friday by filing a joint proposal.

The proposal will reportedly call for Microsoft to be split into two separate companies. Even at the eleventh hour, there were a few states hanging in the balance, with some leaning toward more lenient remedies, and others toward more stringent approaches.

California Attorney General Bill Lockyer was lobbying hard for Microsoft to be broken into three companies, while Ohio Attorney General Betty Montgomery said she favored keeping the company intact.

Earlier this week, when it appeared unlikely that the states and the DOJ would reach accord on proposed remedies, Federal District Judge Thomas Penfield Jackson said a majority of states could file separate proposals if necessary.

Microsoft Stands Firm

The joint proposal will most likely call for Microsoft to separate its Windows operating system division from the rest of the company. If such a proposal is made tomorrow, Microsoft is expected to ask the court for additional time to study the proposal before it files its formal response, due May 10th. A remedy hearing is already scheduled for May 24th.

Microsoft has consistently and publicly been resolute in its objections to a company split.

Earlier this week, Microsoft Chairman Bill Gates once again defended his company’s business practices, saying, “It’s important to understand that Microsoft is very clear that it has done absolutely nothing wrong.”

Reacting to the reports, Microsoft spokesman Mark Murray said, “There’s nothing in the existing trial record to support this kind of excessive proposal, which is clearly outside the scope of the case. There would need to be months of discovery, depositions and hearings in order for the court to review such a radical step.”

In fact, even if a breakup is proposed, it will not happen until all appeals have been exhausted, which could take as long as two years.

Legal Troubles Mount

Meanwhile, as industry observers await the next scene in the ongoing antitrust drama, Microsoft’s legal woes continue to grow. Compounding the company’s immediate problems are 27 separate private antitrust lawsuits from 17 jurisdictions across the United States.

Late yesterday, a panel of judges transferred all of the suits to a single court in Baltimore, Maryland, with pretrial activities to be coordinated by U.S. District Judge J. Frederick Motz.

As Microsoft wages its public battle for survival, it is also maneuvering internally to keep the peace among its employees. To alleviate morale problems caused by the slipping value of the company’s stock during the legal upheaval, Microsoft has increased its employees’ stock options.

Microsoft shares took a 16 percent dive on Monday, and have lost more than one-third of their value since the end of March.

Although the move to offer increased stock options was not made public, the Associated Press reported the news yesterday after obtaining an internal e-mail circulated to Microsoft employees.

Reportedly, employees will be able to buy stock at $66.62, Monday’s closing Nasdaq price. Microsoft shares closed Wednesday at $68.