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A Judge Ordered Microsoft to Split. Here’s Why It’s Still a Single Company

4 minute read

It was Friday, Nov. 5, 1999 when then-Microsoft CEO Bill Gates got the bad news. Judge Thomas Penfield Jackson had declared that his company was a monopoly. And not just any monopoly, but the very worst kind: one that uses its power to squash would-be rivals before they’re even out of the gate. At the time, Microsoft packaged its Internet Explorer web browser with its Windows operating systems, which gave Microsoft an incredible advantage over rivals like Netscape in an era when dial-up Internet meant that downloading and installing alternative web browsers was a slog at best.

“It’s actually hard to imagine how, for Microsoft, it could have come out any worse,” TIME wrote in a Nov. 15, 1999 cover story on Jackson’s decision. But Jackson wasn’t done yet — the declaration that Microsoft was a monopolist was only the first half of his decision. Jackson’s conclusions and remedy wouldn’t come until April and June of the next year, respectively, after Gates had already stepped down as CEO and transitioned into the newly created role of “chief software architect.”

“Assuming he says yea [to the question of whether Microsoft’s monopoly was used to violate antitrust laws]–a near certainty considering Friday’s findings–he can impose a remedy as far-reaching as the total dismemberment of the Gates empire,” TIME wrote in 1999. “The gamut of possible outcomes runs from a mild go-forth-and-sin-no-more to the truly Draconian stuff: forcing Microsoft to share its Windows source code with its competitors or carving up the company into the so-called Baby Bills.” (“Baby Bills” was a clever riff on the “Baby Bells” born of the 1982 breakup of the Bell telephone system.)

In 2000, Judge Jackson took the harsher path, decreeing that Microsoft should be split into two halves, one dedicated to Windows and the other to everything else Microsoft.

So why aren’t there two Microsofts today?

Jackson’s word was far from final. The case found its way to the D.C. Circuit Court of Appeals, which rejected Jackson’s remedy and accused him of unethical conduct after it was revealed he had private conversations with reporters about the trial while it was still ongoing. Microsoft would settle the case with the Department of Justice in November of 2001 by agreeing to make it easier for Microsoft’s competitors to get their software more closely integrated with the Windows operating system — a tough pill for Microsoft to swallow, but hardly on the same level as a forced breakup.

These days, it’s harder to see Microsoft as the big monopolist bully Judge Jackson once described. Microsoft Windows operating systems still dominate the PC OS market, but PC OSes are less important than they’ve ever been before, diminishing Microsoft’s ability to use Windows’ market share to make life harder for its rivals. Thanks to the rise of high-speed Internet, web-based solutions and cloud computing in general, it doesn’t really matter what OS you use — Facebook and Gmail don’t care if you’re accessing them from Windows, OS X or Linux. On top of that, we do more of our daily computing on mobile devices like smartphones and tablets, a sphere that’s owned not by Microsoft but by rivals Apple and Google. (Interestingly, that latter company has increasingly run afoul of antitrust regulators, particularly in Europe, where a four-year investigation of Google’s potential abuse of its dominance in search to favor its own secondary products over those of its competitors was just reopened. As the power has shifted from Microsoft to its rivals, so have the watchful eyes of regulators.)

Sure, there have been fresh calls to split up Microsoft — except they’re not coming from regulators, but from Microsoft stockholders and analysts, surely inspired by the trend of corporate spinoffs that’s already hit massive players in tech like eBay, HP and now, potentially, security and storage firm Symantec. Microsoft, the spinoff advocates say, would be better off jettisoning its consumer-facing products, like the Xbox and its Bing search engine, so it can focus on enterprise solutions for corporate customers.

Will we ever see the birth of the Baby Bills? Maybe, but not for a long while: Microsoft’s newest CEO, Satya Nadella, hasn’t even had the reins for a full year yet, but he’s already well underway in changing course to a mostly software-oriented, platform-agnostic company. Microsoft’s stockholders seem to be willing to give Nadella some time to enact his vision, which could preserve the single Microsoft that’s been around since Gates and Paul Allen founded it in 1975 — a single company, even if that’s not so threatening anymore.

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