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By Suzanna Kerridge, 28 April 2000 00:25

NEWS Microsoft is to be broken up into two separate companies and have restrictions placed on its conduct, according to reports leaked to the New York Times. The reports state that federal and state legal teams have finally decided on a punishment for the software giant, with the majority of state attorney generals agreeing to divide the company into software and Internet divisions. The imposition of uniform price lists and free access to Windows software interface codes are among the proposed restrictions to be placed on the company. The restrictions will last for three years if the breakup is implemented, but as long as ten years if it is not. Glenn Manischin, anti-trust lawyer and partner at Patton Boggs, confirmed the reports. "From what I am hearing, the internal differences between the states have been resolved and a two-company divestiture plan agreed." However, Manischin questioned the effectiveness of the restrictions. "It depends on the amount of resources and how clearly the restrictions are written and how much Microsoft tries to hide or evade them. If the court pursues the restrictions then it is just an exercise in the futility of enforcement," he said. Analysts were divided about the long-term effect a split would have on end users. Clive Longbottom, analyst at Strategy Partners, said users would lose out. "Software prices will be pushed up as PC manufacturers deal with separate Microsoft companies, so they end up paying separately for products instead of buying packages," he explained. "They'll pay £30 for the operating system and £30 for each of the other applications. Also, the separate companies will not be able to benefit from cross-funding and if you look at where most of the profits come from, it is the OS division. That might push up the price of other applications," he said. But Martin Brampton, analyst at Bloor Research, said a breakup will increase innovation. "I'm on the side of the shareholders who say a split is a positive thing for free innovation. The company itself has already lost face and respect in the industry so it is in everyone's interest to settle the matter and release additional shareholder value."