Breakup of software giant Microsoft offers potential and pitfalls

SAN FRANCISCO - The potential impact of a court-ordered breakup of Microsoft Corp. remains as murky as the millions of lines of code that made the software giant's ubiquitous operating system successful, with corporate friends and foes alike poised to benefit.

But one thing is clear, analysts say: Consumers have the most to lose.

''As long as there is turmoil in the industry, the only people who could possibly lose right now are the consumers, because there aren't any companies necessarily equipped to step in and immediately fill a void from a crippled Microsoft,'' said analyst Rob Enderle, who follows Microsoft for research firm Giga Information Group.

As U.S. District Judge Thomas Penfield Jackson mulls whether to split the company into two entities - one built around the monopoly Windows operating system, the other controlling its Office software and Microsoft's Internet businesses - many companies are salivating over the opportunity to feast on a vanquished giant.

Larry Ellison, the flamboyant chief executive of database powerhouse Oracle Corp. and one of Microsoft's fiercest critics, in a recent interview with The Associated Press gloated, ''the world is going in one direction and Microsoft is going in another.''

''Our war with Microsoft is over technology. We went for the Internet, they stuck with Windows,'' Ellison said. ''And we think, regardless of what the government does, that we're at an advantage in our competition with Microsoft. They just got into it real late.''

Microsoft hopes to unveil its strategy for adapting Windows to the Internet services market later this month, but company chairman Bill Gates has said those efforts would be ''doomed'' if the Redmond, Wash.-based company were broken up as suggested by the Justice Department and 17 states.

Industry watchers say a breakup would strengthen the hands of such companies as Oracle, Sun Microsystems, chipmaker Intel Corp., equipment provider Cisco Systems and the rejuvenated Apple Computer Inc. - all of which are in positions of power that make them natural leaders.

Competitors, emboldened since the Justice Department brought its lawsuit, no longer fear the traditional power players such as Intel and Microsoft. And Microsoft's business partners have found that many consumers don't want or need the cumbersome PC operating systems to surf the Internet for information, shopping and communication.

A range of mobile products, from Internet-accessible cellular phones and handheld computer organizers to games consoles and music download devices, have hit the market with brisk sales.

Increasingly, those devices are incorporating alternatives to the Windows operating systems that runs on more than 90 percent of the world's personal computers, such as the free operating system Linux.

Just in the past week, Gateway Computer announced it planned to market two simplified computers for Internet access using Linux with Transmeta's new Crusoe power-saving computer chip - a move seen as a further blow to the ''Wintel'' Microsoft-Intel powerhouse combination.

David Ditzel, chief executive of Transmeta, said the Windows operating system and Linux ''are really the two OS platforms that will be dominant for the next five years.'' But, he noted, ''Linux is becoming increasingly popular.''

Even more wild cards in any move to capitalize on the turmoil at Microsoft include those poised to be the dominant providers of high-speed Internet access, including AT&T Corp. and the pending America Online-Time Warner combination.

Those companies will dominate a cable-based pipeline to reach consumers and increasingly are forming alliances with hardware vendors that could make the underlying operating system irrelevant.

Still, despite Microsoft's recent missteps and its late move to embrace the Internet stakes, its current market dominance could help the company even if it were broken up, said Giga Information's Enderle.

''If Microsoft's executes properly after any breakup, the biggest winner could be Microsoft itself,'' he said. ''They're dying a slow death right now anyway with all the competition they face, and a breakup could reinvigorate them and make them more nimble.

''But if Microsoft does sink, that throws the entire market open to a lot of turmoil.''

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