What was the court ruling as to Microsoft’s business practice? What are the supposed benefits of breaking up Microsoft into two

Anchor: Big news today, the Justice Department said they would ask the Federal judge to break up Microsoft. It was expected earlier this month when the judge in the government case against Microsoft ruled the company did break antitrust law by trying to use its monopoly in the market for computer operating systems to stifle competition. Here’s our correspondent Martin White on today’s development.
Martin White, correspondent: I heard the government planned that Microsoft would have to come up with the details of this breakup itself, how to divide its people, its-property, its cash into two still very powerful pieces.
   To accomplish the breakup, Microsoft would have to sell of about half its assets to create two companies. One would control most of Microsoft software, including Word, Excel and Internet Explorer.  The other company would consist mostly of Windows operating system. But only one can keep the name of Microsoft. The other company would become completely independent.
   For the first 10 years, the two companies would not be allowed to recombine. And Microsoft’s top executives, including Bill Gates, could own stock of only one of them. The result, said Joel Klein, antitrust chief of the Justice Department, would be an exciting, and innovative set of new products with more choices and lower prices for America’s consumers.
  17 of the 19 states that sued along with the government signed on to the plan,  but two states, Ohio and Illinois, dissented, asking that Microsoft be left intact but ordered to change its anti-competitive behavior.
   For Microsoft, the breakup plan was not a surprise. Today Microsoft co-founder Bill Gates promised a long court fight and predicted a victory. He said he didn’t believe the courts would uphold these radical regulatory suggestions which would hurt consumers and undermine the high technology economy.
   Even if the court accepts the government’s breakup plan. Microsoft would remain intact as it appeals, and that would take years. But government also asks the court to impose immediate restrictions on the company’s business practice even as the court battle drags on.
Anchor: Thanks very much, Martin White in Washington. So the government has won the first battle to prove that’ Microsoft’s size and power are problem. But it’s not clear at all if breaking up the software colossal would make things any better for consumers.  Here’s our correspondent, Susan Kelley.
Susan Kelley, correspondent: There’s no consensus today that breaking up Microsoft would be good for consumers. For one thing, they could end up paying more for Microsoft products. Two companies mean two of everything, including two manufacturing operations.
An industrial analyst: If you run two separate, distinct companies, you lose your economy of scale. That’s gonna increase cost for running the company that will ultimately be passed to consumer.
Susan Kelley: There’s also no agreement now on whether breaking up Microsoft would improve the quality of products available to consumers. Some said if Microsoft was forced to share its unique code that operates Windows, competitors would be able to make better products to go with Windows. What would it be, though, is a lot of companies deciding to write competitive products because they now think the playing field is level. Others claim that progress in bringing new products to market will slow if the Microsoft brain trust is split in two.
An industrial analyst: There’s a lot of cohesion that takes place by working as one solid entity rather than a separate distinct group of companies.
Susan Kelley: As for competitors eager for a breakup, they will still find themselves facing formidable foes. Microsoft is by far the Number One company. If you split it in two, it will be the Number One and Number Two software companies in the world.
Bottom line: Plenty of reasons to wonder if the government’s proposal to break up Microsoft would solve the problems it is designed to fix.
Anchor: Thank you, Susan. On Wall Street today, Microsoft stock was down slightly. It’s fallen nearly 25% since the judge’s ruling against it early this month.