States Seen Joining Justice Dept. in Calling for Microsoft Breakup

The states involved in an antitrust case against Microsoft Corp. are expected to join the federal government Friday in calling for the software giant to be split in two, sources familiar with the case said.

The states and the U.S. Justice Department are expected to file a joint proposal to break Microsoft into two companies, one to manufacture the Windows operating system and the other to make applications, such as Microsoft Office programs, the sources said Wednesday.

Earlier this week, sources said the Justice Department was likely to propose a breakup. But there had been reports the states were having trouble agreeing among themselves, and were even further from agreeing with the Justice Department.

U.S. District Judge Thomas Penfield Jackson ordered the Justice Department and 19 states to file their proposed remedies by Friday after he ruled April 3 that Microsoft violated the nation’s antitrust laws.

Jackson said a majority of states could file separate proposals if they were unable to agree with Justice. They have now agreed to file a joint proposed remedy, the sources said, although a few states may file minority remarks.

Microsoft’s stock fell $1.38 on Wednesday to close at $68.

Under the proposal, most of Microsoft’s Internet browser functions would go along with Office, but the operating system company would retain some rights to the browser.

The plan would delay the Microsoft breakup until the appellate process is complete, but impose curbs on its conduct in the meantime.

Microsoft will file a reply May 10, when it will suggest its own remedy.