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Microsoft News

Washington, Jan 15 -- In a move that stunned the high-tech industry, Microsoft and the U.S. Justice Department announced today that Microsoft's monopoly over the desktop has come to an end. The move came one day after U.S. District Judge Thomas Johnson, who has been hearing arguments in the ongoing dispute between Microsoft and Justice over the bundling of Internet Explorer with Windows 95, ordered Microsoft to pay a fine of $1 million for every PC sold with both Windows 95 and Internet Explorer.

The agreement, which must be approved by Johnson, calls for a breakup of Microsoft modeled after the extremely popular 1983 breakup of AT&T, which split AT&T into seven regional operating companies and one national long distance carrier. That breakup vaulted Judge Harold Browne to a household name and put him in the hot seat for more than a decade, arbitrating disputes between the Bell septuplets and the FCC. The Microsoft breakup should do the same thing for Johnson.

Under the terms of the agreement, scheduled to be effective 4/1/98, Microsoft will split Windows 95 into seven regional operating systems. Seven new Babysofts will own the rights to develop and market their own versions of Windows in a specific geographical region. Microsoft itself will retain rights to its application programs.

The seven regional operating systems, which correspond to the original Baby Bell regions, will use seven different brand names: "Windows 9X" in New England, <"Windows@LANTIC"> in the Atlantic states, "Wintech" in the north central US, "WindowsSouth" in the south, "Southwestern Windows" in the midwest and southwest, "Pacific WIN.SYS" in the west, and "West Wind" in the northwest.

The Babysofts are free to compete in international markets and can compete domestically once they have demonstrated that they have opened their operating systems up to competition.

Industry analysts hailed the announcement as a brilliant move by Microsoft. Insiders boasted about the position Microsoft would be in after the breakup: "In one move, Microsoft eliminates the problem of being blamed for every software problem on every desktop computer in the world -- even those running competing operating systems," said one unnamed president of Microsoft, who asked to remain anonymous.

A Department of Justice representative disclosed that the new plan was finally ironed out in the early morning hours after the original plan to split up Windows 95 along functional lines was rejected. That proposal, which would have created separate products named Windows 95, Menus 95, Buttons 95 and Startup 95, among others, was rejected when the managers of the Menus and Buttons products complained that without Windows, they would have no place to display their products.

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