Gates: Keep Microsoft in One Piece

By MICHAEL J. MARTINEZ, AP Business Writer

SEATTLE (AP) - Microsoft Corp. (NasdaqNM:MSFT - news) Chairman Bill Gates says breaking up the company he helped found 25 years ago would hurt the average consumer.

In an interview Tuesday with The Associated Press, Gates said further development of the Windows operating system, the software that powers the vast majority of the world's personal computers, would be stunted if the Windows or Office software divisions were split from the rest of the company.

``We wouldn't have Windows today if it hadn't been for the Office group and the Windows group working together,'' Gates said, speaking by telephone from a computer hardware developers' conference in New Orleans. ``It was the thinking that was done, being in one company, going after a new user interface, taking a huge risk, that we were able to create Windows.''

Gates' comments came as the U.S. Justice Department briefed White House officials for an hour and 45 minutes on what remedies the government would seek in its antitrust action against the company.

``They reviewed the status of the case, the proposed remedy and the rationale behind that proposal,'' White House spokesman Jake Siewert said. ``It was strictly informational.''

Lawyers for the Justice Department and the 19 states that successfully sued Microsoft for antitrust violations are considering breaking up the company as a way to curb anticompetitive practices.

One reported option would be to split the company into two or three parts, each selling separate products, such as the Windows operating system or Internet content. Another alternative would be for Microsoft to divest its dominant Office software suite, which includes word processing (Word), database (Access), presentation (PowerPoint) and spreadsheet (Excel) programs and controls more than 90 percent of the market.

Microsoft has said it would fight any move to break up the company. Gates said the next generation of Windows, which will help power various consumer electronics devices as well as personal computers, depends on the interaction between his company's divisions.

``We need to have our research people, our Office people, our Windows people all in one group taking breathtaking risks on this breakthrough user interface that is delivered in this next phase of the Internet,'' Gates said.

He added that any breakup of his company would be ``anti-consumer,'' and that it would be ``a very inappropriate thing, even given the government's unfortunate theory that innovation should be regulated.''

The government's proposed remedies are due to be filed in court by Friday. Microsoft is then due to respond by May 10, but company officials have said they may ask for more time, especially if the government's proposal includes a breakup plan.

News of a possible breakup contributed to a 16 percent plunge in Microsoft shares on Monday. Investors also were disheartened by a mediocre earnings report last Thursday and resulting stock downgrades by analysts at SG Cowen Securities Corp. and the Goldman Sachs Group.

In response to the recent dive in Microsoft's share price, the company told its employees Tuesday that they would receive additional stock options to help compensate for the market's activity.

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AP White House Correspondent Terence Hunt contributed to this story.