- The Washington Times - Friday, January 14, 2000

Bill Gates Thursday relinquished daily control of the company he built into a software powerhouse to a longtime friend who immediately criticized the government for its conduct in the antitrust case against Microsoft Corp.

Steve Ballmer, who will take over as chief executive while Mr. Gates reclaims his role as the company's chief software architect, faulted the Justice Department for proposing a plan to bust Microsoft into as many as three separate "Baby Bills."

"It would be absolutely reckless and irresponsible for anyone to break up this company. It would be a disservice to consumers in this country… . I just think it would be reckless beyond belief," Mr. Ballmer said.

U.S. District Judge Thomas Penfield Jackson ruled last Nov. 5 that Microsoft is a monopoly that uses its power in the PC operating system market to quash competition.

That ruling led to settlement talks before Judge Richard Posner, who heads the 7th U.S. Circuit Court of Appeals in Chicago.

Justice Department officials have proposed breaking up Microsoft to reprimand the company.

Department spokeswoman Gina Talimona declined to discuss the plan Thursday. "The mediation process is continuing," she said.

Mr. Ballmer said the Justice Department has purposely leaked information this week about possible punitive action against Microsoft.

"I believe the leaks are deliberate. Not only the leaks, but the entire line of conjecture is reckless," he said.

Mr. Gates said the timing of Microsoft's announcement about internal changes has nothing to do with settlement talks or Justice Department leaks about potential breakup plans the federal government may propose to Judge Jackson.

"There's no relationship in terms of the different events," he said.

Mr. Gates said he is making the leadership changes because he wants to develop software. Mr. Ballmer, who was best man at Mr. Gates' wedding in 1994 and has been with the company since 1980, has served as its president since 1998.

Microsoft and Justice Department attorneys are scheduled to return to court on Feb. 22 to make oral arguments on proposed conclusions of law before Judge Jackson.

Unless there is a settlement before then, the judge is expected to make a decision on a penalty against Microsoft within a month after the hearing.

Mr. Gates said he has no plans to make any acquisitions to counter the proposal Monday to merge AOL and Time Warner Inc.

"I don't anticipate the need for mergers," he said.

Observers are divided over whether the $183.8 billion merger creating AOL Time Warner erodes the federal government's antitrust case against Microsoft.

Now there's less reason to believe AOL, which markets a competing browser called Netscape Navigator, is a weakling compared with Microsoft, analysts said.

Microsoft had $19.7 billion in sales last year. AOL had fiscal 1999 sales of $4.8 billion. Its new partner, Time Warner, had 1998 sales of $26.8 billion.

The government's case hinged in part on the argument that Microsoft exploited smaller competitors.

"The government said that unless Microsoft was restrained, it would be able to exploit weaker companies. Now that AOL is so much bigger, it's hard to imagine them not being able to defend themselves," said William Kovacic, George Washington University law professor.

Ed Black, president of the Computer and Communications Industry Association, a D.C. trade group that supports the government's fight against Microsoft, said the antitrust case is unaffected by the merger.

"In the core areas where Microsoft is a monopoly, that's not affected by the merger because the acquisition is a move by AOL into the media and content company," Mr. Black said.

Microsoft closed Thursday up $2 a share at $107.81.

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