Microsoft still faces anti-trust action

Microsoft is still likely to face tough behavioural remedies from the courts over its ongoing anti-trust battle with the US Department of Justice which could leave it in deep waters than if it had been forced to split into two companies.

The news follows yesterday's decision by the DOJ to stop pressing for the software giant to be split up and to drop a central part of its case - the contention that the bundling of its Internet Explorer browser was illegal and anti-competitive.

The news has been hailed as a win for Microsoft in the press, but some analysts think the firm may live to regret not being forced to split up.

Martha Bennett, VP at the Giga Group, said: "My personal view is that Microsoft could be better off in the long-run as two different businesses, free to behave as it likes, rather than hamstrung by behavioural remedies."

"Either way the consumers do not seem to be benefiting from the process," she added.

Microsoft was initially sentenced by Judge Penfield Jackson to be split into an operating systems business and an applications business. In June it won its appeal to have this overturned and the charges reconsidered in a lower court.

In a statement released Thursday, the DOJ said it will no longer seek to have the firmed dismantled, but will instead concentrate on new developments in the industry to determine so-called "behavioural remedies".

The remedies could include making Microsoft allow rival media players to bundle with its software, forcing it to open up source code, or regulating its agreements with partners.

The DOJ's statement underlines the fact that it is looking hard at Microsoft's recent behaviour, such as with XP and .NET.

Andy Tanner-Smith, program manager for analyst house Frost & Sullivan, said: "As two companies Microsoft would grow independently just as large as a single, unified Microsoft."

Clive Longbottom, service director at consultancy Quocirca, agreed: "I have always said Microsoft would be healthier if forced to split its different businesses. Their constant battle against critics causes them to lose focus, and they would be nimbler and sharper as separate businesses."

Microsoft and the DOJ have been ordered to produce a joint status report by the 14 September outlining ways forward in the trial, with the court pushing for a settlement.