Why Didn’t Microsoft Corporation Split?

by Brendan Byrne

Back in 1999 Judge Thomas Penfield Jackson declared Microsoft a monopoly and slammed the company for suffocating its rivals at birth.

In a further judgment in 2000, the judge declared that Microsoft Corporation (NASDAQ:MSFT) should be split into two halves, with the Windows business cut off from the rest of the company. If Judge Jackson declared war on what he saw as a monopoly, why is the company still in one piece today?

Microsoft’s legal wrangling

First came the remarkable twists and turns in the case. Predictably Microsoft Corporation (NASDAQ:MSFT) appealed the decision, and the D.C. Circuit Court of Appeals rejected Jackson’s ideas, as well as accusing him of unethical conduct. It was revealed that the judge had spoken informally with journalists while the trial was still ongoing.

Microsoft and the Department of Justice later settled the case in November 2001, agreeing to allow competitors easier integration with the Windows operating system. Although this was still a bitter blow, it was nowhere near as much of a disaster as a forced breakup of the company.

The situation today

Microsoft’s power has waned with the shift from PC to mobile. Of course Windows is still the dominant force in the PC operating system market, but their decrease in market share has lessened Microsoft’s control over its rivals. The company has found its grip loosening with the arrival of high-speed internet, web-based solutions and cloud computing, which do not require fidelity to one OS.

The increasing popularity of mobile devices has seen a power shift from Microsoft to Apple and Google, who are far more powerful in that sector. It is not just consumer attention that has shifted from Microsoft to its competitors, as Google now finds itself under investigation from regulators in much the same way as Microsoft was back in 2000.

Nowadays regulators are not clamoring for the breakup of Microsoft Corporation (NASDAQ:MSFT), but stockholders and analysts are. A recent spate of corporate spinoffs has increased the pressure on Microsoft to separate its consumer and corporate businesses. So far however, CEO Satya Nadella seems set on maintaining the present structure of the company.