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You May Not Believe This, but...

Jim Seymour

You'll be able to read later today the smallest particulars of the remedies the Justice Department and the 19 state attorneys general allied with the government in the Microsoft (MSFT Quote) antitrust action will file this afternoon with U.S. District Judge Thomas Penfield Jackson.

In the meantime, let's look at what, thanks to a spectacularly leaky endgame, we know about those proposed remedies, and about what they mean. I can promise you that you're going to be surprised by one of my reactions.

The Justice Department and Friends will propose that:

• Microsoft be split into two new companies, one taking the Microsoft Office applications and Internet Explorer software assets, the other with the present company's Windows assets.

• The two resulting companies not be allowed to recombine for at least 10 years.

• Microsoft's own management and board of directors be allowed to (or be forced to, as you prefer) come up with the details of the split (that is, exactly how the intellectual property, employees and contracts with equipment manufacturers will be divided).

There will be other, smaller details, including probably some behavioral constraints applied to both the resulting companies. That bullet list is the gist of what we understand to comprise the Justice Department laundry list.

So what do I think?

First, as I've been saying for a year and a half, over time a split probably will benefit Microsoft shareholders -- if not the company itself, its customers or the computer industry -- by producing a 1 + 1 = 3 effect. A year after the split -- and perhaps much sooner -- I think the two new halves will be worth more than the former whole. Don't be distracted by Microsoft management's trash talking on this: They're furiously spinning, suggesting that any division would be a share-price Armageddon. That's exactly what we should expect them to say.

Second -- I know, I know, this is an opposite tack from what I've been saying for a long time -- I think this breakup could work out OK. Some things in its favor:

• Just two resulting companies, not three or four.

• No spinning Windows code off to a multitude of other companies, which would then, in the process of seeking sustainable advantages over one another, fracture forever the idea of Windows as a single technical and industry standard.

• Microsoft management -- a group of folks that even the Justice Department might admit do know something about managing these assets -- get to work out the details of the split.

• Nonsense such as "putting Windows in the public domain" is over.

• Finally, it's over -- perhaps the biggest gain Microsoft holders can now hope for.

In fact, it won't really be over, of course, because Microsoft will appeal the heck out of this, going all the way back to how Judge Jackson redrew the lines on the field midproceedings.

And this is neither, I'm convinced, a just nor appropriate denouement. But appeals notwithstanding, what the company, its customers and its shareholders need most right now is to get this behind them.

If my understanding of the Justice Department remedy proposals is close, then this, in effect, draws a line under these penalties, a "no worse than this" limitation. That alone should be worth 10 or 20 points for Microsoft -- and maybe twice that for the Nasdaq -- and a lot more in the months to come.

If Microsoft goes forward knowing that while it hopes for a better outcome on appeal to the Supreme Court, it should know it can't get any worse. Then it can focus on the world beyond shrink-wrapped software and on the need to become a Web-services company.

Which has to be good for everyone.