Implications of the Microsoft Order

Judge Thomas Jackson ruled Wednesday to split Microsoftinto two parts: one for the operating system, anotherfor applications and Internet software. Microsoft willhave four months to come up with a plan to splititself, but it is immediately appealing the ruling.

"We will be appealing this decision, and we believe wehave a very strong case on appeal," said Chairman BillGates. This plan would undermine our high-techeconomy, hurt consumers, make computers harder to use,and impact thousands of other companies and employeesthroughout the high-tech industry."Since the judge's ruling came after the market's close Wednesday the market's didn't have much time to react. Early Thursday trading saw both RealNetworks and Microsoft rather unaffected by the news.

A split will certainly affect the streaming mediaindustry. What are the ramifications of a split,however? Does this mean RealNetworks is breathing asigh of relief?

Ramnarayan,Sujata analyst at Gartner Dataquest said that the decision and subsequent appeals are going to give RealNetworks a boost. "The longer Microsoft is embroiled, the more uncertainty there is for partner relations, a place where Real has done particularly well," she said. "In the long run, if it does get broken up it would be great for consumers and for the stock. It is probably better for Microsoft to find a way to get out of this legal embroil. The longer it remains embroiled, the better it is for the competition."

But what does this decision mean to Microsoft's streaming media efforts and its Digital Media Division? The company didn't respond to specificquestions about its division, but did release company statements.

Judge Jackson wrote: "There is credible evidence in the record to suggest that Microsoft, convinced of its innocence, continues to do business as it has in the past, and may yet do to other markets what it has already done in the PC operating system and browser markets." This could be in reference to the Windows Media products which have been closely tied to the operating system.

If Microsoft splits up, where will its streaming media division end up? It's possible that it will go with the operatingsystem side since the Windows Media server is so tiedinto the OS. But it can just as well fit into theapplications, especially with Microsot's recent pushinto a more commercial media player it releasedrecently.

Some in the streaming media industry seem to think that Windows Media belongs in the Internet/software group, not the OS group.

Some don't see the ruling having much impact at all. "Microsoft isn't being broken up...yet," said Larry Gerbrandt, senior analyst at Kagan Associates. "If it ever does, it will be years from now, after the appeals process is complete. Streaming media will be an entirely different business by the time something actually happens."

Overall the consensus seems to be that we should just wait and see. This isn't over yet.