Microsoft's Trial Balloon

You didn't think Microsoft was going to agree with the government Wednesday and argue in favor of its own breakup, did you?

Of course not.

And you didn't think that Microsoft was going to insult a federal district judge by arguing that no remedy against the company is appropriate in light of the judge's stark findings and conclusions that Microsoft is an illegal monopoly, did you?

Of course not.

What Microsoft did, then, was chart a middle course—right down the fairway if you will—in which it asked U.S. District Judge Thomas Penfield Jackson to impose remedies aimed at changing the company's operations, not its structure, which is the remedy that the government has asked for.

At least now the company can argue with a straight face that it made a remedy proposal in good faith, one which offers a self-inflicted change in the way Microsoft does business—and one which helps set the stage for appeals issues down the road should Judge Jackson indeed split up the company.

Actually, in spite of this latest filing, I bet that neither the Justice Department nor Microsoft truly expects the company's proposal, as it now stands, to be acceptable to Judge Jackson.

Microsoft's attorneys surely can read the handwriting on the wall. They surely must suspect or fear, based on the factual findings and legal conclusions unleashed upon them by the judge, that he's leaning toward the government's position.

That position, just to remind you, seeks a breakup of the company into two separate entities, which the feds believe would be more amenable to fair competition and more choices for consumers.

And that's why the company devoted a significant amount of space in its filing to blasting the government's position.

Here's why you shouldn't buy the government's position, Microsoft argues, and here's why you should buy our argument.

It's a two-pronged strategy frequently employed by attorneys who hope to cast doubt on their opponent's argument because they believe the judge isn't quite buying theirs.

The government now has a week to decide how to respond to Microsoft's proposal and on May 24 the judge will hold a hearing to decide what to do next.

Of course, government attorneys will argue on May 17 that Microsoft's proposals don't go far enough in prohibiting the sort of monopolistic conduct that even the judge agrees has occurred over the past few years.

And, of course, the judge will evaluate both sides—and take some time—before making his final ruling.

But here's one way of forecast what's worth looking for as the case progresses toward its conclusion:

If Judge Jackson denies the company's request for a lengthy extension of time in which to hold depositions and prepare for a big remedy hearing, it coud be a sign that he's willing to sign off on a remedy which is significantly less comprehensive than what the government has proposed.

After all, why would he make everyone spend the time and money to talk about a breakup if you don't intend to order a breakup?

If, on the other hand, the judge allows the extension and holds lengthy and extensive hearings on remedies late this year or early next year, it is a sign that he's thinking seriously about breaking up the company and wants to cover his procedural tracks for the appeal judges.

After all, he'd probably get overturned on appeal if he refused to give Microsoft a chance to fully argue against a break-up and then broke up the company.

Think of this stage of the Microsoft case as you might a criminal sentencing matter you might have seen on television or witnessed in person.

In a sentencing hearing, the government argues for the heaviest penalty of all, the defense argues for the lightest, and the judge picks one or the other or splits the baby.

In the Microsoft case now, all that's left is for the judge to decide.

By ANDREW COHEN