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Microsoft paints a bleak post-breakup picture

A confusing landscape of bureaucratic regulations and other blocks to innovation now await the software giant, an attorney with close ties to the company says.

A confusing landscape of bureaucratic regulations, coupled with a distinct lack of innovation and virtually no tangible benefits to customers: That will be the bleak future of technology in the wake of the government's antitrust case against Microsoft, said an attorney with close ties to the software giant.

"Whatever you think about Microsoft, pro or con...the stakes are pretty high for the industry," said Evan Cox from San Francisco law firm Covington & Burling, which represents Microsoft. "What's left after this case is legal rules that apply to everybody: tie-in rules, monopoly rules, having courts make decisions about what is an efficient or allowable integration and then supervise the companies that aren't."

Admittedly unprepared to discuss details of the government's effort to cleave Microsoft into two companies, Cox became the company's ad hoc spokesman during a lunchtime speech Friday at the PC Data 2000 Trends Conference in San Francisco.

Cox also became Microsoft's apologist.

Microsoft deputy general counsel Brad Smith was supposed to address the crowd of software engineers, product planners, consultants and journalists. But event coordinators said Smith had to bow out because his flight from Seattle was canceled because of a United Airlines labor dispute. Smith was originally scheduled to speak Thursday afternoon, but coordinators said he had to cancel that engagement because the San Francisco airport was too foggy to accept incoming planes.

Cox, who has worked with Microsoft on intellectual property issues but not antitrust issues, joked that attendants should petition PC Data for a refund as a show of their disappointment. He deferred difficult questions about whether his portrait of a world bereft of innovation were overstated, and he didn't address why many Microsoft competitors have hailed a judge's order to split the company.

Cox, who said Smith helped him craft his hour-long address, said breaking Microsoft into an operating system company and an applications company would set precedents that would endanger the broader technology industry.

He said the government's insistence that Microsoft illegally bundled its Internet browser with its operating system means PC makers can't bundle popular products such as sound cards, graphics cards and modems, which have become standard features on the most affordable PCs.

He also said the breakup would kill key initiatives-most notably the Java virtual machine and PocketPC. Microsoft executives have touted the handheld device as a strategic product that helps the computing industry moves beyond the desktop and into everyday appliances.

"The PocketPC initiative pretty much comes to an end because the operating system and Pocket applications are put in separate companies," Cox said. "Microsoft put the time and money into the two of those because they were hoping to build a market for that package. If you delink the operating system and apps, you have the classic chicken and egg system: Do you put a lot of effort into the operating system if you don't know if people will demand the apps? Do you put a lot of effort into the apps because you don't know the demand for the operating system?"

Despite Cox's enthusiasm, the future of the PocketPC has never been secure: Hewlett-Packard recently acknowledged its Microsoft-powered device doesn't deliver the full color experience HP promised, and the mistake may have in itself derailed Microsoft's latest handheld venture.

Cox also said the short-term consequences and expense of the antitrust case would cripple Microsoft and its shareholders--contrary to the assertions of government officials who say that the case will result in two healthy companies instead of one.

The government would cause Microsoft irreparable harm if it allows other companies to view Microsoft's source code, Cox said. Financial losses could be particularly devastating if the government forces Microsoft to open its code within 90 days, as it has said it would do--long before the appeals process is under way.

"Perhaps this is an apocalyptic example, but if you were a virus writer and wanted to write something for the operating system," Cox said, "you're perfectly entitled to go into Microsoft's room, look at the source code and write a whiz-bang virus."