The most drastic action, of course, would be to break Microsoft up into a series of Baby Bills, separating operating systems from applications and from content and services.

If Microsoft does not compromise, the Justice Department might be forced to embrace a heavy-handed solution such as regulating Microsoft as a utility (deeming Windows the modern equivalent of railroad terminals) or breaking the company up into "Baby Bills."

But it may be significant that Sherlund went out of his way to dismiss industry speculation that the FTC may consider breaking Microsoft up. The creation of separate companies, focusing on the systems and applications markets respectively, would eliminate any possibility of unfair trading. Sherlund claimed it was not "a case of the Baby Bills" — referring to the break up ofthe Bell telephony group into regional Baby Bell companies.