SURPRISE SETTLEMENT EVENLY SPLITS MICROSOFT;
ONE FIRM TO MAKE SOFTWARE, OTHER TO MAKE PATCHES

In a surprise settlement today with nine U.S. states, Microsoft agreed to be split into two independent companies — one that will continue to make Microsoft operating systems, browsers, and server software, and another, potentially larger company that will make patches for Microsoft operating systems, browsers, and server software.

Critics immediately charged that the settlement — which overrides a previous agreement with the U.S. Department of Justice — does nothing to diminish Microsoft's standing as the world's most powerful software company. But industry analysts argued that providing patches for security holes in Microsoft programs is a major, untapped growth industry, and applauded the states for not allowing Redmond to control it.
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