In the past month alone, antitrust action in the case against Microsoft has robbed Microsoft stockholders of over 80 billion dollars and helped force the tech-heavy Nasdaq composite into a downward spiral, culminating in the April 14 market crash. The government would be wise to heed the important message that the market is sending out.

More wreckage is on the way because federal and state litigators are getting ready to swing the axe at Microsoft as part of the anti-trust settlement proposed today. The breakup plan is senseless, even on the government's own terms.

Under the plan, Microsoft will be split in two, with one company keeping the Windows operating systems and another taking everything else, including applications and the Internet Explorer browser. Whoever devised that scheme must not have been following the case, which is about a company with a monopoly in the PC operating systems market.

Spinning a monopoly off into a separate company won't do anything to create more competition in the market. In fact, a company selling only Windows might be more likely to raise its price, since the company would no longer have to worry about the negative effect that a price hike could have on the applications market.

Equally perplexing is the government’s insistence on enforcing a "structural" remedy for complaints that are clearly non-structural, such as Microsoft’s bundling of a browser with the operating system. Simply stated, there is no link between the government’s claims and the proposed "remedy." That’s why this "break-up" scheme stands no chance of surviving on appeal, even if all of the alleged offenses were miraculously upheld.

If the government succeeds in dismembering Microsoft, the company will require constant government monitoring to determine whether a product fits into the category of an operating system, an Internet product, or application. In the seamless world of technology, this is a nearly impossible task, and one that's guaranteed to cost taxpayers a bundle.

Analysts in the past have speculated that if Microsoft follows the example of AT&T or Standard Oil, a company breakup would prove a windfall for investors. But that theory has brought very little comfort to Microsoft's investors, watched their stock prices plunge 14.5 percent on April 3, when the court released its scathing "Finding of Law."

Not only Microsoft, but the company's rivals have also seen their stock prices fall when the government turns up the heat in the anti-trust case, according to George Bittlemayer and Thomas Hazlett of the University of California, Davis. Shouldn't rival companies, that stand to gain from the case, be observing their stock prices lifting instead of languishing? Perhaps investors know what the government has failed to recognize.

Any government meddling in Microsoft's value-generating business spells bad news for investors. After all, the Nasdaq index has lost 1,000 points since Jackson's decision, and there's a good chance that the DOJ's regulatory crusade won't stop with Microsoft. Already, eBay has been mentioned as a possible anti-trust target.

Investment in the stock market is the foundation for America's current prosperity. Half of American households now own stock. And according to the Federal Reserve Board, stock investments account for 28 percent of all household wealth in the United States. The technology boom has fueled much of that growth but the government's foray into high-tech planning will give these stockholders, and consumers in general, the roughest possible ride.

* Helen Chaney is a public policy fellow in the Center for Freedom and Technology at the California-based Pacific Research Institute for Public Policy.

For additional information, contact Helen Chaney at (415) 989-0833.