A federal judge ruled that Microsoft should be broken into two companies, a decision that could radically tilt the balance of power in the technology industry.

U.S. District Judge Thomas Penfield Jackson decided that Microsoft could retain its operating systems for PCs, TV set-top boxes, handheld computers and other devices. But the company would be forced to create a separate firm for its other software and Web products--such as Outlook, Internet Explorer, BackOffice and the Microsoft Network (MSN)--resulting in sweeping changes from corporate offices and homes to the entire Internet. In addition to the breakup, Jackson imposed restrictions on Microsoft's business practices that go into effect in 90 days unless an appeals court blocks the action. Microsoft said it will immediately appeal the ruling. As part of a strongly worded decision, Jackson said the court "has reluctantly come to the conclusion...that a structural remedy has become imperative: Microsoft as it is presently organized and led is unwilling to accept the notion that it broke the law or accede to an order amending its conduct." He added that Microsoft "continues to do business as it has in the past and may yet do to other markets what it has already done to the PC operating system and browser markets." Jackson also said Microsoft has "proved untrustworthy in the past." He said Microsoft should not be surprised by the ruling, either. According to Jackson, Microsoft had sought "months of additional time" in further hearings regarding a breakup. The decision effectively marks the end of a bitter two-year trial that exposed Microsoft's hardball business tactics. But the case is far from over: Microsoft immediately said it will appeal, which could tie up the case for two or more years. "This is the beginning of a new chapter in this case," Microsoft chairman Bill Gates said in a videotaped response. "We will be appealing this decision, and we have a very strong case on appeal.