More on the Decision

But the future of the company, based in Redmond, Wash., is still uncertain.

Indeed, the ruling was hardly unabated good news for Microsoft. The circuit court upheld Jackson's November 1999 finding that the computer giant had acted as a monopoly while trying to maintain a stranglehold on the operating systems market.

Appeals Court Ruling At A Glance

An appeals court upheld Judge Thomas Penfield Jackson's 1999 ruling that Microsoft acted as a monopoly to maintain sales of its operating system.

The court overturned Jackson's 2000 order to break up Microsoft.

The court overturned Jackson's ruling that Microsoft acted illegally in tying its Web browser in with its operating system.

The court ruled the penalty for Microsoft should be determined by a judge other than Jackson. An appeal to the U.S. Supreme Court or a settlement are still possible.

And while the court's stinging rebuke of Jackson — its decision said that his criticisms of Microsoft in the media "seriously tainted the proceedingings" — and referral of the case to a different, yet-to-be-named judge means that while Jackson will not determine the company's fate, Microsoft still has to be concerned about court-imposed penalties it might face.

In fact, a few possible options remain: the case could go back to another district court judge who would be responsible for finding a new remedy; the government could appeal the case to the U.S. Supreme Court; or both sides could attempt to negotiate an out-of-court settlement, something they unsuccessfully tried last year.

 Complete Coverage of the Microsoft Case

Everyone Claims Victory

Not surprisingly, both sides have hailed the ruling as a win.

"I'm pleased to say that the court unanimously found that Microsoft engaged in unlawful conduct to maintain its dominate position in the computer operating systems," said Attorney General John Ashcroft at a press conference Thursday afternoon. "This is a significant victory."

But Microsoft co-founder and Chairman Bill Gates seized on another part of the ruling — the appeals court's reversal of Jackson's finding that Microsoft had illegally bundled its browser into Windows.

"We're very pleased that this ruling reverses the lower court ruling and sets a much higher standard for these issues than the lower court applied," Gates said at his own Thursday news conference.

But the solomonic nature of the decision could give both the government and Microsoft incentive to head back to the bargaining table in an effort to resolve the matter out of court. And both sides dropped broad hints today that they are willing to consider that option.

The assistant attorney general for antitrust matters, Charles James, said Thursday the Justice Department would "work with the states to digest the opinion and determine our future course of conduct."

Nineteen states joined the federal government in the suit against Microsoft. Resistance by some state attorneys general to cutting a deal with Microsoft helped scuttle last year's settlement talks.

Gates seemed to open the door to more talks, by saying "We will also work hard to resolve the remaining issues without the need to resort to litigation."

Go-Ahead for XP

The appeals court decision also has implications for Microsoft's future business practices.

The company could still face a raft of civil lawsuits, charging it with illegal practices such as unfair pricing, thanks to the court's upholding of the finding that Microsoft has acted as a monopoly to preserve its Windows dominance.

But with the release of the company's newest highly touted operating system, Windows XP, slated for Oct. 25, the ruling means Microsoft can be far less concerned about potential future charges that it is unfairly bundling new applications into the system.

"There's nothing in today's ruling that changes our plans for our future products, including Windows XP," added Gates on Thursday.

XP is loaded with a variety of multimedia features that move Microsoft further away from simply managing of software, and places the company more squarely in the role of being an multi-faceted provider of home entertainment. Observers of the case agree that this aspect of the ruling holds good news for Microsoft.

"It does say the government's case against Microsoft didn't hold for adding Internet Explorer to the operating system," says Nicholas Economides, a professor at New York University's Stern School of Business who specializes in antitrust issues. "The language leads me to believe that they [the appeals court justices] are close to the Microsoft position, which is that Microsoft can keep adding things to its operating system."