Senior bank executives are divided on how a breakup of Microsoft Corp. might affect them.

Despite the software company's assurances, few in the financial industry are buying the argument that the outcome will not matter to them. While some think a breakup could force Microsoft to pay more attention to service issues, many are worried, if not wistful, about losing the simplicity and cost benefits that a Microsoft-dominated market brought to their technology budget.

Part of Microsoft's appeal as a vendor, these bankers say, is that it offers an all-inclusive technology architecture at an attractive price. If the part of Microsoft that sells operating systems were severed from the applications software side of the business - as the Justice Department has proposed - banks might have to rethink their practices and approach other vendors.

Some are already prepared to do that.

PNC Financial Services Group, for example, is not wedded to Microsoft's Office software suite, said Eric Meredith, vice president of advanced technology at the Pittsburgh banking company.

Office, which includes the Word and Excel applications, is "a great product," he said, but not so great that PNC would stick with it if the price went up.

In fact, said Mr. Meredith, his company intends to revisit all its technology decisions once details of the proposed split are available. "The details will drive cost, and financial institutions are very cost-sensitive," Mr. Meredith said. Banks will always choose the cheaper of two functionally equivalent products, he said.

Mr. Meredith also speculated about the future of Microsoft's free browser product, Internet Explorer. Over the last couple of years PNC has swung to 60% Explorer and just 40% Netscape Navigator for browser use. With a breakup "the pendulum could switch back in the other direction," Mr. Meredith said.

Several bankers agreed that Microsoft's market power has helped keep a lid on technology costs, and they welcomed the company's steady march into new product categories.

"As Microsoft moved forward from desktop applications to back-office servers, it consistently brought the price point down, and everyone benefited," said William Randle, executive vice president at Huntington Bancshares in Columbus, Ohio. "With Windows NT, we got a quality operating system at a competitive price."

Dividing the company "is potentially damaging to those of us considering an optimal, low-cost Wintel solution," Mr. Randle said. Huntington Bancshares counts Microsoft as a marketing and technology partner in e-Bank, a new company selling an array of technologies.

Microsoft's senior liaison to the banking industry says such worry is misplaced.

"Any talk of a breakup is entirely premature, and any speculation about how it might affect financial institutions is even more premature," said William Hartnett, Microsoft's director for worldwide financial services.

Mr. Hartnett said the legal turmoil does not seem to have disrupted Microsoft. Its Windows 2000 operating system, released in February, has been a tremendous hit in the financial services world, he said. "We're seeing an incredible number of new units sold - not just upgrades - and we think that trend will continue."

New financial services customers include Credit Suisse First Boston, which is replacing its Sun Microsystems infrastructure with Windows 2000, and Wells Fargo & Co., which is replacing its Novell Corp. infrastructure. Citigroup Inc.'s Travelers Property Casualty Corp. is among the early deployers of Windows 2000 in the insurance industry.

Banks have loaded up on Microsoft software in recent years. Seventy-five percent of all banks and 61% of those with more than $4 billion of assets use Windows NT or Windows 95 as their primary operating system for branch servers, according to GartnerGroup Inc. of Stamford, Conn.

Matthew Cone, formerly of Microsoft and now chief marketing director at Corillian Corp., a provider of NT-based Internet banking software, said a breakup would not cause banks to change their systems choices. They would "continue to buy and use the Microsoft operating system and the Microsoft Office application suite whether they come from one company or two," Mr. Cone said.

Some bankers said they would be protected either way.

"Based on what Microsoft has talked about publicly, it should have no major impact on its business structures," said Peter Goldberg, senior vice president of Ohio Savings Bank in Cleveland. The $9 billion-asset bank runs Microsoft operating software and was one of the early adopters of a Microsoft framework known as Windows DNA (for distributed Internet applications), which lets users link new software to older, inflexible legacy systems. Ohio Savings writes its own front-end application software.

"The only question for us would be, What will [our software] run on?" Mr. Goldberg said. "But we're not even thinking about that yet. It all depends on what they do and how they do it."

First Tennessee National Corp. in Memphis is almost exclusively a Microsoft organization, after making a switch from International Business Machines Corp.'s O/S 2 system.

"Microsoft built its office suite of products to work with its operating system, which was pretty nice," said Robert King, senior vice president of information systems and investment banking at $18 billion-asset First Tennessee. "So far we've had issues, but we're not unsatisfied that we made that strategic call."

On the operating system side, First Tennessee uses Windows NT and is looking to go to Windows 2000 within 12 to 14 months.

"I haven't heard anything that would cause us not to do that," Mr. King said. "If the government splits Microsoft in two, then Microsoft will lose some of the advantages it has," he said.

One such advantage is that about 80% of software vendors write applications to work with Microsoft. "This allows us a big selection to choose from and the ability to integrate our own products," Mr. King said.

Michael Cardiff, president and chief executive officer of Vancouver-based Prologic Corp., a large provider of NT-based software to the financial services industry, said he thinks a split could be a positive development. Prologic has 350 financial institution customers worldwide, including 25 Internet-only banks.

A Microsoft company devoted to an operating system "could focus on greater support, service, and relationships with corporate buyers worldwide," Mr. Cardiff said, while a separate company focused on office products "could enhance these products to handle larger, higher-volume, mission-critical applications," he said.

A breakup "could force Microsoft to make products suited to a particular space, which is positive for us and our customers," Mr. Cardiff said.

Lawrence Tabb, a director at Tower Group in Needham, Mass., said a Microsoft breakup "absolutely would" have an impact on the financial services industry.

Microsoft's dominance "has simplified life for technologists in the industry," Mr. Tabb said. "It is easier for these financial services firms to develop software and roll it out and not have to make bets on software that won't make it into the new millennium." Microsoft has "helped our industry save money and make more generic applications suitable for different organizations and different departments," he said.

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