It was one of those weeks in Seattle, the kind that comes infrequently but packs a wallop when it does. This economically vibrant city, which USA Today newspaper just this month ranked as the third best place to live in America, was hit with bad news concerning its two largest companies, Boeing and Microsoft.

Now gloomy news is not what people in Seattle tolerate. That is not why they live here, not why they moved here. Set amidst lush greenery, tucked far away from the rest of America in the Pacific north-west corner, people come here to live the good life. The city itself is nestled on a narrow strip of land between Puget Sound and the 18-mile-long Lake Washington. To the west are the Olympic mountains; to the east are the volcanic peaks of the Cascade range, where snow-capped Mt Rainier stands at 14,411 feet.

In between is the icongraphy of the region - Starbucks coffee emporiums, do-good environmentalism married to an outdoor sporting lifestyle, a nouveau riche consumerist sensibility tethered to social accountability - lies the heart of the region. And that heart can best be summed up in two words: Boeing and Microsoft.

The aerospace giant Boeing, the world's largest manufacturer of aircraft and aircraft parts, stood for years as the centre of the area's burgeoning prosperity. That shifted in the 1990s as Microsoft took off; but together the two companies account for more than a third of the region's employment.

With US military spending curtailed in the last decade, Boeing has fallen on hard times. Just weeks ago, the company failed to deliver a report to federal investigators that was supposed to have shed light on the 1996 crash of TWA flight 800. Then came the crash of Egypt Air Flight 990. Last week, Boeing suddenly announced it would halt delivery of four of its commercial jet models following the discovery of a defective cockpit part. Rumours of massive layoffs are rampant.

Now a federal judge, in an initial ruling against Microsoft, has threatened the very existence of the giant software maker. If the court eventually rules that Microsoft has violated US anti-trust laws, it could demand the break-up of the company, or worse, according to some, it could impose continual governmental monitoring of Microsoft's business practices.

Some people are wondering what all this means to those employees at Microsoft's bucolic 265-acre campus in Redmond, which along with the suburbs of Bellevue and Kirkland make up the core of Seattle's high-tech heart. Others are wondering what the impact could be on the region and both its spending and philanthropic habits.

"We love our Microsoft customers," Dave Bingham of Park Place Motors told the Seattle Times. Like other luxury car dealers, Bingham estimates that nearly half his sales are to Microsoft employees. Between 1995 and 1997, the last year for which data are available, the numbers of BMWs, Jaguars, Mercedes-Benzes, Porsches and Volvos registered in Bellevue, Richmond and Kirkland postal codes rose by 26 per cent. The numbers for 1998 and 1999 are expected to be higher.

The quality of life in the area has also been helped by generous giving on the part of those Microsoft employees made newly rich by the company's soaring stock. Just a few examples; former Microsoft president Jon Shirley plonked down $2 million to the tiny Bellevue Art Museum. (His stock value at the time was estimated to exceed $300 million.) He also gave the Seattle Art Museum $1.5 million, and handed over $3.4 million to the Pilchuk School of Glass.

BUT it's not just the Microsoft big guys who are generous. The company itself will match up to $12,000 a year in donations made by employees. In 1997, 8,000 of Microsoft's then 12,000 employees took advantage of the perk.

Employees like Leo Notenboom, a 14-year Microsoft veteran, took full advantage. He gave his full $12,000, matched by the company, to the Cougar Mountain Zoo, the Red Cross, the Salvation Army, and others.

Aside from Bill Gates's personal giving, which he upped this year and which has now reached the $400 million mark, the company has given millions to local schools and community colleges to help expand high-tech training programmes.

If anyone is seriously worried about the future of Microsoft in Seattle, they were not showing it this week. There were no rally-the-troop emails at the campus, and the mood was not sombre, said one employee.

"We stay on top of the case, but it feels far away from the work we do here," said one, who asked that his name not be used.

As for Mr Gates . . . well he was in fine form following the judge's ruling. On Monday night, Mr Gates attended a $500-a-plate fundraiser for Washington state Governor Gary Locke at a downtown hotel. The event turned into a pep rally for Mr Gates, as he was mobbed by well-wishers and gave autographs.

"I think the press was timing the applause and we know the person who got the most was Bill Gates and deservedly so," said Governor Locke after the 43-second ovation.

"Too bad I'm not running for office," quipped Mr Gates.

On Wednesday, Mr Gates was feted by 3,000 Microsoft shareholders at the normally staid annual shareholders' meeting. This time, at the Meydenbauer Convention Hall in Bellevue, Mr Gates again received a standing ovation. The mood was light; Microsoft vice-president Robert Herbold even drew laughs when in his report he noted that, among other things, the company was anticipating significant litigation costs in the future.

While Mr Gates said he was open to continuing negotiations with the government, he added that separating the company's Internet technology from the Windows operating system was not an option.

If Microsoft is to be broken up into smaller companies, experts say that Mr Gates would be wise to initiate the break-up himself so that he might have more control over the outcome.

Perhaps, but so far Mr Gates has consumers on his side and he is counting on them to pressure the US Congress, which could ultimately pass judgment. In a Gallup poll taken after the ruling, 58 per cent of Americans said they would oppose any government action requiring Microsoft to break up.

Back in Seattle, it seems like most people feel that high-tech industry is here to stay, along with its demand for highly-skilled workers, with or without Microsoft.

"I feel we are past the Microsoft dependency stage," said Janis Machala, an ex-Microsoft employee who now runs a Kirland-based recruiting firm. She noted that other Seattle companies, such as Amazon.com and RealNetworks, are still hurting for top employees.