Microsoft Settles Private Antitrust Lawsuits

SEATTLE – Microsoft Corp. confirmed Tuesday it has reached a settlement in most of the private antitrust lawsuits filed against the huge software company.

Under the proposed settlement, the company will provide more than $1 billion to over 12,500 of the nation's poorest schools over five years.

The money will pay for teacher training, technical support, refurbished computers and virtually unlimited amounts of Microsoft's most popular software, such as Windows and Office, company spokesman Matt Pilla said.

"It is a settlement that avoids long and costly litigation for the company and at the same time I think it will really make a difference in the lives of some of the most disadvantaged students in the country," Microsoft Chief Executive Steve Ballmer said in a conference call to journalists.

Microsoft admits no wrongdoing in the settlement.

The settlement would put to rest most of the private lawsuits alleging that Microsoft abused its monopoly power in the software market and overcharged millions of computer buyers. However, it must first be approved by U.S. District Judge J. Frederick Motz in Baltimore, who is overseeing the class-action suits. A hearing to discuss the settlement is scheduled for next Tuesday in Baltimore.

Microsoft was hit with a host of private lawsuits claiming antitrust violations after the government filed its antitrust suit against the software company in 1998. Many states dismissed the suits because new computer buyers did not buy the Windows operating system directly. The remaining cases were consolidated under Motz.

Michael Hausfeld, representing a group of private plaintiffs in Washington, D.C., said he originally thought of the unorthodox settlement idea about nine months ago after realizing that each of the 65 million computer buyers eligible to gain from the settlement would likely receive only about $10 if they won the case or a settlement were reached.

Hausfeld and other lawyers consulted with academics and other education experts, then worked with Microsoft to hammer out final terms of the deal, he said.

Hausfeld and Microsoft officials conceded that some lawyers, including several representing plaintiffs in California, oppose the deal because it does nothing to curtail Microsoft's behavior.

But Hausfeld said he felt it was the government's job to find a way to curtail Microsoft's power, and that it was unrealistic to expect that a better deal could be reached for such a large class-action group.

"(The settlement) was to find a practical way of resolving probably the most numerous class ever affected by a single course of conduct," he said.

"The people that we spoke with — our clients — felt that this was a tremendous social benefit," he said.

Microsoft has settled its antitrust case with the federal government and nine of the 18 states that sued the company. A judge will review the settlement in March.

The remaining nine states suing Microsoft are scheduled to tell a judge in December how the company should be punished for hurting competition.

Because Motz has the power to overrule the California cases, it was not clear whether those lawyers' opposition would stall the private settlement. Those issues are to be addressed at the preliminary approval hearing Tuesday.

The five-year program will target about 14 percent of U.S. schools, said Cathy MacCaul, communications manager for Microsoft Community Affairs.

Under the settlement, Microsoft will provide:

—$150 million in cash to establish the foundation, and will seek $100 million in matching funds from other corporations and education groups.

—$160 million in hardware and software support and $25 million in online computer support.

—Up to $90 million to train up to three teachers in each participating school.

—Up to 200,000 refurbished computers each year, at a cost of about $200 to $500 per computer.

—Virtually unlimited copies of popular programs such as its Windows operating system and Office business software suite to participating schools, and more limited numbers of other titles.

Roger Kay, an analyst with IDC in Framingham, Mass., called the settlement "a huge victory" for Microsoft. The settlement does nothing to curtail Microsoft's behavior, Kay said, while giving Microsoft an edge over competitors.

"It derails other companies like Apple and Dell — even it's own customers like Dell," Kay said. "It's amazing to me how favorable this is to Microsoft."

Microsoft said the settlement would not harm competition since educators could ask to use their funds for Apple or other rival products.

Shares of Microsoft were up one cent to $66.55 in afternoon trading Tuesday on the Nasdaq Stock Market.