Microsoft offers a gift to settle antitrust suits

Associated Press

SEATTLE — Microsoft Corp. said Tuesday it will give some of the nation’s poorest schools more than $1 billion in computers, software, training and cash to settle most of the private antitrust lawsuits filed against the huge software company.

But lawyers for some of the plaintiffs warned they would oppose the plan, calling it "pathetic and a sweetheart deal for Microsoft."

The proposed settlement, to be disbursed over five years, would pay for teacher training, technical support, refurbished computers and copies of Microsoft’s most popular software, such as Windows and Office, at more than 12,500 schools, 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 with journalists.

Microsoft admits no wrongdoing.

The company said Tuesday it will take a pretax charge of about $550 million in the current quarter ending Dec. 31 to cover the proposed settlement. After taxes, the company expects to incur a charge of about $375 million, or between 6 cents and 7 cents a share.

The settlement could 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. But it still faces some hurdles.

Daniel Furniss, lead counsel for the plaintiffs in California, said some lawyers from California and at least three other states were not involved in the settlement negotiations after Microsoft spurned their more stringent proposals.

Furniss said the proposed deal does not provide enough money to sustain the school programs and therefore would have no real long-term benefits. He also said it provides no real punishment for Microsoft, which has cash reserves of some $32 billion.

"It’s pathetic and a sweetheart deal for Microsoft," he said.

Tom Burt, Microsoft’s deputy general counsel, said the company did not realistically expect to appease all the plaintiffs,and is confident the settlement will be approved.

U.S. District Judge J. Frederick Motz in Baltimore, who is overseeing the class-action suits, will hold a preliminary hearing Tuesday to discuss the settlement. Because Motz has the power to overrule the California objections, it was not clear whether those lawyers’ opposition would stall the private settlement.

Microsoft was hit with dozens 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 proposed this type of settlement after realizing that each of the 65 million computer buyers eligible under the class-action lawsuits would likely receive only about $10 if they won the case or a settlement were reached.

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

"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.

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 in the education arena.

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