States weigh Microsoft deal

Software giant, U.S. agree to settle suit but others may not

They get Tuesday deadline

Proposed settlement hailed by Gates as benefit to economy

November 03, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

Bill Gates sounded repentant, Wall Street was indifferent and state attorneys general hunkered down for a weekend of studying fine print after the U.S. government yesterday announced a proposed settlement in its landmark antitrust lawsuit against software giant Microsoft Corp.

Attorneys for the Department of Justice and Microsoft presented their agreement to U.S. District Judge Colleen Kollar-Kotelly in Washington. The judge gave the 18 states and the District of Columbia until Tuesday to decide whether to join the settlement.

The plan would impose restrictions and regulations for five years on how the company develops its software and operating system, which runs 80 percent of the world's computers.

Microsoft would be forbidden from deterring computer manufacturers from offering competing software and would have to disclose certain operating information to rivals. The settlement also includes Windows XP, the Internet-related software that Microsoft released to great fanfare a week ago.

Whether or not the states sign on, the settlement isn't a certainty: It is subject to the judge's approval and hearings must be held to determine that it was reached fairly without undue political pressure.

"We will focus more on how our actions affect other companies," said Gates, Microsoft's chairman and chief software architect, at a press conference at the company's headquarters near Seattle. "We resolve ourselves to becoming an even better industry leader."

"While the settlement goes further than we might have wanted, we believe that settling this case now is the right thing to do to help the industry, and the economy, to move forward," said Gates, who co-founded Microsoft in 1975.

Comments from company executives about the case in recent months often have referred to the slumping economy.

Even Microsoft's opponents acknowledge that the Sept. 11 terrorist attacks on the United States undercut political support for the nation's largest antitrust case since American Telephone and Telegraph Corp. was broken apart in 1984.

Attorneys general for the states involved in the suit, including Maryland, have insisted repeatedly that their sole concern is upholding anti-monopoly protections.

"As elected law enforcement officials, we believe that it is imperative that we fully assess the specific language of the agreement," Iowa Attorney General Tom Miller, a leader of the states' effort, said in a statement yesterday. "We will complete this evaluation by Tuesday and will communicate our decision at that time to Judge Kollar-Kotelly."

The state attorneys general will spend the weekend reviewing the proposal, including changes offered Wednesday night by Microsoft that were viewed as conciliatory, a source said.

Maryland Attorney General J. Joseph Curran Jr. also declined comment yesterday.

"The states are certainly an independent lot, but I think they may sign on to this," said Edward C. LaRose, an antitrust attorney in Tampa, Fla. "In any settlement, you don't get everything you want, but this brings closure and provides some certainty."

The company's stock dipped 44 cents a share yesterday to $61.40 on the Nasdaq stock market, apparently dragged down by larger concerns about unemployment and the economy.

James D. Ragan, an investment analyst with Crowell, Weedon & Co. in Los Angeles, said that Thursday's 6.4 percent rise in the stock, its largest gain in three months, reflected the impending news more than yesterday's formal announcement, he said.

"This is good news for Microsoft," Ragan said. "It does remove a risk element and it paves the way for the stock to go higher, but I'm not surprised that we're not seeing a huge run-up right away."

The antitrust investigation against Microsoft has been a roller coaster for years. The Justice Department and Microsoft had agreed to a settlement in 1995, but U.S. District Judge Stanley Sporkin refused to sign it.

A federal appeals court overruled Sporkin and replaced him with Judge Thomas Penfield Jackson, who ordered the company split in two. But Jackson was himself removed from the case after making derogatory comments to the media about Gates and Microsoft.

When Judge Kollar-Kotelly entered the case last summer, her stated preference for a speedy conclusion led many to believe it wouldn't drag on much longer. The change in the White House, from Bill Clinton to President Bush, also aided Microsoft, many said.

"After the election a year ago, they celebrated [at Microsoft's headquarters] in Redmond, Washington because they knew they would get a much easier deal from the Bush people than from the Democrats," said Robert H. Lande, a law professor at the University of Baltimore who has studied the case.

"Microsoft had a waiting strategy," said Carl Howe, an industry analyst for Forrester Research Inc. in Cambridge, Mass. "It was hoping for a change at the federal level. That worked against the states."

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