IBM, Microsoft settle case

Microsoft Corp. will pay IBM Corp. US$775 million and give it another $75 million in credit under an antitrust settlement announced by the two companies Friday.

The settlement resolves all discriminatory pricing and overcharging claims stemming from the U.S. government’s mid-1990s antitrust case against Microsoft, the companies said in a press release.

The settlement also resolves most other IBM antitrust claims, including those related to its OS/2 operating system and SmartSuite products. IBM’s claims of harm to its server hardware and server software businesses are not covered by the settlement, however.

Friday’s settlement, of private antitrust claims by IBM, focused only on the desktop-related antitrust issues addressed in the U.S. government’s antitrust case against Microsoft, said Scott Brooks, an IBM spokesman. The settlement resolves claims arising from the U.S. government’s antitrust case against Microsoft, in which U.S. District Judge Thomas Penfield Jackson found that IBM was hurt by Microsoft antitrust practices.

Both companies said they were pleased by the settlement. With the agreement, the two companies “move ahead, at times cooperatively and at times competitively,” Brad Smith, Microsoft’s general counsel and senior vice president, said in a statement.

Microsoft can afford to make the agreed upon payment, which isn’t exorbitant, and IBM can use the money, so the settlement seems favorable to both parties, said Rob Enderle, principal analyst at Enderle Group in San Jose, California.

The one sticking point for Microsoft is the exclusion of IBM’s harm claims regarding its server hardware and server software, Enderle said. By not settling those in this agreement, IBM leaves itself the option of taking additional legal actions against Microsoft with regard to server damage, especially in Europe, where the E.U.’s antitrust litigation is still ongoing, Enderle said.

“Clearly Microsoft would like to put a cap on those [claims] but IBM was successful in leaving that unsettled, which is wise pending the outcome of the European litigation,” Enderle said.

Last year, the European Commission — the E.U.’s executive branch, with antitrust powers — ruled against ruling Microsoft in an antitrust case, in a decision that the company is appealing. The Commission determined the software maker had abused its dominance in desktop operating systems to gain an unfair advantage in related markets, including servers. The Commission fined Microsoft

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