Microsoft Settles Private Suits

Microsoft has reached a negotiated settlement to put more than 100 pending private antitrust cases behind it while, at the same time, scoring a huge public relations victory and increasing its exposure and installed base at schools.

Microsoft Corp. has reached a negotiated settlement to put more than 100 pending private antitrust cases behind it while, at the same time, scoring a huge public relations victory and increasing its exposure and installed base at schools.

The private antitrust cases were brought against the Redmond, Wash., firm by a number of lawyers last year following the ruling by District Court Judge Thomas Penfield Jackson that Microsoft had violated two sections of the Sherman Antitrust Act.

If accepted by the Federal District Court of Maryland, the proposed settlement deal, which the parties signed on Monday, would see Microsoft donate more than $1 billion in reconditioned computers, services, software and training to some 14 percent of all the schools nationwide, Steve Ballmer, Microsofts CEO, told reporters at a media briefing Tuesday morning.

If given the green light, the settlement proposal would result in a five-year education program that would provide cash, computer hardware, software, technical assistance and training to some 12,500 of the nations poorest schools, benefiting some 7 million students from the countrys most economically disadvantaged communities, Ballmer said.

The deal mandates the establishment of an independent national educational foundation to make grants to local foundations and community organizations for purchasing computers and software.

But apart from the public relations coup Microsoft scores by its willingness to provide much-needed technology to the nations poorest schools, it will also increase its market share in the educational market.

In the second quarter of this year, Apple held some 23 percent of the market for kindergarten through grade 12 schools in the United States, figures from the International Data Corp. show. But Ballmer said the settlement was not about market share but about using the settlement to contribute to the countrys school system.

"The benefits can be used for PCs or Macs, for software for either PCs or Macs," Ballmer said. "Just like the recent settlement of the federal antitrust case with the U.S. Department of Justice and nine state Attorneys General, we believe this is a fair and reasonable solution that will benefit consumers, the high-tech industry, and the overall U.S. economy. We remain hopeful that the remaining state Attorneys General will join these settlement efforts."

Mark East, Microsofts worldwide general manager for the Education Solutions Group, said Microsoft would seed the national foundation with a $150 million grant and make an additional $100 million available to match donations from other sources.

Microsoft would also pay a total of $160 million into a separate fund overseen by the foundation, to be used for technology support programs to assist the participating schools. Microsoft would also contribute up to $90 million over the five-year period for training teachers, school administrators and support personnel in integrating technology into the school curriculum and using the technology provided by the program, East said.

"Microsoft will also ensure that at least 200,000 Pentium-class PCs and Macintosh computers are available to eligible schools each year during the five-year settlement period. Eligible schools can apply for grants from the new education foundation that will make refurbished machines available at a net cost to them of $50 per unit," East said.

During the settlement period, Microsoft will also make a wide range of educational and productivity software available to eligible schools for all PCs, laptops or Macintoshes already owned or acquired during the settlement period. The value of the software well exceed $500 million, based on Microsofts academic prices, he said.

Tom Burt, Microsofts deputy general counsel, said the settlement proposal will be filed with the Federal District Court of Maryland later today, and followed by a public hearing on the proposal next Tuesday before District Judge J. Frederick Motz in Baltimore.

Burt also told the media that if the deal were accepted by Judge Motz, the settlement would resolve all pending cases against Microsoft that claimed it charged too much for its software products to date.

"While some lawyers in California have registered their objections to the deal, if Judge Motz concludes it is a fair and adequate settlement for all claims from all plaintiffs across all states and enters it as a final settlement, all claims will be released and all lawsuits dismissed," he said.

Legal counsel for the plaintiffs would then receive reasonable attorneys fees from Microsoft, the amount of which would be decided by the Court, he added.

For his part, Ballmer said he was pleased with the settlement as it "avoids long and costly litigation for the company and will make a difference in the lives of school children from the countrys most needy communities."

While Burt said he believed Microsoft would have prevailed in the lawsuits, the company was pleased to have put them behind it while "greatly improving public education at the same time. Microsoft has always delivered great software at very competitive prices. This settlement allows Microsoft to focus on the future, on innovation and building great technology," he said.

If the proposed settlement is approved by the Court, Microsoft will recognize a pre-tax charge of some $550 million in the current fiscal quarter ending December 31, 2001. Microsoft said it would also provide additional detail on the financial impact of the proposal later this week.