Microsoft Plans Appeal, Pledges No Distractions

Microsoft Corp. attempted to reassure its customers, partners and investors that the company will stay focused on business as it prepares to appeal Monday's court ruling.

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Microsoft Corp. attempted to reassure its customers, partners and investors that the company will stay focused on business as it prepares to appeal Mondays court ruling.

"We will continue to innovate and deliver the best solutions for our customers," Microsoft chairman Bill Gates said during a teleconference following the release of Judge Thomas Penfield Jacksons conclusions of law. "As our legal team resolves the case, we will put our energy and our focus on these new innovations and software that will improve peoples lives.

"Todays ruling was not unexpected given the courts findings [of fact]," said Gates. "We did everything we could to settle the case and continue to look for opportunities to resolve it. We think we have a good chance on appeal."

Jacksons ruling found that Microsoft had violated the Sherman Antitrust Act by maintaining its monopoly through anticompetitive means and by tying Internet Explorer to Windows, but not through its marketing arrangements with partners including PC OEMs.

Despite Jacksons harsh words, Microsoft found some cause for celebration in the ruling.

"One part of the ruling … in our favor is in terms of whether any marketing agreements restricted our competitors," said Gates.

"We are encouraged by some aspects of this," said Bill Neukom, senior vice president for law and corporate affairs at Microsoft. "We will be zealous in asserting our position on appeal and we believe we will prevail on appeal.

"We will appeal several aspects of the case," including the procedure imposed in the case, the appropriate laws that apply and the remedies, Neukom added.

Part of Microsofts appeal will likely address the issue of tying Internet Explorer to Windows. Jacksons ruling goes to great pains to explain why the combination of the two products violates the law and is not covered by current law that protects product design.

But Neukom and at least one other attorney disagree with the judges conclusions.

"Microsoft has a great appeal if the court finds they engaged in tying. I think Microsoft would then win on appeal," said Dan Wall, a partner at Latham & Watkins in San Francisco. "The [tying] claim is legally very dubious. The legal standard is against judging product design."

The remedies will not likely be handed down for several months. At that point, Neukom said, Microsoft will appeal the case to a three-judge panel, which will review it before it goes to the Court of Appeals. He expects the remedies to be stayed during the appeal and for the court to expedite the case and release a ruling within a year.

According to Microsoft, Jacksons ruling will have little effect on the 100-plus consumer-based class action suits that have been filed against the company.

"The class action lawsuits and this conclusion of law are not connected," said Steve Ballmer, Microsofts president and CEO. "They may get help from this ruling, but there is not a 100 percent correlation. The benefit to consumers is the only important test in those class action cases."

While not discussing specifics, Ballmer and Gates insisted that Microsoft was not to blame for the failure of the settlement talks that were mediated by Judge Richard Posner. Gates said Microsoft went "the extra mile" in an effort to reach a settlement, while Ballmer said the company put "its heart and soul" into the mediation process.

Microsofts stock took a beating in advance of Jacksons ruling, closing down 14.5 percent Monday.

When asked if Microsoft was concerned about employee retention during the long appeals process and the threat of continuing erosion of share price, Ballmer said, "Ive never known a Microsoft employee who was unhappy with their stock options."

For investors and partners, Microsoft executives reiterated that the company will not be disrupted or distracted from its business.

"I will speak directly to customers and partners," said Ballmer, "to ensure them that todays ruling will not affect our ability to deliver products."