Posted on 07/01/2005 10:04:24 AM PDT by Tumbleweed_Connection
IBM Corp. will receive $775 million in cash and $75 million in credit for software from Microsoft Corp. to settle claims that resulted from the federal government's antitrust case against Microsoft in the 1990s, the companies announced Friday.
The payout is one of the largest that Microsoft has made since U.S. District Judge Thomas Penfield Jackson ruled in 2000 that Microsoft engaged in anticompetitive practices. Jackson's ruling cited IBM as a company that Microsoft had forced to "desist from certain technological innovations and business initiatives."
For example, Microsoft didn't charge all computer makers the same amount for its Windows operating system, allegedly using higher prices as a cudgel against PC companies that didn't comply with Microsoft's wishes.
IBM had irked Microsoft in the '90s by pushing its own OS/2 operating system as a Windows alternative and putting its SmartSuite productivity software on IBM PCs, cutting into the market for Microsoft Office programs. IBM also was an early supporter of Java, a programming language that doesn't need Windows to run.
Citing the higher Windows prices and other tactics - such as delaying IBM's Windows 95 license until 15 minutes before the product was launched - Jackson wrote that IBM repeatedly got "discriminatory treatment" from Microsoft.
IBM hadn't sued Microsoft, but still pressed for retribution for the behavior cited by Jackson. Microsoft reached a similar deal with Gateway Inc. for $150 million in April.
Separately, Microsoft has spent more than $3 billion in recent years settling lawsuits by rivals, including a $1.6 billion deal with Sun Microsystems Inc. in 2004 and a $750 million truce with America Online, part of Time Warner Inc., in 2003.
Redmond, Wash.-based Microsoft still faces other legal challenges, including a lawsuit by RealNetworks Inc. and an appeal of a $600 million antitrust ruling against it by European regulators.
Even so, Microsoft's general counsel, Brad Smith, said he believes the antitrust issues are close to being resolved. IBM had been the biggest rival with a pending claim.
"This takes us another very significant step forward," he said in an interview. "We're entering what I think is the final stage of this process."
IBM shares were rose $1.04, 1.4 percent, to $75.24 in morning trading on the New York Stock Exchange. Microsoft shares rose 5 cents to $24.89 on the Nasdaq Stock Market.
The U.S. case against Microsoft led Judge Jackson to rule in 2000 that Microsoft should be broken into two companies as punishment for its monopolistic practices. But a year later, with the Clinton-era Justice Department having given way to the Bush administration, the government decided not to seek the breakup. The case was settled in 2002.
Neither IBM nor Microsoft have decided when the $775 million payment will be accounted for. Microsoft set aside $550 million in April to handle antitrust claims, so this deal might result in a charge from that quarter, Smith said.
Whenever it comes, the payment would be a significant boost for Armonk, N.Y.-based IBM, which showed a $1.4 billion profit in the first quarter but fell short of analysts' expectations.
Even with Friday's deal, IBM reserved the right to press claims that its server business was harmed by Microsoft's behavior. However, such claims appear unlikely to surface soon, because IBM also agreed that it would not seek damages for actions that occurred before mid-2002. That means the findings in Jackson's ruling would no longer apply.
It warms the cockles of my heart to know that all these awards against Microshaft for business misbehaviors are continued to be paid by me and millions of other software purchasers and legitimate software users.
And hardware.
Something you might want to consider the next time you put together a PO with Microsoft's name on it. Your choice, my friend.
Maybe this round, but this is the Microsoft way of competing.
Well, since MS makes most of its money selling software the only money it can use to pay these debts to others they have stuck it to is the money they make selling software. What do you think they should do, print their own? Maybe they can start a side business doing something else and use that money to pay for their criminal acts, would that be better?
Good. Everyone who's violated anyone's rights or property in the IT industry needs to pay up. The sooner the better.
Which is exactly what I don't like about them. Why can't Microsoft complete on the merits of their products and prices rather than strong-arm tactics. No, Microsoft isn't technically a monopoly but those are exactly the sorts of tactics that make a monopoly a bad thing for consumers.
no mention of the monopoly declaration?
I wonder if the government will try and take the settlement money because it is "punishment" and would serve society to have the government control the distribution of monies for punishment. (/sarcasm off)
Is that the fault of Microsoft or the fault of the user?
Is what the fault of Microsoft or the user?
Are you trying to edge SCO's wholly unproven claims into this discussion?
I wonder how much gross sales IBM would need to generate 850mill in profit.
Of course. And? In some regards, the damage has already been done. In other regards, I'm not entirely conviced that Microsoft still doesn't have an anticompetative attitude. Please note that I do think that Microsoft could compete in several areas based on quality and price but they won't. For example, I have no doubt that MS Office for Linux would sell just as well as the Mac version of Office does, if not better.
And the irony of this story is that IBM turned around and sold its PC hardware business to the Chinese ...
Are you saying IBM should get a free pass if they illegally used Unix code in Linux? Should anybody, if they did?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.