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Microsoft Races to Boost Its Offer in Antitrust Case

Settlement: Ruling planned for today is likely to be postponed pending negotiations. Parties have intensified their efforts.


WASHINGTON — Microsoft Corp. on Monday scrambled to see if it could sweeten a 10-page offer aimed at ending its landmark antitrust case with the government, moves that are likely to delay a federal ruling in the case that had been planned for today.

U.S. District Judge Thomas Penfield Jackson told representatives of Microsoft and the Justice Department last week that he intended to rule today on whether Microsoft violated the Sherman Antitrust Act unless the two parties were close to a settlement.

But a delay was widely expected, according to sources close to the case. The parties have negotiated more intensely since Friday, when Microsoft faxed a last-minute settlement proposal.

Microsoft and the Justice Department are supporting a request from U.S. District Judge Richard Posner, who is acting as a mediator in the case, to put off the ruling, although at least some of the 19 state attorneys general involved in the case disagree.

"Our inclination is not to move," said one attorney general, who asked not to be identified. The objection of some states is unlikely to be enough to stop Jackson from holding off.

But it is a sign that the ongoing negotiations will not be speedy or easy. Microsoft would have little incentive to settle with some plaintiffs while continuing to fight others.

The gulf between the company and the government lawyers, sources said, rests on complex issues such as enforcement, pricing and marketing tactics.

"The sides are still far, far apart," said Rob Enderle, a computer industry analyst with Giga Information Group who has been following the case.

Reflecting the pessimism, Microsoft stock fell $7.63 Monday, to close at $104.06 in Nasdaq trading. As reported in Saturday's editions of the Los Angeles Times, Microsoft has agreed to let personal-computer manufacturers ship alternative Internet Web browsers and multimedia software with Windows and gain some control over the computer start-up process as well as Windows' underlying software code. Microsoft also offered to release some current and future versions of Windows without the controversial Internet Explorer Web browser.

Microsoft's offer to untie its browser from some versions of Windows appears to meet a key government demand.

In a January court filing, the Justice Department declared its "clear position" that it is Microsoft's "coercion" of computer makers to take Internet Explorer along with Windows that violates the Sherman Act antitrust provisions--not its option to consumers to combine the two. "We have not sought to prohibit Microsoft from licensing the bundled version" of Windows and Internet Explorer, the government said.

But sources close to the states say they have been seeking clarification about how far the other parts of Microsoft's offer go.

"Users favor uniformity over fancy designs," said Jonathan Zuck, a Washington software developer who heads the Assn. for Competitive Technology, a trade group that generally has backed Microsoft's position. "They want to be able to go from a PC at work to one at home and have a consistent user experience."

Microsoft also has offered, in general terms, to end price discrimination in licensing Windows. The software giant has been accused of charging higher license fees for Windows to PC makers such as IBM that have offended Microsoft by offering competing products, and lower fees to those such as Dell Computer Corp. that do its bidding.

Sources said Microsoft is finding it tricky to reach an accord with the government on Windows' pricing because the software giant has always denied any wrongdoing. Yet some state officials are pressing for such an admission as part of a settlement deal.

The attorney general who spoke Monday said some states also are pressing for consumers to get something tangible in the settlement.

Another stumbling block is enforcement.

Several states are pressing for a clear, quick and certain enforcement mechanism to ensure that Microsoft abides by any agreement.

The government felt burned after it reached an agreement with Microsoft in 1994 and entered a court-ordered consent decree in 1995 that appeared to address many of Microsoft's allegedly anti-competitive business practices.

"The government is going to want to push for much more specific prohibitions this time than last time," said Andrew Gavil, a law professor at Howard University School of Law. "One way to deal with getting the states on board is to have very clear sanctions for violating" any settlement. "Fines wouldn't do it; it has to be something much more draconian."

What's more, some legal experts think Microsoft and the government may have to iron out even more arcane issues such as the price Microsoft can charge for Windows to eliminate any marketing loopholes that Microsoft might later try to exploit.

"A settlement agreement must address pricing issues," said W. David Slawson, a USC professor who filed a motion in January that sparked the government's edict on browsers.

Now, Microsoft offers both products--Windows and Internet Explorer--for one price. Any settlement, say the company's critics, would have to force Microsoft to charge a lower combined price to ensure competition in the marketplace.


Times staff writer Joseph Menn contributed to this report.


Cisco Systems surpassed Microsoft as the world's most valuable company. A1


Market Jitters

Microsoft shares rebounded in the last month on optimism over its talks with the government, but the stock tumbled $7.63 to $104.06 on Monday amid renewed jitters. Weekly closes and latest on Nasdaq:


Monday: $104.06


Source: Bloomberg News

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