Microsoft Corp., the world’s largest software maker, agreed to pay $536 million to end an antitrust dispute with Novell Inc. and made peace with a hostile trade group after more than 10 years.
The Computer & Communications Industry Association and Novell will stop helping the European Union’s case against Microsoft, which accused the company of stifling competition by packaging its Windows software with audio and video features. The group’s agreement removes “the most substantial obstacle” to settling, Microsoft General Counsel Brad Smith said.
The settlements help silence two of Microsoft’s loudest critics and leave RealNetworks Inc. as the only party backing European regulators’ efforts to force Microsoft to remove some capabilities from Windows. Redmond, Washington-based Microsoft has paid or set aside $3 billion to resolve antitrust suits.
“Microsoft is willing to go forward to do what they need to do to clean up their antitrust issues,” said Michael Sansoterra, an analyst at Principal Global Investors in Des Moines, Iowa, which manages $122 billion. “This is another big step in that direction.”
Microsoft said the settlements will cut previously reported first-quarter net income to $2.53 billion, or 23 cents a share, from 27 cents. The remaining antitrust claims may total as much as $950 million. European regulators will continue the suit, said spokeswoman Amelia Torres.
Shares of Waltham, Massachusetts-based Novell rose 65 cents, or 9.5 percent, to $7.51 in Nasdaq Stock Market composite trading. The settlement is equal to almost six month’s revenue for the company. Microsoft fell 3 cents to $29.28.
“This sends a strong message that we and other companies in our industry do have the capacity now to sit down face to face and resolve the kinds of thorny antitrust issues that in the past were left to governments to resolve,” Smith said on a conference call with analysts.
Smith has carried out plans by Chairman Bill Gates and Chief Executive Steve Ballmer reach out to rivals to end legal disputes and help the company focus on reviving sales. Microsoft in May 2003 ended a fight with Time Warner Inc.’s America Online unit and settled with Santa Clara, California-based Sun Microsystems Inc. for $1.6 billion in April.
RealNetworks is seeking $1 billion in damages and says the dominance of Windows, which operates about 95 percent of the world’s personal computers, limits competition in software for playing Internet audio and video, and Burst.com has filed similar claims for unspecified damages.
The trade group had been a key advocate of the U.S. Department of Justice antitrust case and participated in the European Commission case against Microsoft. The Washington-based trade association will end its involvement in the European case and withdraw its complaint with the European Commission filed in February 2003 related to Microsoft’s Windows XP.
The complaint had “made it difficult or impossible to reach a settlement” with European regulators, Smith said.
The group, whose members include Sun, Oracle Corp. and Nokia Oyj, accused Microsoft of abusing its dominance and using its Windows XP operating system to move into new markets such as e- mail, video players and instant messaging.
The commission ruled in March that Microsoft must offer a version of Windows without a video and music player and disclose secrets about its operating system. Mario Monti, the European Union’s competition commissioner, imposed a record 497 million- euro ($643 million) fine in the case.
Microsoft appealed in June. A judge at the European Court of First Instance, Europe’s second-highest court, will decide in the next few weeks whether to suspend the order.
The settlements don’t mean the commission will drop its cases. “Antitrust enforcement by the commission does not hinge upon complaints by individual parties, but is geared towards protecting the consumer’s interests,” Torres said in an e-mailed statement.
The agreements may also help Microsoft wrap up the U.S. case. In June, the appeals court in Washington upheld a settlement in the U.S. government’s antitrust case against Microsoft and upheld a trial judge’s refusal to impose tougher restrictions on the software maker.
As part of the agreement, the trade group won’t appeal that ruling to the Supreme Court. That “effectively means the end of the U.S. antitrust case,” Horacio Gutierrez, Microsoft’s European counsel, said in an interview.
The Justice Department and 18 states that sued Microsoft are still overseeing the enforcement of that settlement, which requires Microsoft to give computer makers freedom to promote software that competes with the company’s products.
Novell had complained that Microsoft was attempting to leverage its monopoly over personal computer operating software to gain control of the market for software that powers computer networks, according to 2002 testimony at hearings on efforts by nine states seeking tougher remedies against Microsoft.
Microsoft will pay cash, and Novell will drop any claims over its NetWare operating system. Claims related to Novell’s WordPerfect software aren’t part of the settlement, Novell said.
The agreement doesn’t obligate Microsoft to license or share technology with Novell, and it doesn’t include any admission of wrongdoing by Microsoft.