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11/8/2004
12:03 PM
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Microsoft Appeases Novell And CCIA

In separate agreements, Microsoft settles two major disputes, further diffusing its legal challenges.



Microsoft has reached a $536 million legal settlement with Novell, resolving all outstanding antitrust claims by Novell against Microsoft involving NetWare and its other products. Microsoft also struck an accord with the Computer & Communications Industry Association, with which it has battled for years over key issues.

The agreements further diffuse some of Microsoft's most serious legal challenges. Novell, for example, said it will back off as a Microsoft opponent in the European Commission's ongoing antitrust case against the company, where the central issue involves Microsoft's bundling of the Windows Media Player with its operating system.

And the CCIA said in a statement it won't seek a review of the antitrust settlement reached in 2001 between Microsoft and the Justice Department. The trade group had been one of the last holdouts to accept those terms. "Today's settlement means the longstanding antitrust litigation in the U.S. is now over," said Brad Smith, Microsoft senior VP and general counsel.

Microsoft plans to become a CCIA member and compensate the organization for past legal expenses incurred during its fights with Microsoft. The former opponents said they will work together on issues including federal support for research and development, U.S. immigration laws affecting software developers, and broadband access.

They also acknowledged they will continue to differ on other issues. "We both recognize that there also are other important areas where there have been and will likely continue to be disagreements," Microsoft and CCIA said in a joint statement. "Some of those areas relate to open source, copyright policy, patent reform, standards policy, and of course, competition policy itself."

Novell had been negotiating with Microsoft for the past year prior to reaching a settlement, though it never filed a lawsuit against Microsoft. "We think Microsoft has done things over the past 10 years that have violated antitrust laws and hurt our business," says a Novell spokesman. "Microsoft undercut competition in the market for operating system software for workgroup servers and acted illegally in maintaining its desktop operating system monopoly."

Microsoft and Novell have yet to settle a separate antitrust disagreement over WordPerfect, the word-processing software that Novell received as part of its June 1994 merger with WordPerfect Corp. At the time, about 51 million shares of Novell common stock were exchanged for all of WordPerfect's outstanding common stock. That same month, Novell acquired from Borland its Quattro Pro spreadsheet product line for $110 million of cash and assumed liabilities of $10 million. Novell also purchased a three-year license to reproduce and distribute up to 1 million copies of current and future versions of Borland's Paradox relational database product for $35 million in cash.

Unable to compete with Microsoft, Novell in March 1996 sold its personal productivity applications product line, including WordPerfect, to Corel Corp. for about 10 million shares of Corel common stock and $11 million in cash. The deal represented a huge devaluation from WordPerfect's estimated $880 million value in 1994.

By the end of the week, Novell plans to file a lawsuit for unspecified damages against Microsoft for what it claims to be Microsoft's efforts to eliminate competition in the desktop applications market during the time that Novell owned the WordPerfect word-processing application and Quattro Pro spreadsheet application.

Novell will add the $536 million received from Microsoft to its balance sheet for the first quarter of fiscal 2005, which started Nov. 1.

The settlements are the latest in a series of agreements between Microsoft and one-time rivals aimed at revolving antitrust claims against the company. In May 2003, Microsoft agreed to pay AOL Time Warner $750 million to settle an antitrust suit brought on by its Netscape Communications subsidiary in 2002. And earlier this year, Microsoft said it would pay Sun Microsystems $700 to settle antitrust charges, which was part of a broader agreement that included royalty and patent payments.

In addition, Microsoft has resolved antitrust suits with more than a dozen states. Company officials now estimate that future antitrust settlements could amount to $950 million in addition to the approximately $3 billion it's already spent or put in reserve.

Microsoft general counsel Smith says the agreements are evidence that Microsoft and its competitors "have the capacity now to sit down face to face and resolve the kind of thorny antitrust issues that in the past were left instead

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