Judge accepts Microsoft settlement with government; warns software giant it must abide

<br>WASHINGTON (AP) _ A federal judge on Friday accepted nearly all the provisions of an antitrust settlement between Microsoft Corp. and the Justice Department, but warned top company executives that

Friday, November 1st 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ A federal judge on Friday accepted nearly all the provisions of an antitrust settlement between Microsoft Corp. and the Justice Department, but warned top company executives that she will hold them individually responsible for complying with her instructions.

In an enormous victory for Microsoft and founder Bill Gates, U.S. District Judge Colleen Kollar-Kotelly rebuffed arguments by nine states and the District of Columbia that tougher sanctions were essential to restore competition in the computer industry.

She concluded that some penalties proposed by those states would chiefly benefit the company's rivals. She made a few minor changes to the settlement that require acceptance by Microsoft and the Justice Department.

The original trial judge had ordered Microsoft split into two parts, touching off two years of wrangling. Friday's result was far more favorable to Microsoft.

The software giant, which helped fuel the computer revolution of the 1990s, called the decisions ``a tough, but fair, compromise.''

``It imposes significant requirements on Microsoft, but it enables us to continue to innovate,'' the company said.

Attorney General John Ashcroft called the decision ``a major victory for consumers and businesses.''

The decision gives consumers more choices. It allows Microsoft rivals more flexibility to offer competing software features on computers running Windows. Microsoft has already enacted terms of the settlement, and now allows users of its latest Windows versions to replace some built-in features, such as instant-messaging or music players, with those from competitors.

While rejecting the states' arguments, the judge acknowledged that Microsoft has a ``frustrating'' tendency not to admit its illegal corporate conduct. She warned Microsoft, the world's largest software company, that she will demand that its directors, especially Gates, enforce the settlement provisions.

``Let it not be said of Microsoft that 'a prince never lacks legitimate reasons to break his promise,' for the court will exercise its full panoply of powers to ensure that the letter and spirit of the remedial decree is carried out,'' the judge wrote, quoting Renaissance philosopher Niccoli Machiavelli, an exponent of expediency.

Appeals by the states were likely, although state officials said they were still studying their options.

``The importance of this settlement is sending a message to the Microsoft board of directors that it will be held accountable at the highest levels of the corporation,'' said Connecticut Attorney General Richard Blumenthal.

Iowa Attorney General Tom Miller said, ``We look forward to further involvement, further proceedings in this case.''

Sen. Herbert Kohl, D-Wis., chairman of the Senate Judiciary Committee's antitrust panel, said that while the Justice Department settlement had shortcomings, ``the time for arguing the merits of the settlement at the trial court has passed.''

But University of Baltimore law professor Robert Lande said the case ``might not be resolved for another two years.''

Microsoft and the government had argued that the settlement they secretly crafted one year ago was sufficient. The agreement, which would last at least five years:

_Prevents Microsoft from participating in exclusive deals that could hurt competitors;

_Requires uniform contract terms for computer manufacturers;

_Allows manufacturers and customers to remove icons for some Microsoft features;

_Requires Microsoft to release some technical information so software developers can write programs for Windows that work as well as Microsoft's own products do.

Investors expected a far worse result for Microsoft, driving prices down in the hours before the judge disclosed her decisions. The stock rose slightly, closing at $53 even, down 47 cents.

Microsoft's extraordinary impact on everyday life is hard to understate: Its lucrative Windows and Office products are essential tools for American businesses and government and an important foundation for the technology sector.

The company's market value of $287.6 billion exceeds the gross domestic product of at least 150 nations, including Saudi Arabia and Argentina. Its stock is among the most widely held by investors, especially among mutual funds and retirement accounts.

Microsoft Internet properties, including its Hotmail e-mail service, are among the world's most popular Web sites, drawing tens of millions of users each month. Increasingly, Microsoft has sought to push into new markets, such as videogame consoles, handheld and tablet computers and cellular phones.

Gates, the famously aggressive Harvard dropout, proved a liability during the trial, as government lawyers showed videotape of him failing to answer some questions and professing to forget key events and meetings.

Even during the darkest moments of the 4-year-old antitrust case, Gates, 47, has retained his image as a business icon and his title as one of the world's wealthiest individuals. His $43 billion in wealth includes 616.8 million shares, or 8.7 percent, of Microsoft's total stock. Gates stepped down as chief executive in early 2000 to become ``chief software architect'' but retained his title as Microsoft chairman.

The Microsoft trial was an early barometer of the Bush administration's views on antitrust rules. Although the Justice Department during the Clinton administration filed the lawsuit and aggressively fought the software giant, President Bush has long pushed for a settlement. The case has eclipsed all other actions under Bush's antitrust chief, Charles James, who is leaving Nov. 22 to become top lawyer for ChevronTexaco Corp. after a remarkably short tenure in the antitrust division.