IBM Wins $850M Settlement From Microsoft

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.

If you believe that Microsoft is currently competing on the merits of their products and price rather than using strong-arm tactics, then your answer to my earlier question should be, "They already are." With respect to proof, I'll simply point out that an absence of evidence is not evidence of an absence. No, my suspicions are not sufficient to find Microsoft guilty of any crime but I'm not a prosecutor and this isn't a trial. I'm judging them on their past behavior the same way we judge Hillary! and John Kerry on their past behavior when they claim to be moderates. It's not as if different people are in charge.

As for my issues with DRM, I don't oppose DRM, per se, but I think that any DRM scheme should be open or freely available and not controlled by Microsoft or any other company that can use their control such standards to squash competition. And propietary standards for players that are not freely available don't help protect IP from what I've seen. They seem to encourage people to develop ways to crack the DRM so they can ignore it. And unless you advocate a war on piracy similar to the war on drugs, turning this into a game of hardball is not the answer.

Nice try. But I didn't make the original assertion that it is in demand, so I bear no burden to prove the converse.

Thanks for nothing. Your subjective assessment is worth zippo to anyone but you.

I've been involved in Internet debates for almost two decades now. If you want to believe that subjective assessments can't be persuasive, you go right ahead and believe that. But before you do, I'd spend a little time reading some of the other threads on Free Republic. Again, absence of evidence is not evidence of absence. Nobody here has the evidence to prove that Microsoft either is or is not acting entirely ethically. In the absence of such evidence, people make a best guess. My best guess is based on past behavior and a lack of repentence, the same sort of assessment that we use to judge everything from criminals seeking parole to politicians. Your best guess is based on what, exactly? Do you really default to trusting people unless you have concrete evidence that they shouldn't be trusted?

By the way, I'm not trying to convince you because I know you don't want to be convinced. Like a good defense lawyer, you are more concerned with technicalities than truth. My points are aimed at lurkers who don't have an axe to grind. I'm not trying a case here, but you act like you are.

Look, when you make assertions, don't be surprised when people pick them apart. You made the point that MS was strong-arming competitors. When we probed that issue further, it turned out that that was just your subjective opinion, not based on any factual evidence. Quite frankly, I'm interested in the truth -- and I don't like when people stretch it, even unintentionally.

I've been involved in Internet debates for almost two decades now. If you want to believe that subjective assessments can't be persuasive, you go right ahead and believe that. But before you do, I'd spend a little time reading some of the other threads on Free Republic. Again, absence of evidence is not evidence of absence. Nobody here has the evidence to prove that Microsoft either is or is not acting entirely ethically.

Then you don't have any basis for making charges. Admit it and move on.

Look, when you make assertions, don't be surprised when people pick them apart.

You weren't picking them apart. You were channelling Johnny Cochrane. It took your last batch of replies for you to get around to doing anything more than demanding proof and when you did, you raised some very good points. While they don't persuade me that Gate, Balmer, or Microsoft have changed their attitude or intent, they do raise some important points that it's now much more difficult for Microsoft ot actually act anti-competatively.

You made the point that MS was strong-arming competitors. When we probed that issue further, it turned out that that was just your subjective opinion, not based on any factual evidence. Quite frankly, I'm interested in the truth -- and I don't like when people stretch it, even unintentionally.

Microsoft did strong-arm competitors. As such, I am concerned with any set-up that puts Microsoft in a position to do so again, based on that past behavior. Using past behavior to decide whether your you should trust someone in the future is not only reasonable but normal. You wanted proof that they are currently doing something specific wrong. I don't have it, but that doesn't mean that I shouldn't be concerned. But you did finally get around to giving me a good reason why I shouldn't be as concerned.

Then you don't have any basis for making charges. Admit it and move on.

I wasn't making a specific charge. This isn't a court. Go find an exorcist to get Johnny out of your head. If and when I make a specific charge that I shoudl prove, by all means invite him back.

Microsoft has engaged in behavior that was shady enough that the DOJ has a person watching them and interfering in their business. You don't dispute that. You don't really dispute my claim that I see no evidence that they've changed. They've been forced to change. I'm sorry but when an 800 pound gorilla has a history of ripping arms off of people, I do worry that it will do so again. You haven't really argued that this 800 pound gorilla wouldn't like to rip a few more arms off. You've simply argued that it's been prevented from doing so by careful minders. That's a fair enough argument.

And as for my wish that Microsoft would compete on quality and price rather than anti-competative behavior, if it could play nice like that without supervision, it wouldn't need minders from the DOJ. And please note that I'm not saying that Microsoft couldn't compete on quality and price. It think it can and should. I not only own licensed copies of MS Office because it's superior to any alternative (including OpenOffice) but I own quite a few of Microsoft's project management and software development books because they are good. I know there are knee-jerk anti-Microsoft Linux and Mac advocates and even communist Open Source advocates. I'm not one of them. I just know that choices are necessary for capitalism to work. An absence of choices is why socialism and communism is bad. It's also why fascism and monopolies are bad. An absence of choices is an absence of freedom.

Don't anybody kid themselves. IBM would gladly have dominated this market if Microsoft hadn't come along. The shock is that Microsoft won out.

Absolutely. Netscape used the same sort of "give it away for free" along with "embrace and extend" sort of strategy that Microsoft later used for IE when Netscape took over the browser market. I don't want any of them to have that kind of control. Not Microsoft. Not IBM. Not Apple. Not Netscape. Not Novell. Not Sun. Not even GNU or Linus Torvalds. I want options. No, not to the point of subsidizing options that aren't viable but to the point where they don't get squashed by product dumping, licensing games, and lawyers.

I don't want any of them to have that kind of control. Not Microsoft. Not IBM. Not Apple. Not Netscape. Not Novell. Not Sun. Not even GNU or Linus Torvalds. I want options. No, not to the point of subsidizing options that aren't viable but to the point where they don't get squashed by product dumping, licensing games, and lawyers.

I can appreciate that. But don't forget that what you may perceive as an additional "option" may, in fact, be anticompetitive. Here's an example. SCO claims that IBM took code from SysV and added it to Linux in violation of agreement. Who gained from that? You did. So did IBM: It used the code to help sell its Linux services business. But it was also anticompetitive, and may have had the result of driving a commercial Unix vendor out of the market. Consequently, I question whether having "options" is a meaningful standard for competition.

You weren't picking them apart. You were channelling Johnny Cochrane.

Hardly. I addressed each of your points (ie. DRM, HD-DVD, web services) individually and you failed to respond to any of them.

It took your last batch of replies for you to get around to doing anything more than demanding proof and when you did, you raised some very good points. While they don't persuade me that Gate, Balmer, or Microsoft have changed their attitude or intent, they do raise some important points that it's now much more difficult for Microsoft ot actually act anti-competatively.

Look, I understand that you don't like or trust MS -- which is your right -- but now, at least, you know that your concerns aren't based upon current facts but on decade-old fears.

Microsoft did strong-arm competitors. As such, I am concerned with any set-up that puts Microsoft in a position to do so again, based on that past behavior.

As I pointed out, the DOJ is monitoring MS pretty closely; including scrutinizing its contracts. So, I think your fears are greatly mitigated.

I wasn't making a specific charge. This isn't a court. Go find an exorcist to get Johnny out of your head. If and when I make a specific charge that I shoudl prove, by all means invite him back.

Nobody ever claimed it was a court. But, if you make a statement, it should come as no surprise when people question it. It's not unreasonable to question the basis of your statements and, if you want to avoid that, you might consider prefacing your statements with "I DON'T HAVE PROOF FOR THIS BUT IT'S MY OPINION THAT ...blah, blah, blah" so that your intentions are clear.

Microsoft has engaged in behavior that was shady enough that the DOJ has a person watching them and interfering in their business. You don't dispute that. You don't really dispute my claim that I see no evidence that they've changed. They've been forced to change. I'm sorry but when an 800 pound gorilla has a history of ripping arms off of people, I do worry that it will do so again. You haven't really argued that this 800 pound gorilla wouldn't like to rip a few more arms off. You've simply argued that it's been prevented from doing so by careful minders. That's a fair enough argument.

I'm not questioning your fears. You can fear whatever you like. Rather, I'm questioning how credible those fears are. There haven't been any issues since the antitrust court ruled years ago.

And as for my wish that Microsoft would compete on quality and price rather than anti-competative behavior, if it could play nice like that without supervision, it wouldn't need minders from the DOJ.

Microsoft competes in a lot of areas that don't require supervision. For example, MS Office. There has never been any kind of finding that MS has held or abused a monopoly on Office products.

I know there are knee-jerk anti-Microsoft Linux and Mac advocates and even communist Open Source advocates. I'm not one of them. I just know that choices are necessary for capitalism to work. An absence of choices is why socialism and communism is bad. It's also why fascism and monopolies are bad. An absence of choices is an absence of freedom.

As I pointed out, beware of mistaking your own short-term gain with competition. Plenty of things are done in the name of competition -- but are, in fact, done specifically to destroy competition (ie. dumping, etc).

As I pointed out, the DOJ is monitoring MS pretty closely; including scrutinizing its contracts. So, I think your fears are greatly mitigated.

And I said I agreed.

It's not unreasonable to question the basis of your statements and, if you want to avoid that, you might consider prefacing your statements with "I DON'T HAVE PROOF FOR THIS BUT IT'S MY OPINION THAT ...blah, blah, blah" so that your intentions are clear.

If every post to Free Republic were held to that standard, almost every message would have to have that disclaimer. As such, I think it's a given. It's fair for you to point out that it's only an opinion but the defense, but your technique could use some work.

Rather, I'm questioning how credible those fears are. There haven't been any issues since the antitrust court ruled years ago.

There haven't been any issues that we know about. It's now what we know about that I'm concerned about but what we don't know about. Again, the absence of proof is not proof of absence. Using your own criteria that any statement of fact be backed up with evidence, to do have actual proof that Microsoft has not engaged in any anti-competative since the anti-trust ruling? And even if I accept your point (and I do think it's a good one), it certainly doesn't suggest that people shouldn't continue to watch or mistrust Microsoft, only that Microsoft has been prevented from doing wrong. Do you support continued DOJ involvement with Microsoft?

Again, as a reminder, I don't want Microsoft to go out of business nor lose money. If they produce a product that people are happy with and buy willingly, more power to them.

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.