IBM wins $850 million settlement from Microsoft

Our Corporate Bureau
02 July 2005

This is among the largest payments made by Microsoft to settle an antitrust-related lawsuits. So far, 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 $750 million with America Online, part of Time Warner Inc, in 2003.

Though the IBM settlement takes the software giant a step closer to settlement of the anti-trust suits pending since 1991, Microsoft still faces legal challenges — among others a suit by RealNetworks and $600-million appeal against an antitrust ruling by European regulators. Novell Inc. has reached a $536-million settlement with Microsoftr, but retains the right to proceed with a separate antitrust suit over its WordPerfect word-processing program. . In 1981 IBM and Microsoft entered in to an alliance for Microsoft to write software for the original IBM PCs, and the two companies jointly created the OS / 2 operating system. The alliance soured, and Microsoft focused on Windows and left OS / 2 to IBM.

In the mid-1990s, IBM began marketing PCs pre-loaded with OS / 2 as an alternative to Windows and its SmartSuite productivity software, a rival to Microsoft Office. IBM also backed Java, a programming language that doesn''t need Windows to run.

Microsoft retaliated by charging IBM more than other PC makers for copies of Windows.

Microsoft also allowed IBM''s rivals to pre-install Windows 95 months before IBM, which drove customers who wanted Windows 95 opted for machines made by IBM''s rivals.

IBM did not sue Microsoft, but kept the right to do so under a 2003 agreement between the companies. IBM still reserves the right to press claims that its server business was harmed by Microsoft..