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Microsoft announces $536 million settlement with Novell

By Ted Bridis
The Associated Press

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Novell, a bitter, decades-long rival of Microsoft, said despite the huge payoff it intends to file an antitrust lawsuit against Microsoft this week over damage a decade ago to its once-popular WordPerfect business software.

The payments announced today, however, were enough to persuade both Novell and the Washington, D.C.-based Computer and Communications Industry Association to pull out of the legal case against Microsoft in the European Union, which has determined Microsoft abused its industry dominance and fined it $600 million. A crucial ruling on sanctions against Microsoft is expected as early as this month.

Microsoft previously spent $2.4 billion settling antitrust and other claims by AOL Time Warner Inc. and Sun Microsystems Inc., both significant supporters of the European case. But even billions in payments won't put more than a dent in Microsoft's staggering cash reserves of about $64.4 billion.

Novell said the $536 million agreement resolves antitrust claims involving the Netware operating system for connecting computers across networks, which competes with Microsoft's dominant Windows software. Joseph A. LaSala Jr., Novell's general counsel, called it a significant settlement. The company's shareholder meeting was set for Tuesday.

Microsoft, one of the most widely held securities, predicted today in financial disclosure documents that it still could face up to $950 million in exposure for remaining antitrust claims, including the court cases expected or already filed by Novell and RealNetworks Inc.

Microsoft restated its first-quarter financial results to reflect today's announcements, adjusting net income down to $2.53 billion and earnings per share to 23 cents. Novell's net income for its latest quarter was $14 million.

Novell said it will allege in its upcoming antitrust lawsuit that Microsoft acted illegally during the mid-1990s when its Office business software eclipsed the popularity of Novell's WordPerfect word-processing program. The WordPerfect lawsuit will seek unspecified damages and will be based partly on facts proven in court during the U.S. government's antitrust case against Microsoft, LaSala said.

"We have had extensive discussions with Microsoft to resolve our differences, but despite our best efforts, we were unable to agree on acceptable terms," LaSala said. "We intend to pursue our claims aggressively toward a goal of recovering fair and considerable value for the harm caused to Novell's business."

Microsoft's general counsel, Brad Smith, said his company was ready for that court fight.

The Computer and Communications Industry Association, which has fought Microsoft vigorously on legal fronts for more than a decade, did not disclose the size of its payment. People familiar with the deal, speaking on condition of anonymity, said it was a fraction of the amount paid to Novell. The association said Microsoft will spend $65,000 to become a member of the trade organization.
 
"Ten years of litigation is a long time to fight a company like Microsoft," said Ed Black, the group's head and one of Microsoft's most vocal critics in Washington. Black said he will not recant any of his past criticisms of Microsoft.

Novell shares climbed 78 cents, or 11.4 percent, to $7.64 while Microsoft shares gained 2 cents to $29.33 in afternoon trading on the Nasdaq Stock Market.