Microsoft Boosting Antitrust Settlement Efforts, Sources Say
Microsoft Corp. has intensified discussions with U.S. and state lawyers in an effort to settle a landmark antitrust case without breaking up the software giant, said people familiar with the talks.
Attorneys for Microsoft, the Justice Department, and 19 states have been exchanging e-mails, phone calls and memos in the last two weeks through U.S. Circuit Judge Richard Posner in Chicago, sources said. Posner was recruited to mediate a possible settlement by U.S. District Judge Thomas Penfield Jackson, who is presiding over the case against Microsoft.
Shares of the company surged $8.63 to $111.88 in Nasdaq trading Thursday. The market value of Microsoft, already the world’s most valuable company, increased $44.9 billion.
“It’ll go through the roof” if the case settles, said William Epifanio, a J.P. Morgan Securities Inc. analyst who has a “buy” rating on Microsoft. “I’ve been telling investors to hold onto their stock. If it settles, it will open 20 points up the next morning, and it could easily go to 150.”
Both sides left a meeting with Jackson on Tuesday with the impression they had only limited time to reach an accord, sources said. Jackson may be delaying his ruling on whether Microsoft broke the law to give the mediation process one last chance to succeed.
The arms-length negotiations, which still could founder, are focusing on changes in Microsoft’s business practices.
With Jackson poised to rule on whether Microsoft violated the law, “the parties now know for certain that the train will leave the station relatively soon, with or without them on it,” said William Kovacic, an antitrust expert at George Washington University’s law school. “If they’re making progress, he will stay his hand.”
After previously rebuffing proposals to settle the case, Microsoft last week signaled through Posner a willingness to consider some restrictions on its business practices, a person familiar with the talks said. The company said it would submit a formal proposal to address the government concerns but has yet to do so, the person said.
Throughout the discussions, antitrust enforcers had insisted on either breaking up the world’s biggest software maker, or short of that, imposing strict curbs on what Jackson found last fall to be repeated efforts to thwart challenges to the company’s domination of personal computer operating software, sources said.
A government spokeswoman expressed skepticism. “Whoever is making these kinds of statements is just engaged in a public relations effort that should not be taken seriously,” said Justice Department spokeswoman Gina Talamona.
Microsoft declined to comment on the substance of the talks. “It is not appropriate for anyone to comment on anything about settlement in any way,” said spokesman Mark Murray. “We are going to observe the confidential process and respect that confidentiality so this process can work.”
An agreement, which must win court approval, would have to address the “serious pattern” of Microsoft’s anti-competitive conduct to settle the suit, Justice Department antitrust chief Joel Klein told Congress on Thursday.
“The remedy ought to be commensurate” with Microsoft’s practices, Klein told a Senate subcommittee on antitrust law.
Also on Thursday, Microsoft said it is abandoning its foray into the tax preparation software market in favor of an alliance with H&R; Block Corp. aimed at developing Internet and desktop tax preparation products. Microsoft said it will drop development of its proprietary tax preparation software, TaxSaver.
Instead, customers who use Microsoft’s financial Web site, MSN MoneyCentral, will be able to download H&R; Block’s tax preparation software, TaxCut. The site also will provide links to H&R; Block’s online tax site.
