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News > Technology
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Microsoft settles class action
graphic November 20, 2001: 5:35 p.m. ET

Software maker agrees to $1.1B settlement; impact on bottom line unclear.
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  • Gates on products, outlook - Nov. 12, 2001
  • Some states balk at Microsoft settlement - Nov. 6, 2001
  • States to pursue Microsoft litigation - Nov. 6, 2001
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  • Microsoft Corp.
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    NEW YORK (CNN/Money) - Microsoft Corp. has reached a settlement in dozens of private antitrust suits, but the proposed deal's impact on the company's bottom line remains to be seen.

    Under the terms of the settlement, which Microsoft executives and attorneys outlined Tuesday, the company during the next five years would provide roughly $1.1 billion in cash, training, support and software to some 12,500 schools in low-income U.S. neighborhoods.

    The settlement stems from numerous claims that Microsoft abused its market position by charging too much for computers and software. Those claims later were incorporated into a class action lawsuit.

    The agreement, which the two sides negotiated over the weekend and signed on Monday, still needs approval of U.S. District Judge Frederick Motz, who is overseeing the class-action case in Baltimore.

    Attorneys from each side are expected to file the settlement agreement with the court later Tuesday, and a public hearing on the agreement has been scheduled for Nov. 27.

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    If the court approves the proposed settlement, Microsoft said it will record a pre-tax charge of roughly $550 million in the current fiscal quarter ending December 31.

    On an after-tax basis, Microsoft said the settlement will result in a charge of roughly $375 million, which will trim between 6 cents and 7 cents from its earnings per share for the quarter.

    Microsoft will provide additional detail on the financial impact of the proposal later this week. However, the company has not yet quantified the total impact of the deal on its bottom line.

    Among the things the company needs to evaluate is the actual cost of the software it would donate under the terms of the settlement, according to Tom Burt, Microsoft's deputy general counsel.

    "It will certainly be tens of millions of dollars, but the cost will be determined in part by the total volume of software that's requested and provided to the schools over the five-year period," Burt said in a teleconference Tuesday afternoon.

    Burt said Microsoft will provide more details on the financial impact of the proposed settlement by the end of this week.

    Under the settlement agreement, Microsoft would provides computer technology resources to all K-through-12 public schools in the United States and its territories where 70 percent or more of the students are eligible for federal meal assistance.

    It also provides for the creation of a national foundation which would make grants to local foundations and community organizations for purchasing computers and software. Local school officials would have the option of choosing Microsoft or non-Microsoft technology, the company said.

    Microsoft would seed the national foundation with a $150 million grant and will make an additional $100 million available to match donations from other sources.

    Additionally, Microsoft said it will pay a total of $160 million into a separate fund overseen by the foundation, to be used for technology support programs to assist the participating schools.

    Microsoft also said it would contribute up to $90 million during the five-year period for training teachers, school administrators and support personnel in integrating technology into the school curriculum and using the technology provided by the program.

    Further, Microsoft said it would establish a program under which it provides non-profit computer refurbishing organizations with licenses and/or software for Microsoft operating systems to be installed on refurbished personal computers. Microsoft also said it would ensure that at least 200,000 Pentium-class PCs and Macintosh computers will be available to eligible schools each year during the five-year settlement period.

    As for the software donations, Microsoft said it will donate a range of educational and productivity software, including licenses for its Windows XP operating system. The total value of the donated software would vary based on how much the schools request, but the company said it may well exceed $500 million.

    "I think this is a very meaningful way for us to concludes this litigation and to be able to really focus in on developing and delivering the innovative products and services that will benefit not only these students and these educators, but the population broadly and around the world," said Microsoft CEO Steve Ballmer.

    The class-action settlement agreement comes about three weeks after Microsoft and the Justice Department agreed to restrictions on the software maker's behavior to settle the federal government's four-year-old antitrust case.

    Some of the states involves in that case, however, have balked at the proposed settlement, saying the restrictions do not go far enough to curb Microsoft's anticompetitive behavior.

    Click here for CNN/money's coverage of the Microsoft trial

    Burt said Microsoft "remains interested" in resolving the remaining issues in the federal case, and the company hopes the settlement agreement of the class-action might help persuade some of the attorneys general who have been reluctant to go along with the deal.

    "We hope that they'll look at this settlement and see that perhaps this is an appropriate time with everything else that's facing the country to get these issues behind us, as Microsoft is working to do," Burt said. graphic

      RELATED STORIES

    Gates on products, outlook - Nov. 12, 2001

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