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Microsoft proposes changes
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December 10, 2001: 12:51 p.m. ET
Software maker seeks to modify private settlement to deflect criticism.
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NEW YORK (CNN/Money) - Microsoft Corp. is offering to modify the proposed settlement of private antitrust lawsuits to deflect criticism it would simply extend its software monopoly by donating reduced-priced software, computers and training to schools.
A Microsoft (MSFT: down $0.77 to $67.06, Research, Estimates) lawyer said schools would benefit from the settlement, not the software firm, adding that schools would be able to make their own technology choices.
Among the changes Microsoft proposes is the way the foundation overseeing the donations would pick its board members. The company also said two other software makers would join the foundation: Connectix, which makes a program that lets Windows work on rival Apple computers, and education software company Key Curriculum Press.
Apple, which is scheduled to argue against the private agreement in federal court in Baltimore Monday, has complained the $1 billion settlement would boost adoption of Microsoft products in schools. Apple holds nearly half the pre-college educational market and analysts said that share could be threatened by the settlement.
U.S. District Judge J. Frederick Motz appeared to share concerns raised by Apple that the agreement would flood schools with refurbished personal computers running Microsoft's Window's operating system and other software.
"If in the solution there are structural biases, however good the intention, then that's something that's got to be of concern," Motz said.
Apple prefers Microsoft establish a foundation with complete independence from the company, the Wall Street Journal reported.
Motz asked Microsoft why it just did not distribute the money and let schools spend it on whatever software they liked.
But Microsoft Deputy General Counsel Tom Burt said the software giant could help more schools under the proposed settlement, distributing more software at a lower cost than if the same schools went out and bought programs on the open market.
In later remarks, Motz expressed some sympathy for Microsoft's explanation, saying that the potential harm to competition had to be weighed against the settlement providing "more bang for the buck" than just handing out cash.
Separately, the U.S. Senate is scheduled to debate Microsoft's settlement agreement in the Justice Department antitrust lawsuit.
Last week, nine states that declined to accept the government's settlement said tougher restrictions should be imposed, such as extending an agreement requiring Microsoft to offer its "Office" software for Apple's Macintosh computer line.
That five-year agreement was to end in August, but the states are pushing for an extension since they fear Microsoft may use Apple's dependence on the software as a "club" to obtain concessions from its smaller rivals.
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Such changes could end up benefiting Apple (AAPL: unchanged at $22.54, Research, Estimates), Sun Microsystems (SUNW: down $0.08 to $13.31, Research, Estimates) and other companies.
Meanwhile, in Brussels, Microsoft failed to persuade European antitrust enforcers to end their case against the company by accepting U.S. settlement terms. And Wednesday, the Senate Judiciary Committee will question Charles James, the U.S. antitrust chief, over the decision to move ahead with the controversial Justice Department settlement rather than continue to pursue it in court. 
From staff and wire reports
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