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Microsoft offers terms
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March 24, 1999: 7:56 p.m. ET
State attorneys general receive offer, but a settlement remains unlikely
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NEW YORK (CNNfn) - Microsoft Corp. sent a settlement proposal Wednesday to the federal government and 19 states suing the company for antitrust violations, but government officials quickly dismissed the offer as unacceptable.
The government plaintiffs in the antitrust case said Microsoft 's (MSFT) proposal doesn't go far enough, leaving doubt that the two sides will reach a settlement before the trial resumes April 12.
"It was a minimalist opening offer," California Attorney General Bill Lockyer told reporters at a meeting of state attorneys general. "It was far from what anyone in our group would expect to be adequate."
Lockyer said he had not seen Microsoft's offer but it was described to him in a brief conversation with Iowa Attorney General Tom Miller.
Miller will brief his counterparts on developments in the case Thursday during a meeting of the National Association of Attorneys General.
Representatives at the Justice Department and Microsoft declined comment.
The Justice Department and 19 states filed a lawsuit against Microsoft last year, accusing the software giant of using its monopoly status in the operating system market to bully competitors.
Last month, presiding U.S. District Judge Thomas Penfield Jackson urged the software giant and the government to try to work out their differences during the current trial recess.
On Monday, Microsoft said it was ready to proceed with a "good-faith" effort to move toward a settlement.
In an interview with David Frost at an investor conference Wednesday, Microsoft Chairman Bill Gates said the company is in ongoing talks with the government and that the company "would like nothing better" than to put an end to the lawsuit.
Settlement still unlikely
Nonetheless, a settlement does not appear to be imminent. Government officials said Microsoft's proposal isn't substantive enough to warrant serious consideration as a basis for negotiations.
"There is not a lot to it," one of the states' attorneys general, who asked not to be identified, said of Microsoft's proposal.
Art Russell, an analyst at Edward Jones, said it's possible that Microsoft is merely responding to Jackson's suggestion that the two sides make an effort to settle the case.
"It could be that they're just going through the motions," Russell said. "At least Microsoft can say they made an effort at a settlement."
'Bundling' not on the table
Though terms of the settlement haven't been disclosed, the issue of Microsoft's ability to add new features to its Windows operating system is said to be non-negotiable.
Microsoft's refusal to concede on that issue could derail any possible settlement, since bundling is one of the key issues in the government's case.
The government claims Microsoft's inclusion of the Internet Explorer Web browser within Windows amounts to unfair competition because Microsoft is giving away a separate product within its dominant computer operating system.
In particular, the Justice Department has said Microsoft's actions have harmed Netscape Communications Corp. (NSCP), which saw the once-dominant market share of its Navigator product plunge after Microsoft integrated IE into Windows.
Microsoft and the government had tried to reach an 11th-hour settlement last May before the government filed its suit. Negotiations broke down in part because of Microsoft's refusal to relinquish control over what it could include in Windows.
"Apparently, this is all coming from Bill Gates being stubborn," Russell said. "They are not going to give in on integrating anything they want into Windows. They feel that that's the strongest part of their case."
That's mainly because a federal appeals court overturned Jackson's order for a preliminary injunction preventing Microsoft from forcing PC makers to include Internet Explorer in Windows 95. The court concluded that the Windows-IE combination was a "genuine integration."
"The ability to innovate Windows, the ability to maintain the integrity of Windows as a fully designed product -- those are important to us," Gates said Wednesday. "As long as we can keep those intact, it would be great to settle the thing."
Microsoft shares finished 4-11/16 higher at 171-1/4 in Wednesday trading. 
-- from staff and wire reports
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