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Apple demands changes to class-action settlement

Apple Computer Inc wants Micro-soft Corp to create a US$1 billion fund to buy computers and software for schools in poor neighborhoods instead of donating the equipment to settle class-action lawsuits.

Apple, which has argued that the proposed settlement would let Microsoft leverage its Windows monopoly into the competitive market for education software, will provide details of its proposal in a filing today with the judge who is reviewing the settlement, said Apple spokeswoman Katie Cotton.

Under the proposed settlement of claims that it overcharged customers, Microsoft would donate 1 million reconditioned computers and software to about 16,000 schools in poor areas. It also would give US$450 million to a private foundation to provide grants, teacher training and technical support for the schools.

Apple and other software rivals say this will only help Microsoft sell its products in one of the few competitive software markets.

"A far better settlement is for Microsoft to give their proposed US$1 billion -- in cash -- to an independent foundation, which will provide our most needy schools with the computer technology of their choice," said Steve Jobs, Apple's chief executive officer.

At a Nov. 27 hearing in Baltimore, US District Judge J. Frederick Motz questioned whether the proposed settlement "might have an indirect anti-competitive effect" on the software market.

Motz said schools might opt for computers that run with free Microsoft software rather than seeking grants from the foundation to buy Apple computers. He also questioned whether the settlement would enable Microsoft to buy "a generation of good will."

Critics of the settlement have argued that giving all the settlement proceeds to a foundation to buy the software and computers would give schools a greater choice to pick non-Microsoft products.

In his statement, Jobs also questioned the real value of Microsoft's proposed software donation.

"People should know that the actual costs to Microsoft for this donated software will likely be under US$1 million," Jobs said.

There was no immediate comment from Microsoft.

Microsoft said the settlement, if approved, would reduce its earnings by US$375 million after taxes. Microsoft shares rose US$0.55 to $68.65. Apple shares dropped US$0.98 to US$22.78.

An expert witness for the plaintiffs testified that 80 percent of the computers would run Microsoft Windows and 20 percent would be Apple's Macintosh machines. In an earlier filing, Apple said the program would create a "strong bias" for Microsoft products.

Apple computers now account for 47 percent of US school computers, while Windows powers 53 percent of them. Apple's share of new purchases has declined to less than 30 percent, company lawyers told Motz at last month's hearing.

Microsoft denies the charges and plaintiffs' lawyer Stanley Chesley said it would be difficult to prove overcharges at trial.
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