Thu, Nov 22, 2001 page21

• Microsoft settlement gives schools computers

  PAYBACK TIME The software giant has agreed to spend at least US$1 billion to provide a million computers to poor schools in order to settle class-action lawsuits

  • BLOOMBERG
  • • 
    • 
    • 

  Microsoft Corp agreed to spend at least US$1 billion to provide a million computers and related services for schools in poor neighborhoods to settle class-action lawsuits accusing it of overcharging consumers.

  The company said the settlement, if approved by the courts, will reduce earnings by US$375 million, or US$0.06 to US$0.07 a share, in the quarter ending Dec. 31. Investors welcomed the plan, announced less than three weeks after the largest software company reached a tentative settlement of a three-year-old government antitrust case. They called it a small price to pay to dispose of the private lawsuits.

  "Anything that keeps Microsoft from the death of a thousand cuts is a good thing," said Richard Babson, the head of Babson-United Inc, which manages US$1.5 billion in investments and owns 329,429 shares of Microsoft.

  Microsoft shares fell US$1.14, or 1.7 percent, to US$65.40. The company said it will provide a million reconditioned computers plus software, technical support and computer training in 12,000 to 14,000 public schools that serve 7 million students in low-income neighborhoods.

  "It is a settlement that avoids long and costly litigation and at the same time will really make a difference in the lives of school children," said Microsoft Chief Executive Steve Ballmer.

  "It's a win-win," said Doug Altabef, managing director at Matrix Asset Advisors Inc, which doesn't own any Microsoft shares.

  "It keeps them out of courts. It makes them look like good guys." The government's antitrust case, which is separate from the private suits, may be far from over. While the US Justice Department and nine states signed the proposed settlement, nine other states are pressing for tougher remedies to limit Microsoft's dominance. Its Windows operating system runs 95 percent of the world's personal computers.

  The private suit settlement will help bridge the country's "huge digital divide between affluent and poor neighborhoods," said plaintiffs' lawyers Stanley Chesley, a veteran class-action lawyer in Cincinnati who has helped negotiate numerous product liability settlements.

  Microsoft will donate US$150 million to set up a private foundation to administer the program, provide US$100 million for matching grants and an additional US$250 million for technical support and training, the company said.

  The agreement, reported yesterday by the Wall Street Journal, would dispose of as many as 150 class-action lawsuits brought by consumers who claim Microsoft took advantage of its monopoly on PC operating systems to overcharge them, Chesley said. The suits seek damages for the alleged overcharges.

  Most of the cases were consolidated before US District Judge J. Frederick Motz in Baltimore.

  Motz is scheduled to consider the proposal next week at a hearing. He also will set fees for plaintiffs' lawyers, an amount not included in the settlement, Chesley said.

  San Francisco lawyer Gene Crew, who filed a 1999 class-action lawsuit against Microsoft in California state court, said he will oppose the settlement because it "is woefully inadequate and perpetuates Microsoft's monopoly in the education market." Crew said California plaintiffs will resist Microsoft's attempt to negotiate a settlement with plaintiffs in the weakest cases and have it imposed on litigants with stronger claims.

  The California lawsuit, which also charges that Microsoft monopolized the software applications market, claims the company overcharged consumers in the state by US$2 billion to US$4 billion for Windows, Microsoft Office and other software, Crew said. Those damages would be tripled if the state court finds Microsoft liable, he said.

  The refurbished computers would be installed in public schools where at least 70 percent of the students receive federally subsidized lunches, said Chesley. Schools, traditionally a fertile market for Apple Computer Inc's Macintosh computers, would be free to purchase non-Microsoft products, he said.

  Ballmer dismissed the notion that Microsoft would use the settlement as an opportunity to increase its share of the school market. "The benefits that we provide can be used for PCs or Macs, it can be used for PC software or Macintosh software," he said.

  Motz dismissed many of the class-action claims in 38 of the cases earlier this year, ruling that consumers who didn't directly purchase Windows from Microsoft couldn't sue. Most consumers buy PCs with Windows software already installed by the manufacturer.

  The judge threw out claims brought by plaintiffs in states that don't allow suits by indirect purchasers of a product.

  Motz continues to oversee cases filed on behalf of consumers from 15 states that allow people who buy a product from a retailer to claim they were overcharged by the manufacturer.

  Those states, including California, passed legislation designed to get around a 1977 Supreme Court decision that allows only consumers buying a product directly from a company to seek monetary damages for monopoly overcharges. It is unclear whether the settlement would cover the 30 state cases filed in California.

  Legal experts have said the plaintiffs in the private cases faced difficulty documenting whether consumers were overcharged for the Windows operating system.

  Microsoft denies the allegation and says the government never proved it charged monopoly prices during the 78-day trial of the case brought by the Justice Department and 19 states.

  The plaintiffs opted to help poor schools rather than giving consumers a coupon for a refund because it would be difficult to quantify damages, Chesley said.
• Most Popular

  • 1

    Dozens of Taiwanese missing in China

  • 2

    PRC likely to launch drills after National Day speech

  • 3

    Formosan black bear punching Winnie the Pooh badge a hit at Japan festival

  • 4

    PRC could not be ‘motherland,’ William Lai says

  • 5

    Double Ten National Day celebrations to begin today