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Microsoft “Gets a Monkey off Its Back" …for $1.1 Billion
Microsoft “Gets a Monkey off Its Back" …for $1.1 Billion

Microsoft CFO John Connors had every reason to say, in a conference call with financial analysts earlier this week to discuss earnings, that - compared to 2003 - the financial challenges ahead for MS would be "daunting."

"It would be great to get some help from a better world-wide economy, but the comparables for 2004 will be tough," Connors said.

By the time of the conference call, the Redmond-based CFO had also heard of course about the latest proclamation in Baltimore by Judge J Frederick Motz, the US District judge who, on Wednesday, after the companies fought over implementing a ruling he made last month, ordered Microsoft to begin shipping Sun Microsystems' Java with the Windows operating system within 120 days.

Motz is the judge who, as Maureen O'Gara of LinuxGram expresses it in this week's issue, "knocked Microsoft's national settlement out of the box." (Just in case anybody has been asleep in a cave for the past 4 years, the original case involved the U.S. Court of Appeals for the District of Columbia, which in 2001 agreed that Microsoft had illegally maintained its monopoly in the Windows computer operating system but rejected breaking the company in two to prevent future violations. The idea of a national settlement arises from the various follow-up cases assigned to Motz arising from the original landmark government antitrust suit filed in 1998.)

"The last settlement Microsoft proposed" O'Gara explains, "would have resolved all such class actions against it nationwide but the deal was rejected in November 2001 by the district court in Baltimore as too self-serving. Microsoft had offered to give software, services, training and money, a total that it valued at $1 billion, to about 12,500 underprivileged schools around the country."

Microsoft CFO was also aware, as he spoke of the "daunting" challenges of 2003, of the massive settlement of up to $1.1 billion that MS has recently agreed to settle the 27 class-action suits pending against it in California alone - all alleging that it overcharged for Windows.

"Microsoft is not admitting any wrongdoing," O'Gara explains. "How much Microsoft actually winds up paying depends in part on how many of the reportedly 13 million people and businesses that are eligible make a claim. Microsoft said 50 million product licenses were involved and according to the other side 80% of them went to businesses."

O'Gara notes that Microsoft took a $660 million charge last year, which she describes as "its best guess at what all such cases would cost to settle."

Connors's remarks suggest that perhaps it has evaluated a need to change that estimate. What might it cost, though? "According to the deal cut," O'Gara explains, "anyone in California who bought Windows 95 or 98, Excel, Word or Office between February 18, 1995 and December 15, 2001 is eligible, provided they have proof of purchase in hand, to get a voucher from Microsoft worth between $5 and $29. Windows is worth $16 a copy, Excel $26 and Word and Works $5. The voucher can be redeemed with the purchase of any desktop, laptop and tablet PC that runs any operating system or on a select list of peripherals. The hardware could be from Apple and could run Linux, for instance. The vouchers will be good for four years."

There's a public service element, too. Two-thirds of whatever isn't claimed will go to California's 4,700 needy schools. "The schools can spend half of what they get on Microsoft software (including Microsoft's Mac stuff)," says O'Gara, "and the other half on non-Microsoft software, hardware and services. The remaining third of the unclaimed money will revert to Microsoft. Typically in such cases all of what's unclaimed goes back the company."

Connors - inspired by President Bush's recent much-publicized announcement that he would like to eliminate the tax stockholders have till now been obliged to pay on dividends - also used the conference call with analysts to announce Microsoft's first dividend. Only 16 cents a share, but even so that amounts to $850 million, according to estimates.

Calling it a "starter dividend," Connors explained that, with all the court cases still looming, MS was obliged to remain fiscally prudent with its huge cash hoard. "As we go forward," he said, "we will look at our legal, risk, research and development and other periodic uses of cash."

But, he added, "This is a good place to start."

The California settlement leaves Microsoft with similar cases in 16 remaining states plus the District of Columbia, which is why Connors is being so cautious. " Since this whole mess started in 1999," comments Maureen O'Gara, "suits were filed in 35 states but Microsoft won a number of them. Litigation continues in Arizona, New Mexico, Kansas, North and South Dakota, Iowa, Wisconsin, Tennessee, Mississippi, Minnesota, Florida, West Virginia, Montana, North Carolina, Massachusetts, Vermont, and DC."

"Microsoft," she concludes, "which declined to discuss the status of any settlement talks in these other venues, cautioned the press not to extrapolate on the California settlement because of California's 'unique antitrust laws.' California represented 40% of all the computers represented by these cases, Microsoft's lawyers said like it was a big monkey off their backs."

See related story
Sun vs Microsoft Injunction Order Filed: Victory for Whom?

See related story
Judge to MS: Ship Java in Windows in 120 Days

See related story
Microsoft To Appeal Motz Ruling on JVM

About Java News Desk
JDJ News Desk monitors the world of Java to present IT professionals with updates on technology advances, business trends, new products and standards in the Java and i-technology space.

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Reader Feedback: Page 1 of 1

Read the judges words people, he specifically said a SUN JVM implmentation.. that means Sun's current JVM




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