Microsoft leaves industry guessing over issue of settlement

Settlement was the word heard most often this weekend as the IT industry and the legal profession mulled the latest turn of events in the long-running anti-trust case brought by the US government against Microsoft.

However, while Microsoft talked up its willingness to settle without an even-more protracted legal process, experts were unsure whether the company was serious or whether such an outcome was even feasible.

Microsoft chief operating officer, Bob Herbold, said on Sunday: "There's nothing we'd like more than to settle this case."

But on the same day, an open letter from chairman Bill Gates to "Our Customers, Partners and Shareholders" set a more ambiguous tone. "Microsoft is committed to resolving this matter in a fair and responsible manner, while ensuring that the fundamental principles of consumer choice and innovation are protected," he wrote, never mentioning the word settlement.

He did not follow on from remarks he made at a press conference on Friday when he said: "From the very beginning, Microsoft has wanted nothing more than to settle this case. The thing that excites us is building great software. The only thing that is important to us is that we are allowed to innovate in that software."

Giga Information Group analyst Rob Enderle said he expected a settlement and he does not expect it to include the breaking up of Microsoft. "I think there's enough evidence of emerging competition here to allow Microsoft to continue to exist."

Within the settlement he said there will be a set of rules and regulations to make sure Microsoft "isn't prematurely killing these competitors." Robert Litan, director of economic studies at the Brookings Institution, a Washington-based think tank, disagrees with Enderle. "I expect Microsoft will go through the motions," said Litan. "But I don't think there'll be a settlement, he said.

Mark Schechter, a former DoJ antitrust lawyer, agreed with Litan. "I have always thought that a settlement is extremely unlikely. The problem, in part, is there are so many parties on the plaintiff's side: reaching some kind of consensus is going to be difficult." The plaintiffs include 19 states, the District of Columbia as well as the US Government.

And what do the plaintiffs think? Joel Klein, who is head of the DoJ's antitrust department, said on Sunday: "Obviously settlement is always an option."

But he obviously wanted a settlement that hurt Microsoft hard: "We would need a settlement that deals with the very findings that the court made in this case, a settlement that produces consumer choice, innovation and competition in the market," he said."

He refused to discuss whether Microsoft should be split up into smaller companies as happened in 1984 to AT&T, which at the time controlled telephony in the US.

A wildcard being discussed is whether Microsoft should play for time and see what happens in the US elections that take place at the end of next year.

There are possibilities that a more business-friendly President might be elected who would curtail the powers of the DoJ's antitrust department.Catching up in the opinion polls behind Republican front-runner George Bush Jr. is Senator John McCain, a vociferous anti-DoJ critic, and one observer believes Klein should want to settle.

Marc Schildkraut, a former US Federal Trade Commission official who led an investigation of Microsoft in the early 1990s, said: "I bet Klein wants to settle this on his watch. That is not going to happen if the litigation continues. Maybe he'll settle for a little less to get it done now, but get it done all the same."