Original URL: http://www.theregister.co.uk/2000/01/11/ms_pays_up_to_settle/

MS pays up to settle on eve of Caldera antitrust trial

But it'll take a while to figure out how much, and what the terms are

By Graham Lea

Posted in Business, 11th January 2000 09:20 GMT

MS on Trial Caldera and Microsoft announced a settlement of their antitrust battle late yesterday. Caldera's private action against Microsoft, centred on DR-DOS, had been scheduled to go to trial on 1 February. A minimalist and obscurantist masterpiece of a press release released in Salt lake City, but carefully-crafted by the most expensive PR organisation in the industry, said: "Microsoft Corp. and Caldera Inc. today announced that the parties have reached a mutually agreeable settlement of an antitrust lawsuit filed by Caldera Inc. in July 1996. "We are pleased to put this issue behind us," said Tom Burt, General Counsel, Litigation for Microsoft. "Rather than litigating, we prefer to focus on building great software for our customers in this dynamic and competitive industry." "We are pleased with the result of this lawsuit. We now look forward to vigorous competition in the marketplace with our Linux products and strategies both from Caldera Systems Inc. and Lineo Inc.," said Bryan Sparks, CEO of Caldera Inc. The terms of the agreement are confidential. Microsoft will record a one-time charge against earnings in the quarter ending March 31, 2000, which will reduce earnings per share approximately three cents." [There then followed the customary paragraph puffs for Caldera and Microsoft.] The purpose of the statement, which was developed by Microsoft, was to suggest that the amount of the settlement was small. Based on around 5.15 billion shares, the suggestion that Microsoft wishes to plant is that the direct cost of the settlement to Microsoft would be $155 million. This figure must be treated with great caution, and there are several reasons to believe that the true cost to Microsoft is considerably greater than this, although Caldera is unable to confirm the probable true figure because of the gagging order Microsoft always demands. The statement leaves out key data about the settlement. It would be foolish to assume that the cost of the settlement to Microsoft is just the three cents a share, as Microsoft wishes everyone to believe. Indeed, it's worth considering what Microsoft did not say - for example that the three cents was the total cost of the action, or that a further charge would be taken, or that legal costs were included, or that Microsoft would not be giving Caldera some other benefit in kind. There may well be additional undisclosed terms that will not immediately be known, or will be buried by Microsoft's bean counters when they massage the accounts. Microsoft itself had estimated the potential damages it faced in the case at $1.6 billion (and they could well have been much more), so a total settlement in the $155 region is most unlikely. In the fullness of time, Caldera's accounts may well yield a truer picture, but Microsoft's immediate purpose is to minimise the damage to its image. Ray Noorda, the former chairman of Novell from whom Caldera acquired DR-DOS, and whose venture capital provided the initial funding for Caldera, said "I feel alright about this [settlement]." He had been dubbed by Bill Gates "the grandfather from Hell", and was one of the most active opponents of Microsoft's monopolies, having coined the term "co-opetition" for ethical competition. Details of The Register's coverage of the case can be found by searching on "Caldera". It is worth repeating that despite Microsoft's desire to "integrate" MS-DOS 7.0 (as Gates dubbed it) and Windows 95 to make DR-DOS substitution impossible, Caldera demonstrated that this was possible publicly and was therefore able to show that DR-DOS had been shut out of the Windows 9x market as well as the Windows 3.x market. Attorney Steve Hill, of the Salt Lake City legal firm Snow, Christensen & Martineau, told The Register that in many ways the most important aspect of the result in both the Caldera case, and in the DoJ's case so far, is that Linux has now reached a position of general acceptance as a major operating system contender. Judge Benson, who was to have heard the case (some suggest he was positively looking forward to it) signed an Order of Dismissal that completed the documentation between Caldera and Microsoft, and news of the settlement was then announced a couple of minutes later. Caldera can justly claim 10 January as Victory Caldera Day - a victory for David against Goliath - and for those interested in these matters, it is worth noting that the legend has it that the Messiah (or Linux as some call it) would be descended from David. Had the case gone to trial, it would probably have taken at least two months, and possibly four months if Microsoft had engaged in delaying tactics in an attempt to wear down a local jury that was expected by inclination to favour the Caldera home team. Caldera planned to quote Judge Jackson's findings of law to the jury. Settlement negotiations took place in a mediator's office in Seattle last Friday, apparently at the instigation of Microsoft, and were completed the same day. The Register understands from sources that a factor that is believed to have influenced Microsoft's sudden decision to settle is the low morale at Fort Redmond as a result of all the litigation. News of the settlement came after the market had closed last night, so Microsoft's share price does not reflect the events and shows only a small gain of 81 cents to $112.25 on a day when NASDAQ gained 4.3 per cent. Asked by The Register about his personal expectations for Microsoft's Washington trial, Sparks said that if there were going to be a settlement, he would expect it to be in the next couple of weeks as in his view Microsoft would not want the case to proceed to the stage where Judge Jackson issued his findings of law. Microsoft will of course imply that it settled the case to allow it to focus on the future, and there is of course some truth in this. Microsoft president Steve Ballmer and a dozen executives were to appear as witnesses. Settling the case gave Microsoft the advantage that it has not been found guilty in court, and as with a consent decree (the outcome if Microsoft reaches a settlement with the DoJ) it is not possible to cite such settlements in other cases, such as the class action suits that have been filed recently. Microsoft's usual panoply was deployed to delay the proceedings to the greatest possible extent, but to no avail since Judge Benson consistently ruled against Microsoft's procedural antics. ® See also: Caldera files for IPO Sun, SCO, Novell, Citrix put bucks into Caldera