WASHINGTON -- In a last-ditch attempt to avert federal antitrust lawsuits, Microsoft agreed today to delay shipping the upgrade to its popular Windows software to computer makers until Monday so that negotiations with the government can continue.
The Justice Department said it and 20 states had agreed not to file lawsuits, as planned today, and Microsoft had agreed not to ship Windows 98 on Friday as planned while "discussions continue over the next several days."
A state source described Microsoft's offer as "major concessions."
Microsoft characterized negotiations as starting as early as May 6, the day after company Chairman Bill Gates met quietly with top Justice lawyers. But an agency official said serious talks began only "in the last day or two."
"There has been an ongoing dialogue exchanging positions, but it's only been in the last day or two that it took on the flavor of a negotiation," said the Justice Department official, who requested anonymity.
The Justice Department and the states had planned to file antitrust lawsuits today in U.S. District Court, contending that Microsoft has wielded its monopoly status to illegally crimp competition, especially in the market for Internet browsers, the software that people use to view information on the World Wide Web.
Microsoft said the brief delay in shipping Windows 98 to computer makers will have no impact on its plan to sell the software to consumers starting June 25.
"The company has taken this step so that discussions with the government ... can continue," spokesman Mark Murray said today.
Facing imminent antitrust lawsuits from the Justice Department and the state attorneys general, Microsoft's top lawyers are offering what a state source described as "major concessions" to ease concerns that the software company has illegally stifled competition.
A source familiar with the negotiations said Microsoft had made "significant offers" to respond to antitrust concerns, including modifying the company's agreements with Internet content providers, Internet service providers and computer manufacturers.
In Assistant Attorney General Joel I. Klein's Justice Department conference room for this morning's negotiations were attorneys general Richard Blumenthal of Connecticut, Dennis Vaco of New York and Thomas Miller of Iowa.
The ongoing investigation into the business practices of Microsoft is one of the biggest antitrust efforts since the 1984 breakup of AT&T. Microsoft is the world's most successful and influential software company, and its Windows products are used on virtually all desktop computers.
The cases, if filed, could have profound implications on the Redmond, Wash.-based company's legal freedom to add new features to Windows, such as the ability of computers to understand speech.
The states want to ask a federal court in a 48-page complaint to force Microsoft to relax many of its sales agreements with computer makers, giving them more freedom to install competitors' products over Microsoft's and to customize the versions of Windows they sell, sources said.
If Microsoft doesn't agree, the states may ask the court to block the latest upgrade to the company's widely used operating system, Windows 98. A research company, International Data Corp. of Framingham, Mass., estimated that Microsoft would sell 19.7 million copies during 1998.
Microsoft has included its browser free in the latest versions of Windows. That has devastated the market for its biggest competitor, Netscape Communications Corp., which saw its own share of the world's browser use fall from 90 percent to 60 percent -- to about 68 million copies -- in just a few years.
A spokeswoman for Netscape said today the company had no comment.
The states that had agreed to sue Microsoft were identified as: California, Connecticut, Florida, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New York, North Carolina, Ohio, South Carolina, Utah, West Virginia and Wisconsin, plus the District of Columbia.
The states don't represent a totally united front: Texas, one of the states that led the antitrust investigation, announced earlier this week it would wait weeks before deciding whether to proceed, in part because of intense pressure applied by Texas computer companies.
And Indiana backed out of the case Wednesday -- at least for now -- because its attorney general was uncomfortable with efforts to block Windows 98 and because Microsoft already has relaxed some of its sales agreements.
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