Microsoft settles with IBM

1 July 2005 Microsoft has agreed to pay rival technology giant IBM $775 million, as part of its plans to settle outstanding antitrust cases.

On top of the $775 million, Microsoft will also give IBM $75 million worth of credit for its software. It is the latest in a long line of out of court settlements and in value of the settlements, second only to the $1.95 billion paid to Sun Microsystems in April 2004.

During Microsoft’s bitter battle with the US Justice Department it emerged that IBM and Gateway had paid more for Microsoft’s programs than other computer manufacturers. The presiding judge ruled that Microsoft had unfairly restrained IBM’s ability to introduce “technological innovations and business initiatives”.


Gateway was pacified with a $150 million settlement earlier this year.

During the 1990s IBM had threatened to undermine Microsoft’s operating system domination through its OS/2 alternative. It also introduced its SmartSuite producitivity software to rival Microsoft’s Office suite.

IBM’s claims relating to OS/2 and SmartSuite desktop application suite were also dealt with. However, disputes over harm to IBM’s server hardware and server software business were not resolved.

As part of the agreement, IBM agreed not to make any claims relating to servers dated before 30 June 2002 and also to not seek any financial damages related to server products for two years.

Brad Smith, Microsoft’s general counsel said: “Over the last few years we have focused on resolving our disputes with other companies, and today’s announcement takes another significant step towards achieving that goal.”

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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