Microsoft Settles Antitrust Claim with Novell for $536 Million

by Alex Woodie

Microsoft has agreed to pay Novell $536 million to settle an antitrust claim related to Novell's NetWare operating system and Microsoft's Windows operating system. However, Novell is keeping its legal options open regarding its WordPerfect productivity software, and the company says it will be filing a lawsuit over that matter later this week.

In exchange for $536 million, Novell has agreed to release all of its antitrust claims over NetWare, and has agreed to withdraw from participation in the European Commission's case with Microsoft. For its part, Microsoft accepts no admission of wrongdoing and has agreed to end all of its counterclaims against Novell over NetWare.

Novell and Microsoft could not resolve their differences over the effect that Microsoft's desktop monopoly had on WordPerfect, which Novell owned for two years in the mid-1990s before selling to Corel. "We could not resolve claims related to WordPerfect in any manner we thought appropriate, and we are prepared to turn to the courts to resolve it," said Brad Smith, Microsoft's top lawyer.

Novell, now based in Waltham, Massachusetts, says it will file a lawsuit related to WordPerfect in its former home state of Utah. "We intend to pursue our claims aggressively toward a goal of recovering fair and considerable value for the harm caused to Novell's business," said Joseph LaSala, Novell's top lawyer.

While it was able to avoid costly litigation in a battle with Microsoft over NetWare, Novell is hoping to score a victory in court over WordPerfect, and perhaps take home a large bounty. Novell will add the $536 million in cash to its balance sheet for the first quarter of fiscal 2005, which started November 1.

Microsoft is also taking the $536 million hit in the first quarter of its 2005 fiscal year, but, in Microsoft's case, that quarter ended September 30. The company has decreased its net income by 13 percent, to $2.53. Microsoft also increased by $200 million the amount that it thinks it can reasonably be held liable for in the future for antitrust activities. In total, the company expects it may have to pay an additional $950 million to settle future antitrust claims.

Microsoft has already paid nearly $3 billion to settle antitrust claims since the middle of last year, including a $750 million settlement with AOL Time Warner related to the Netscape browser, a $700 million settlement with Sun Microsystems over Java compatibility, $536 million to Novell, and $1 billion to settle various class-action lawsuits filed by states. If it pays out almost another $1 billion more, possibly to Novell and other companies, that would bring the total amount required to settle antitrust claims to about $4 billion, or about half of its net income for fiscal year 2004.