Microsoft reaches anti-trust deal

The agreement falls far short of the original government aim of breaking up the company, but imposes a number of restrictions.

"This historic settlement will bring effective relief to the market and ensure that consumers will have more choices in meeting their computer needs," US Attorney General John Ashcroft said in a statement.

Microsoft chairman Bill Gates said the settlement was "fair and reasonable and, most important, is in the best interests of consumers and the economy.

"We recognize that the success of our products has created concerns. This settlement addresses those concerns in a fair, and reasonable manner, while still enabling Microsoft to continue innovating and pushing technology forward."

At a news conference, Mr Ashcroft argued the deal would "put an end to Microsoft's unlawful conduct".

Mr Ashcroft said the settlement would remove uncertainty from the US computer industry, which he described as "vital in today's economic climate".

Tuesday deadline for approval

The two sides have now presented the settlement to district court judge Colleen Kollar-Kotelly, who must approve it for the case to be brought to an end.

Judge Kollar-Kotelly gave the 18 states and the District of Columbia, which were also parties to the case, until Tuesday to decide whether to back the settlement.

Click here to see the proposed settlement in full

Under the settlement, a panel of three independent monitors will work onsite at Microsoft in order to oversee its conduct and review its accounts.

Crucially, Microsoft would also be obliged to provide rival software firms with information to allow them to develop competing "middleware" products - in other words, software programs that interact with the computer operating system.

Microsoft will be prevented from "retaliating" against computer manufacturers and software rivals who bring out competing products, and must deal with licensing partners on uniform terms.

High hopes

The restrictions "will stop Microsoft's unlawful conduct, prevent recurrence of similar conduct in the future and restore competition in the software market, achieving prompt, effective and certain relief for consumers and businesses," the Department of Justice said.

The restrictions would be imposed for five years, and could be extended for another two years if Microsoft failed to follow the terms, the government said.

The agreement has gone ahead without the explicit agreement of the 18 US states that are also suing Microsoft.

Earlier on Friday, it was reported that the states were planning to ask for more time to consider their response to the settlement, but their objections were overridden by the federal government.

In theory, the states still have considerable powers to derail the deal, but US legal experts say that in practice their influence is not strong.

The states could continue a separate legal action against Microsoft - without the government's participation - raising the prospect of further hearings into how Microsoft can be stopped from abusing its monopoly power.

Microsoft shares rose 10 cents to $61.84 in trading immediately after the settlement was announced, before slipping back modestly.

Analyst reaction

Most analysts agreed that the settlement was a victory for Microsoft.

Drew Broseau, of SG Cowen, said: "I don't think it can be viewed as anything but a win for Microsoft because there's been, in essence, no material change in the behaviour and product strategy that the company will be following."

Henry Asher, president of North Star, a New York based investment adviser, said: "As a society, we probably are at a moment where there's something more important on our agenda than using federal manpower on this case. That's a huge part of it.

"They (Microsoft) were heading towards a win anyway. This is just a bigger win."