Microsoft Tentatively Settles Class Action Suits

Microsoft Corp. Monday reached an agreement to settle more than 100 class action lawsuits and said it will record a pre-tax charge of about $550 million in its December quarter as a result.

The settlement will require the company to provide software and computers to more than 12,500 of the poorest public schools in the U.S.
for five years. The arrangement is estimated to cost the company about $1.1 billion, according to The Wall Street Journal.

Under the deal, Microsoft will provide about $900 million worth of software for five years to schools in which most students
qualify for federal lunch programs. The company will also provide 200,000 reconditioned desktop and laptop computers, $90 million
in teacher training and $38 million in technical support. Another $250 million will be used to set up an independent foundation to
meet project goals. It will seek an additional $200 million in matching funds for that effort. Finally, the company will also put
up $160 million to help fund an organization that teaches students how to repair and service computers and networks.

The software Microsoft provides will include titles like Microsoft Office and Encarta, and the company would value that software at
educational-license prices, not at the retail prices it initially proposed, the Journal said. The agreement mandates standards for
the reconditioned computers, setting minimum chip speeds and memory allotments, and requiring color monitors, speakers and CD-ROM

The settlement will take care of class action lawsuits that consolidated the cases of more than 65 million computer buyers. The
cases were launched in 1998, alleging the company abused its monopoly to overcharge computer buyers all over the country.

However, Michael Hausfeld, one of the lead plaintiff’s lawyers, concluded that each member of the class bringing the suit only stood
to gain about $10 in a settlement or victory. He suggested the alternative solution to which Microsoft has agreed, the Journal said. Hausfeld’s proposal also separates attorneys’ fees from the size of the settlement, and instead gives U.S.
District Judge J. Frederick Motz the power to determine attorneys’ fees and costs, which Microsoft would pay separately, the Journal

That provision has apparently set some of the lawyers against the settlement. The Journal said they would prefer to take Microsoft
to court in order to win a larger settlement and higher attorneys’ fees.

Judge Motz will hold a hearing on the matter next Tuesday.

If the settlement is not approved, the first of the cases is expected to go to trial next year.

Microsoft said Tuesday afternoon that the settlement will result in a charge of about $375 million on an after-tax basis, representing a 6 cents to 7 cents reduction in forecasted diluted EPS for the December quarter.

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