Microsoft Talks End Without Settlement

Updated from 9:03 p.m. EST

Talks between Microsoft (MSFT Quote) and the government aimed at settling antitrust charges against the software giant ended Saturday.

In a statement, Judge Richard Posner, the court-appointed mediator, said he ended his efforts to bring the two sides together because "the disagreements among the parties concerning the likely course, outcome, and consequences of continued litigation, as well as the implications and ramifications of alternative terms of settlement, are too deep-seated to be bridged."

Now it's up to Judge Thomas Penfield Jackson, who already has issued findings of fact in the case that harshly criticized Microsoft. Jackson is expected to issue his verdict as early as next week. He then would hold other hearings to determine what sort of sanctions Microsoft would receive.

Microsoft Chairman Bill Gates said in a statement that he and his lieutenants worked for four months to achieve "a fair and reasonable settlement."

"We went the extra mile to resolve this case, but the government would not agree to a fair and reasonable settlement that would have resolved this case in the best interests of consumers and the industry," Gates said.

Gates added that "Microsoft offered significant concessions in the interest of ending this case. Ultimately, it became impossible to settle because the Department of Justice and the states were not working together. Between them, they appeared to be demanding either a breakup of our company or other extreme concessions that go far beyond the issues raised in the lawsuit."

The government, meanwhile, said it too would've preferred a settlement. "But settlement for settlement's sake would be pointless," Assistant Attorney General Joel Klein, head of the Justice Department's antitrust division, said in a statement.

It was just over a week ago that the two sides seemed to be making progress toward settling the case. But on March 25 the government began making noises that Microsoft's settlement proposal was inadequate.

One issue was that some of the 19 states also involved in the case still wanted Microsoft broken up as part of its punishment. Still, this week Judge Jackson agreed to withhold his verdict while the two sides continued talking.

So the two sides exchanged proposals through Judge Posner over the past week, according to a New York Times story. The newspaper reported that the Justice Department sent its latest proposal late this week, but Microsoft refused to go along with the government's demands.

Meantime, some of the states were unhappy with responses from both Microsoft and the Justice Department, the paper said. And on Friday, the attorneys general sent Judge Posner their own demands, which the Times said included stricter terms to enforce the proposed agreements.

The newspaper quoted an unnamed Microsoft official as saying, "The hard-liners won."

In a statement reported by the Associated Press, the state attorneys general said, "The states, together with the Department of Justice, exerted their best efforts to make this process succeed."

Microsoft now may simply wait for Jackson's verdict and then work on its appeal, something it hinted at Saturday.

"We continue to believe that we have a strong legal case, and that the judicial system will ultimately rule in our favor," CEO Steve Ballmer said in a statement. "We would prefer to resolve this case through settlement, but we must protect our right to bring the best products for consumers to the fast-changing marketplace."