Microsoft Moves on Class Actions - TheStreet

Microsoft Moves on Class Actions

The company will pay $200 million for six of the 15 remaining class-action suits in states.
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(MSFT) - Get Report

announced Tuesday it has settled class-action lawsuits in five states and the District of Columbia for $200 million, removing yet another obstacle to the cash-rich software maker increasing its dividend.

Of the six settlements, Microsoft General Counsel Brad Smith said two suits -- in the District of Columbia and Kansas -- have been granted preliminary approval. The Kansas suit will cost Microsoft $32 million, while the D.C. case will cost $6.2 million -- figures that are based on the population size of PC users in each area.

The four other settlements -- in North Carolina, Tennessee, North Dakota and South Dakota -- are still awaiting preliminary court approval and therefore more details were not yet disclosed. But Smith said all of the settlements have been structured to provide benefits to needy school students as well as purchases of Microsoft software.

Under the terms of the settlements, Microsoft provides vouchers to people who bought Microsoft software that will enable them to buy software made by any manufacturer for both PCs and Macintosh computers. Because a portion of such payouts typically go unclaimed, Microsoft has also agreed to give the unclaimed portion to schools to buy hardware, software or technical training.

At one time, more than 100 federal and state class-action lawsuits were filed claiming Microsoft used its market dominance to charge unfair prices for its Window operating system software. The federal cases were consolidated and ultimately resolved in September, while Microsoft has won dismissals or denials of class certification in 18 state cases. The six that were settled are among the 15 state suits that are still moving through the courts.

The settlements announced Tuesday bring to 10 the total number of state class-action antitrust cases settled by Microsoft, worth a total of $1.55 billion. Microsoft is still fighting cases in five states -- Arizona, Iowa, Minnesota, New Mexico and Wisconsin.

"We are over halfway toward resolving our consumer class-action lawsuits," Smith said in a conference call.

The announcement comes days before the one-year anniversary Saturday of U.S. District Court Judge Colleen Kollar-Kotelly's ruling largely upholding the antitrust settlement hammered out by the Justice Department in 2001. Only one state, Massachusetts, is appealing that decision, with oral arguments on the appeal scheduled next month.

And other legal fights also still hang over Microsoft. In mid-November, the European Commission will hold an oral hearing in its antitrust case against Microsoft. The EC has charged that Microsoft leveraged its dominant position from the PC into low-end servers and tied its Windows Media Player to its operating system.

In addition, an antitrust lawsuit filed by rival

Sun Microsystems

(SUNW) - Get Report

is pending in the court. The litigation path in the Sun case has a "long ways to go," Smith said.

"It would be premature for anyone to conclude that all of our antitrust issues are resolved while these three cases are pending," Smith said. He added that its legal experience has made the world's largest software maker realize the importance of constructive and collaborative relationships with other tech companies -- a statement that is likely to be met with some skepticism.

Microsoft has cited its legal battles as the obstacle holding it back to paying a larger dividend to shareholders. So with more antitrust class-action settlements, that obstacle shrinks. At the end of last week, Goldman Sachs analyst Rick Sherlund said Microsoft also may have held off declaring a bigger dividend during the summer because it was hammering out details of an employee stock option exchange program with

J.P. Morgan


With that out of the way and Microsoft's cash on hand likely to surpass $55 billion and approach $60 billion in the company's March quarter next year, Microsoft may finally do something, Sherlund said. "I think the company is on board with the desire to do something with the cash now," he said. Sherlund has an outperform rating on Microsoft and his firm has done banking with the company.

Shares of Microsoft gained 14 cents, or 0.5%, to $27.05 in recent trading.