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June 3, 2002—In this issue:
1. NEWS AND VIEWS
- Judge Won't Allow Retaliation Memo
- SEC Announces Microsoft Settlement
- Get Valuable Info for Free with IT Consultant Newsletter
- Raising Windows 2000 Availability—Free Webinar
3. CONTACT US
- See this section for a list of ways to contact us.
1. NEWS AND VIEWS
(contributed by Paul Thurrott, [email protected])
In a major blow to the nonsettling US states that are pursuing stricter remedies in the Microsoft antitrust case, Judge Colleen Kollar-Kotelly said Friday that she won't let the states' lawyers enter an internal Microsoft email message into the official court record. The 2-year-old memo threatened retaliation against PC companies that allied with Windows competitor Linux. Lawyers for the nonsettling states tried to introduce the memo in court twice: once during Microsoft Chairman and Chief Software Architect Bill Gates's cross-examination and again near the close of the remedy hearings. But both these instances occurred after the states had presented their case.
"The litigation process presumes that the parties will present their case only once and will present their best arguments at that time," Kollar-Kotelly said in her order, noting that the memo presentation came too late. She also said that entering the message now would "cause prejudice to Microsoft" and noted that the states didn't provide sufficient reason for her to do so.
In the controversial August 2001 email message, Microsoft Vice President Joachim Kempin told Gates that microprocessor-maker Intel was contacting PC makers "who are not friendly \[to Microsoft\] in the first place and ... encouraging them to go to Linux." Kempin said that he planned to "stop any go-to-market activities with Intel \[and\] only work with their competitors \[such as AMD\]." After recommending that Microsoft withhold technical information from PC makers that went along with the plan, Kempin explained other ways in which Microsoft could express its displeasure. "I would further try to restrict source-code deliveries where possible and be less gracious when interpreting agreements—again without being obvious about it," Kempin wrote. Gates never responded to the memo, but he did forward it to Microsoft CEO Steve Ballmer.
The Microsoft remedy hearings ended last month, but both sides will present closing arguments June 19. According to sources close to the case, Judge Kollar-Kotelly will issue a ruling late this summer.
The US Securities and Exchange Commission (SEC) revealed Friday that it has agreed to settle its accounting-practices case against Microsoft. The agency had launched an investigation to determine whether the company misled shareholders by understating earnings so that it could pad future, less lucrative, reporting periods. Microsoft won't need to admit any wrongdoing or pay a fine, but the company must permanently cease using the controversial accounting practice called smoothing, revenue deferral, or cookie-jar accounting (depending on which legal expert you ask).
"The commission and Microsoft entered into an agreement to settle the case," an SEC spokesperson said this weekend. "It's a cease-and-desist order. \[Microsoft has\] agreed not to do it in the future."
Microsoft declined to comment about the investigation or settlement but reiterated that it takes financial reporting "very seriously." Unlike the company's high-profile antitrust case, the SEC's financial-reporting investigation was private, with little news coverage. Nevertheless, the SEC is aggressive about pursuing any accounting irregularities at high-tech companies. Most such irregularities, however, involve companies overstating, not understating, their revenues.
For more information about the SEC investigation, see last week's WinInfo Daily UPDATE article, "Report: Microsoft, SEC in Financial Reporting Settlement."
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