Microsoft Corp. on Thursday agreed to pay $750 million to settle a private lawsuit brought by AOL after the world's largest software company was found guilty of violating federal antitrust laws.
The case involved Netscape Communications, which now is controlled by AOL. In its suit, AOL had accused Microsoft of using anti-competitive business practices to ensure the dominance of its Internet Explorer browsing software over Netscape's software.
AOL also claimed that Microsoft made deals with computer manufacturers and other companies to shut out Netscape.
"The agreement we've reached marks a new phase of relationship between Microsoft and AOL Time Warner," Microsoft Chairman Bill Gates said in a teleconference. "It puts any past issues behind us."
Gates added that the agreement extends existing technical cooperation between both companies.
As part of the agreement, Microsoft will give a new royalty-free, seven-year license of its browsing technology to AOL. The Redmond, Wash., -based company will provide technical information to AOL to ensure that its products run effectively on Microsoft's Windows operating system.
"This is the broadest and most comprehensive license we've ever done with our Right Management software and our media software," said Gates.
The two companies will also work together to develop high-quality digital media over the Internet.
AOL Time Warner's Chairman and Chief Executive Officer Dick Parsons said he welcomed the opportunity to build a more productive relationship with Microsoft.
"Our agreement to work together on digital media initiatives marks an important step forward," he said.
Parsons told reporters that he plans to use proceeds from the deal to retire some of the New York-based company's $24 billion net debt.
AOL paid $10 billion for Mountain View, Calif., -based Netscape in 1999. It filed suit against Microsoft in January 2002.
Asked about the future of its Netscape subsidiary, Parsons said, "We've been looking at ways to maximize the value of what we have there, and all of those still available to us."
When pressed if the company would get rid of Netscape, Parsons said, "Not at this point."
The agreement also lets AOL use Microsoft's Windows Media software, which lets users play music and videos over the Internet, and its digital-rights-management software, which is used to prevent piracy.
Microsoft also agreed to distribute AOL CDs to small computer manufacturers, let a group of AOL developers work at its headquarters and share technical information for future versions of Windows with AOL at the same time the information is shared with other companies.
"These agreements are good news for the AOL service, its members and the Internet as a whole," said Jonathan Miller, chairman of the America Online division. "It provides America Online with certainty that, as Microsoft develops new operating systems and platforms, the AOL service will work optimally with them to benefit our members worldwide."
Shares of Microsoft lost a penny, or 0.04 percent, to close Thursday at $24.40 on heavy volume of 75.4 million shares traded on the Nasdaq stock exchange. AOL also lost a penny, or 0.07 percent, to close at $14.85 on volume of 19.9 million shares traded on the New York Stock Exchange.
In after hours trading, Microsoft lost 5 cents, or 0.21 percent, to close at $24.35, while shares of AOL gained 61 cents, or 4.11 percent, to close at $15.46.