Microsoft Deal Calls For $1 Billion School Effort

By Andrew Trotter — November 28, 2001 3 min read
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Microsoft Corp., which faces scores of private lawsuits for allegedly using its monopoly position to overcharge computer buyers for its software products, announced a sweeping settlement plan last week that would include the launch of a
$1 billion company-sponsored program to pour technology into needy schools.

If approved by Judge J. Frederick Motz of the U.S. District Court in Baltimore, the deal could be a public relations boost for the beleaguered software giant because the initiative could benefit up to 14,000 schools over five years.

Some competitors were irate.

“The settlement does nothing for consumers, and merely rewards Microsoft for its illegal behavior by enabling it to place its products in more schools at the expense of competitive products,” said Kenneth Wasch, the president of the Software and Information Industries Association, a Washington-based group that represents hundreds of software companies. “Microsoft is feeling no pain as a result of this settlement. ... Apple [Computer Inc.] and others are clearly the losers here.”

The company has $36 billion in cash on hand.

But a lead plaintiffs’ lawyer who helped craft the proposed deal disagreed with Wasch.

“Any time a company pays over $1 billion and creates a foundation that will last permanently and provide technology to a large portion of the school population, I don’t think you can say they’re let off scot-free,” said Michael Hausfeld of the Washington office of the law firm Cohen, Milstein, Hausfeld & Toll.

The proposed settlement would provide cash, computer software and hardware, and training to schools for five years.

Also, Microsoft would set up a national educational foundation and give it $150 million in seed money that would make grants to local foundations and community organizations to purchase computers and software for schools. The company would contribute up to $100 million more, with matching funds from other sources, to support what it hopes would be an ongoing program.

Local schools that would qualify because of the percentage of needy students they enroll could apply for the money for buying computers and software.

The company and the lawyers for the plaintiffs pointed out that the entire fund for technology could be used for non-Microsoft software and equipment. And so, the company denied that the program would simply be an underhanded way for Microsoft to dominate the school technology market.

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“I don’t view this [as being] about market share,” said Mark East, Microsoft’s worldwide general manager for education. “We wanted to resolve this thing ... this was a good way to contribute.”

A separate $160 million fund, overseen by the foundation, would be earmarked for a technical-support program for the participating schools, using community colleges and an existing training program for school-age students.

In addition, the Redmond, Wash.-based company would provide up to $90 million over five years for training school administrators, teachers, and support personnel in the use of the technology and its integration into the curriculum.

Microsoft would also establish a nonprofit computer-refurbishing program and provide it with licenses for Microsoft software. The program would furnish 200,000 Pentium-class PCs to schools per year for five years for $50 per computer. The minimum specifications for the computers would be updated annually.

Company officials said the program would directly benefit about
7 million students and 400,000 educators in the nation’s poorest schools, or those in which at least 70 percent of students qualify for free or reduced-price lunches.

The schools would be given a “wide range of educational and productivity software,” including Office XP and Office 2000, company officials said. The amount of software available to the 10,000 K-8 schools would be unlimited, but the amount available to the 4,000 high schools would have “high” limits, the officials said.

Each school would also be offered a Windows 2000 server and an Encarta-class server by Microsoft and would have one opportunity to upgrade all its computers to Windows XP at no cost.

Lawyers representing some plaintiffs reportedly do not like the deal and might oppose it. But if Judge Motz approves it, the settlement would have the effect of dismissing the more than 100 private lawsuits filed against the company, according to Tom Burt, a Microsoft lawyer.

The settlement would not have any impact on the company’s ongoing litigation with nine states that have not accepted the settlement of the federal government’s separate antitrust case against the company.

A version of this article appeared in the November 28, 2001 edition of Education Week as Microsoft Deal Calls For $1 Billion School Effort


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