Media group settles with Microsoft for €750m

AOL TIME Warner Inc, the world’s largest media company, will use $750 million from a legal settlement with Microsoft Corp to reduce debt, chief executive Richard Parsons said.

Microsoft said yesterday it had agreed to settle an antitrust lawsuit by New York-based AOL Time Warner. The lawsuit accused

Microsoft of illegally dominating the market for internet-browser software and shutting out AOL Time Warner’s Netscape Navigator programme.

The settlement was “less than I think AOL could have gotten if they could have held out longer,” said George Gilbert, who helps manage about $340 million in technology stocks, including AOL Time Warner and Microsoft shares, at Northern Trust Bank in Chicago. “Settling this for a little bit less is going to move the company in the direction of bringing the debt load down.” Parsons has said he will reduce AOL Time Warner’s debt, $26.3 billion in March, to $20 billion by the end of next year.

The company netted $1.23bn recently by selling its stake in the Comedy Central cable-television network and is seeking buyers for its book publishing unit and the CD-manufacturing arm of its music business, people close to the situation have said. “We’re going to use the settlement proceeds just to retire some debt,” Parsons said yesterday in a conference call discussing the Microsoft settlement.

After the settlement, Washington-based Microsoft and AOL Time Warner said they will develop programmes to cut down on theft of movies and music over the web and collaborate on ways to deliver instant messages between the two companies’ systems.

For “making AOL a better product, having Microsoft’s support doesn’t hurt”, said Mark Greenberg, who manages about $700m,

including AOL Time Warner shares, in the Invesco Leisure Fund.

Revenue at America Online, the world’s largest internet service, declined to $2.2bn in the first quarter, down 4.1% from a year earlier as the service lost subscribers and advertisers. America Online is also under investigation by the US Justice

Department and Securities and Exchange Commission over how it accounted for advertising sales in the past.

AOL Time Warner filed a lawsuit against Microsoft in 2002 seeking billions of dollars in damages for crushing the rival Netscape Navigator browser programme. AOL Time Warner acquired Netscape after the US government filed its antitrust suit. The court said Microsoft waged a campaign to curb distribution of Netscape Navigator to keep it from posing a threat to Windows. Microsoft will give AOL Time Warner a long-term licence to use its internet browser and audio and video software.