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Has Microsoft gone soft?

What's up with the company's about-face in recent months? CNET News.com's Charles Cooper calls it a case of pragmatism winning out.

When you're the industry's 800-pound gorilla, what's a few billion dollars to pay for problems to disappear?

So it is that erstwhile rivals like Sun Microsystems, America Online or InterTrust Technologies have walked away with small fortunes, courtesy of Microsoft over the last year. How much longer before Steve Ballmer invites Rob Glaser to drop RealNetworks' $1 billion lawsuit in return for a sizable check with fewer zeroes?

As CEO, Ballmer no doubt has far better ideas about how to invest the company's funds.

Microsoft is not suddenly turning kinder or gentler.
But shareholders need not wonder whether their favorite equity holding is turning into a pliant pinata. With nearly $60 billion in cash, Microsoft can afford to settle all its various legal troubles and not miss a beat.

What gives? Simply this: Microsoft is not suddenly turning kinder or gentler. Rather, it's become increasingly pragmatic. To wit:

In the InterTrust Technologies case, Microsoft was accused in 2001 of infringing upon a patent-protected anticopying technology that got built into the company's products. Microsoft reached a $440 million legal settlement and licensing deal with InterTrust this April.

Did Microsoft make the smart calculation? The company could have further dragged things out and buried InterTrust's lawyers in mountains of paperwork. But the deal cleared the decks to pursue its ambitions in digital rights management. From Microsoft's perspective, it was a relatively small up-front investment in anticipation of a huge payday, when Windows pushed into music and movie distribution over the Internet.

The settlement also came less than two weeks after the company agreed to pay Sun $1.6 billion to drop an antitrust suit against Microsoft and clear up patent disputes between the two companies. After all the verbal pyrotechnics attending the dispute between the two companies, this was the equivalent of the lion lying down with the lamb. But it made all the sense in the world for Microsoft to pay Sun to go away and Scott McNealy to shut his trap.

I'll let the Freudians in the audience analyze Ballmer's thinking, but the government antitrust saga obviously had a clarifying effect on his thought processes.

Rather than consign its managers to more years of distracting litigation, Microsoft grabbed the chance to settle, move on and make nice for the cameras.
I'll bet the folks in Redmond would do anything to avoid again placing their fate in the hands of a hanging judge like Thomas Penfield Jackson. One near-death experience is more than sufficient for a lifetime.

Microsoft still believes that it was right; it's a spots-on-the-leopard sort of thing. But rather than consign its managers to more years of distracting litigation, Microsoft grabbed the chance to settle, move on and make nice for the cameras. Janet Reno? Oh, she's just a swell ol' gal.

The same sort of thinking went into Microsoft's more recent decision to settle with Minnesota an antitrust suit that claimed that Microsoft had overcharged the state for Windows and Office software.

Maybe this is a sign of maturity. During the PC industry's earlier days, companies were so confident that they were right about everything that many seemingly avoidable disagreements wound up in court. Now, nearly three decades removed from the Homebrew Computer Club, it's no surprise that the arrival of middle age means that companies like Microsoft are more than ever willing to split the difference.

Viewed another way, call it enlightened self-interest.