The two companies resolve their suit regarding a product called DR-DOS, causing Microsoft to take a one-time charge against earnings.
In a statement, both firms announced they had reached a "mutually agreeable settlement" of the suit filed by Caldera against Microsoft in July 1996.
As part of the announcement, Microsoft said it will record a one-time charge against earnings for the quarter ending March 31, which will cut earnings per share by about three cents. This could mean that the settlement could cost somewhere in the neighborhood of $150 million, based on one analyst's estimate, although the actual settlement could be higher. Caldera had been expected to ask for at least $400 million, according to another observer.
The surprise settlement, which appears to be lower than Caldera's earlier demands, defused a number of potential antitrust time bombs for the software giant. Although many legal analysts thought Microsoft had strong arguments in its favor, a ruling against it could have given fuel to recently filed class-action suits. Unlike the case filed by the Justice Department, Microsoft would have had to appear in front of a jury.
"We certainly prefer to negotiate a settlement rather than go through a costly litigation process," Microsoft spokesman Jim Cullinan said. "It means we can put this settlement behind us, and we believe this is good for us and good for the industry. We are pleased to put this chapter behind us."
Bryan Sparks, CEO of Caldera, added in a statement: "We are pleased with the result of this lawsuit. We now look forward to vigorous competition in the marketplace with our Linux products and strategies both from Caldera Systems Inc. and Lineo Inc."
Both firms said terms of the agreement are confidential. Caldera was seeking $1.6 billion in damages.
Orem, Utah-based Caldera claimed Microsoft used its dominance in PC operating systems in the early 1990s to crush competition from a product called DR-DOS, which Caldera obtained from Novell in 1996.
The case had been scheduled for a jury trial starting on Feb. 1. Several top executives had been slated to take the stand, including Steve Ballmer, Joachim Kempin, Paul Maritz, Brad Chase and former executive Brad Silverberg.