Microsoft has agreed to pay IBM $775 million and give it another $75 million in credit under an anti-trust settlement announced today.

The settlement resolves all discriminatory pricing and overcharging claims stemming from the US government's mid-1990s anti-trust case against Microsoft where Judge Jackson found that IBM has been hurt by Microsoft's abusive business practices. The settlement also resolves most other IBM anti-trust claims, including those related to its OS/2 operating system and SmartSuite products. IBM's claims of harm to its server hardware and server software businesses are not covered by the settlement, however.

Both companies said they were pleased by the settlement. They can now "move ahead, at times co-operatively and at times competitively," said Brad Smith, Microsoft's general counsel.

Microsoft will extend $75 million in credit toward Microsoft software at IBM. IBM will not make claims for server monetary damages for two years and will not try to recover damages on server claims made before 30 June2002.

Settlement with the US government in its anti-trust case against Microsoft was approved in 2002. Microsoft currently appealing last year's anti-trust ruling by the EU against it.