Computer software giant Microsoft has agreed to allow computer makers that licence its Windows 95 operating system to delete the icon for its Internet Explorer browser.

BBC Correspondent Richard Quest on where the row goes now (2'55")

The company has been accused by the US Justice Department of anti-competitive practices for its policy of bundling the two programmes together.

The surprise announcement was made by lawyers for the two sides at a hearing on the case before US District Court Judge Thomas Penfield Jackson who immediately endorsed the agreement.

Bill Gates: The force behind Microsoft

The government had been seeking a contempt ruling against Microsoft on the grounds that the company had failed to comply with the judge's decision last month that it should unbundle its browser from the Windows 95 package.

Microsoft had faced a fine of up to $1m a-day fine if Judge Jackson had held the company in contempt, as US experts said he would.

Microsoft initially responded to the ruling by offering computer makers the choice of an out-of-date version of Windows, the current version with all IE files removed which it said would not work, or the bundled version.

The Justice Department repeatedly said the only acceptable solution would be for Microsoft to offer a working, up-to-date version of Windows 95 without tying it to the Web browser.

Microsoft insisted it had complied with the order, saying it was technically impossible to remove Internet Explorer files without ruining Windows 95 as the two programmes were highly integrated.

Consumers 'to benefit'

Assistant Attorney General Joel Klein described the settlement as a big win for consumers.

"This will increase consumer choice and will also send precisely the right message to the market," he said.

The agreement showed that technology companies developing innovative computer software would not be "snuffed out by Microsoft's exercise of monopoly power," he said.

Despite the agreement, no major computer manufacturers have announced their intention to ship their computers without IE4 installed, though in earlier sworn testimony a number had said that they wished to.

The settlement does not cover the Justice Department's charge that Microsoft violated a 1995 ban on it forcing computer makers who licence Windows to use other Microsoft software too.

Mr Klein said the Justice Department was "continuing to pursue the matter."

When Windows 98 ships later this year the issue will re-emerge as the internet browser will be more tightly integrated into the new operating system.
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