Microsoft Corp. and IBM reported today that they have entered into an agreement to resolve antitrust issues between themselves.

The settlement resolves claims arising from the U.S. vs. Microsoft antitrust case that originated in the mid-1990s, in which IBM was identified by U.S. District Judge Thomas Penfield Jackson to have been impacted in its business by certain Microsoft practices.

The agreement calls for Microsoft to pay IBM $775 million and extend $75 million in credit toward deployment of Microsoft software at IBM.

In addition to addressing all discriminatory pricing and overcharge claims based on the findings in the U.S. antitrust case, the settlement resolves all antitrust claims, including claims related to the IBM OS/2 operating system and SmartSuite products, with the exception of claims for harm to IBM’s server hardware and server software businesses, according to a statement by the companies.

Also, IBM has agreed not assert claims for server monetary damages for two years and would not seek to recover damages on such claims incurred prior to June 30, 2002. Microsoft also released antitrust claims.

Back in November 2003, Microsoft and IBM entered into agreements that extended the statute of limitations on antitrust claims based on the U.S. antitrust case while exploring resolutions that would avoid protracted litigation.

This agreement was set to expire this month, so the two said they engaged in settlement discussions during the last two months.

“With these antitrust issues behind us, both Microsoft and IBM can move ahead, at times cooperatively and at times competitively, to bring the best products and services to customers,” commented Brad Smith, general counsel and senior VP at Microsoft, in a statement.

“Over the last few years we have been focused on resolving our disputes with other companies, and today’s announcement takes another significant step towards achieving that goal,” he added.

IBM’s general counsel and senior VP Ed Lineen echoed the comments. “IBM is pleased that we have amicably resolved these long standing issues,” he concluded.

Industry analyst Amy Wohl of Wohl Associates, a consulting firm based in Narberth, Pa., said this was a good deal all the way around.

Given that the products at issue in the suit were included in IBM’s sale of its PC division to Lenovo, Wohl believes it is not likely to have an impact, because legal issues are typically accounted for in such cases, unless the legal liabilities went to Lenovo. In that case, the settlement money would have been the company''s.

Wohl noted the $75 million credit to IBM for Microsoft software is interesting, and was likely a creative way to obtain a larger settlement without it being cash.

“For IBM, this would be more valuable than cash since their OEM downloads for servers total more than $75 million,” she explained.

This settlement was also beneficial to Microsoft as Wall Street looks at outstanding legal issues as uncertainties, which are reflected in the stock price, Wohl concluded.