Microsoft, the world's largest software company, is understood to have offered a significant concession in its landmark legal battle with the US government by opening up its Windows computer code.
The move would allow rivals to develop products that can be used with Microsoft Windows, the software used on more than 90% of the world's personal computers, and managers hope it would be enough to head off legal attempts to break the company apart.
The Seattle-based company would also "unbundle" its internet browser from Windows. This concession goes to the heart of the government's case, as it was Microsoft's insistence that its browser be sold together with Windows that provoked the authorities into launching the anti-monopoly action more than three years ago.
Despite the moves, there were signs yesterday that an agreement between the two sides could be some way off. Sources close to the talks believe several of the 19 American states that brought the case alongside the US justice department remain to be convinced of an agreement that falls short of a break-up. Their unease about Microsoft's offer stems from the fact that a behavioural remedy - one forcing Microsoft to open up Windows, for example - is difficult to police.
There is also little trust between the two sides, largely because of the failure of a previous agreement designed to stop allegedly anti-competitive behaviour in the mid-1990s. Professor Bill Kovacic of George Washington University law school said that leaks to US papers about Microsoft's position underlined the difficult relationship. "To be successful, negotiations of this type must be secret," he said. "The fact that there has been so much disclosure by insiders of what's going on is a bad sign."
The company founded by Bill Gates has jealously guarded its source code in the past, maintaining that its frequent updates are good for the consumer and not an abuse of a monopoly position. Significantly, Microsoft's position paper, faxed to the government on Friday night, agreed that a settlement should apply to all current and future versions of Windows, according to a report in the Wall Street Journal.
This would limit the company's ability to insist on bundling any new products with Windows and would therefore remove a key part of the government's argument. The company is also expected to agree to stop using its Windows licences as a way of punishing or rewarding computer manufacturers as part of any agreement. Legal experts believe Microsoft would have to agree to some kind of third-party audit of its behaviour as well as a set of penalties if it transgresses the settlement.
Mr Gates, who gave up the day-to-day running of Microsoft earlier this year, has opposed opening up the company's source code in the past.
