Microsoft and Spyglass kiss, make up and make plans

Settling their browser royalty tiff, Spyglass and Microsoft are expanding their partnership to the Web device market. Spyglass, which has just reported a US$1.5 million quarterly loss, has restructured its royalty arrangement with Microsoft, which uses Spyglass technology in its Internet Explorer browser. With a one-time payment of $8m, the bulk of it in cash, Microsoft will buy out all current and future royalties through the end of the contract in 1998.

Settling their browser royalty tiff, Spyglass. and Microsoft are expanding their partnership to the Web device market.

Spyglass, which has just reported a US$1.5 million quarterly loss, has restructured its royalty arrangement with Microsoft, which uses Spyglass technology in its Internet Explorer browser. With a one-time payment of $8m, the bulk of it in cash, Microsoft will buy out all current and future royalties through the end of the contract in 1998, officials said.

The news comes less than three weeks after Spyglass claimed that Microsoft's underpayment of royalties was partly responsible for Spyglass' anticipated first fiscal quarter loss. Microsoft disputed Spyglass' claims, saying that it was ahead of its payments.

Spyglass maintains that Microsoft did not give it any revenue in excess of the minimum quarterly payment due under its licensing agreement for Internet Explorer on the Macintosh and Windows 3.1 platforms. Under the buyout, Spyglass will receive a $7.5m cash payment and $500,000 in software and maintenance in return for the fully paid license. Spyglass no longer plans to audit Microsoft, according to a Spyglass spokesman.

"We're very pleased with the outcome because we think it's the best thing for both companies and for the shareholders," says Randy Pitzer, Spyglass spokesman. "It allows both companies to focus on their core competencies."

With the dispute behind them, the companies plan to collaborate on open standards for Web devices, including Hypertext Markup Language for televisions. They will evaluate each others' Web device technologies with an eye towards cross-licensing and distribution. Spyglass' Professional Services group will handle integration services for Microsoft's Windows CE platform, so that Spyglass products will work with Windows CE, Pitzer says.

Spyglass also plans to offer its infrastructure technologies, including its Prism server software for converting Web content to match the display of a device, on Windows NT, officials say. Spyglass' MicroServer will run on Windows CE.

Spyglass today reported the loss of $1.5m, or 12 cents per share, on revenues of $3.9m. During the same period last year, the company posted revenues of $4.8m and net income of $842,000, or 7 cents per share.

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