Microsoft says it overpaid Spyglass

Microsoft is disputing claims made by Spyglass Inc. that it owes Spyglass for licensing technology it uses in its Internet Explorer browser and says it is actually ahead on royalty payments

Microsoft is disputing claims made by Spyglass Inc. that it owes Spyglass for licensing technology it uses in its Internet Explorer browser and says it is actually ahead on royalty payments.

"We prepaid nearly US$3 million in royalties, so we are actually far ahead on our royalty payments" to Spyglass, Microsoft spokesman Mark Murray says.

Spyglass announced yesterday that it expects to lose 10 cents to 13 cents per share in its first quarter, which ended Dec 31, partly as a result of not receiving adequate payments from Microsoft. Spyglass said it would not report any revenue during the quarter from Microsoft beyond a minimum quarterly payment called for under contract. Spyglass, which will announce earnings of approximately $4 million on Jan 22, says it plans to audit Microsoft's records because Microsoft has not divulged the number of copies of Internet Explorer it has distributed.

"We're not saying much more than that. We're still talking to them," Spyglass spokesman Randy Pitzer says . "The way the contract reads is there is a fixed fee and royalty payments for the platforms."

But Murray, also declining to discuss specifics of the agreement, says the part of the contract in question was strictly royalty-based and did not cover copies of Internet Explorer for Windows 95 or Windows NT 4.0, only for some copies for the Macintosh platform and earlier Windows 3.x software. "(The amended) contract only applies to a very small segment of overall Internet Explorer shipments," he said.

Meanwhile, Murray says Spyglass has the contractual right to audit Microsoft at any time and that Microsoft will comply with that action.

The dispute comes at a time when Spyglass is transitioning to new Internet device products and plans to embed a more compact version of its browser code in a variety of networked devices.

Spyglass stock, which lost $1.25 after its announcement yesterday, gained $1.12 today, closing at $12.37.

Spyglass, based in Naperville, Illinois, can be reached on the World Wide Web at http://www.spyglass.com/.

Microsoft, in Redmond, Washington, is at http://www.microsoft.com/.

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