Microsoft, Google Settle Over Employee

SEATTLE - Microsoft Corp. said late Thursday it had reached a settlement with rival Google Inc. and former employee Kai-Fu Lee, ending a legal battle that had exposed behind-the-scenes rancor between the companies.

In a statement, Redmond-based Microsoft said the three parties had entered into a "private agreement that resolves all issues to their mutual satisfaction."

Google confirmed the settlement and released a statement from Lee saying he was "pleased with the terms of the settlement agreement."

Microsoft spokesman Jack Evans would not say when the settlement was reached. He also would not provide details of the settlement, calling it confidential. Google also declined to comment further.

Lee had worked at Microsoft since 2000 and helped develop its MSN Internet search technology, including desktop search software rivaling Google's. He left in July to lead Google's expansion into China after Google offered him a $10 million compensation package.

Microsoft sued Lee and Google in a Washington state court, contending that Lee's job at Google would violate terms of the noncompete agreement that prohibits him from doing similar work for a rival for one year. Microsoft also accused Lee of using insider information to get his job at Google, based in Mountain View, Calif.

Google responded with its own lawsuit against Microsoft in U.S. District Court in San Jose, Calif.

Because of the settlement's confidential terms, it's unclear what tasks Lee can perform until his noncompete agreement runs out.

A Washington state judge ruled in September that Lee could not work on products, services or projects he worked on at Microsoft, including computer search technology, pending the trial. But the judge said Lee could recruit and staff a Google center in China.

The case has shed light on bitterness between software titan Microsoft and search engine king Google, two high-tech powerhouses who seem increasingly to be edging into one another's turf.

Court documents released in September said that Microsoft CEO Steve Ballmer, in an obscenity-laced tirade over another former employee's having been hired away by Google, threw a chair and vowed to "kill" Google. Ballmer has called the characterization of his response a "gross exaggeration."

Also last fall, Microsoft released an internal e-mail from a Google executive that suggested the search-engine company pursue Lee, then still a Microsoft executive, "like wolves."

Microsoft had offered to settle in September, hours after the state judge ruled that Lee could do limited work for Google pending a full trial. That trial was set for next month.

'Kong' Grabs Unremarkable $50M in Debut

LOS ANGELES - "King Kong" was less of a box-office brute than Hollywood expected, taking in $50.15 million in its first weekend, a sturdy start but unremarkable by Hollywood blockbuster standards.

Universal Pictures' action spectacle about a giant ape took over the top box-office spot from Disney's "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe," which slipped to second place with $31.2 million and lifted its 10-day total to $112.5 million, according to studio estimates released Sunday.

Premiering at No. 3 with $12.7 million was 20th Century Fox's ensemble comic drama "The Family Stone," featuring Sarah Jessica Parker, Diane Keaton, Luke Wilson and Claire Danes in a tale of an uptight businesswoman meeting her fiance's relations during a holiday visit.

The cowboys-in-love drama "Brokeback Mountain," which led the Golden Globes with seven nominations, broke into the top 10 with $2.4 million playing in just 69 theaters, compared to 3,568 for "King Kong."

Hollywood analysts generally expected "King Kong" to have a debut weekend at least in the $60 million range. Though it came in lower than expected, "King Kong" led Hollywood to a solid weekend, with the top 12 movies grossing $121.2 million, up 22 percent from the same weekend last year.

That was good news heading into the holidays, when studios are counting on a strong finish to help snap a prolonged slump in which movie attendance has fallen 7 percent compared with last year.

Peter Jackson's remake of "King Kong" did out-gross the opening weekend of his "The Lord of the Rings: The Fellowship of the Ring," the first of his J.R.R. Tolkien fantasy trilogy that debuted with $47.2 million. But factoring in a 12 percent rise in admission prices since that 2001 film's release, "King Kong" sold about 7.9 million tickets, 450,000 fewer than "Fellowship of the Ring."

And "King Kong" did not measure up to the first five days of "Fellowship of the Ring," which debuted on a Wednesday and had grossed $75.1 million domestically by Sunday. Also opening Wednesday, "King Kong" got to $66.2 million in its first five days.

Still, distributor Universal was high on the long-term prospects for the film, which received rave reviews both as a visual-effects spectacle and as a drama about a majestic ape that falls for a woman ( Naomi Watts).

Along with its domestic haul, "King Kong" took in $80 million overseas in its first five days.

The studio hopes "King Kong" follows the long-term pattern of another three-hour epic, "Titanic," which opened with a modest $28.6 million weekend then sailed on to become the modern box-office champ with $600 million domestically.

"The expectation or the guessing or hypothesizing of what it was going to do is based on a lot of misunderstanding and ignorance over how a three-hour movie plays that doesn't come with legions of fans," said Marc Shmuger, vice chairman of Universal Pictures, who brushed aside suggestions that "King Kong" had not lived up to expectations. "This is not Tolkien. This is not the ` Harry Potter' fan base."

Grosses for "King Kong" jumped 40 percent from Friday to Saturday, a huge increase for a non-family film and a sign that good word-of-mouth was pulling in audiences, said Paul Dergarabedian, president of box-office tracker Exhibitor Relations.

"A movie like `King Kong' just automatically creates an expectation that it will break all kinds of box-office records," Dergarabedian said. "But much like `Titanic,' which started very slow, sometimes it's not always about opening weekends. Sometimes, it's how the film plays in the long run."

Estimated ticket sales for Friday through Sunday at U.S. and Canadian theaters, according to Exhibitor Relations Co. Inc. Final figures will be released Monday.

1. "King Kong," $50.15 million.

2. "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe," $31.2 million.

3. "The Family Stone," $12.7 million.

4. "Harry Potter and the Goblet of Fire," $5.9 million.

5. "Syriana," $5.5 million.

6. "Walk the Line," $3.6 million.

7. "Yours, Mine & Ours," $3.4 million.

8. "Brokeback Mountain," $2.4 million.

9. "Just Friends," $1.95 million.

10. "Aeon Flux," $1.7 million.


Universal Pictures and Focus Features are owned by NBC Universal, a joint venture of General Electric Co. and Vivendi Universal; DreamWorks is a unit of DreamWorks SKG Inc.; Sony Pictures, Sony Screen Gems and Sony Pictures Classics are units of Sony Corp (NYSE:SNE - news).; Paramount and Paramount Classics are divisions of Viacom Inc.; Disney's parent is The Walt Disney Co.; Miramax is a division of The Walt Disney Co.; 20th Century Fox and Fox Searchlight Pictures are owned by News Corp.; Warner Bros., New Line and Warner Independent are units of Time Warner Inc.; Lions Gate is owned by Lions Gate Entertainment Corp.; IFC Films is owned by Rainbow Media Holdings, a subsidiary of Cablevision Systems Corp.

Intel Narrows Fourth-Quarter Forecast

SAN JOSE, Calif. - Intel Corp. narrowed its fourth-quarter sales forecast Thursday but left the midpoint unchanged as the world's largest chip maker said demand has been consistent with its earlier expectations

The Santa Clara, Calif.-based company said it expects revenue of $10.4 billion to $10.6 billion in the three months ending in December, compared with the previous range of $10.2 billion to $10.8 billion. The company does not release earnings forecasts.

"Growth in emerging markets, demand for mobility and advances in manufacturing are delivering healthy growth in Intel's revenue and gross profits," said Andy Bryant, Intel's chief financial officer.

But the new range is slightly lower than Wall Street estimates. Analysts were expecting Intel to earn 43 cents per share on sales of $10.61 billion for the period, according to a survey by Thomson Financial.

Intel shares lost 77 cents, or 3 percent, to $24.93 in extended-session trading after the update was released. Earlier, they lost 45 cents to close at $25.70 on the Nasdaq Stock Market.

In October, Intel said sales could be affected by supply constraints and a buildup in client inventory.

"They are more capacity constrained — more than they're letting out," said Apjit Walia, a semiconductor analyst at RBC Capital Markets. "They're missing some of the upside — and essentially that business will fall into the next quarter."

Bryant said the inventory buildup has been working itself down. At the same time, the company has begun integrating chipsets built by third-party vendors in its motherboards to help relieve short supplies of the chips that serve as the nervous system for computers.

"We think that will continue to improve through the first part of the year," Bryant said.

Intel also continues to face stiff competition from smaller rival Advanced Micro Devices Inc., which has been selling server and PC chips that have beat Intel's offerings in some performance tests. AMD also could see its share of the market rise as a result of Intel's tight supplies.

Intel narrowed its gross margin percentage — a measurement of the difference between sales and the cost of the products sold — to 63 percent, plus or minus a point, with the final number expected to be slightly above the midpoint of the new range.

Previously, the company said it expected a gross margin percentage of 63 percent, plus or minus a couple points. In the fourth quarter of last year, the gross margin was 56 percent.

In another change, capital spending for 2005 is now expected to be below the midpoint of its previous forecast of $5.9 billion, plus or minus $200 million.

South Korea Watchdog Fines Microsoft $32M

GWACHEON, South Korea - South Korean antitrust regulators ruled Wednesday that Microsoft Corp. abused its market dominance, fined it 33 billion won ($32 million) and ordered the software giant to offer alternative versions of Windows. Microsoft said it will appeal the decision in court.

"The Korea Fair Trade Commission found such tying practices liable because they constitute abuse of market dominant position and unfair trade practices under monopoly regulations and the Fair Trade Act," Kang Chul-kyu, the commission's chairman, told reporters.

The ruling comes after the U.S. software giant reached separate settlements with companies that then withdrew the complaints that led to the investigation. The companies had complained that Microsoft violated trade rules by tying its instant messenger software to Windows.

The commission ordered Microsoft to offer two versions of Windows in
South Korea within 180 days.

One version must be stripped of the Windows Media Player and Instant Messenger software, while the other version must come with links to Web pages that allow consumers to download competing versions of such software, the commission said.

The corrective measures will remain effective for 10 years and after 5 years, Microsoft will have the opportunity each year to request a review of the remedy to account for changes in the market environment, the commission said.

"We are very disappointed with the commission's decision," said Tom Burt, a Microsoft vice president and deputy general counsel. "Ultimately, we will file a lawsuit in Korean court challenging the decision."

The European Union ordered Microsoft in March 2004 to pay 497 million euros, share code with rivals and offer a version of Windows without Media Player software. Microsoft is appealing that ruling.

Boston Scientific Makes $25B Guidant Bid

INDIANAPOLIS - Troubled Guidant Corp. drew a $25 billion offer from medical device rival Boston Scientific Corp., topping Johnson & Johnson's watered-down bid by more than $3 billion.

Guidant's once flagging stock rose $6.16, or nearly 10 percent, to close at $67.98 amid Wall Street's speculation of a bidding war.

But market analysts said that J&J, which did not return repeated phone calls for comment, may not want Guidant badly enough to spend billions more for the Indianapolis-based maker of pacemakers, defibrillators and other devices which has been plagued by a series of recalls and by related regulatory investigations.

Marc Monseau, a spokesman for Johnson & Johnson, said the company would not comment on the Guidant deal at this time.

It was just three weeks ago that Guidant accepted a revised $21.5 billion proposal from J&J and stopped suing the health care products company to close on a year-old acquisition offer of $25.4 billion.

Boston Scientific, whose products include the top-selling cardiac stent Taxus, offered Guidant a combination of cash and stock worth about $72 per Guidant share — a 16 percent premium over Friday's close. The prospect of entering the lucrative $10 billion international market for implantable pacemakers and defibrillators outweighed Guidant's recent legal and regulatory woes.

"The primary driver of our proposal is to increase Boston Scientific's diversification and grow our cardiac-rhythm management business," Boston Scientific's chief operating officer, Paul LaViolette, said in a telephone interview.

Guidant's original deal with J&J bogged down amid a series of recalls and warnings affecting nearly 200,000 pacemakers and about 88,000 defibrillators since June. Dozens of shareholder and product liability lawsuits have ensued, costing Guidant more than a quarter of its value. Its stock plummeted to a low of $55.26 last month.

"We understand there have been some recent issues, but we believe they are manageable," LaViolette said. "We are experienced with these issues."

Guidant's strengths outweigh its problems for Boston Scientific, which has seen its profits dwindle recently, Jefferies & Co. analyst Ryan Rauch said.

"Guidant would shore up Boston Scientific's 2008 pipeline, if they're willing to take significant dilution to their shares in the short-term," Rauch said.

Rauch said he did not expect Guidant's shareholders would embrace J&J's offer over Boston Scientific's, given the premium and the frayed relations between Guidant and J&J. Rauch said J&J was not likely to sweeten its offer.

"There's no love lost between Guidant and J&J," Rauch said. "I believe J&J will not come back into the dance at a higher price."

The Boston Scientific offer consists of $36 in cash and $36 worth of its shares for each share of Guidant stock. J&J is offering $33.25 in cash and 0.493 share of Johnson & Johnson common stock for each Guidant share.

The deal, if it goes through, would dilute Boston Scientific's cash earnings per share through 2007, the company said. Moody's Investors Service said it was reviewing Boston Scientific for possible downgrade, and Fitch Ratings placed Boston Scientific on a ratings watch while downgrading Guidant.

Observers said Guidant's problems have been overblown.

"I think once it all blows over, Guidant will continue to be the leader in the fields of pacemakers and defibrillators," said Dr. Jacob Shani, chairman of the Cardiac Institute at Maimonides Medical Center in New York.

Boston Scientific has faced its own problems, including a voluntary recall announced after the close of markets Friday of 18,000 vena cava filters, devices that are implanted in a vein that carries blood to the heart from the lower body. A $600 million legal settlement led to a third-quarter loss of $269 million, and it also has had to contend with a federal inspection that found manufacturing problems.

Guidant issued a terse statement saying its board would consider the Boston Scientific offer and that the company had no further comment.

Richard Langan, a merger expert and a partner with the law firm Nixon Peabody in New York, said that under the original agreement with J&J, once Guidant's board determines it has received a better offer, J&J has five business days to match it. The companies have not yet filed an amended agreement with regulators.

A potential pitfall for Guidant would be the cost of any breakup penalty in its deal with J&J. The original deal set the cost at $750 million.

Boston Scientific's Taxus holds 55 percent of the market for drug-eluting coronary stents after recently giving up some ground to the Cypher stent made by Cordis Corp., a J&J unit. The metal-mesh devices keep coronary arteries propped open after surgery to clear blockages.

LaViolette said Boston Scientific was prepared to sell Guidant's stent business to satisfy any antitrust concerns, but wanted to retain some shared rights in Guidant's drug-eluting stent program, which has not yet brought a product to market.

"We are prepared to divest them. We think that will address any competition concerns," LaViolette said.

John Putnam, an analyst with Stanford Group Co., said Boston Scientific was a better fit for Guidant, which likely would hold less prominence among the much more sprawling J&J.

"With Boston Scientific, it's more of a merger of equals," Putnam said.

The rancorous negotiations that led to its lower price for Guidant last month also are working against J&J, he said.

"It's going to get tough for them to save face and raise their offer."

Rauch said that if Guidant accepts Boston Scientific's offer over J&J's, that could put pressure on J&J to make an offer to buy another medical devices maker, St. Paul, Minn.-based St. Jude Medical Inc., to compete against a Boston Scientific-Guidant combination.

Boston Scientific stock lost 98 cents, or 3.6 percent, to end at $26.35 on the
New York Stock Exchange. J&J shares fell 16 cents, to close at $61.05. St. Jude Medical shares gained $2.29, or 4.7 percent, to close at $50.56 on the NYSE.

'Harry Potter' Conjures $20M Over Weekend

LOS ANGELES - The third weekend was still a charm for " Harry Potter and the Goblet of Fire," which remained the top movie with $20.45 million.

Charlize Theron's sci-fi tale "Aeon Flux," a movie apparently so bad distributor Paramount did not screen it beforehand for critics, still managed to debut in second place with $13.1 million, according to studio estimates Sunday.

With "Aeon Flux" the only notable new wide release, the remainder of the top 10 was filled out with holdover flicks, led by 20th Century Fox's Johnny Cash chronicle "Walk the Line," the No. 3 movie with $10 million.

It was a quiet weekend at theaters compared to the busy Thanksgiving period. The top 12 movies took in $79 million, virtually the same as the corresponding weekend a year ago.

Hollywood is in the midst of a prolonged slump, with attendance down 8 percent compared to 2004, though studios are preparing for a brisk December with such films as "King Kong," "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe," "The Producers" and
Steven Spielberg's "Munich."

Warner Bros. lifted its domestic total for "Harry Potter" to $229.8 million. Worldwide, the latest adventure of boy wizard Harry has taken in $560 million.

"`Harry Potter' is clearly dominating the business," said Paul Dergarabedian, president of box-office tracker Exhibitor Relations. "It's the movie that everybody hoped it would be. The box-office performance is living up to, and maybe at this point, exceeding expectations."

"Aeon Flux" stars Theron in an action adventure based on the 1990s animated series about a rogue anti-hero battling a government leader in a post-apocalyptic world. The movie cost $60 million to make, and it was uncertain if box office combined with DVD and television rentals will recoup that investment.

Still, the movie's opening weekend came in at the high end of Paramount's expectations, said Wayne Lewellen, the studio's head of distribution. The fact that Paramount did not screen "Aeon Flux" for reviewers probably did not affect the outcome, he said.

"The audience was young males, and they don't really respond to reviews, anyway," Lewellen said.

In limited release, the road-trip tale "Transamerica" opened strongly with $45,269 in two theaters, averaging $22,635 a cinema. By comparison, "Aeon Flux" averaged $5,023 in 2,608 theaters.

"Transamerica" has drawn
Academy Awards buzz for
Felicity Huffman, who gives a remarkable performance as a man preparing for the final surgical procedures to become a woman.

The Weinstein Co. plans to expand "Transamerica" to the top 20 markets during Christmas week then continue rolling the movie out to more theaters as Oscar nominations approach in January.

Also in narrower release, the snowboarding documentary "First Descent" debuted weakly with just $423,000 in 243 theaters for a $1,741 average.

Estimated ticket sales for Friday through Sunday at U.S. and Canadian theaters, according to Exhibitor Relations Co. Inc. Final figures will be released Monday.

1. "Harry Potter and the Goblet of Fire," $20.45 million.

2. "Aeon Flux," $13.1 million.

3. "Walk the Line," $10 million.

4. "Yours, Mine & Ours," $8.4 million.

5. "Just Friends," $5.9 million.

6. "Pride & Prejudice," $4.62 million.

7. "Rent," $4.6 million.

8. "Chicken Little," $4.5 million.

9. "Derailed," $2.4 million.

10. "In the Mix," $1.9 million.