Microsoft Corp. will pay $775 million in cash and $75 million in credit for software to International Business Machines Corp. to settle claims that resulted from the federal government's antitrust case against Microsoft in the 1990s, the companies announced Friday.

The payout is one of the largest that Microsoft has made since U.S. District Judge Thomas Penfield Jackson ruled in 2000 that Microsoft engaged in anticompetitive practices. Jackson's ruling cited IBM as a company that Microsoft had forced to "desist from certain technological innovations and business initiatives."

For example, Microsoft did not charge all computer makers the same amount for its Windows operating system, allegedly using higher prices as a cudgel against PC companies that did not comply with Microsoft's wishes.

IBM irked Microsoft in the '90s by pushing its own OS/2 operating system as a Windows alternative and putting its SmartSuite productivity software on IBM PCs, cutting into the market for Microsoft Office programs. IBM also was an early supporter of Java, a programming language that does not need Windows to run.

IBM had not sued Microsoft, but still pressed for retribution for the behavior cited by Jackson. Microsoft reached a similar deal with Gateway Inc. for $150 million in April.

Separately, Microsoft has spent more than $3 billion in recent years settling lawsuits by rivals, including a $1.6 billion deal with Sun Microsystems Inc. in 2004 and a $750 million truce with America Online Inc., part of Time Warner Inc., in 2003.

Redmond, Wash.-based Microsoft still faces other legal challenges, including a lawsuit by RealNetworks Inc. and an appeal of a $600 million antitrust ruling against it by European regulators.

A man stands near a Microsoft billboard in Berlin. The company settled an antitrust suit with IBM Friday.