SAN FRANCISCO — SAN FRANCISCO -- The Microsoft Corp. said yesterday that it was abandoning its planned $2 billion acquisition of Intuit Inc., which would have been the largest deal ever in the software industry, because of the Justice Department's legal challenge and the possibility of protracted litigation.
Scuttling the deal with Intuit, whose Quicken software is by far the most popular personal-finance computer program, will significantly slow Microsoft's entry into the world of electronic commerce and could alter the choices that consumers have among computerized financial and banking services.
On April 28, the Justice Department filed suit to block the deal, saying it would lead to higher prices for consumers and less innovation in personal finance software.
At the time, Bill Gates, Microsoft's chairman and chief executive, said: "Our enthusiasm for bringing Intuit and Microsoft together is very, very strong, exactly as it was when we first announced the plan to come together."
But Microsoft said yesterday that it was backing off rather than facing months of wrangling in court. On Friday, the Justice Department accused lawyers for Microsoft and Intuit of acting in bad faith and asked a federal judge to push back the opening of a trial scheduled to begin on June 26 in San Francisco.
"We're disappointed not to be able to combine Intuit and Microsoft on a timely basis," Mr. Gates said in a conference call with journalists yesterday afternoon. "This is a fast-paced industry experiencing lots of change. Progress toward realizing our goals could not wait until the government's lawsuit was resolved."
Anne K. Bingaman, the assistant attorney general in charge of the Justice Department's Antitrust Division, said in a statement: "We are gratified that Microsoft and Intuit have abandoned their plans to merge. This is truly a victory for American consumers."
Ms. Bingaman said the department had been prepared to move quickly to resolve the case, but "the companies' decision to abandon the transaction gives us 100 percent of the results we sought."
When Microsoft announced in October that it would swap some of its stock for Intuit, the deal was valued at $1.5 billion, but increases in the value of Microsoft shares pushed the deal above the $2 billion mark.
Scott D. Cook, chairman of Intuit, said that the decision to drop the deal was Microsoft's and that he was disappointed. Microsoft will pay Intuit a termination fee of $46.25 million.
Intuit has continued to develop new products and to form new alliances with financial institutions, he said, and was confident of its future as an independent company.
"We're certainly experiencing no difficulty in getting banks to work with us," he said. "The partnerships we've entered have all been with us, not with Microsoft."
Indeed, industry analysts said Intuit would be in a stronger position to enter alliances with financial institutions, other software companies and on-line services than it would have been as a part of Microsoft.
Microsoft, the largest software company in the world, dominates much of personal computing through its MS-DOS and Windows programs, which set the standard for personal-computer operating software that people use to run their computers. It has aggressively extended that hold by introducing programs for word processing, spreadsheets for mathematical calculations, and entertainment and educational software.
But other software companies have complained that Microsoft's dominance of operating software has given it an unfair advantage in developing software for other uses and in persuading computer makers to package Microsoft programs with their hardware.
When Microsoft announced plans to provide its own on-line service starting in August, and to acquire Intuit, the fears and criticism grew.
The leading on-line services, such as America Online and CompuServe, have expressed fears that Microsoft's plans could put them out of business.