NEW YORK -- Microsoft Corp. made a settlement offer yesterday to resolve the landmark antitrust case against the world's largest software company that government officials promptly called inadequate.

The proposal to the U.S. Justice Department and Iowa Attorney General Tom Miller was "a minimalist opening offer that is far from what anyone in our group would expect to be adequate," said California Attorney General Bill Lockyer. "It was a very small offer."

Miller is expected to describe the offer today in Washington to the other 18 states that are suing Microsoft. The National Association of Attorneys General is holding its annual spring meeting in the nation's capital. Miller held a conference call to read the settlement proposal to the other states.

Earlier yesterday, Microsoft Chairman Bill Gates said the company is willing to settle the suits as long as it remains free to keep integrating new features into its Windows computer operating system.

"We'd love to have this thing settled," Gates said on NBC's "Today" show. "But the key principles haven't changed, and that's because what Microsoft is all about is building great software and that freedom to innovate is important to us and every other company."

Justice Department officials declined to comment on whether they have received a settlement offer.

On Monday, the department's antitrust chief, Joel Klein, said he had not received a settlement proposal from Microsoft yet. Microsoft spokesman Jim Cullinan declined to comment on any offer, saying "for this process to succeed, it needs to remain confidential."

The five-month trial is on recess for at least another month, giving lawyers for Microsoft and the government time to negotiate. Still, Gates gave no sign yesterday of a change in Microsoft's position that it will insist on freedom to integrate new technology into Windows.

At an investor conference yesterday sponsored by Schroder & Co. and Variety, Gates -- elaborating on his televised remarks -- said he was confident that his company will keep the right to innovate.

It is "not only legal but encouraged in the American system," Gates said.

Officials at the Justice Department and states suing Microsoft have expressed interest in negotiating an end to the case.

U.S. District Judge Thomas Penfield Jackson, who is overseeing the trial, suggested last month that both sides use the break productively, hinting he would welcome settlement talks.

Any agreement would have to "fully protect consumers and assure that similar antitrust violations don't occur in the future," Klein, the Justice Department's antitrust chief, said in his remarks Monday.

Pub Date: 3/25/99