Microsoft wins temporary ceasefire to pursue face-to-face talks.

Microsoft has won a temporary reprieve from a US government anti-trust lawsuit by agreeing to delay the release of Windows 98 for a few days.

The temporary "ceasefire" will allow the US Justice Department, a number of US states, and Microsoft to pursue a negotiated settlement in a new round of face-to-face talks starting today. fri

The disclosure came an hour before federal and state regulators were to announce one of the largest ever US anti-trust cases, accusing Microsoft of abusing its power and driving competitors from the lucrative software market.

The Windows 98 update to the successful Windows 95 system had been scheduled to be shipped today to give computer makers time to load it on to new computers for the planned worldwide launch next month.

The company said: "Microsoft confirms it has completed all work to develop Windows 98 but has agreed with the Department of Justice and state attorneys general not to release to computer manufacturers until Monday."

The company still planned to release Windows 98 on June 25, it added.

Microsoft said the negotiations began a week ago following a meeting between its chairman, Mr Bill Gates, and Government officials.

In a short statement, the Justice Department confirmed it would temporarily delay filing a major new anti-trust action against the company.

"The Department of Justice, a coalition of state attorneys general, and Microsoft are engaged in discussions.

"They have reached an agreement under which, while the discussions continue over the next several days, Microsoft will not ship Windows 98, and the Department of Justice and states will not file lawsuits," the statement said.

The Justice Department has been joined by at least 20 states in its battle with Microsoft.

Some leading computer manufacturers had asked the US government not to delay Windows 98, agreeing with Microsoft that interfering with the launch would hurt their business and the US economy.

Mr Gates said "an entire ecosystem" of computer hardware, software and retail companies depended on the timely release of Windows 98.

In 1995, Microsoft avoided a major anti-trust lawsuit by agreeing not to require computer makers buying its operating systems to buy other Microsoft products.

Last year the government went to court complaining Microsoft had violated that agreement by abusing its dominant position to dissuade computer makers from installing a rival Internet browser.