Microsoft said yesterday that it had agreed to settle private claims that it overcharged millions of people for its software by donating more than one billion dollars to the poorest US schools.

Under the deal, Microsoft commits itself to a five-year programme, providing cash, computer hardware, software, technical assistance and training to more than 12,500 schools. "It avoids long and costly litigation for the company and at the same time I think will really make a difference in the lives of millions of school children," Microsoft chief executive Mr Steve Ballmer said.

But the agreement has yet to be approved by District Judge Frederick Motz in Baltimore, Maryland, who is overseeing the class-action suits and is expected to review the deal at a hearing on November 27th.

Competitors fumed that the deal was inadequate. "This is a reward, not a remedy," said Software and Information Industry Association president Mr Ken Walsch.