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Under the settlement, computer manufacturers will have more flexibility to bundle non-Windows software on new machines, and Microsoft will have to disclose more critical technical information to its competitors. An independent panel of monitors will oversee Microsoft's conduct.
The settlement would be enforced for five years, but could be extended by two years if Microsoft violates its terms and conditions, according to reports.
"Microsoft is as guilty as sin of bad business practices and squeezing other technologies out. But this gives them a free five-year ride," said an IT executive at one of the top 10 companies in the US.
However, the DoJ said the restrictions "will stop Microsoft's unlawful conduct, prevent recurrence of similar conduct in the future, and restore competition in the software market, achieving prompt, effective and certain relief for consumers and businesses".
The settlement was reached in the face of industry opposition and without the agreement of the 18 US states that are also suing Microsoft.
Sun Microsystems said it was particularly concerned about how much technical information Microsoft would be required to share, particularly around its .Net initiative.
"It's very hard for me to integrate SunOne [with .Net]. It's very hard for IBM with WebSphere, hard for BEA with WebLogic and hard for Oracle with 8i to interoperate seamlessly with .Net because it's also closed. Proprietary, none of the interfaces are published and none of the APIs [application program interfaces] are available. That's really the crux of what should be done here," said Ed Zander, Sun's president and chief operating officer.
"The entire software food chain, if we're not careful, from cell phones to back-end systems, and then on top of that your identification authentication, are all going to go the way of Microsoft, because there's no way for us to compete in a very closed world that's controlled by one company," he added.
Some users said they had little faith that the three-person review committee charged with ensuring Microsoft complies with the ruling could be any match for the company.
Microsoft rivals in the Linux world said the proposed settlement would do little to improve their chances of loosening the company's grip on the desktop operating systems and application markets. Even being made to make its code more available to the industry could work in Microsoft's favour, they argued.
"They [Microsoft] say they will publish code. Well, source code in and of itself does nothing. Doing so will probably be to Microsoft's advantage, not disadvantage, because it will allow people to better integrate their stuff. That isn't exactly a penalty," said Ransom Love, president and chief executive of Caldera International.
"It's like saying Al Capone contributed greatly to Chicago's economic well-being, so we'd better not arrest him because the economy would be in dire straits, we'd better let him go back to doing his thing. And we'll send someone along to watch him," Love added.
The position of the 18 states that have not settled could prove critical, however. Early indications are that most believe there are not enough teeth in the terms and conditions to significantly alter most of Microsoft's offending business practices and policies.
In late October, several states hired top trial attorney Brendan Sullivan to represent them in the Microsoft case, signalling to some observers that they plan to object to the settlement.
Hillard Sterling, a partner at Chicago-based technology law firm Gordon & Glickson, said the states have the right to object to the proposed settlement, adding that there would be a separate set of hearings before a judge.
However, "there is tremendous pressure on these states to fall in line. The Justice Department is trying to sell the states on the settlement proposal," Sterling said.
But Microsoft's history suggests that the settlement itself could turn into a new set of legal battles, he warned.
"It's likely this settlement will face challenges as technology and markets shift into new areas. Windows XP is a good source for testing the parties' agreement. The government will be very focused on ensuring Microsoft's commitment applies to XP," Sterling said.
Despite future potential challenges to Microsoft's product strategy, the settlement would indicate a clear victory for Microsoft, he added.
"It's business as usual for Microsoft. This case has not affected Microsoft's strategy in creating new products and releases."