Microsoft appeared closer to putting its antitrust troubles behind it this week after a settlement was reached with the Justice Department. But the software maker isn't quite in the clear. Friday's settlement proposal would let computer makers swap in non-Microsoft applications on the Windows operating system, force Microsoft to reveal its server protocols, and curb backlash against companies that support competing products, among other provisions. The restrictions are relatively mild compared with earlier rulings that labeled the software giant a monopoly, sparking outcry from high-tech rivals. Although Microsoft has cleared one hurdle with the proposal, it has not yet completed the legal course. State attorneys general, who are also part of the lawsuit, have yet to sign off on the deal. The states have the option of pursuing the case even though federal trustbusters have cut a deal. District Court Judge Colleen Kollar-Kotelly, the federal judge overseeing the case, gave the states until Tuesday to respond.

Aside from the proposal, which some are calling a victory for Microsoft, not everything is going the company's way. Its roadblock that kept competing Web browsers from MSN.com may have backfired. Rivals reported record traffic and download numbers this week, and a leading Internet authority has spoken out against the software giant. Separately, early results indicate marketing and rebates are doing little to boost sales of Windows XP, which trailed Windows 98 but ran ahead of Windows Me this week. Fewer than 300,000 boxed copies of the new operating system were sold in the first days after its release, according to a poll of retailers and mail-order clients about XP. In all, pollsters said the final tally of first-week sales could be 20 percent to 25 percent lower than what Microsoft saw with Windows 98. Typically, OS sales peak in the first week and then fall off dramatically. More bad news came to Microsoft by way of Amazon.com. The online retailer, which has switched to the Linux operating system, says it saved millions of dollars in technology costs last quarter. That disclosure could give other companies a model for cutting expenses in a stagnant economy.