The CEOs for the two companies--Steve Ballmer from Microsoft and Daniel Carp of Kodak--resolved many of their major differences last week, although some issues remain, sources close to the companies said. Kodak had accused Microsoft of foul play in how Windows XP handles digital photos, taking control of any digital camera attached to a PC and steering consumers to the software maker's online photo processing providers. Some Windows XP beta testers dispute the legitimacy of Kodak's claims, however. Kodak's criticism appears to have been quelled by Microsoft changing one dialog box affecting how Windows XP handles imaging devices, such as digital cameras and scanners. Kodak agreed that its software would not automatically become the default for any digital camera attached to a PC--including competitors'--and to publicly support Windows XP. Kodak also plans to pull back some of the pressure it placed on Charles Schumer, a democratic senator from New York, to question whether Windows XP's photo features are anticompetitive. The companies are expected to announce the resolution of their differences Monday.

"We are pleased to have worked together with Kodak to resolve any perceived issues regarding how Kodak's cameras and software work with Windows XP," said Jim Cullinan, Windows XP lead product manager. "Kodak is an important partner for Microsoft, and we welcome feedback from Kodak on ways to improve the digital photo experience in Windows XP.

"We think this is a positive move by Microsoft," Kodak spokesman Anthony Sanzio said Sunday morning. "We're happy that our EasyShare cameras will work well with Windows XP. We look forward to moving ahead with Microsoft to making further improvements with the digital photography experience."