The justice department and 20 states agreed to delay the lawsuit -- which had been set for filing on Thursday -- and in return Microsoft agreed to delay the shipment of its Windows 98 operating system until Monday.

Microsoft had planned to ship Windows to computer makers on Friday for release on June 25.A department spokeswoman saidthose in the talks included Neukom, assistant US attorney general Joel Klein, who heads the department's antitrust division; Iowa attorney general Thomas Miller and Connecticut attorney general Richard Blumenthal.The states and justice department have readied a major antitrust lawsuit accusing Microsoft of abusing its power and driving competitors from the lucrative consumer market.

But for now the two sides are talking.``It's a tough situation,'' said partner George Cary at Cleary, Gottlieb, Steen & Hamilton in Washington, who until recently, was a senior official and litigator at the Federal Trade Commission.Cary, the litigator in the government's successful court battle to halt the merger of Staples Inc and Office Depot Inc last year, said the justice department had a ``substantive case that is worth litigating.''On the other hand, Klein has ``a Court of Appeals that is sending him signals he could very well not win the case,'' Cary said.

The US Court of Appeals for the district of Columbia decidedanother Microsoft case earlier this week against the justice department and said it had concerns about putting ``judges and juries in the unwelcome position of designing computers.''Given all that, Cary said, the justice department will have to seriously consider whether to accept some relief even if that is not ideal from its perspective.``Or do you roll the dice even though your chances of victory are not 100 per cent? '' he asked. ``That's always a tough call.''In 1995, Klein's predecessor, Anne Bingaman, negotiated a deal with Microsoft that ended the practices by the Redmond, Washington, software giant that would have been most likely to fall if challenged in court, Cary said.

Some later criticised Bingaman for getting so little.On the other hand, many have criticised the justice department for huge cases like the International Business Machines Corp challenge that lasted from 1969 to 1982. It has been called the department's Vietnam, in that it went on for years until the US government pulled outwithout victory.``Bring the massive case and everyone says you're in Vietnam,'' he said. ``Take the narrow case, and everyone says you didn't do enough.''But in many ways, Carey said, it would be helpful if the Microsoft case went to court.(Reuters)``It would be helpful to innovators, investors and distributors to know what the rules of the game are,'' he said.