Microsoft general counsel William Neukom said that the deal showed that a dynamic market had made the case against Microsoft irrelevant and that the government was "five steps behind the industry."

"The government ought to drop this case," Neukom told reporters on the steps of the courthouse.

But Neukom and Microsoft's lead litigator, John Warden, said that they cannot yet ask district judge Thomas Penfield Jackson to halt the trial and dismiss the case. But, when the government witnesses have finished testifying -- the trial is hearing from the seventh of 12 slated to appear -- Microsoft will ask the judge to dismiss the case.

Microsoft Corp. has been on trial for six weeks on charges brought by the federal government and 20 states that it used its monopoly in computer operating systemsto compete unfairly in the market for software used to browse the Internet.

America Online Inc. announced earlier that it would buy Netscape Communications Corp., Microsoft's rival in the Internet browser market, in a deal worth $4.2 billion.

Under a related three-year deal, Sun Microsystems Inc. -- whose Java Internet programming language is now seen as the greatest threat to Microsoft's software dominance -- will develop and market electronic commerce software that makes it easy to set up shop in cyberspace.

In court, Microsoft lawyer Michael Lacovara asked a government economic expert, Frederick Warren-Boulton, to reanalyse the case in light of the AOL announcement.

In questioning Warren-Boulton, Lacovara said, incorrectly as it turned out, that Sun "will make substantial payments to acquire the (Netscape) browser," prompting the judge to question Lacovara's presentation of the facts.

"Is that question premised on known facts? That Sun will acquire the browser?" Jackson asked.

An AOL officialsaid in an interview later that AOL and not Sun will control the Netscape browser.

"Sun has not acquired the browser," George Vradenburg, AOL senior vice president of global and strategic policy, said in an interview. "Indeed, AOL is going to acquire the Netscape Corp. and acquire the browser."

He said that development of the browser would take place at Netscape where he said there was "a very talented" set of people. He said that Sun's role will be to help develop electronic commerce.

At day's end, Lacovara said he still needed one more day of cross-examination of Warren-Boulton.

"I am going to hold you" to finishing on Monday, said Jackson, when the trial resumes for a seventh week after a recess for Thursday's Thanksgiving holiday.