Microsoft Corp. (MSFT) settled antitrust claims made in the mid-1990s by International Business Machines Corp. (IBM), agreeing to pay IBM $775 million, the companies said on Friday.

In the lawsuit, IBM charged that certain Microsoft practices hurt its OS/2 (search) operating system and SmartSuite products, along with its server and hardware business.

The settlement resolves the discriminatory pricing and overcharge claims, and includes Microsoft extending $75 million in credit toward deployment of Microsoft software at IBM.

Under the settlement, IBM agreed not to assert claims for server monetary damages for two years and not to seek damages on such claims incurred before June 30, 2002. The companies said in a joint news release that the settlement resolves all antitrust claims.

Microsoft and Armonk, N.Y.-based IBM entered into an agreement in 2003 to extend the statute of limitations on antitrust claims while exploring a resolution that would avoid protracted litigation. That agreement was set to expire in July.

The companies said they reached the current settlement after two months of talks.

Shares of Redmond, Wash.-based Microsoft rose 6 cents to $24.90 on the Nasdaq, while IBM shares rose 35 cents to $74.55 on the New York Stock Exchange (search).

Reuters and the Associated Press contributed to this report.