Under pressure from employees and rights activists, Microsoft has decided to accept a gay rights bill in Washington state, in whose capital Seattle the company is headquartered.

The New York Times reported that Steve Ballmer, the company's chief executive, announced the reversal in an e-mail message sent to 35,000 employees in the US.

"After looking at the question from all sides, I've concluded that diversity in the workplace is such an important issue for our business that it should be included in our legislative agenda," Ballmer was quoted as saying.

"I respect that there will be different viewpoints. But as CEO I am doing what I believe is right for our company as a whole."

Although the company has long protected its gay employees against discrimination, it created quite a stir when it decided to stay "neutral" on the state bill.

There were reports that the company buckled under pressure from an evangelical preacher who threatened to boycott the company. The company denied the suggestion.

The bill aimed at protecting against discrimination in employment, housing and other areas to gay men and lesbians, failed by one vote April 21.

However it will come up for next year because bills in the Washington legislature remain active for two years.

Following the defeat, Ballmer sent an e-mail message to company employees, defending the withdrawal of support.

However, his latest message suggested that employees' responses had helped persuade Microsoft officials to renew their backing of the measure, the paper said.