THREAD ---Microsoft Corp.
Dow Jones Newswires -- June 4, 1999
DJ Judge Shows Strong Interest In Netscape/AOL Data
By Mark Boslet
(This story was originally published Thursday.)
WASHINGTON (Dow Jones)--Antitrust Judge Thomas Penfield Jackson said he was eager to take
a closer look at claims that Netscape Communications Corp. anticipated a rebound in its business
with computer makers and Internet service companies.
In an unusual statement to government lead trial attorney David Boies, Jackson said he expected
documents from late last year showing Netscape with ambitious expectations for both markets to be
more closely examined.
There is "very interesting information in there I hope you're going to revisit," Jackson said as he
scheduled a Friday court appearance for rebuttal arguments in the landmark antitrust case. Only on
rare occasions does Jackson deviate from his Monday thru Thursday court schedule.
In testimony earlier today, Microsoft attorney Michael Lacovara had introduced the documents under
seal and publicly discussed several paragraphs. In these excerpts were ambitious plans for Netscape
to have its Navigator browser shipped on or with 22% of new computers and for it to capture a 24%
share of the browsers distributed by the top 20 Internet service providers.
The documents were prepared by America Online Inc. (AOL) executives and their investment
bankers from Goldman Sachs & Co. as AOL mulled purchasing Netscape. The merger between the
two companies was consummated in March.
Lacovara argued that Netscape's ambitions in these two most important distribution channels for
browsers showed Netscape to be healthier than former Chief Executive James Barksdale let on
during testimony at the trial in October.
A vigorous Netscape could undermine antitrust claims by the Department of Justice and 19 states
that Microsoft used its Windows monopoly in a successful, anti-competitive attack on the software
maker.
Outside of court, Boies said even if Netscape regained 22% of the computer maker market, the
government could still prevail with antitrust charges alleging Netscape was illegally pushed out of that
market.
"You don't have to drive somebody to zero to dominate a market," Boies said. "You don't have to
drive someone from the market to foreclose them (and) there is no (question) Netscape is on a
downward spiral."
He also said it wasn't clear whether the percentage targets were projections or levels that Netscape
actually achieved.
Even so, "regardless of what AOL's plans are in the future, (the documents) don't go to Microsoft's
anti-competitive conduct over the past several years," Boies said. Government attorneys have shown
during the case that restrictive contracts Microsoft signed with Internet service providers and
computer makers kept these companies from promoting Netscape's Navigator from 1996 to 1998.
So the issue of a Netscape rebound will most likely become important if the court feels it is necessary
to impose a remedy against Microsoft, he said.
In court, government attorney Boies did undermine evidence Lacovara used earlier in the day to
argue Microsoft's Windows software faces potent competition from outside the computer industry.
Lacovara had displayed a chart from market researchers International Data Corp. showing shipments
of non-computer information devices will outpace shipments of computers by the year 2000.
The devices include television set-top boxes, phones with Internet keyboards and display screens,
and handheld organizers. Few of these devices are sold today.
Boies pointed out that the chart compared information devices to consumer computers and not the
entire computer market. A chart on the following page included business as well as home computers
and showed the computer market remaining significantly larger than the device market.
Personal computers "far outstrip information appliances on a unit basis and dwarf the market on a
value basis" comparing dollar sales, the study stated.
The battle of wits between Lacavara and Boies also spilled over into the Linux market. Linux is an
operating system developed by engineers who volunteer improvements and is available free for use.
During the trial, Microsoft has said the growing interest in Linux is a serious competitive threat to
Windows. In support of this claim, they've listed the numerous high-tech companies that have
announced support for the operating system, including International Business Machines Corp. (IBM),
Oracle Corp. (ORCL) and Dell Computer Corp. (DELL).
Government attorneys have responded by pointing out that Linux is used primarily on network
servers and not personal computers. They also say its marketshare is still rather small.
To reinforce his point that Linux is a threat to Windows, Lacovara introduced an internal Microsoft
e-mail sent on May 25, 1999, to Senior Vice President James Allchin. In it, underlings claim Linux is
beating Windows.
During a May review of sales data at West Coast retail chains MicroCenter and Fry's Electronics,
reports Microsoft employee Ed Chase, Linux was found to be outselling Windows.
"I object," shouted an irrate Boies, who complained the document is not appropriate evidence
because it was developed during the course of the trial by Microsoft employees. Even Judge Jackson
acknowledged its "self-serving" nature.
When given the chance to re-examine his witness, Boies returned to Linux, reading several public
statements from Microsoft executives, with some as recent as March 1999. they describe Linux as
no threat to Windows, and in one from June 1998, Gates notes that the Linux following should
remain small.
BEST WISHES
BILL |
