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Technology Stocks : RealNetworks (NASDAQ:RNWK) -- Ignore unavailable to you. Want to Upgrade?

To: neverenough who wrote (984)	7/27/1998 8:39:00 AM
From: Brad Rogers	Respond to of 5843

from the Seattle Times: MIcrosoft: Dispute a misunderstanding by James V. Grimaldi Seattle Times Washington bureau A dispute between Microsoft and a Seattle software company that exploded into a public brawl before Congress yesterday boils down to a misunderstanding over a business deal between the two companies, Microsoft executives say. RealNetworks, maker of the leading software to play audio and video over the Internet, accused Microsoft of designing its competing software to disable RealNetworks' Real Player. Microsoft, which bought a 10 percent stake in the company last year, paid RealNetworks $30 million for access to media-distribution technology. What Microsoft is doing is wrong, RealNetworks Chairman Rob Glaser testified before a Senate Judiciary Committee hearing investigating business practices in the software industry. Glaser is a former Microsoft senior vice president. The fallout seems particularly unusual because the companies are business partners, but Microsoft's reaction yesterday shed some light on the controversy. Microsoft at first denied there was any problem. But late yesterday, Yusuf Mehdi, Microsoft's marketing director for Windows, said the disagreement centered on a misunderstanding over the business deal with RealNetworks. "The spirit of that agreement was essentially this: that we would move beyond competing standards and competing players and agree on a single, easy way for viewers to view multimedia stream over the Internet," Mehdi said. That way, he said, was through Microsoft's Media Player. Glaser disagrees on that interpretation of the agreement. While the complaint comes from an unfamiliar source, it follows a familiar story line alleged by other aggrieved competitors: Microsoft licenses a competitor's technology, writes its own software, sabotages the competitor's software and adds it to its operating system. In this case, RealNetworks contends that Microsoft crossed the line and fought dirty. "What Microsoft is doing is wrong, pure and simple," Glaser said yesterday. "It damages our business and reputation. It's bad for consumers who depend on quality and reliability of our products. It serves no positive purpose." "This is something we're surprised they didn't bring up and surprised that the first time he would make an issue of this is on the floor of the Senate Judiciary Committee," Mehdi said. But Glaser said he not only raised the issue, he took it to the top. When the company failed to resolve the problem with mid-level officials and word spread to government investigators and then to the Senate Judiciary Committee, Glaser sent an e-mail to Microsoft Chairman Bill Gates asking him to intervene. "Bill. Hope all is well with your family," Glaser wrote. "I'm writing regarding a topic I want to discuss with you personally." Gates sent a brief reply asking for the date of the hearing, and after a couple of other exchanges, Glaser said Gates rebuffed his entreaty. "I've decided it doesn't make sense for us to meet. I'm not familiar with our (business) relationship. While you're in D.C., I suggest you visit the National Gallery and Smithsonian." The argument is not a trivial matter, but is over one of the hottest sectors of the software industry: software that broadcasts audio and video over the World Wide Web. Glaser said he was contacted by Senate Judiciary Committee Chairman Orrin Hatch, R-Utah, and his staff and repeatedly asked to testify. "Hatch was unbelievably adamant," Glaser said. The dispute opens another chapter in the ongoing antitrust battle between Microsoft and government authorities, who questioned RealNetworks President Bruce Jacobsen about the dispute - and the company's business deal with Microsoft - at length last month. "We've been under constant Department of Justice subpoena since last fall," Jacobsen said. "We have no desire to be a Susan McDougal," the Whitewater figure who is not cooperating with independent counsel Kenneth Starr. The federal inquiry of RealNetworks ties into a broader investigation into whether Microsoft is trying to monopolize the software market for delivering and receiving audio and video over the Internet. Investigators recently began looking into alleged Microsoft attempts to persuade Apple Computer to stay out of the audio-video software market. A Microsoft executive for 10 years, Glaser said he thinks he knows the problem in his former company: lack of restraints on the ferocious competitiveness of its employees. Such aggressiveness was understandable, even laudable, when Microsoft was the David against a Goliath, he said, "but not when you're now the Goliath." In 10 of 16 instances with eight versions of its software, including a test version of its Real Player Plus G2, Microsoft's product disables various Real Player software programs. "That doesn't happen by accident," Glaser said. "Code would have been written deliberately to achieve this effect."