WITNESSES IN CASE AN UNUSUAL MIX OF ALLIES AND FOES
WARREN WILSON P-I Reporter
10/19/98
Seattle Post-Intelligencer
FINAL
Page A1
(Copyright 1998)
Cut a deal today; cut a throat tomorrow. Such is life in the software industry, where corporate strategy mixes cooperation and competition so often as to spawn a new descriptive term: "coopetition."
Used mainly by techies to describe their industry's Byzantine webs of alliance and antagonism, coopetition is a handy concept to consider as the curtain rises today on U.S. vs. Microsoft Corp., the biggest antitrust case in decades.
Years in the making, the showdown in Washington, D.C., will feature testimony from some of Microsoft's closest allies, biggest customers and most important strategic partners.
But the witnesses from Intel, America Online, Intuit and IBM won't be throwing bouquets. They've been called to testify against Microsoft, summoned to help prove the government's case that Microsoft is a monopolistic bully that must be reined in.
Testifying for the software giant is an executive with Compaq Computer Corp. - one of three companies whose alleged mistreatment by Microsoft the government cited a year ago when it fired its opening shot in the case.
Trial lawyers might not see anything outlandish or ironic in the witness lists; crucial testimony is often gained from the very people most reluctant to give it.
But in this case, a look at who will testify, what they might say and the history of their employers' relations with Microsoft sheds light not only on the trial issues, but also on the convoluted nature of the modern computer industry.
By order of U.S. District Judge Thomas Penfield Jackson, who is overseeing the case, each side may call just 12 witnesses - a management technique "to keep the trial focused," said Eleanor Fox, a professor of antitrust law at New York University.
The government's witnesses include a half-dozen economic or technical experts called to support the view that Microsoft holds a monopoly in operating-system software for personal computers and has used it improperly to gain advantage in other areas, notably the strategically important market for Internet software.
The government's list also includes Jim Barksdale, chief executive of Netscape Communications, whose complaints about Microsoft were an important catalyst for the lawsuit.
Some of the other names on the government's list, however, best show coopetition at work.
-- Intel Corp., along with Microsoft the other half of the so- called Wintel desktop computer duopoly.
-- America Online, the world's largest online service and a Microsoft strategic partner for more than two years.
-- Apple Computer, which once sued Microsoft (unsuccessfully) for mimicking its graphical look and feel but which last year accepted a $150 million investment from Microsoft, whose Office for the Macintosh is the largest-grossing product for Apple's computers.
"This case is filled with complex relationships," said Carey Heckman, co-director of Stanford University's Law and Technology Policy Center. "There are all sorts of examples of friends who are enemies, and enemies who are friends."
But that's the nature of the high-tech industry, Heckman said; the smart players are willing to set aside some differences to cooperate when it is to their mutual benefit.
From microchip giant Intel, the government has called Steven McGeady, a vice president who has led Intel's research into the Internet and Java, the network-oriented programming language whose ability to run on any type of computer threatens - or promises, depending on one's point of view - to undermine Windows.
Intel and Microsoft are often referred to as the "Wintel duopoly" for their close alliance in desktop computers - Intel supplying the main chips and Microsoft the software that operate the vast majority of desktops. In fact, despite that common ground, theirs is an uneasy relationship that the industry watches closely for signs of rift or harmony.
In court papers, the Justice Department has said Microsoft pressured Intel to drop certain Internet-related software projects, including some Java applications, and to take actions "directly to disadvantage and foreclose Netscape. . . ."
Microsoft has tried - unsuccessfully so far - to narrow the scope of the trial to exclude such matters that it says stray too far from the lawsuit's original claims - mainly, that Microsoft illegally "tied" its Internet Explorer browser to its dominant Windows operating system to gain advantage in an emerging market.
The government also plans to call America Online executive David Colburn, apparently to portray AOL's 1996 deal with Microsoft as an example of the Redmond company using its Windows monopoly to advance its browser software for navigating the Internet.
In that deal, AOL agreed to license Microsoft's browser for free and build it into its own software; in return, Microsoft agreed to give AOL prominent placement in the on-screen "desktop" of its Windows 95 operating system, which presumably would bring more new members for the online service.
A clue to Colburn's eventual testimony may lie in recent remarks made by AOL Chairman Steve Case, who said at a recent technology forum, "Our choice was Microsoft in large part because they provided the technology free and also were willing to bundle us with their operating system."
If that is the thrust of the government's argument, Microsoft may counter with quotes from both Case and Colburn. Both have said Microsoft's technology met their needs better than Netscape's because it is "modular" and can more easily be "integrated" into AOL's software.
As Case himself said when the deal was announced in March 1996, "The reason we're doing this is because the more we learned about the Microsoft technology . . . and particularly their modular architecture, we felt it would allow us to better meet the needs of our consumer audience.
". . . We do want to make sure consumers have the best possible Web experience, and part of that is building something in an integrated, seamless fashion," he said.
Colburn makes the same point in "aol.com," the recent book by Wall Street Journal reporter Kara Swisher.
"I basically looked at what was the better deal for AOL, what would give us the most advantages," Colburn said. With Microsoft's technology, members could browse the Internet while staying within AOL; that wasn't possible with Netscape's browser.
"With the Netscape browser, users would absolutely know they were leaving AOL to go to the Web, which meant we handed our members over to them," Swisher quotes Colburn as saying.
Similarly, the government has said it intends to call William Harris, CEO of Intuit Corp., to testify that Microsoft tried to "bribe" Intuit to use its browser instead of Netscape's. In a public statement last week, Microsoft quoted from a 1997 article in The American Banker in which Intuit's Debra Kelley says Intuit rejected Net-
scape's product because it was 'time-consuming and inconvenient" while Microsoft's, being modular, could be embedded into Intuit's programs.
Microsoft's witness list consists mostly of its own executives. An exception is John Rose of Compaq Computer Corp., to whom Microsoft turned nearly a year ago to offset an affidavit from another Compaq executive, Stephen Decker, supporting the government's claim that Microsoft was illegally tying its browser to Windows.
Decker's role for the government and Rose's for the defense may distinguish Compaq as the only company giving direct testimony for both sides in the case.
Decker, Compaq's director of software procurement, said in an affidavit that the company had been shipping Netscape's browser on its Presario computers for some time and at one point removed Microsoft's browser icon from the "desktop" screen in order to give top billing to Netscape.
". . . Netscape was actually the browser partner, and we wanted to give (it) that position on the Compaq Presario desktop," Decker said.
When Microsoft heard that, "They sent a letter to us telling us that, you know, they would terminate our agreement for doing so," Decker said. "We went back and reworked the code so that we put an icon (for Microsoft's browser) back on."
When Decker's testimony became public, Microsoft quickly referred reporters to Rose, who said Decker had testified in response to a government subpoena, implying that Compaq hadn't been the one to complain to the government. Furthermore, he said, Compaq has no objection to installing Microsoft's browser.
"The feedback we've gotten from customers is that they like and want Internet Explorer with Windows 95," Rose said at the time.
Compaq has been one of Microsoft's most visible supporters over the past year. In May, amid speculation that the government would seek to block the release of Windows 98, Compaq President and Chief Executive Eckhard Pfeiffer joined Microsoft Chairman Bill Gates on a stage in New York to warn of harm to the industry if that happened.
Pfeiffer called Windows 98 an "enabler" of high-tech innovation, a "catalyst for significant advances in PC hardware and obviously in PC software and the Internet."
Examples of coopetition - that word again - aren't limited to the witness lists.
Another is that of Novell Corp., a leader in business networking software and a frequent critic of Microsoft as the company gains ground in that market with Windows NT. The tensions have spilled onto the floor of the Senate, where Utah Republican Orrin Hatch has been so vocal a critic of Microsoft that some have called him "the senator from Novell."
Despite their rivalry, Novell announced Sept. 9 that it would license Microsoft's Internet browser and distribute it with its own software, along with that of Netscape Communications.
"When 90 percent of the Web-browser market is owned by either Microsoft or Netscape, it just makes sense to give customers both Web-navigation options," a Novell executive said in announcing the deal.
The browser agreement may be less a turning point for the companies than a small oasis in an otherwise barren relationship.
Just two days after the deal was announced, Microsoft demanded documents from Novell, Netscape and other companies that it said would show them collaborating in their attacks on Microsoft.
The documents will show that the competitors - Oracle Corp., IBM and Sun Microsystems, along with Novell and Netscape - "are doing everything the government accuses Microsoft of doing, and more," a spokesman said.
Microsoft didn't demand documents from AOL, but the online service's new 4.0 software provides an unintentional example of the kind of tactic often ascribed to Microsoft: When installed, it replaces the user's Internet start page with its own - aol.com - without asking permission.
P-I reporter Warren Wilson can be reached at 206-448-8032 or warrenwilson@seattle-pi.com
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