Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: David Howe who wrote (11867)	10/27/1998 10:34:00 PM
From: John F. Dowd	Read Replies (1) \| Respond to of 74651

Dear David: Concur in your outlook for MSFT and don't worry about DOJ. They have brought a bogus suit and they will not prevail. I offer this latest rebuttal brief from MSFT as a good indicator of how thoroughly fabricated this entire accusation on the part of NSCP is? Even Penfield Jaaackson will be able to figure this one out: In the evidence presented thus far, Microsoft has shown that Netscape made an internal decision not to make the necessary changes in its technology and to provide the developmental and technical support to meet the specific needs of AOL. At the core of Microsoft's winning of AOL as a customer was Microsoft's decision to provide a modular architecture so that AOL could integrate browser technology seamlessly into AOL's service. The agreement between Microsoft and AOL was not exclusive and did not prevent AOL from working with Netscape. In his testimony, Mr. Colburn alleges that AOL was very interested in continuing to work with Netscape, but the agreement with Microsoft prevented that effort. The facts are that Steve Case announced that AOL would continue to work with Netscape on its GNN project (this was an ISP targeted to a different type of user), and AOL has always supported Netscape users on the AOL service. Mr. Case announced the arrangement between GNN and Netscape the day before appearing with Microsoft Chairman and CEO Bill Gates to announce the deal between Microsoft and AOL at Microsoft's Professional Developers' Conference and on a subsequent conference call for press and analysts later that day. Mr. Colburn himself has been quoted confirming that AOL's decision to use the Internet Explorer technologies was based in large part on superior technology. In a recently published book on AOL by Kara Swisher entitled aol.com, Colburn confirms that Microsoft's willingness to work with AOL to provide a seamless user experience was an important factor in AOL's decision: "Netscape did not want to change Navigator in any substantial way to accommodate AOL, and wanted Navigator to sit on top of AOL, directing users to the Netscape site as they entered the Web. But AOL wanted to deliver to the consumer a customized browser that was seamlessly integrated into the service in much the same way that BookLink was, with no barrier separating the service from the Internet. '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,' said Colburn. On the other hand, Microsoft was willing to change the browser in any way that was amenable to its service design, making it easier to customize." (aol.com, by Kara Swisher, p. 137 (1998)) Despite AOL's current testimony, AOL's historical pattern does not support the allegation that AOL entered into the license agreement with Microsoft solely for distribution on the Windows desktop. The statements in Mr. Colburn's testimony and recent statements by AOL officials seem to be an attempt at revisionist history regarding the March 1996 agreement between Microsoft and AOL. At the time of the agreement, AOL stated that a major reason they signed the contract was because of the technological advantages of Microsoft's technology - including the modular architecture of Microsoft's Internet technologies. Any claims to the contrary in Mr. Colburn's testimony are clearly rebutted by the facts. At the time of the agreement, AOL was already on 90 percent of home user personal computers shipping at the time, due to AOL's direct agreements with OEMs. The Microsoft-AOL agreement resulted in only a limited incremental increase of distribution for AOL since they already had a dominant position on PC desktops. Technical considerations were a major consideration in AOL's decision to choose Internet Explorer over Netscape Navigator. The claim by Mr. Colburn that the technical benefits of Internet Explorer had very little to do with the decision to enter into the agreement with Microsoft contradicts the AOL's public statements at the time. "So then we underwent a fairly exhaustive review of the options both in terms of the technology review as well as a broader understanding of the business implications, and it was as we walked down that process and learned more about the Microsoft technology strategy, it was clear to us that the modular architecture would make sense in terms of building it seamlessly into AOL." (Steve Case, March 12, 1996, announcing the AOL/Microsoft agreement) Furthermore, at the announcement of the technology partnership with Microsoft, Mr. Case stated on March 12, 1996 that, "the reason we're doing this [integrating the Internet Explorer technologies with AOL's software] is because the more we learned about the Microsoft technology and their strategy and their commitment to the space, and particularly their modular architecture, we felt it would allow us to better meet the needs of our consumer audience by providing this Web experience, and 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 and part of that is to the extent they do have some other preference, giving them a choice." Mr. Case also mentioned that AOL would continue to work with Netscape in order to provide AOL customers choice. This statement contradicts the false assertion that the contract was exclusive. Mr. Colburn's testimony alleges that Netscape was very willing and ready to redesign Navigator to AOL's requested specifications. But Microsoft has introduced evidence that refutes Mr. Colburn's claim, from a new book, Competing on Internet Time, by Michael A. Cusamano and David B. Yoffie. In this book, Netscape executive Ram Shriram is quoted as stating that: "Netscape was saying, 'We're not really interested. Our focus is not consumers, so we're not terribly interested in working with you.' We lost another opportunity to take charge of another 10 [million] to 12 million browsers." Despite the government's claims, AOL was not compelled to license Microsoft's technology in order to compete with the threat of MSN (the Microsoft Network) on the Windows desktop. Mr. Colburn claims in his testimony that AOL had to come to an agreement with Microsoft in order to keep pace with the competitive threat of the new Microsoft Network - Microsoft's online service product. Mr. Colburn seems to say that AOL viewed MSN as a serious competitive threat even though AOL had the overwhelming market share in the online services market. As Microsoft began to recognize the popularity of the Internet, the company developed MSN as an integrated component of Windows 95. This was a new technology and had zero market share when it was released in August 1995. To this day MSN has less than 10 percent market share compared with AOL's 70-plus percent market share today. At the time this agreement was signed, AOL was shipping on the desktop of 90 percent of personal computers, as a result of AOL's direct agreements with OEMs. AOL clearly had the dominant position in the online services market and was shipping on the "critical position" of the PC desktop without any agreement with Microsoft. John Dowd