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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Wally Mastroly who wrote (2929)	1/21/1999 4:24:00 PM
From: Lars	Respond to of 15132

* MSFT Trial Update * Death by 1,000 cuts By Charles Cooper 01/21/99 07:45:00 AM Call it the death by a thousand cuts. When Richard Schmalensee first eased his frame into the witness chair last week, it figured to be a juicy confrontation. After all, the man had all the credentials you'd ever want to see in an expert witness for Microsoft, and he should have been able to hold his own against the DOJ's David Boies. It wasn't to be. After the government's chief trial lawyer finished his cross-examination of Schmalensee on Wednesday, the MIT dean was in dire need of first aid. In the run-up to this confrontation, the press had wondered what Boies would be like during cross-examination. Until now, we had only seen Boies work with friendly witnesses on redirect testimony. And he is not a bellower, like his opposite number John Warden. He is neither a great orator or a flashy dresser -- the guy wears black sneakers to court and is the lousiest $400 an hour lawyer I've ever seen. But the shlumpfy appearance belies the underlying reality for Boies has an undeniable court presence. He asks razor sharp questions -- repeatedly, until he gets the answer he wants -- pouncing on the smallest of inconsistencies in a witness's testimony. It's not just what he asks, but how he poses the question, often in a sweetly annoying manner that invariably grates on the object of his attentions. That remarkable knack for getting under a witness's skin was on display during his interrogation of Schmalensee. And on Wednesday, Schmalensee, who has been doing a slow stew since Monday, had finally had enough of it. After Boies suggested the economist had reached his conclusions in order to satisfy his paymasters at Microsoft, Schmalensee blew his cork. "I value my economic reputation very highly!" Schmalensee replied indignantly. "I'm doing this because I believe it to be correct." Say what? At another point during the day, the two men engaged in another heated discussion, this time about Microsoft's profitability, Schmalensee said he wasn't able to get his hands on certain figures because Microsoft records its operating system sales "by hand on sheets of paper." That elicited guffaws in the peanut gallery -- and for good reason. The reaction was: Hey, we're not talking about Albania here: The biggest PC software company in the world uses paper and pen to record sales? Puh-leeze! It was not happenstance: Boies wanted to make Microsoft's expert witness -- a man of clear accomplishment -- appear ridiculous. And unfortunately for Schmalensee, he complied. Schmalensee was brought in to counter the testimony of Franklin Fisher who testified that Microsoft is a monopoly. If that were true, Schmalensee said, Microsoft could charge 40 times as much as it does for Windows in order to maximize its profits. That would mean Microsoft could charge as much as $2,000, Boies asked, laughing as he posed the question. "I think -- there are a range of prices in the paper. $2,000 is one of them. It's the simplest one arithmetically to get to," Schmalensee said. Do you think that makes any sense? Boies. No, the economist replied. "Because Microsoft faces significant long-run competition. That's precisely the point." Watching the judge's face all throughout the exchange, I don't think he bought it. I'm not sure many other people in court did either. My browser or yours? There were countless other instances where Boies forced Schmalensee onto the defensive. And each time the economist attempted to talk his way out of trouble, things only got worse. For instance, Microsoft has repeatedly attributed Internet Explorer's market success to its technical superiority. Schmalensee echoed that conclusion, pointing to magazine reviews giving the nod to Microsoft's browser. But Boies then presented a May 1998 Microsoft document which concluded that IE was "fundamentally not compelling" and "not differentiated" from Netscape's Web browser -- and this after investing a cool $500 million into browser development. The Microsoft document went on to describe IE as a "commodity" with no "grass roots end-user demand." The good professor then offered a tautological tongue twister. There's really was no difference between saying that Internet Explorer is "better" and saying that it's "not differentiated" from Navigator and viewed as a commodity. Maybe that plays well in a Cambridge colloquy. But it failed to cut the mustard in Washington. Microsoft's attorneys will attempt to repair the damage over the next day but Boies has already accomplished what he set out to do.