To: Daniel Schuh who wrote (22644 ) 2/11/1999 2:32:00 AM From: Rusty Johnson Respond to of 24154
Microsoft Admits Browser Deals Were Geared to Limit Consumer Choice SmartMoney Interactive Edition February 10, 1999 WASHINGTON -(Dow Jones)- Microsoft Corp. struckbrowser-distribution contracts with Internet-service providers to prevent consumers from having a choice of browsers, Vice President Cameron Myhrvold testified Wednesday at the software giant's antitrust trial. Microsoft was the "Johnny come lately to the Internet" and feared that if its Explorer browser was offered alongside Netscape Communications Corp.'s rival Navigator browser, Navigator would win, Myhrvold said under cross-examination by lead government lawyer David Boies. The Justice Department and 19 states, in a suit filed last May, charge Microsoft (MSFT) with engaging in a pattern of predatory conduct to maintain a monopoly in operating-system software and to illegally extend control into the Internet-software market and other new markets. Microsoft has denied the charges and has called its actions good for consumers. U.S. District Judge Thomas Penfield Jackson will decide the case without a jury. The government wrapped up its case in January. Microsoft has stumbled badly in its defense, so much so that many economists, lawyers and think tanks think the company will lose the case. That has sparked talk that the government will seek tough remedies, including breaking up the firm or forcing Microsoft to offer access to the source code for its Windows operating system. A key issue in the trial has been the charge that Microsoft "welded" together Windows and the Explorer browser in order to deprive customers of a choice and crush Netscape. The software giant has stuck by its argument that the products are inseparable. Myhrvold testified Wednesday that the company was afraid that if Explorer were presented "side by side" with Navigator, "we would lose the majority of those decisions." "We did ask ISPs (Internet-service providers) to distribute Internet Explorer by itself. What we wanted to do was encourage the distribution of Explorer," he said. In other words, Boies asked, "you were concerned if (ISPs) presented consumers with a choice, they would pick Netscape and not Internet Explorer?" "Yes, that's right," conceded Myhrvold. That exchange came as Boies, who has made a habit of making Microsoft look bad throughout the trial, quizzed Myhrvold on the dozens of contracts the software giant struck with ISPs. Myhrvold frequently answered questions about documents he wrote or business relationships he supervised with "I don't know" or "I don't recall." At times, he found himself tripped up by his own answers. Meanwhile, in written testimony released ahead of his appearance, Microsoft marketing chief Brad Chase said America Online Inc. settled on Explorer in 1996 because of its superior technology, not because Microsoft offered the online service favorable placement on the Windows desktop screen. Chase countered AOL Senior Vice President David Colburn, who testified in October that the promise of an icon on the Windows online services folder was the most important reason AOL agreed to use Explorer over Navigator. "While placement in the online services folder may also have been important," Chase wrote of a 1996 conversation he had with Colburn, "Mr. Colburn focused on different issues, making it clear that AOL would not have chosen Microsoft as its supplier of Web browsing software if we had not had superior technology." Indeed, Chase acknowledged that AOL agreed to use Explorer through January 2001 - two years beyond the agreement's original expiration. Furthermore, Chase disputed testimony given earlier in the trial by Netscape Chief Executive Officer James Barksdale about several deals Microsoft won at Netscape's expense, including one with KPMG Peat Marwick. "The truth is that after disproving Netscape's fallacious statements about our lack of technological competence, we won the KPMG deal on the merits," Chase said. Barksdale had testified KPMG had settled on Netscape software after conducting a technical comparison with Microsoft products, and had paid Netscape "in full upfront." But then Microsoft wrestled the deal away, offering KPMG special concessions and a 10% stake in its Enterprise Integration Systems, Barksdale had said. The bulk of Chase's written testimony focuses on the superiority of Explorer and how well received the browser was among Internet content and services providers.