Microsoft's counterattack to focus on rivals' linkup
New York Times
Microsoft Corp., portrayed by the government as an entrenched monopolist, will counterattack when its antitrust trial resumes next month by presenting evidence that suggests that America Online Inc. plans to become a head-on challenger, according to people close to the software company.
The Microsoft legal tactic focuses on the three-way deal announced in November, when America Online agreed to buy Netscape Communications Corp. and made a side agreement to buy and jointly develop technology with Sun Microsystems Inc.
In December, Judge Thomas Penfield Jackson, who will decide the outcome of the nonjury trial, expressed his view that the deal might result in ''a very significant change in the playing field as far as this industry is concerned.''
The Justice Department's antitrust division announced on Friday that it had reviewed and approved the America Online-Netscape-Sun pact, which tightly links three of Microsoft's major rivals. The America Online purchase of Netscape, made with shares, was valued at $4.2 billion in November, but is now worth nearly $9 billion, given the run-up in America Online's stock price.
Microsoft started issuing subpoenas for documents last month to the three companies involved in the deal, as well as to their financial advisers, after Jackson gave his approval.
The first of the responses to the Microsoft subpoenas, including documents and internal e-mail that detail the strategy behind the deal, were received about a week ago by Sullivan & Cromwell, the New York law firm representing Microsoft. At Sullivan & Cromwell, a team of lawyers, led by Michael Lacovara, a partner, is poring over the documents, looking for evidence to support Microsoft's defense.
The Microsoft legal team also plans to depose key executives involved in the three-way deal, and perhaps call one or two of them as rebuttal witnesses. The tentative list of executives to be examined, according to a person close to the case, includes Stephen Case, the chairman of America Online; Marc Andreessen, a co-founder of Netscape, who will become America Online's chief technology officer, and William Raduchel, the chief strategy officer of Sun Microsystems.
Another executive at America Online, David Colburn, a senior vice president, has already appeared as a government witness at the trial. He testified about a central accusation in the case -- that America Online chose Microsoft's Internet Explorer as its preferred browser instead of Netscape's because Microsoft used its monopoly power as a lever. Microsoft, Colburn testified, offered America Online a prime place on its Windows desktop screen, the most prized real estate in computing.
Even after the Netscape purchase was announced, Case and other America Online executives insisted that the company would not switch to the Netscape browser because Microsoft desktop placement was too valuable to lose. That stance, Microsoft insists, will last as long as the antitrust case does -- and no longer.
But the Microsoft lawyers are mainly focused on exploring the software plans of its rivals. At the time of the deal, Case spoke of the long-range vision of being able to deliver his online service through a ''new generation of Internet devices,'' including pagers, cell phones and television set-top boxes.
A crucial technology for realizing that future is Sun's Java, an Internet programming language regarded as a major threat to Microsoft's dominance.
Yet the America Online strategy, according to executives close to the company, also calls for its software, developed with Sun, to play a central role in bringing it into new markets that compete directly with Microsoft.
As the line between software and services blurs, America Online wants its centralized hub computers to be able to ''serve'' Web applications, like personal contacts, scheduling and spreadsheets, onto users' screens at home or at work. These Web applications, industry executives say, need not run on Windows and could replace Microsoft's Office productivity software.
Antitrust experts say documents detailing America Online's ambitious plans may be most important in persuading the court not to impose harsh sanctions against Microsoft, if it loses the case. ''The plans of these Microsoft rivals do not relate directly to the case,'' said Carl Shapiro, a former senior official in the Justice Department. ''Ambitious plans do not change the fact of Microsoft's desktop monopoly and how it used it.''
Still, Shapiro said he expected Microsoft to use the deal documents ''to bring alive for the judge the notion that this high-tech landscape is changing and fluid, and that's not just Microsoft's view.'' The Microsoft message, he said, will be that ''even if you think we cross the line, draconian measures are not needed.''
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