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

To: Jim Lamb who wrote (23421)	5/30/1999 8:38:00 AM
From: puborectalis	Read Replies (1) \| Respond to of 74651

Microsoft returns to trial revived and rearmed by James V. Grimaldi Seattle Times Washington bureau WASHINGTON - At long last, Microsoft's attorneys think their case has some traction. More than a year after the U.S. Department of Justice and 19 states filed a broad antitrust lawsuit, nearly eight months after the case went to trial and three months after it rested a blunderbuss defense, Microsoft returns to court armed with a passel of fresh documents and a rehabilitated argument. The crux of the new Microsoft defense is not an explanation of what it did and why. Instead, its attorneys will turn the spotlight this week on two other industry players. The company's new argument is that America Online's acquisition of Netscape Communications, along with a partnership with Sun Microsystems, is a prime example of how the changing landscape of the software industry makes the government's lawsuit moot. Company attorneys are also accusing Justice Department lawyers of keeping news of the deal secret for weeks last fall in the heat of the trial. With a break in the trial stretching to three months, Microsoft has had time to make the most of the argument. But sure footing doesn't always translate into a winning case, and it is far from certain whether Microsoft can regain the momentum lost during the trial, when the credibility of the company's witnesses was damaged, the defense lacked focus and even some friends said the case had been bungled. Government lawyers also mock the new defense with a fundamental question: What does this have to do with the central allegation, that Microsoft broke the law when it used a monopoly in personal-computer operating systems to outmuscle competitors? Despite the criticism, Microsoft's attorneys smile and refer cryptically to documents they have retrieved from AOL, Netscape and Sun. Moreover, they're bolstering their bravado with a risky bet. For its rebuttal case, Microsoft attorneys have called David Colburn, an AOL executive, back to the stand as a hostile witness in an attempt to cast doubt on his earlier testimony. The risk, said Stan Liebowitz, a Microsoft ally and University of Texas economist, is that the tactic will backfire. But if Microsoft has the documents to destroy his credibility, then it might work. "If nothing is there, and they can't prove it, they can look pretty bad," Liebowitz said. The strategy is clear: Hurt the credibility of the government and its witnesses, showing the government combined with AOL and Netscape to keep the merger under wraps. "A theme in the government's case has been our witnesses are believable and their witnesses are liars,"' said William Kovacic, a law professor following the case. "I sense that what Microsoft is trying to suggest here is that their (the government's) witnesses are liars, too, that their witnesses shaded the truth to accomplish in the courtroom more effectively what they couldn't accomplish in the marketplace." Microsoft's ultimate goal is murkier. Even if it successfully changes the subject from the evidence presented at trial, it still leaves open the question of its business practices. In the end, Microsoft might even the score with the government and create parity for settlement talks, which seem stalled. Many industry participants are lobbying for far-reaching remedies, including breaking up the company. If Microsoft can win a few legal rounds, cutting a deal might become easier for both sides. The trial so far Microsoft wasn't supposed to be losing this trial so bad