The old giant of the computer world, IBM, learned the hard way that by the mid-1990s it was not such a good idea to make Microsoft mad.

Evidence to the trial heard how IBM, Dell, Compaq and Intel were all either bullied or given considerable financial inducement to favour Microsoft products.

It was IBM which had given Microsoft its big break, back in the early 1980s, when it asked Bill Gates' young company to create the operating system for its first personal computers.

But that balance of power had changed by the 1990s, when IBM decided to create its own operating system for the computers it made for personal and business use.

IBM's primary negotiator with Microsoft in the mid-1990s, Garry Norris, described how they were pressurised into stop shipping its own OS/2 operating system and a series of business programmes which competed with Microsoft Office.

The crunch point came in the run-up to the launch of Windows 95. IBM refused to stop shipping its own product, Microsoft responded by not supplying the Windows 95 code. IBM only signed an agreement to receive Windows 95 a few minutes before the system was released in late August.

Lesson learned

Mr Norris said: "There was a lot of pent-up demand for Windows 95. We missed the initial spurt of demand, we missed the back-to-school season. And we were late to the Christmas market as well, which is our biggest quarter."

He added that IBM realised it had to improve its relationship with Microsoft and that it would lose up to 90% of its computer sales if it relied on its own operating system.

Mr Norris said that PC manufacturers who wanted to license OS/2 were threatened by Microsoft. Compaq was one of these, and IBM was informed of Microsoft's intimidation by Compaq vice-president Mike Clark. As a consequence, Compaq did not licence OS/2.

Meanwhile Intel, the world's largest computer chip manufacturer, to use a Microsoft developed version of the Java programming language widely used on the internet.

Intel executive Steven McGeady, a government witness, said Microsoft was "very upset" that Intel was working on the Java language at all.

Compaq and Dell

Java was seen as a direct threat to Microsoft because it could operate independently of the Windows operating system.

Sun Microsystems, which introduced Java, had accused of Microsoft of wishing to tamper with its product to make it work better with Windows than other systems.

Microsoft was also keen to stop chip maker Intel diversifying into producing software, seeing it as a possible challenge to its own products, although Intel's main purpose in doing so was to show off the capabilities of its processors by means of some special effects.

Support for Microsoft's case came from the two new giants of the computer making industry, Compaq and Dell, which exclusively supplied the Microsoft system.

In hearings with the public and press excluded - so the discounts they were given were kept secret - the two firms were quizzed by the judge.

"Still cheap" defence

John Rose, a senior vice president in charge of Compaq's enterprise business, gave evidence for Microsoft for three days.

During earlier hearings in the contempt case that preceded the anti-trust trial, it had come to light that in June 1996 Microsoft had given notice to Compaq to terminate the contract for supplying Windows 95 unless Compaq restored the Internet Explorer and MSN icons that it had removed from the desktop of its consumer PCs, despite Compaq's agreement with Netscape that Navigator was its preferred browser.

Compaq complied immediately to Microsoft's ultimatum and replaced the icons. Mr Rose confirmed to the court that it got a significantly lower price from Microsoft than other PC makers.

Microsoft says that the low cost of Windows proved it was not a monopoly. If it was a monopoly, the company claimed, Windows would cost more than 5% of the cost of a new PC.