USA versus Microsoft: the fourth week

Bill Gates - paused long and hard before replying to questions

By independent computer industry analyst Graham Lea.

The fourth week of Microsoft's trial saw more raw examples of how Microsoft plays the competitive game, and further videotaped testimony from Bill Gates.

Although it is early days - only four witnesses have been heard out of between 24 and 29 - Microsoft did not have a good week in court.

A letter from Apple CEO Gil Amelio to Bill Gates on 3 July 1997 said: "I know (not having Internet Explorer as the preferred browser) is a source of great irritation to you."

Two days later, Apple board member Edgar Woolard called Amelio and suggested he resign, although whether there was any connection was not revealed.

Just a month later, acting Apple CEO Steve Jobs announced that IE was the default browser, to booing from the MacWorld audience, and cheers when he added that Navigator would remain an option.

It was a mistake for the Microsoft defence team to show this video extract to the court, as it had the opposite effect to that desired.

It was also revealed that Compaq decided not to use Apple's QuickTime because, according to e-mail evidence from David Obelcz, a Compaq engineer, to Apple executive Phil Schiller: "You have to understand what's going on here.

"They are very afraid of doing anything to upset Microsoft. We are very wary of bundling anything that would upset Microsoft because they touch us in so many places".

In videotaped evidence introduced by the Department of Justice, Compaq's procurement director Steven Decker said "[Compaq] would be shipping QuickTime if Apple gave it to us for free," but Apple's software VP Avie Tevanian, told the court in rebuttal evidence that Decker omitted to tell the whole truth: there were two versions of QuickTime on offer: a free basic version, and a professional version for which there would be royalty payments.

The final blow for Microsoft was Mr Tevanian's insistence that Apple would not have used IE as its default browser if it were not for Microsoft's threat to discontinue the Microsoft Office for Mac development.

Intel revelations

The second series of extracts from Bill Gates video testimony was about Microsoft's relations with Intel.

He did not make a good witness for Microsoft, and often paused for long periods before giving an answer to a simple question.

He denied that Microsoft "had attempted to convince Intel not to engage in any software activity", but later evidence from Intel VP Steven McGeady, and e-mails from Microsoft executives, showed overwhelmingly that this was not the case.

Bill Gates' mantra in response to questions was that Intel's software quality was not high (repeated seven times) and that there were "incompatibilities" (repeated eight times) with Microsoft software.

An important sub-text was that Microsoft strongly objected to Intel's work on native signal processing (NSP), which would have incorporated considerably improved multimedia capability into the processor rather than Windows, so threatening Microsoft's Windows monopoly.

NSP was dropped by Intel following threats by Microsoft that it would not support Intel's MMX and Merced microprocessors, unless Intel stopped its software development.

Andy Grove, Intel's former CEO, had admitted in an interview that Intel "caved" when faced with this serious threat, which was backed-up by Microsoft's claim that it would throw its weight behind the rival Digital alpha chip.

The evidence from Intel VP Steven McGeady was not given in written form first, since McGeady had been sub-poenaed by the Department of Justice.

Intel maintained that it was neutral in the case, and in any event has its own concerns, such as the antitrust case being brought by the Federal Trade Commission that starts shortly, and competition from AMD in the consumer PC sector.

McGeady said that Microsoft had described its policy towards Netscape in a meeting as "embrace, extend, exterminate".

Vigorous cross-examination failed to cause him to modify this.

Mr McGeady was present when Microsoft exec Paul Maritz made the chilling remark that Microsoft would "cut off Netscape's air supply".

Maritz wrote in an e-mail on 17 April 1995 saying that "McGeady remains an issue for us. He is a champion of Java, and a believer that the day of ¿Bloatware' (ie our apps) is over, and Intel needs to be supporting this new paradigm of ¿applets'.

Maritz also revealed in an email that Microsoft decided to pretend that its cost-of-ownership "jihad" was to be "positioned as a industry initiative", rather than a Microsoft initiative.

It was also minuted that "Microsoft will ¿prevent others from having to write [device software]' ". It looked as though Microsoft's intention was to control the writing of all drivers, in order to increase its hold over device manufacturers.

Microsoft attorneys tried hard to shake McGeady's evidence, but the supporting documents shattered hopes that Microsoft's version of events would be believed. McGeady testified that Gates became "enraged" that Intel was developing software.

One document consists of detailed notes taken by McGeady during a briefing by Gates at a meeting with Intel, and there are some very interesting revelations. For example, Gates said about Windows NT: "we blew it ¿ too big, too slow".

So far as selling upgrades in the future was concerned, Gates foresaw "on-demand download of . . . application upgrades", implying that resellers may find themselves competing with Microsoft.

Gates also said that "One of the great mysteries of the computer industry [was] that UNIX had not taken off" ¿ something that may haunt him yet, in view of the rapid rise in the popularity of Linux.

During McGeady's evidence, Microsoft seated Paul Maritz in the front row of the court. This was claimed by the DoJ to be an attempt to intimidate McGeady, but Judge Jackson ruled that he would permit it.

Microsoft tried to present McGeady as a marginalised maverick, but the arguments were a thin defence to what had been revealed in McGeady's testimony and the documentary evidence.

Microsoft has been storing up legal points that strongly suggest it will contest any adverse result in the Court of Appeals or the Supreme Court.

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Graham Lea is a leading computer industry analyst specialising in Microsoft who will be following the case for News Online. His views do not represent those of the BBC.