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Microsoft exec: Bundling only a benefit

By Bloomberg News
Special to CNET
February 1, 1999, 6:05 PM PT

update WASHINGTON--Microsoft's Windows 98 operating system in many regards doesn't offer consumers more benefits than they could get by installing the company's Internet Explorer Web browser on an earlier version of Windows, said Microsoft senior executive James Allchin.

That testimony in the company's antitrust trial goes to the heart of one Microsoft's day in court of Microsoft's main lines of defense: That the company put a Web browser in Windows 98 to benefit consumers, not squelch competition from rival browsers.

Under relentless cross-examination by the government's lead attorney, David Boies, Allchin acknowledged that Windows 98 gave consumers roughly the same capabilities they would get from separately installing Internet Explorer into an older version of Windows.

Boies grilled Allchin using the same videotaped presentation that Microsoft attorneys presented in court to detail the benefits of Windows 98.

Nineteen times, Boies played a clip from the tape and asked Allchin about Windows 98's purported benefits. He asked Allchin, "If you took a Windows 95 machine without any Internet Explorer technologies and added a browser that you got off the Internet, you'd get the same rich experience you got here?"

Allchin, whose answers became less and less audible, responded, "Yes, I believe that's correct."

The second Microsoft executive to take the stand at the company's antitrust trial under way here added that when Internet Explorer is installed separately on an operating system, it "replaces core files" in Windows that enable the browser to run in much the same way Windows 98's Web browsing function does.

"It doesn't matter where [consumers] get the software," Allchin testified, referring to Internet Explorer.

Boies shot back, "Within Microsoft, it mattered a great deal because if [consumers] got [Internet Explorer] one way it represented a competitive choice, and if they got it another way the consumer had to take it, right?"

Allchin agreed with the assertion after Boies showed him a copy of an email the executive sent in December 1995 that discussed Microsoft needing to "leverage Windows more" to gain share in the Internet browser market.

Critical exchange
Today's courtroom exchange is critical to the case against Microsoft brought by the Justice Department and 19 states, which allege the company used illegal tactics to protect its Windows monopoly from competitive threats posed by emerging Internet technologies. The government alleges Microsoft realized Internet browsers could become alternate computer operating systems.

The company responded by "welding" Internet Explorer to Windows to ensure a dedicated distribution method with the majority of computer users. Windows runs on more than 90 percent of the world's personal computers.

Company officials frequently cite, as they did today, language in a June 1998 appeals court decision in a related dispute that said the company is free to integrate new products into Windows as long as some consumer benefit results. That language was not central to the appeals court's decision.

Speaking outside the courthouse after the trial adjourned today, Microsoft spokesman Mark Murray dodged a question about the benefits Windows 98 has that consumers couldn't get by installing Microsoft's browser separately.

Instead, emphasizing the appellate court ruling, he said, "The government's case is really about trying to dictate product design...which would set back the growth of the high-tech sector in our economy."

Boies' questioning of Allchin today was intended to support the government's claim that there is no reason for Microsoft to link the two products except to illegally maintain its Windows monopoly. To support this charge, Boies cited pretrial testimony by Microsoft executive Ben Slivka, who answered "yes" when asked if integrating the browser into Windows was a response to the threat posed by Internet browsers.

Boies read this part of Slivka's deposition to Allchin, asking him if he agreed. Allchin answered: "Yes," saying that Microsoft "believed Netscape was a serious potential platform threat" to Windows.

Last week, Microsoft senior executive Paul Maritz testified that the software giant had asked Netscape not to compete against it in the Internet browser market in an attempt to have Netscape instead build products that worked with Windows.

Roll the video
Microsoft provided the ammunition for Boies' attack by introducing into evidence almost three hours of videotaped presentations. That video was intended to prop up Allchin's direct testimony about why it was important include Internet browsing technologies in Windows 98, which went on sale last June.

One segment featured Microsoft Chairman Bill Gates at a 1995 conference explaining to software developers how Microsoft planned to make it easier to access information on the Internet by "reducing the number of steps the user has to learn." The company planned to "set standards" for configuring Web sites to help Internet users find information, he said.

Another video purported to show the ease with which computer users could "seamlessly" move from accessing files within their personal computers to information on the Internet. Microsoft employee David Fester showed that such features were unavailable when Navigator was loaded onto a Windows 95-based personal computer.

Boies called the comparison irrelevant. "This is not a trial about whether Navigator is better than [Internet Explorer] or whether [Internet Explorer] is better than Navigator," he told reporters. "This is a trial about whether consumers ought to have a free choice" between Web browsers, he said, noting later that Allchin's testimony showed that Microsoft had "no technological justification for what was done."

At the close of the day's proceedings, Microsoft attorney John Warden asked U.S. District Judge Thomas Penfield Jackson to "nullify" an earlier order barring the attorneys from talking to their witnesses outside the courtroom. Jackson turned Warden down.

Shares of Microsoft fell 2.0625 to close at 172.9375.

Copyright 1999, Bloomberg L.P. All Rights Reserved.

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