Newly Released Documents Shed Light on Microsoft Tactics

[Jonathan <j.e.drews@worldnet.att.net>]

Interesting reading here; maybe the EU knew more than we did.

http://www.nytimes.com/2004/03/24/technology/24soft.html
Even as Microsoft prepares to face penalties from the European Union,
which accuses the company of abusing the Windows monopoly, new details
about the tactics Microsoft used to secure a dominant position in
software markets for nearly two decades are emerging in a state
courthouse in Minneapolis. 

Testimony during the second week of trial in the consumer class-action
lawsuit in Minnesota has revealed some embarrassing internal documents
from Microsoft which were not disclosed in the bitter 1997 federal
antitrust lawsuit that focused on the company's attempt to control the
browser markets in the 1990's. 


Among the documents introduced in court this week was a letter from June
1990 in which Bill Gates, Microsoft's chairman, told Andrew S. Grove,
the chief executive of Intel at the time, that any support given to the
Go Corporation, a Silicon Valley software company, would be considered
an aggressive move against Microsoft. 

Other evidence presented by the plaintiffs' lawyers at trial yesterday
gave an account of how Microsoft violated a signed secrecy agreement
with Go and showed that Microsoft possessed technical documents from Go
that it should not have had access to. 

A Microsoft spokeswoman said that many of these newly disclosed
documents were not relevant to the trial, which focuses on Microsoft
pricing actions.

"These are very old documents, taken out of context for the sole purpose
of obscuring the real issue of this case," said Stacy Drake, the
Microsoft spokeswoman.

But lawyers for the plaintiffs contend that the documents show how
Microsoft unfairly dominated the market. "All of Microsoft's conduct was
designed to acquire and hang on to their monopoly,'' said Eugene Crew, a
lawyer at Townsend, Townsend & Crew, based in San Francisco. "Consumers
were harmed by being deprived of choice. The greatest harm out of the Go
story was the suppression of innovation and new technology by
Microsoft."

Microsoft has already paid $1.6 billion in its efforts to settle
consumer antitrust claims filed in 10 states.

The new lawsuit, which contends that Microsoft overcharged Minnesota
customers from 1994 to 2001, seeks almost $500 million from the company.
If the company, based in Redmond, Wash., loses, it could also be forced
to pay triple that amount under Minnesota state law.

This week, the lawyers representing the Minnesota consumers are focusing
on Microsoft's efforts to undercut Go, a start-up company that was
developing an operating system for hand-held computers. 

The first witness appearing at the trial yesterday was Jerry Kaplan, the
co-founder of Go. Mr. Kaplan, who was a software developer at the Lotus
Development Corporation before he started Go, has been a longtime
opponent of Microsoft. 

Yet he said he was surprised by what was revealed about Microsoft's
activities in the documents. "I was shocked," Mr. Kaplan said in a
telephone interview. "This was a corporate mugging that went uncorrected
and unknown."

The events surrounding the failure of Go have often been cited as a
reason for the animosity between Silicon Valley executives and
Microsoft. Go was one of the most prominent efforts by Silicon Valley
entrepreneurs and venture capitalists to create software for
tablet-sized devices. In addition to an all-star cast of technologists,
the start-up had backing from major industry players like I.B.M., Intel
and AT&T. 

The plaintiffs contend the new documents show that Microsoft violated
nondisclosure agreements with Go, and then used that information to
build PenWindows, a competitor to Go's PenPoint operating system. The
documents included Microsoft's internal e-mail messages showing that it
had detailed knowledge of Go's product plans. 

The documents also suggest that Microsoft sought to pressure Intel to
cancel its plans to invest in Go. On June 28, 1990, Mr. Gates wrote a
letter to Mr. Grove trying to convince the Intel executive that he
should back a version of Windows for portable computers, then code-named
Windows-H, rather than Go's PenPoint software.

"I guess I've made it very clear that we view an Intel investment in Go
as an anti-Microsoft move, both because Go competes with our systems
software and because we think it will weaken the 386 PC standard," Mr.
Gates wrote.

Shortly after the letter was written, according to Mr. Kaplan, Intel
reduced its planned investment in Go from $10 million to $2 million, and
stipulated the investment be kept a secret.

An Intel spokesman declined to comment on the events.

Silicon Valley executives said that Microsoft's aggressive behavior in
the early 1990's led to a widespread belief among technology companies
that Microsoft was using its operating system monopoly and unfair
tactics to compete in markets where its technology was inferior.

Microsoft was well aware of this perception, and in 1991 tried to alter
the way the company was viewed.

In a document titled "Microsoft Criticism," the company's outside public
relations consultants recommended training for its executives on
"personal demeanor and style." The advice read in part that the focus
should be shifted from "killing the competitor" to "providing a better
solution to the customer's problems."

"It's a bit of artifact, but in its day it was a good memo," said
Marianne Allison, an executive at Waggner Edstrom, Microsoft's longtime
public relations firm.

In late 1993, Go was sold to AT&T where it was ultimately merged into
the company's portable computer subsidiary. In 1994 the phone company
shut down the effort in portable computing. Three months later Microsoft
canceled its PenWindows project. 

In 1996, Mr. Kaplan wrote a book, "Start-Up: A Silicon Valley Adventure"
(Penguin USA), in which he blamed Microsoft, in part, for the demise of
Go. Two years later, Marlin Eller, a former Microsoft programmer who was
part of the PenWindows project, wrote in "Barbarians Led by Bill Gates"
(Owl Books) that the intent of the PenWindows project had been primarily
to undermine Go.
bb


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