Government Turns Up Heat On Microsoft

No matter how Microsoft denies the credibility of their testimony, government witnesses like IBM’s Garry Norris do much to make its antitrust case against the software giant.

According to Reuters, Norris, who negotiated Windows licensing agreements for IBM, testified last week at a pre-trail deposition that Microsoft threatened IBM if it didn’t stop shipping its OS2 operating system — it would be treated less favorably.

“As long as you’re shipping competitive product you will suffer” in pricing terms, conditions and support programs, Norris said a Microsoft representative told him.

There are Two Sides

Nevertheless, under tough questioning by Microsoft lawyers, Norris did acknowledge that a dispute arose over Microsoft’s claims that IBM underreported royalties it owed for shipping Windows 3.1 and other products. But when confronted, Norris said he wasn’t aware that IBM had agreed to pay $30 million to Microsoft to settle a $50 million claim.

According to Norris’ testimony, IBM became very alarmed, “We were going to be out of the PC business.” Norris added that senior managers jumped into the negotiations — at one point writing directly to Bill Gates to “delink the audit” to the shipping of Windows 95.

The companies finally signed an agreement only 15 minutes before the launch of Windows 95, which proved disastrous for IBM: “It greatly disadvantaged us in the marketplace. We missed the fall back-to-school market,” Norris said.

It’s Going to Get Ugly

If you think this type of testimony is nasty, you haven’t seen anything yet, according to the Justice Department officials. Count on the next several weeks to get even uglier — laced with charges and counter charges as the government takes its best shots against Microsoft by a parading a cadre of damaging witnesses — while Microsoft fights back.

It Could Have Been Avoided

But the sad part of this whole melodrama, some analysts say, is much of this battle could have been avoided, if Bill Gates hadn’t let his ego get in the way by deciding to take such a pugnacious stance. Others say Microsoft wouldn’t be Microsoft without committing itself to this kind of dragged-out free for all.

As a result, the chasm separating Microsoft from the Justice Department and 19 states could widen in the next few weeks as each side struggles for ways to advance their cases. Federal Judge Thomas Penfield Jackson had advised both sides to use their time wisely during the three-month recess — a remark most took to mean they should find a settlement.

Bill’s Last Stand

Bill Gates and company didn’t seem to listen — as it now appears the software titan is gearing up for the final phase of its battle royal with the government. Some say there are similarities between Gates’ showdown with the Justice Department and George Armstrong Custer’s Last Stand against the Indians: Custer didn’t know he was surrounded and outnumbered until it was too late — and either will Gates.

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