Gates' DOS worries found in 1989 email

The contents of a 10-year-old email are made public as part of Caldera's private $1.6 billion antitrust suit against Microsoft.

Microsoft chairman Bill Gates expressed concern in a 1989 email that competition was undermining the software giant's ability to set prices for its DOS operating system.

The contents of Gates's 10-year-old email were made public today, as part of Caldera's private $1.6 billion antitrust suit against Microsoft. Orem, Utah-based Caldera accuses the world's largest software maker of trying to eliminate competition posed by the DR-DOS operating system, which it had acquired.

"Our DOS gold mine is shrinking and our costs are soaring--primarily due to low prices, IBM share, and DR-DOS," a competing product, Gates wrote to Microsoft executive Steve Ballmer, who later became the company's president.

"I believe people underestimate the impact DR-DOS has had on us in terms of pricing," Gates wrote.

On Friday, Caldera filed a motion urging a federal court in Utah to unseal several confidential Microsoft documents out of hundreds of thousands collected for the case, which is set to go to trial in January.

Caldera is citing Gates' memo and other Microsoft documents to support its claim that the company engaged in illegal predatory business practices. "This is just a very small snippet of the evidence we have," Bryan Sparks, Caldera's chief executive, said.

"We've literally gone through millions of documents and this is evidence of the things we allege Microsoft does to inhibit competition to make sure nobody else gets a foothold in the marketplace."

In one 1990 internal report, for instance, Microsoft discussed plans to "block out" DR-DOS by pushing one computer equipment manufacturer, Hyundai Electronics, to sign a license that required it to pay a license fee for every machine it shipped, regardless of whether the computers ran on Microsoft products.

The practice "acted as a tax for any other viable alternative" to DOS, Sparks said.

Microsoft, though, claims all of the documents cited in Caldera's motion were reviewed during the early 1990s by government antitrust regulators who took no action against the company. "It appears to be an attempt by Caldera to sensationalize the case by taking a handful of documents out of millions provided by Microsoft out context," Microsoft spokesman Tom Pilla said.

Gates's email, for instance, directly contradicts Caldera's assertion that Microsoft monopolized the market for computer operating systems, he said.

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

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