Microsoft's browser tactics revealed

A Microsoft executive acknowledges that major Internet Web sites had to agree not to promote Netscape's browser as the price for receiving featured Windows placement.

A Microsoft executive acknowledged that major operators of Internet Web sites had to agree not to promote Netscape's Internet browser as the price for receiving featured placement on the Windows desktop.

Microsoft's day in court Microsoft Chairman Bill Gates mandated that if companies such as Walt Disney and Intuit wanted "top-level" marketing agreements, they "would be promoting Microsoft's Internet Explorer preferentially to Netscape Navigator and any other leading browser," Will Poole testified at the company's antitrust trial.

Intuit, maker of the popular Quicken financial planning software, agreed to the restriction in 1997 because it wanted access to millions of consumers whose personal computers come installed with the Windows operating system, he said. "They told me that was very important to them," Poole testified.

The desktop, the first screen computer users see when they turn on their machines, is regarded as an important marketing channel for software and Internet sites.

Poole, senior director of business development for the Redmond, Washington-based software giant, was called to the witness stand by Microsoft to rebut testimony by Intuit Chief Executive Officer William Harris Jr. Harris testified earlier in the trial, now in its fourth month, that Microsoft had required Intuit "to forego any business relationship with Netscape" as a condition for having the Web site promoted in the Windows desktop. Poole denied that Intuit was pressured to cut all ties to Netscape.

Curtail marketing
Microsoft is accused of using its dominance in the operating system market to crush competition from Netscape, whose rival Navigator Web browser was viewed as a threat to Windows. One way was to force major Internet content providers like Intuit and the Disney Channel to endorse Internet Explorer and not Navigator, the government charges.

In 1995, Microsoft dropped a planned $2.1 billion acquisition of Intuit rather than face a lengthy antitrust battle with the Justice Department (DOJ).

Under cross-examination by David Boies, the government's chief trial lawyer, Poole acknowledged that as a condition for placement on the desktop, Intuit had to curtail marketing and a promotion agreement with Netscape. It also had to agree to use Internet Explorer in its software programs like Quicken and TurboTax, a popular tax preparation program.

"You told them that if they were going to get that, they would have to agree to limit what they had to do with Netscape?" Boies asked.

"That is correct," Poole said. "The terms of participating at that top level [of marketing agreements] had limits on what they could do with other browser manufacturers, of which Netscape was the primary one. Intuit could not have a certain set of relationships with Netscape" having to do with "marketing, promotion, and other activities," Poole said.

Poole also acknowledged writing to colleagues that the agreements with Intuit and 23 other Internet content providers were part of Microsoft's "drive toward our overall market share objectives." The government is trying to show that Microsoft wanted more widespread use of Internet Explorer in order to hurt Netscape.

Was email a "bribe?"
On a related matter, Boies asked Poole about a 1996 email in which Gates reported he had told Scott Cook, then Intuit's chairman, that "if he had a favor we could do for him, that would cost us something like $1 million to do that in return for switching browsers... I would be open to doing that."

"Mr. Gates is saying our technology is advanced and the Netscape browser is an inferior technology," Poole said. "I may not be an expert at interpreting his words."

During a recess, Boies told reporters outside the courthouse that Gates's offer "in economic terms" amounted to a "bribe." Microsoft spokesman Mark Murray said he was "frankly shocked" that Boies would call the Gates offer a bribe. Gates was merely offering to compensate Intuit for "significant sunk cost, $1 million or more" to reengineer Quicken to quickly adapt it to Internet Explorer, Murray said.

Poole also acknowledged that before Microsoft decided to forego charging companies such as Disney Channel for a featured spot on the Windows Channel Bar, Microsoft could have made "many tens of millions, possibly $100 million."

The Channel Bar is a feature that allows computer users to go directly to a Web site to get music, news, stock quotations or other information. The government contends Microsoft believed it could make money from the Channel Bar but traded placement in premier spots for agreements that content providers not promote Netscape Navigator.

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

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