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States pressured over Win 98

Nine top PC executives in California have written the state's attorney general urging him to rethink antitrust action against Microsoft.

Nine top computer executives in California, including Intel's Andy Grove, Hewlett Packard's Lew Platt, and Advanced Micro Devices' W.J. Sanders, have written California attorney general Dan Lungren urging him to rethink taking antitrust action against Microsoft.

The letter to the top prosecutor in California--a state flush with Microsoft competitors such as Netscape Communications and Sun Microsystems--comes as federal antitrust regulators along with other states are preparing to file an antitrust case against Microsoft, perhaps tomorrow.

"The filing is tomorrow in Washington," Reuters quoted a source close to the case.

The source identified the states as California, Connecticut, Florida, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New York, New Mexico, South Carolina, Utah, West Virginia, and Wisconsin. Texas may join the case within a few weeks, the source added.

Indiana, which had been expected to join the multistate suit against Microsoft, opted out at the last minute. "We do not believe that the mere bundling by itself of [Microsoft's] Windows 98 and Internet Explorer software is necessarily anticompetitive," said an attorney for the Indiana state attorney general in a letter to head prosecutors in Iowa, New York, and Texas, obtained by CNET's NEWS.COM.

As reported, Texas attorney general Dan Morales, who has helped lead the fight against the software giant for more than two years, agreed to reconsider joining the legal effort for at least "a few weeks" after receiving a similar--in some parts identical--letter of concern from Texas PC executives to the one sent to Lungren. A state source said that decision could weaken the states' legal case should they decide to file suit.

The letter-writing campaign from pro-Microsoft computer companies to state attorneys general also is taking root in New York and elsewhere.

A Microsoft spokesman said the computer giant did not pressure the CEOs to write these letters but said that the company helped "answer their questions" and "provide support" where necessary.

In a previous letter from 26 CEOs to the Justice Department, Sen. Orrin Hatch (R-Utah), an outspoken critic of Microsoft, accused the company of concocting "a concerted campaign...to generate precrafted protest statements" by PC makers in support of its position. Hatch said he would find it troubling if these efforts would "frustrate legitimate efforts to enforce the laws." Microsoft denies his allegations.

The company also said it has a "constitutional right" to convey information to its government representatives.

"We are writing to express our strongest possible concern that the release of Windows 98 would be enjoined by antitrust litigation initiated by your office and other states' attorneys general," the state's CEOs said in their letter to Lungren, dated May 1. "While we do not express an opinion on the merits of any investigation of Microsoft, we respectfully urge you not to take any action that might delay or block the release of Windows 98."

The letter was signed by Beny Alagem, CEO of Packard Bell; Platt of HP; Gordon Eubanks, CEO of Symantec; Grove of Intel; Guerrino De Luca, CEO of Logitech; Dwight Steffensen, CEO of Merisel; Sanders of AMD; Rob Burgess, president of Macromedia; and Jay Amato, president of Vanstar.

The letter sent to Morales by Compaq Computer--as well as a separate one from Compaq, Computer City, CompUSA, and Elsinore Technologies--also were dated May 1.

Those letters bore a close resemblance to the one received by Lungren, and some parts were identical. For example, the letter from Compaq CEO Eckhard Pfeiffer said: "More than 2 million Americans develop software for Windows, and many thousands of them live and work in Texas." The California letter said: "More than 2 million Americans develop software for Windows, and many thousands of them live and work in this state."

Both letters also contained this identical sentence: "We--and many other companies in the personal computer industry--have spent millions of dollars developing, marketing, and promoting products and services that depend upon the on-time launch of Windows 98."

A spokesman for the Texas attorney general's office said Morales is not reversing his earlier position toward Microsoft. "We've had some concerns expressed to us by some of our Texas-based companies, and we feel it's respectful to hear what they have to say. Other states are welcome to proceed as they see fit," he added, "but we don't feel pressured at this point."

A spokeswoman for the California attorney general wouldn't confirm receiving the letters, but said: "We do take under consideration relevant information provided by members of the public. A determination of whether to proceed with legal action will be based on the result of our investigation and whether we find evidence of violations of the law."

She added that any action in California would not be affected by Texas's decision.

A source close to one state inquiry called Texas's announcement troubling.

"Something like this could torpedo not only the public relations effort but also the legal effort [by the states]," the source said. "Obviously, Microsoft is going to take Texas's position and say, 'There's going to be big harm to the computer industry'" if a lawsuit proceeds.

Microsoft has mounted a major lobbying effort in the wake of a previous lawsuit filed by the Justice Department and the threat of a new one from both the DOJ and the states.

The company's political ammunition includes support from powerful Democratic and Republican leaders. Conservatives include Haley Barbour, former chair of the Republican National Committee; Grover Norquist, who runs a group called Americans for Tax Reform; and Vin Weber, a codirector of the conservative think tank Empower America, which is affiliated with former White House drug czar Bill Bennett and former Congressman Jack Kemp. Liberal support includes former member of Congress Tom Downey, a close ally of Vice President Al Gore from the law firm Downey Chandler.

Microsoft also won the support of Washington state legislators, as well as Sen. Lauch Faircloth (R-NC).

Netscape, meanwhile, has retained its own high-powered political and legal team. The group includes former Sen. Bob Dole and former appeals judge Robert Bork. The company also joined forces with Sun, Oracle, Corel, the Software Publishers Association, the Computer & Communications Industry Association, and Sabre Group Holdings (the airline reservation system controlled by the parent of American Airlines), in a lobbying group called ProComp.