AMD chief testifies in Microsoft's favor

WASHINGTON--Microsoft will call Advanced Micro Devices CEO Jerry Sanders as its first witness Tuesday as the company's antitrust remedy hearing begins its second phase.

Sanders, in written testimony submitted before his scheduled appearance, said that the litigating states' proposed remedy of requiring Microsoft to sell a stripped-down version of Windows "would have harmful effects on AMD, the computer industry as whole, the U.S. economy and consumers worldwide."

Sanders said Microsoft Chairman Bill Gates asked him to testify and that he agreed out of concern over the remedy proposal. He faulted the remedy provision of the litigating states, which would compel Microsoft to release a second version of Windows without so-called middleware, such as browsing and media playback technologies.

The proposal, he argued, could lead to the fragmentation of Windows and "would set the computer industry back almost 20 years."

The CEO's court appearance will open the second phase of the remedy hearing, which is expected to go on for about another month.

During Monday's session, Microsoft attorney Michael Lacovara grilled University of California at Berkeley economist Carl Shapiro for a second day before the nine states and District of Columbia wrapped up their case. The proceeding, which entered its fifth week Monday, will help U.S. District Judge Colleen Kollar-Kotelly determine a remedy for Microsoft's antitrust violations.

Before Sanders took the stand, Microsoft filed a motion asking Kollar-Kotelly to dismiss the litigating states' claims. The company argued that the states failed to prove that a broad remedy--one greater than the November settlement cut with the Justice Department and nine other states--is warranted. The judge said she would rule on the motion at a later time.

In a related matter, the Justice Department on Monday afternoon filed a "friend of court brief" requested by Kollar-Kotelly. The brief addressed an earlier Microsoft motion to dismiss the states' case in lieu of the settlement between the Justice Department and nine other states. Federal trustbusters could not support Microsoft's motion, "as a matter of law," the brief stated. But the Justice Department made clear that the federal government--not the states--sets national antitrust policy, a point the judge should take into consideration.

As with other witnesses, Sanders submitted written testimony to the court, after which the states started their cross-examination. Written testimony carries the same weight as that given orally. The sides present written testimony for expediency, as the court has limited the proceeding to 100 hours.

In his testimony, Sanders argued that Microsoft's dominance in PC operating systems fosters diversity rather than limiting consumer choice. He compared the situation to "proprietary operating systems that run only on specific hardware designed and manufactured by the same vendor," such as Apple Computer's Mac OS or Sun Microsystems' Solaris. "Microsoft's Windows operating systems run on computers manufactured by thousands of different companies," he stated.

Sanders praised Microsoft for helping to bring standardization to the computer industry. "Standardized platforms promote competition," he asserted. The absence of this standardization "would diminish overall competition as many software and hardware vendors would have to decide which particular operating system(s) to target as a development platform."

Sanders also dealt with one of the most contentious parts of the original trial--which concluded in September 1999--and of the Justice Department settlement and the litigating states' proposed remedy: disclosure of application programming interfaces (APIs) and other technical information essential for developing third-party software that works well with Windows.

AMD's CEO asserted that Microsoft's API disclosure greatly benefits his company.

The settlement, which is awaiting approval or rejection by Kollar-Kotelly, would increase the amount of technical information given to software developers. The litigating states contend that the settlement doesn't go far enough.

Fear of Windows fragmentation
The states' remedy provision would make it possible for PC manufacturers to ship Windows with varying middleware components, which they claim would foster competition.

But Sanders testified that this would hurt rather than benefit competition or API disclosure.

"Were computer manufacturers or other Windows licensees enabled to distribute a smorgasbord of different versions of Microsoft Windows...AMD, like other software and hardware vendors, would no longer be able to rely upon the existence of particular software code in Windows or the APIs," he said.

In addition, Sanders contended it would be too expensive for companies like AMD to "create products for multiple, inconsistent versions of Windows."

In his 17-page testimony, Sanders also addressed product integration, known as bundling. The states have argued that Microsoft integrates new technologies into Windows to thwart competitive threats rather than benefit consumers. In fact, in its June 2001 ruling that found that Microsoft used illegal means to maintain a monopoly in Intel-based operating systems, a federal court of appeals determined the commingling of browser and operating system code to be an anti-competitive act.

"Contrary to some suggestions I have heard in connection with this case, product integration is unambiguously good for consumers," Sanders testified. "The integration of innovative features is a principal means by which both software and hardware products are improved, to the benefit of consumers."

He cited AMD's integration of memory-controlling functionality into its upcoming Hammer microprocessor as an example of how companies integrate once-separate features into their products.

Sanders concluded by addressing Microsoft's moves in the server business, where he argued that the litigating states' proposed remedy would lessen competition.

"Microsoft's development of reliable and scalable server operating systems has enabled AMD to enter and compete more effectively in the server businesses...because most non-Microsoft server operating systems only run on specialized microprocessors," he testified.