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Microsoft calls hostile witness in risky move

Microsoft will attack the credibility of a senior AOL executive and grill him about his company's $10 billion acquisition of Netscape Communications.

When Microsoft's antitrust trial resumes, the company will attack the credibility of a senior America Online executive and grill him about his company's $10 billion acquisition of Netscape Communications, the software giant said today.

Attorneys from the Justice Department and 19 states, meanwhile, will attempt to bolster the weakest part of their case by calling an IBM executive who negotiated the key company licenses for Windows 95 and other Microsoft products.

The decision to Microsoft's day in court call AOL senior vice president for business affairs David Colburn as a hostile witness is considered a bold move. Microsoft attorney John Warden cross-examined Colburn earlier in the trial but was unable to impeach the AOL executive's most damaging testimony.

Microsoft also said it would call former Symantec chief executive Gordon Eubanks, now the top executive at Oblix, a maker of corporate software. Eubanks has long been a staunch Microsoft ally.

The other three witnesses, one for Microsoft and two for the government, are experts who testified earlier in the case.

In addition to tipping each side's strategy during the rebuttal phase of the trial, the list of witnesses was notable for the names it did not include. Speculation had run high that Steve Case and Ted Waitt, chief executives of AOL and Gateway, respectively, would be called.

This time around, Microsoft is expected to focus on the three-way deal announced in November between AOL, Netscape, and Sun Microsystems. In a court document filed today, Microsoft said that Colburn's testimony would concern the specifics of the deal and when company executives and antitrust prosecutors knew about it.

The testimony, Microsoft said, would speak to "the completeness and candor of prior testimony given by Mr. Colburn in his deposition prior to the trial of this action and during his prior testimony to the court."

Microsoft has been busy taking the depositions of executives from all three companies about the deal. Attorneys from the Redmond, Washington, company on Wednesday are scheduled to depose Case, AOL's CEO, and Barry Schuler, president of AOL's interactive services.

Microsoft is expected to use the evidence to show that at the same time Colburn was testifying that Microsoft was a monopolist, he was orchestrating a merger that would profoundly shape the competitive landscape. In addition to harming Colburn's credibility, Microsoft's strategy appears aimed at fighting charges that Microsoft's dominance in the industry is likely to go unchecked by rivals.

Microsoft's decision to recall a witness who performed well earlier struck at least one court observer as risky. "It's a very dangerous tactic to call a strong hostile witness as one of your three rebuttal witnesses," said Rich Gray, an antitrust litigator at Bergeson, Eliopoulos, Grady & Gray.

Meanwhile, the government's decision to call Garry Norris, the former director of strategic relations for IBM's PC division, appears to be an effort to shore up one of the weakest parts of its case. While the government has repeatedly presented evidence that suggests Microsoft played hardball with its partners, proving those tactics harmed consumers has been more elusive.

Norris, who from 1995 to 1997 negotiated his company's most crucial licenses with Microsoft, will testify about "the impact of the absence of any commercially viable alternative" to the Windows operating system, a government filing in the case said.

Hillard Sterling, an antitrust attorney who has repeatedly criticized the government's case for failing to prove consumer harm, said Norris's designation made sense. "The government [has] suffered from a dearth of computer manufacturers" testifying in the case, said Sterling, a partner at Gordon & Glickson who is not involved in the case.

Microsoft's third witness will be Richard Schmalensee, dean of Massachusetts Institute of Technology's Sloan School of Management. The economist likely will explain earlier writings that appeared to contradict his testimony in the case, as well as refute allegations that Microsoft is a monopolist.

Eubanks, who has been a vocal critic of governmental intrusion into the high tech arena, will testify on competition in the software industry, the company said.

The government's remaining witnesses will be Edward Felten, assistant professor of computer science at Princeton University, who will testify further about the combining of Windows with the Internet Explorer browser and other technical issues. Franklin Fischer, another economist at MIT's Sloan, is expected to testify further about Microsoft's alleged monopoly.