PC makers show their worst fears

Documents detailing Microsoft's hardball tactics bring into sharp focus a PC company's worst nightmare: alienating the Redmond empire.

2 min read
Government documents detailing
Microsoft's hardball tactics bring into sharp focus a PC company's worst nightmare: alienating the Redmond empire.

On Monday, the Justice Department filed testimony from Compaq Computer, Gateway 2000, and Micron Electronics demonstrating that all three companies were required to carry the Internet Explorer browser as a condition of licensing Windows 95. Two of those companies now say it was the superiority of its products--rather than alleged threats by Microsoft--that drove them to make their decision.

Micron chairman and chief executive Joe Daltoso issued a statement yesterday that a declaration made by a manager at his company did not constitute a complaint about Microsoft. And John Rose, a senior vice president at Compaq, told the Wall Street Journal that it was customer demand, not a Microsoft letter threatening to terminate its Windows 95 license, that drove his company to offer Internet Explorer exclusively on the boxes it sold.

Both PC manufacturers added that aggressive negotiations are standard in the computer industry--a perspective that analysts and Microsoft itself are quick to confirm. But analysts add that currying disfavor with Microsoft can put a computer vendor (also called an original equipment manufacturers, or OEM) out of business.

"[PC vendors] work on the assumption that keeping good relations with Microsoft is a top priority," said Dwight Davis, editorial director at Windows Watcher, a publication that follows the industry. "Clearly, some of these people who have had their dirty laundry [with Microsoft] aired are doing all they can to smoothe things over. There's sort of revisionist history going on on both sides right now."

Micron may have special reason to worry. According to the deposition filed by its manager, Eric Browning, the company's Windows 95 license expires next week. The company declined to discuss whether it has renewed an agreement yet, but an analyst who follows the Nampa, Idaho, company says its needs all the bargaining position it can get.

"Micron is in somewhat of a precarious position as an up and coming second-tier vendor," said Roger Kay, a computer analyst at International Data Corporation. "They are not in a sufficiently established position that they can do much swaggering."

All three companies declined to discuss their relationship with Microsoft, but a spokesman for the Redmond, Washington, software giant said there was no truth to analysts' assertions that Microsoft inspires fear in its licensees.

"We view our OEMs as our partners, and we work closely with them to meet their needs," Microsoft spokesman Mark Murry said. He added that, while the company requires vendors to ship the Windows platform in its entirety, Microsoft in no way restricts them from shipping the products of competitors.

"Customers want to know that Windows will run the same on any computer, no matter who they buy it from," Murray said. "What you see in the exhibits is Microsoft basically informing our partners that we do require that they ship our product in its entirety."