START -- PAGE 10 --
Q. Okay. Do you currently attain Windows operating system products from Microsoft pursuant to a license agreement?
Q. Do you have a current license agreement in force with Microsoft for Windows 95?
A. Yes, we do. It's actually been extended. The agreement expired June 30th of this year and they've given us an extension to continue to ship product against that agreement.
Q. In what form have they given you the extension?
A. I'm not exactly sure. I believe it's a letter. But it's either a letter or an E-mail. I can't recall.
Q. Has Microsoft given you any reason as to why they haven't actually entered into a new license agreement with you for this year?
A. What they have said is that we have many other activities going on with them right now, contract activities, and they aren't -- they aren't ready to start into a new contract negotiation with us until they have completed all these other things on the table.
Q. Do you have any concerns about possible other reasons that Microsoft may have for not formally renewing your license agreement yet?
A. My suspicions would be either they're trying to integrate some terms around the new product which would be, you know, formally known as Memphis, now Windows 98. Possibly they would want to understand what some of the outcome of the other contract discussions are.
Q. And when you say they, Microsoft would want to understand the outcome of some of the other contract discussions, can you explain what you mean?
A. Yeah. If they possibly don't like some of the other outcomes, you know, that could give them some more leverage positions with our negotiating a Windows 95 renewal.
Q. And when you talk about other outcomes, do you mean licensing terms or agreements for other Microsoft products other than Windows 95?
Q. What other products do you have in mind that perhaps are playing a role in Microsoft not renewing your Windows license yet?
A. We are currently negotiating with them on other products including Office, Microsoft Office Applications, Microsoft Mouse, Microsoft Consumer Applications, and a variety of smaller service agreements.
Q. Is having a Windows operating system on the personal computers that you ship important?
A. It's required.
Q. And why is that?
A. The market that we distribute our products into, that's essentially the de facto standard for product in the PC industry.
Q. And when you say it's the de facto standard, could you just explain what you mean by that?
A. The market success of that product is somewhere in the 90 percent market share range or possibly higher.
Q. The market success of Windows 95?
A. Of Windows 95 as a percent of operating system shipped on personal computers and other desktop computers.
Q. And why does that make it essential for you to have Windows 95 on the products that you ship?
A. Without an operating system, we would not be in business.
Q. But why does that operating system have to be Windows?
A. Again, it's probably used by over 90 percent of the people using desktop computers. And we do not have a Unix compatible desktop product. We do not have an Apple operating system compatible desktop product. So the only product we ship is an IBM compatible, which is essentially today a Windows compatible PC.
Q. The PCs that you have shipped for that last year or so with Windows 95 on them, have they included as part of the software on that machine Microsoft's Internet Explorer 3.0 Browser?
A. Yes. We are shipping IE 3.0 on our Windows machines.
Q. Do you have a choice -- in terms of your contract with Microsoft, do you have a choice about whether or not you put IE 3.0 onto the machines you ship?
A. I'm not very familiar with the specifics on IE 3 requirements in our contract.
Q. Do you have an understanding about whether or not you are allowed to either remove IE 3 from the machines or ship a machine without IE 3?
A. My understanding is that there is a preconfigured icon on the Windows operating system screen. We are not allowed to remove any of those icons that Microsoft preconfigures there.
MATERIAL REDACTED BY COURT
START -- PAGE 31 --
START -- PAGE 31 --
Q. Is that why in the way that you're configuring your shipments of Communicator you have a button that the end user has to activate in order to start the process of getting to Communicator?
Q. And just so I'm clear, does Gateway believe it would be of value to the end user if they wanted and so ordered from you to have a PC that would boot straight into the Gateway customized version of Communicator?
A. Is it of value to the end user?
A. We believe it would be. It would be a much simpler environment for the end user to immediately use the PC as they ordered it.
Q. You mentioned this sort of new or different interface that can be presented by Communicator. Do you believe that over time a separate interface, an interface that sits on top of the operating system such as the Communicator interface has any potential to affect the need for a specific underlying operating system?
A. Yes, I think that it would.
Q. Can you explain that? It was a poorly phrased question. But if you did follow that, can you explain what you mean, how you think that might happen.
A. If the user is not required to boot or launch an application directly from Windows and there was some sort of an underlying layer that sat between the interface and the PC operating system that abstracted those commands, then there would not be -- then there would definitely be a threat to Microsoft Windows.
Q. Why would there be a threat?
A. The requirement for Windows would not be there.
END -- PAGE 32 --