MS/DOJ: IBM tells of 'secret discussions'

IBM executive Garry Norris was back on the witness stand today in the Microsoft Corp. antitrust trial, telling of 'secret discussions' during which, he said, Microsoft executives pressured the company to drop its use of the Netscape Communications Corp. Navigator browser.

IBM executive Garry Norris was back on the witness stand today in the Microsoft Corp. antitrust trial, telling of "secret discussions" during which, he said, Microsoft executives pressured the company to drop its use of the Netscape Communications Corp. Navigator browser.

Norris, testifying for the second day as a government witness in this landmark case, filled out his portrait of Microsoft with new details about the company's tactics.

But Microsoft, which began its cross-examination shortly before the lunch break, immediately tried to create some perspective about the combatants.

Microsoft attorney Rick Pepperman pointed out that IBM earned US$81.7 billion in revenue last year, its fourth straight year of record revenue, compared to Microsoft's $14.5 billion.

The impression that Norris sought to convey on the witness stand, however, was that IBM had an unequal relationship with Microsoft.

Pepperman's cross-examination this afternoon aimed at finding discrepancies in Norris' testimony and showing that it was IBM in 1994 that sought out an alliance with Microsoft but later rejected it because of an "IBM First" policy -- a plan to promote IBM products among others.

But Norris, as he testified earlier, said Microsoft wanted exclusive terms and conditions that would have hurt its other software products, such as IBM's OS/2 operating system.

Judge Thomas Penfield Jackson showed some irritation with Pepperman's line of questioning. When Pepperman offered to call additional Microsoft witnesses, such as Joachim Kempin, a Microsoft senior vice president in charge of the company's dealings with original equipment manufacturers, to clarify what was appearing in some of the documents, Jackson snapped that they are going "to have a lot more to testify to" than the documents.

Norris will return to the witness stand tomorrow for more cross-examination by Microsoft.

Handwritten notes Norris took at meetings with Microsoft officials were used by the government to back up his testimony.

Microsoft's power was such that it could raise royalty fees and even delay hardware configuration tests, which some PC competitors got back in two weeks, for 60 to 90 days, Norris testified.

In a meeting held on March 6, 1997, Microsoft outlined a plan that would give IBM favorable Windows licensing conditions if it made its PC systems "neutral" -- and dropped all use of competing software programs, such as IBM subsidiary Lotus Development Corp.'s SmartSuite.

Norris' notes for a meeting with Bengt Akerlind and other Microsoft negotiators include the reference to "no Netscape." He put three asterisks next to it. "Bengt was very specific -- he said 'no Netscape,'" Norris said in court.

That same month, IBM and Microsoft officials again met, this time holding a much larger meeting to discuss the issues separating them.

But one Microsoft official, Ted Hannun, said they also wanted to hold a smaller meeting, a "secret discussion" because they were wanted to offer a proposal on Internet Explorer, Norris testified.

The "secret discussion" meeting was held March 27, 1997.

"After an exchange of niceties," said Norris, "the first thing Bengt said was, 'We have a problem if you load Netscape.'"

One intriguing piece of evidence, that wasn't fully explored in court, was Norris' handwritten notes of a March 21, 1997 telephone conversation with Microsoft official Hannun. In the notes Norris writes: "MS lawyers' say 'Horizontal Restraint'." Norris in court said "it wasn't very clear" what Hannun referred to when saying that and government attorney Philip Malone didn't pursue it, although Judge Thomas Penfield Jackson appeared to take copious notes. Under antitrust law horizontal restraint refers to a situation in which one company blocks a competitor's products.

Soon after that meeting, Norris was promoted program director of IBM's Network and Hardware Division. But he said IBM eventually signed an agreement with Microsoft that allowed it to continue to ship Netscape.

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