MS/DOJ: Browser seen as key to AOL-Netscape deal

Microsoft has introduced to court documents that seemingly contradict testimony about the importance of the Netscape browser in last November's deal in which America Online bought Netscape Communications and partnered with Sun Microsystems.

Microsoft has introduced documents that seemingly contradict testimony about the importance of the Netscape browser in last November's deal in which America Online bought Netscape Communications and partnered with Sun Microsystems.

In a Nov. 21, 1998 document prepared by AOL's investment bank, Goldman Sachs, under a heading called "Strategic Rationale: The Plan," the first item listed talks about turning the browser into a more complete desktop application to rival Microsoft's operating system Windows.

"Extend browser to be a more comprehensive desktop application, bundling communications and productivity applications to absorb more share of computing time, with the goal of becoming user's de facto environment," the document states.

In addition, the document lists as one of the benefits of the deal "a viable alternative to Microsoft as a browser provider" to AOL.

A series of documents turned over to Microsoft in the course of discovery cast doubt on deposition testimony from AOL executives Barry Schuler and Steve Case that AOL purchased Netscape in November for what then amounted to US$4 billion [B] in AOL stock "despite the browser" instead of because of it. In addition, Case said under oath that he stood by a Washington Post article that said he had no intention of competing with Microsoft in the operating systems market.

But an internal e-mail between Sun officials, dated Nov. 10, 1998 seems to cast doubt on what AOL's intentions were just prior to announcing the deal. "The litesuite productivity apps is something AOL would very much like to have," wrote Sun's Krishynamurthy Venkatasubramanian to a series of colleagues. "The suite consists of a word processor, spreadsheet (both standard and multi-dimensional) and presentation graphics."

U.S. District Court Judge Thomas Penfield Jackson, however, questioned Microsoft attorney Michael Lacovara about whether he was introducing the documents at the right time, while the U.S. Justice Department's economist, Franklin Fisher, is on the witness stand. After Lacovara confronted Fisher with several documents that the Massachusetts Institute of Technology professor said he never read, Jackson interrupted.

"I'm not sure what your strategy is here," Jackson said. "You have shown the witness a number of documents with which he is not familiar. Some of them are ambiguous and cryptic. I am not suggesting that these documents shouldn't come in. I'd much prefer to hear representatives from AOL, Sun and Netscape as to the significance of the documents and to the extent to which they represent the current state of the relationship."

Lacovara said he would question the one AOL witness expected to testify during the rebuttal case, vice president David Colburn.

Fisher had testified that he believed the three-way-deal would have no impact on AOL's decision over whether to continue to distribute Microsoft's Internet Explorer browser to subscribers and Lacovara said he introduced some of the documents to cast doubt on whether that was AOL's intention. In January, AOL chose not to terminate its agreement with Microsoft to continue distributing the browser to its estimated 17 million [M] users.

"If this has been used to call into question his prognostications," Jackson said, "the point has been made. You don't have to go into it any further."

(Wasserman is Washington bureau chief for The Industry Standard.)

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