Microsoft on Trial: MS a '1,000-pound gorilla' says Disney

Tuesday morning in federal court the US government showed excerpts from the videotaped depositions of Microsoft Chairman Bill Gates and Steve Wadsworth, an executive with the Walt Disney Co. They depicted Microsoft as unafraid of using its operating system power to threaten partners and competitors into changing their business practices.

Wadsworth's deposition, taken in September as part of the government's ongoing antitrust case, centred on threats Microsoft allegedly made regarding the Disney channel on Microsoft's Active Desktop. As part of a deal between the two companies, Wadsworth said Microsoft placed serious restrictions on how Disney could promote or partner with Netscape Communications Corp. to develop a similar channel on Netscape's Netcaster and Netcenter services.

In his deposition, Wadsworth stated that while the restrictive nature of the agreement was far more exclusive than Disney wanted, it felt it had to do a deal with Microsoft from a business perspective. The contract allowed Disney to create a channel to run on Netscape's services, but Disney could not promote it. Nor could it promote any Netscape technology or product in any way.

Characterising the negotiations with Microsoft as working with "a 1,000-pound gorilla of the industry," Wadsworth said that all along he felt uncomfortable working with Microsoft, claiming that "I felt like we were being, you know, leveraged." Wadsworth described how Microsoft had threatened to pull Disney's channel off Windows 98's Active Desktop because Disney had added some interactivity to its Netscape channel. Ultimately, to keep its relationship going with Microsoft, Disney agreed to make technical changes for the Netscape version, he said.

While the segments of Gates' videotaped deposition were similar to what has been shown in court already, in which an evasive witness dodges questions, the clips focused on Microsoft's willingness to bully IBM.

Department of Justice prosecutor David Boies asked Gates about an e-mail he received on March 23, 1994, entitled "IBM helps Lotus." In the e-mail, Joachim Kempin, senior vice president of Microsoft's OEM sales and marketing group, said he was "willing to do whatever it takes to kick them out, but strongly believe we need a WW hit team to attack IBM as a large account, whereby the OEM relationship should be used to apply some pressure."

Boies grilled Gates about what "WW hit team" meant and if Microsoft in fact used its power in the OEM market to pressure IBM. Gates said the phrase stood for a "worldwide" sales person, and that he didn't remember anyone telling him or proposing that OEM pressure should be applied to IBM.

Whereupon Boies said Kempin's message was actually a reply to e-mail from Gates himself asking Kempin to find out what was going on with IBM helping Lotus Development Corp. Asked again whether Kempin was actually replying to his questions, Gates retorted that he didn't remember receiving Kempin's e-mail.

Outside the courtroom, Microsoft spokesman Mark Murray dismissed the questioning, saying that IBM later bought out Lotus and that the questions were about e-mail sent prior to Microsoft's involvement with the Web. However, in 1994, Microsoft and Lotus were already involved in a bitter battle over groupware and messaging systems, with Microsoft trying to take on Lotus Notes with its Exchange messaging system.

The government also showed portions of the videotaped deposition of Santa Cruz Operation Inc.'s Ron Rasmussen. While Rasmussen said SCO had been working on putting HTML into its operating system for years, he also stated repeatedly that a browser is an application that can be removed from the operating system without any impact. An afternoon session with a tape of Sun Microsystems Inc. marketing executive Brian Croll yielded none of the fireworks of the morning, however. Croll, a marketing manager for Sun's high-end Solaris operating system, conceded to Microsoft attorneys that his company had long integrated basic Internet networking technologies such as TCP/IP into its operating system. In addition, he said, Sun had bundled with its operating system its own HotJava browser.

Croll distanced himself from marketing documents which spoke of "integrating" the browser with the operating system. Where Microsoft had made it impossible to remove the browser from the operating system, HotJava was completely separable, Croll said.

Government attorneys quizzed Croll on Solaris' failure to gain significant ground against Windows in the market for ordinary desktop computers. Though the heavy-duty operating system is a hit among Internet server operators, Croll said the system's lack of average users has created a chicken-and-egg problem: because so few people use Solaris, there are few applications that will run on it, which in turn discourages average users from buying computers that run with it. "There's really only one platform that's viable," he said.

For the rest of the week, the government is expected to show videotaped depositions from a number of other industry executives, including representatives from Network Computer Inc., Gateway Inc., Packard Bell NEC, Sun and Caldera Inc.

For all the trial stories, go to the Microsoft on Trial page.