Microsoft brings out the big guns

Microsoft Corp.'s dealings with its hardware vendor partners on issues which are at the heart of the U.S. Department of Justice antitrust trial will return to center stage tomorrow, when one of Microsoft's most senior executives takes the stand.

Microsoft today made public the 33-page written testimony of that official, senior vice president Joachim Kempin. In his testimony, Kempin revisits charges against Microsoft of product tying, exclusionary contracts and prohibitive first-boot requirements. And like a number of his Microsoft predecessors on the stand, Kempin devotes much of his testimony to splitting hairs regarding the meaning of terms, such as "browser".

Kempin, who has been a part of Microsoft since 1983, is the official in charge of Microsoft's lucrative OEM business. While he rarely speaks at forums open to the public, Kempin is well-known and much feared by even Microsoft's largest OEMs, as he personally weighs in on thorny contractual dealings between hardware makers and Microsoft. As he himself acknowledges in his testimony, Kempin and his group work directly with more than 500 "royalty" OEMs who license Windows directly from Microsoft and another 80,000 who license Windows indirectly.

In his testimony, Kempin denies the assertion made by numerous OEMs in their trial depositions and private conversations that Microsoft requires as a term of licensing Windows 95 and Windows 98 their agreement to preload Internet Explorer.

Kempin says that, "In fact, no such [IE preinstallation] requirement exists in Microsoft's license agreements." He bases his claim on the fact that Internet Explorer isn't a separate product. "Internet Explorer is the name for a set of technologies that are an integral part of the Windows operating system, as designed, developed and tested by Microsoft," Kempin states. Kempin also makes a point of noting that OEMs are free to preload non-Microsoft software, including non-Microsoft browsers, on their systems -- a fact that OEMs are not disputing. Microsoft's change in its Internet sign-up policies to accommodate the demands of OEMs is another area explored by Kempin in his remarks. He discusses the "additional rights that Microsoft has recently granted certain OEMs under their license agreements to modify this sign up process."

In fact, Microsoft granted OEMs permission to install their own Internet sign-up software in lieu of Microsoft's Internet Connection Wizard in Windows 98 only after a number of OEMs, led by Gateway Inc., said they wanted to launch their own Internet sign-up services and/or offer services from their service providers of choice.

In his testimony, Kempin offers a different take on the ISP sign-up matter. Prior to the release of Windows 98, "several large OEMs informed Microsoft that the Internet Connection Wizard feature of Windows was not sufficiently 'jazzy' in their view. They also said that they wanted to promote their own proprietary Internet sign-up process," he says.

In his summary, Kempin says he is "surprised and disappointed" by the government's allegations regarding Microsoft's OEM licensing practices. "To the best of my knowledge, no one at Microsoft has ever threatened an OEM with negative consequences such as withholding a Windows license or increasing the OEM's royalty if that OEM chooses to license Netscape's web browsing software," he says.

He also denies that Microsoft's Market Development Agreements, or MDAs, are "malevolent attempts to strong arm OEMs into doing things against their will." As OEMs have noted in numerous private conversations, MDAs reward vendors who most heavily market and promote Windows, Internet Explorer and other Microsoft products and technologies. The more MDA to which an OEM agrees, the better a per-copy price that OEM receives when licensing Windows.

Kempin is expected to take the stand today. He is Microsoft's second-to-last witness. Judge Thomas Penfield Jackson has told both sides in the case he would like to finish hearing all the witnesses by the end of this week.

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