By Rachel Chalmers in Washington
America Online Inc acquired Netscape Communications Corp not for its browser business, as Microsoft Corp has tried to imply, but in spite of it. AOL chief executive officer Steve Case made this revelation in a videotaped deposition played in the Microsoft antitrust trial today, Friday June 4 1999. Judge Thomas Penfield Jackson, who is presiding over the case, has made it abundantly clear that he is interested in the possible ramifications of the Netscape acquisition to the government’s case. Microsoft itself wants to paint AOL-Netscape as a huge and formidable competitor, which it certainly is, in the e-commerce and internet portal markets. But the government maintains what it has always maintained, which is that Microsoft’s monopoly is in the PC operating systems market. The new AOL will not compete there – precisely because of Microsoft’s entrenched position.
Case could scarcely have made the point more clear. In interviews with the press in January 1999, he said that AOL will not compete with Microsoft on the desktop and that we have no flight of fancy that AOL can affect what is a Microsoft monopoly there. In his deposition he confirmed that this was his opinion in January and that it continued to be his opinion in May. Netscape’s value to AOL, he said, was principally contained in its portal, NetCenter. We were largely missing in action in the portal space, Case observed. The company’s options were to build or acquire. Case said NetCenter turned out to be the best option: Especially given the price. He said the other attractive properties the company brought to the table were its enterprise software, which is now being sold in alliance with Sun Microsystems Inc, its brand name and its people.
Contrary to everything Microsoft has sought to imply, the browser was, Case says, a disincentive. The Netscape browser business was in a state of significant decline, he said. There was a lot of concern that it declining on our watch might reflect poorly on AOL. But we decided that if we focused on the businesses we cared about – the portal and e-commerce – and the assets we cared about – the brand name and the team – that would make up for the risk of the browser. Government expert witness Franklin Fisher, whose redirect testimony offered the government the opportunity to play the Case videotape, said at its conclusion: This confirms my proposition that the purchase of Netscape was not because of the browser.
Apparently not even Microsoft believes that there is life left in Netscape’s browser business. As he wound up his redirection of Fisher, Boies produced a series of Microsoft internal emails dating from January 1999. The thread begins with Greg Shaw of Microsoft corporate PR writing: What data can we find right away that shows Netscape browser share is still healthy[?] The Government is introducing a bunch of data showing NS is headed down big time and Msft way up… It would help if you could send me some reports showing their market share healthy and holding. All of the analysts have pretty much come to the same conclusion, which is that NSCP share is declining and IE is gaining, replied Microsoft group product manager Robert Bennett.
That wasn’t the end of it, though. After some digging, Microsoft executive Yusuf Mehdi discovered two reports showing Internet Explorer’s share in a very slightly poorer light. He wrote: This is for the trial so let’s provide the more negative analysis to Greg. Back in court, Fisher observed that: Microsoft has an interest in showing Netscape doing well. If they don’t like the answer they get, they’re prepared to go out and ask someone else until they get an answer they do like. Mr Boies, this document speaks for itself, louder than most. A grinning Boies let his witness go. In the corridor spin-session, Microsoft attorney Michael Lacovara dismissed the email as marketing – an interesting new definition of that word.
