By Jonathan Collins
Far from being persecuted by Microsoft Corp because it competed with the software giant, IBM Corp was fighting to wipe out Microsoft in the PC market, while at the same time insisting on the best deals to license Microsoft products, according to Microsoft’s defense in the ongoing antitrust case in Washington. Yesterday in court, Microsoft attorney, Rick Pepperman argued that starting in the fall of 1994 through to the summer of 1995 when Windows 95 was successfully launched, IBM had run a public campaign to disparage and denigrate Windows 95. Rather than the victimized OEM reseller that IBM has been portrayed as by the defense in the past days, IBM was in fact looking to kill the core Microsoft Windows 95 software before its launch, he said. According to Microsoft, the reason for the apparent schizophrenia was the conflict of interest at IBM. It argues that while the IBM PC Co needed the best deal it could get for Windows 95 in order to compete, other IBM units, especially the IBM Personal Software Products unit that sold OS/2, fought to kill off Windows 95.
Pepperman produced an IBM white paper released in September 1994 entitled Warp Vs Chicago – Chicago was the code name for Windows 95, which would not be released until August 1995. In the document, which was aimed at corporate PC software buyers, IBM said Chicago is yesterday’s technology dressed-up to look like tomorrow’s 32-bit OS. Why wait for the impostor? When asked if IBM was saying the same things publicly as it was in the document, Norris replied I don’t know.
Pepperman asked government witness Garry Norris if documents such as Warp Vs Chicago were evidence of a smear campaign being conducted by IBM against Microsoft in a bid to discredit Windows 95. It may appear to be a smear to you. I call it marketing, said Norris. Microsoft also produced an email dated July 24, 1995, sent by Rick Thoman IBM senior vice president to the IBM chief executive committee – the company’s highest decision making board. In it Thoman said that in a phone conversation that day, Gates had complained about the lack of respect he felt IBM had for Microsoft. Gates had cited a statement made by IBM CEO Louis Gerstner in an interview published in Business Week. In it Gertner had said that Microsoft was a great marketing company not a great technology company. Gates also complained of a smear campaign he believed had been initiated against Windows 95 by Dan Lautenbach, then VP sales & marketing at IBM’s Personal Software Products unit.
But according to the email, Gates’ key complaint was with the licensing fee payments due from IBM to Microsoft. Auditors had judged that IBM owed Microsoft tens of millions of dollars for sales of OS/2 and Microsoft Windows products. The audit payments were a key part of Norris’s testimony on Monday. Norris had testified that the settlement of the audit payments – not expected until late in 1995 – was linked to negotiations between Microsoft and IBM for licensing Windows 95 by Microsoft, in a negotiating tactic to make IBM agree to its terms. IBM was desperate to get to the Microsoft code as far in advance of the August 24 release date as possible, said Norris.
Norris had testified that Microsoft linked settlement of the audit payments to the Windows 95 licensing talks just days after IBM said it would load software from Lotus Development Corp on its machines and not Microsoft software on July 17, 1995.
Yesterday, Microsoft struggled to lay the blame for linking settlement of the audit process to the Windows 95 agreement at IBM’s door. Microsoft’s defense produced a letter from Microsoft to IBM which set out that it was an IBM executive responsible for the audit negotiations, Jim Miller, that had first linked settlement of the audit dispute with the licensing of Windows 95 by IBM. The letter said Miller had indicated IBM was not sure it could sign the license for Windows 95 at that time. However, the document had not been turned over to government lawyers previously and was not found by IBM in its files. Judge Thomas Penfield Jackson allowed Microsoft to use the document but called it a self-serving, out-of-court statement,” and complained it had no verification.
Justice Department lawyer, Phil Malone objected to the document being admitted as the prosecution had never seen the document. Microsoft said the document had not been required by the government as it related to the audit – a topic not covered by the government’s requests. Malone, however, protested that the government did not have access to all the files to know if the letter was authentic and whether there were other letters that would support its case. However, the judge rebuked him for the government’s apparent failure to ask for it in advance from Microsoft files. You could have asked for this yourself,” Jackson said, but you’re going to have to take the consequences of not asking for it.”
Norris denied any knowledge of Jim Miller’s involvement in the licensing negotiations. Miller was not working on the audits by the time an agreement was reached. The audit was settled on August 24, the same day IBM signed to license Windows 95. Pepperman also highlighted IBM’s refusal to arrange a meeting between IBM CEO Lou Gerstner and Microsoft CEO Bill Gates despite requests from Microsoft to do so throughout the summer of 1995, as further example of IBM’s aggressive stance toward Microsoft.
