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February 8, 1999


By CBR Staff Writer

By Nick Patience in Washington

No company likes having its mistakes dissected in public – least of all when it is compelled to tell the truth about them under oath. Therefore it was not surprising that Microsoft Corp senior director of business development Will Poole was being as evasive as he could be when facing cross-examination from lead government attorney David Boies in the antitrust trial yesterday. The name of the mistake in question is Microsoft’s Active Desktop – and its channel bar component in particular. And coupled with the fact that Microsoft apparently did not really plan to make any money from it, we wonder why it pursued partners for the technology so vigorously. Ah yes, we remember now, as a carrot- stick combination to force them to take Internet Explorer at the expense of Netscape Navigator and thus increase its browser’s market share. Parts of the technology were so shaky that Poole admitted yesterday that PCs performed better when it had been turned off and that he that he even disabled the screen saver built into the Active Desktop because it caused problems for his PC at work in Redmond each time it kicked in. In January Intuit chief executive William Harris testified that had his company not been compelled by Microsoft to license IE exclusively together with a space on the Active Desktop’s channel bar, he would instead have offered customers a choice of Microsoft and Netscape’s browser (01/06/99). But a place on the bar is what he wanted, and therefore he had to choose IE, drop Navigator, and is still trying to patch things up with Netscape to this day. The Active Desktop channel bar pops up on the start page of Windows 95 and 98 on most new PCs, but can be turned off by users or by PC manufacturers, but the code itself cannot be removed. There were 24 companies that signed so-called platinum-level agreements with Microsoft, representing 31 web sites between them. Below that were 30 to 50 or so gold level agreements, all of which had their content displayed either on the top of the bar, or within one of the channels, which included sports and business news. Poole set about, both in his written testimony submitted prior to his first appearance on the witness stand, and while being cross- examined, to prove in April 1998, just seven months after IE 4.0 was released and a month before Windows 98 was let out of the bag. However, the channel bar was present on later versions of Windows 95. Like Netscape’s Netcaster technology, the channel bar turned out to be a commercial disappointment, penned Poole in his written testimony. But back in the summer of 1996, nobody suspected that would be the case. Push was all the rage, and Microsoft and Netscape were both scurrying to add it to their browsers. Bill Gates had dictated that the only way companies like Disney, Warner Brothers and so on would get their wished-for cherished platinum position on the desktop, would be to adopt IE exclusively and drop any other browser deals they had – Poole admitted as much in court yesterday, when presented with an email from Gates to Brad Chase – Poole’s boss – and other senior Microsoft executives in July 1996 when Gates, after talking to the Intuit CEO Scott Cook said, I was quite frank with him that if he [Cook] had a favor we could do for him that would cost us something like $1m to do that in return for switching browsers in the next few months I would be open to doing that. That favor was prime placement on the channel bar that Intuit wanted and that could be offered once development of the technology was well underway in Spring 1997, which is when Poole got involved in negotiating the deals with the internet content providers, including Intuit. Poole said that in 1996 Microsoft had estimated that it could get about $10m a year from each platinum-level partner for a position on the channel bar – it even thought it could get push fall guy PointCast to pay that much – but by 1997 the company had realized this was unrealistic and had made the decision not to seek revenues from the deal, but instead ask for exclusive distribution of IE and joint marketing efforts. Poole’s email summary of the deal with Intuit dated April 17 1997 indicated that part of Intuit’s obligations under the deal were to not enter into any promotional agreements with Netscape and create exclusive content only viewable by IE. Poole protested that it left Intuit free to create content only viewable by Navigator, but there would be little point if it could get nothing back from Netscape in return – not even its browser. Poole admitted that he had not thought of Intuit as an ideal channel partner because it was a personal finance software company, not known for its content. But he came round to the idea when Intuit approached Microsoft saying it was interested in the componentized version of IE, which Netscape could not offer. It was then that Microsoft said it could have IE, but it would have to be exclusive. Poole tried to show that such deals were commonplace in all types of industries. But after invoking Coca Cola and McDonalds and a host of others, could not provide an example of a single deal beyond the realm of internet content providers. At one point Judge Thomas Penfield Jackson intervened and told Poole to answer the questions in one of three ways, yes, no, or I don’t know, so evasive had Poole been trying to dodge the question and implying that everybody did business this way, not just Microsoft. á

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