DOJ Barksdale Notes : LUSENET : MS-DOJ : One Thread

I was assigned to sum up Barksdale's testimony from the DOJ perspective. Below please find those notes.

When I pasted it in, it lost all its formatting. So I hope it makes sense without the bold type and indenting. . . . Please feel free to call if it doesn't at 497-1145.

Hope flyout week is going well. See you all on Monday.

Matt ____________________________


(Note: The document below outlines the argument Barksdale made in his direct testimony and contributed to during his live testimony. Quotes not otherwise attributed are Barksdale. I tried to use his words to keep the flavor of the testimony, but Im afraid it ran to three rather than two pages. D10 means page 10 of the direct testimony, 27AM10 means page 10 of the A.M. testimony on the 27th)


Jim Barksdale is the President and CEO of Netscape and has been since Jan 95 - Netscape was founded in April 1994 by Jim Clark and Marc Andreessen. (D31)

Barksdale is the DOJs first witness and presented direct testimony as well as 5 days of cross examination (Oct 19, 20, 21, 22, 26) and 1 day of re-direct and re-cross (Oct 27)


1) Netscapes browser threatened the Windows platform

a) Netscapes browser, using Java, provided both the technical means and the broad distribution to offer a new super platform for developers of network-centric applications (D10)

b) When Netscape entered the Windows world . . we knew our window of opportunity was building the bridge between the platform dependent computer operating system world and the cross platform environment of the internet (D42  discussed D43-D48)

2) In response to this threat Microsoft allegedly approached Netscape during a meeting on June 21, 1995 and presented the ultimatum: split the browser market (with MS getting the Win95 market) or Microsoft would destroy Netscape (D15  Discussed in detail D59  65  Documents from Andreessen, Reeback, and some Microsoft Employees were brought out during re-direct 27AM25-40)

Microsoft apparently came to Netscape with a single focus: to convince Netscape not to compete with its Windows 95 browser product, Internet Explorer. Microsoft proposed a division of the browser market between our companies (D16)

[Microsoft] proposed that a line be drawn between the area in which we developed products and competed and the area in which they developed products. (D61)

I had never been in a meeting in my 33-year business career in which a competitor had so blatantly implied that we should either stop competing with it or the competitor would kill us. In all my years in business, I have never heard nor experienced such an explicit proposal to divide markets. (D62)

Andreessens testimony on this point was also played in court (27AM25-27) where he says: in my understanding, Microsoft was asking Netscape to divide the market, to establish those areas in which Netscape could compete and could not compete . . . (27AM26)

DOJ lawyers read from the deposition of Chris Jones a Microsoft employee the following: Do you recall any discussion about a desire on anyone  on the part of the Microsoft, who was participating, to be able to persuade or influence Netscape not to Compete with Microsoft?  And he Answers: Absolutely 27AM40

3) Barksdale claimed that when Netscape did not agree to the demand, Microsoft preceded to use their monopoly power to cut off Netscapes air supply using the following tactics

a) Giving the browser away for free

Barksdale claimed that Netscapes business model had always depended on charging for the browser as a main source of revenue (D13) (The DOJ also read into the record Andreessens testimony that charging was fundamental to the companys business plan 27PM14-16)

Microsoft could afford to do this due to the revenues from Windows: Our business model works even if all Internet software is free. . . we are still selling operating systems. What does Netscapes business model look like (if that happens)? Not very good. (Bill Gates  Financial Times of London June 16, 1996)  D67)

When MS announced that their browser would be given away for free (Dec 7, 1995) , Netscapes stock fell $30 per share to the reported glee of Microsofts executives (D18)

Barksdale claims on re-direct that  . . . the act of making it free, which is way below cost, is predatory. I mean, you wouldnt do it for other reasons. You certainly wouldnt do it on Macintosh, which wasnt your O/S. You wouldnt do it on Unix. You wouldnt do it on Win 3.1 because you are trying to get people to upgrade from 3.1 to 95 and from 95 to 98. Thats their whole business Model. So, by giving it away on 3.1, you actually slow down the upgrade to your o/s. The only reason you do that is because youre following Netscapes lead and youre trying to put them out of business. (27PM30)

b) Bundling Internet Explorer into Windows (D19)

DOJ lawyers submitted a 1998 Microsoft Marketing Review Document that said It came with my computer, is the number one reason people switch to IE (27PM10-11, Gov Exhibit 233)

c) Cutting off Netscapes avenues of distribution

i) ISPs (D72  D85)  Internet service providers  (Earthlink, AOL, etc)

- Barksdale believes Microsoft entered into exclusive or restrictive deals with all of 8-10 largest ISPs (D73)

- AOL backed out of Netscape deal to sign a deal with Microsoft - Barksdale claims Steve Case and David Colburn of AOL told him that they would not have entered the agreement with Microsoft but for access to the Windows desktop (D77)

- Barksdale said that Microsoft was giving away browser free or better than free by giving away software, advertisements, preferred treatment and even paying bounties to licensees whose customers signed up for Microsofts internet services (D78) so that in many cases, even when a potential customer preferred Netscapes technology, they felt forced to choose Internet Explorer because it was free. (D79)

- Earthlink described Microsofts pressures and tactics as medieval. (D82)

ii) OEMs (D85-D92) Original Equipment Manufacturers (Dell, Compaq, IBM, etc)

- Barksdale got reports that 1) OEMs were required to keep the IE icon on the desktop and 2) various financial incentives were offered to OEMs to get them to prefer IE over Navigator and 3) subtle and not-so-subtle verbal pressure was put on the OEMs not to have anything to do with us (D86)

- Most notably [Netscape] also learned that Microsoft had threatened to terminate Compaqs Windows license. This would have put Compaq  the largest PC OEM in the world  out of business. This demonstrates Microsofts unprecedented power (D89)  Barksdale claims this leads to Compaqs decision not to put Navigator on the desktop

- Barksdale concludes that Microsoft pressure has led Netscape to be forced into very limited distribution deals with all the major OEMs (D92)

iii) ISVs (D92-D95)  Independent Software Vendors (Intuit, Adobe, etc)

- My understanding is that Microsoft coerced Intuit into adopting its technology. Intuit later informed us that Microsoft was offering the inclusion of Quicken code into Windows and the display of Quicken.Com on the desktop. I believe Microsofts unique ability to place Quicken on the Windows desktop and the vast opportunity that access to the monopoly desktop would give Intuit was the reason Intuit went with Microsoft (D94)

iv) ICP (D95  D98)  Internet Content Providers (Disney, ESPN, etc)

- Barksdale described better than free terms that Microsoft offered

d) Pressuring Netscapes customers (D99-D104)

Barksdale also claims that Microsoft pressured their corporate customers and offered deals like partnering with KPMG in electronic commerce or giving away free software or exposure in print advertising in return for using IE (D100)

e) Not giving Netscape technical specifications that it needed

Barksdale claims that Dan Rosen of Microsoft suggested that Netscape would not get the Windows 95 Technical specs they asked for unless they agreed to the June 21 meeting proposal (D17)  They didnt agree and didnt get the APIs they needed until after the launch of Win95 (D65) (For the re-direct on Microsoft being slow to give APIs see 27AM52-62)

Microsoft held back a scripting tool that MS was already freely distributing to ISPs (D106 27AM62-68)

f) In 1996 Microsoft imposed a new license restriction on the OEMs, one requiring that the first, or boot-up, screen be controlled by Microsoft rather than the OEM, so that, as Steve Ballmer, Microsoft Executive Vice President, told Forbes magazine, Netscapes browser would not be able to take over the desktop. (D20)

g) Creating technical problems with Netscapes products

I began receiving reports of technical problems that resulted from using Netscape in conjunction with certain Microsoft products and in conjunction with accessing certain Web sites (D22)

Microsofts home page and developers network had periods when they might not have worked with Navigator according to Barksdale (D107)

4) Barksdale claims that the result of all of this has been less innovation in the browser market as a whole and the chilling of future companies who wont enter a new market for fear of being targeted and destroyed by Microsoft

-- Anonymous, November 05, 1998

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