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

This summary assumes that you are at least somewhat familiar with the direct testimony of Barksdale. The government summary should therefore be read before reading this summary.

Warden tries to bring out a few major themes throughout the cross-examination. The first is that most of Barksdale's testimony is actually hearsay. He consistently challenges Barksdale on personal knowledge of the statements in the direct testimony. As it turns out, most of the testimony is indeed second or third hand hearsay, and Barksdale is forced many times to say that he cannot be sure about many of the claims in his direct testimony. However, more importantly, Warden emphasizes at every step the financial success of Netscape and the fact that the company need not rely on browser revenues to be a major force in the Internet software market. This is the most important point because Barksdale's major theme throughout the direct is that Microsoft has crushed Netscape's browser product and is thus driving Netscape out of business. Finally, Warden often tries to portray Netscape as the true monopolist here. They were the ones with the 85% market share at one time. How can a company with such a dominant market share (Netscape) worry about a lack of innovation coming from an internet upstart (Microsoft)?

The following are very short summaries of some of the more interesting exchanges from the point of view of Microsoft:

Barksdale admitted that Netscape urged the government to pursue the contempt proceeding against Microsoft in regard to the consent decree. Additionally, Netscape sought the Justice Department's help to block Microsoft from having a Microsoft Network ("MSN") icon on the desktop. When questioned about how this hurt Netscape, Barksdale replied that it hurt Netscape as well as AOL, a company he considered to be a "kindred spirit." It was further established that at the time Netscape urged the government to intervene and remove the MSN icon from the desktop, AOL was a well established company with a thriving business that had a desktop icon on 90% of desktops. Warden questioned Barksdale, "So, AOL, as I understand you, with your support, was trying to deny Microsoft Network a position that AOL itself already had on many PCs; Is that correct?"

Warden challenged Barksdale to define the term "Browser Product." Barksdale responded:

"A browser is generally assumed to be a product that allows you to - using a graphical-user interface or an easy-to-use interface for normal human beings, nontechnologists, to easily peruse the World Wide Web and to gather information, to bring it back and be able to do things . . . like edit it, resend it or print it or whatever. . . . Well, I would say that it's sold independently that it has its own market, that it has its own relevance, that its got an ability to get it separate and apart from other products, would be one of the product characteristics."

Warden next had Barksdale describe the history of the Netscape browser, especially the eventual inclusion of e-mail and other functionalities. It is Netscape's claim that Microsoft illegally bundles IE with Windows 95. However, Barksdale admitted that e-mail is not part of what he would define as a browser, yet Netscape Communicator includes e-mail as part of the package. As a matter of fact, Netscape, for a while, dropped the stand alone browser and licensed only the full Communicator package. At the time Netscape had approximately 70% of the market. Barksdale admitted that by adding e-mail capabilities they entered competition with stand alone e-mail software products, such as Eudora.

An interesting point was made by Warden when while discussing Barksdale's claim that the browser that comes with the PC is the browser that most people are going to use, without even trying the other. It was pointed out that up until IE 3.0 was released, IE 1.0 and 2.0 were the only browsers that were bundled with an operating system, yet Netscape still had over 70% of the market share. Only with the introduction of IE 3.0 (and the first time reviewers considered the Microsoft product to be competitive) did Netscape begin its decline in market share.

Barksdale was then question about the actual price at which the browser was sold, and whether Navigator was distributed free of charge and the potential advantages of doing that. Barksdale maintained that the only customers who received Navigator free of charge were educational consumers and nonprofit organizations. Also ISP consumers may also have gotten it free but Netscape charged the ISP for Navigator. The purpose of this line of questioning was to show that the revenue from the Browser itself was not that important to Netscape. In fact the real goal was to get as large a market share as possible even if that involved giving the software away for free. This was evident from the fact that Netscape did not pursue users who downloaded the software but did not pay after the 90 day trial period. A deposition statement by Jim Clark also stated that Netscape was planning to give away their browser for free because Gates had made it known in October 1994 that Microsoft would do the same. In addition, there is also a Clark e-mail from December 1994 that states that Netscape's business was never the client (browser). To bolster this point Warden led Barksdale through a financial analysis of Net Center, Netscape's portal web site. As it turns out it is extremely popular, and Marc Andreessen has even stated that:

"Netscape made a strategic choice to make its browsing software free and focus on building net center because, in doing so, Netscape swapped into a higher growth business."

Barksdale generally agreed with this statement.

Another approach was to pit Barksdale against Clark. Often Warden would force Barksdale to disagree with e-mail or deposition testimony of Clark. The e-mail discussed above is one example. Another is Clark's deposition testimony that Internet distribution is one of the cheapest and best forms of software distribution for a company like Netscape. Barksdale had to take the position in his direct testimony that the ISP and OEM channels were much more effective for Netscape. Barksdale is also forced to disagree with statements made by Andreessen, such as a statement that Netscape is the most widely used software of all time.

Warden introduced four product reviews comparing IE 3 to Navigator 3 and 4. The reviews indicated that IE was at least as good if not better than Navigator. Warden also produced 19 more "reviews" that all favored IE over Navigator. Barksdale countered that these were not real head-to-head reviews and that his marketing group had found only 16 such reviews. The tally from those 16 was 10 in favor of IE and 6 in favor of Navigator.

The following are additional interesting facts that came out of the testimony:

7 Private placement memorandum for Netscape series C preferred stock, dated January 16, 1995: Stated that Netscape anticipated that "web browser functions" would be added to the operating systems of all major OS vendors including Microsoft at no additional cost.

7 Netscape was working on a browser product, Communicator 6.0, that was to be fully Java implemented. However, they abandoned the Java implementation for a C++ implementation instead. Part of the reason was that it ran quicker on C++.

7 Netscape is in fact available from AOL. It is not part of the AOL interface but can be downloaded and used as part of AOL

7 Neither the Compaq nor NCR agreements with Microsoft required the OEM to remove the Netscape icon from the desktop. Rather, in the case of Compaq, Microsoft only considered Compaq to be in breech if it removed the IE icon from the desktop.

7 There was a feeling within the Netscape camp that the reason Netscape did not get the Intuit contract was because they did not have a componentized browser and Microsoft did (IE 3)

7 According to the Zona Report 60% of North American corporations use Navigator. This was part of testimony that established that Netscape is actually gaining market share in the enterprise market.

7 Can't access Barksdale's own web page without a Netscape browser. Barksdale said in response: "If you don't use my product, I don't want you to read my home page."

7 Bill Gates wasn't the only corporate executive threatening a rival. Mark Andreessen was quoted as saying that Netscape would "reduce Windows to a set of poorly debugged device drivers." Barksdale shrugged off these and other such comments as a young man making jokes.

-- Anonymous, November 07, 1998

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