The New York Times

January 23, 1999

 

Microsoft Executive's Testimony Attacks Accusers

By STEVE LOHR

he most senior executive of Microsoft Corp. to testify at its antitrust trial delivered an unflinching defense of the company's practices Friday and an attack on the testimony of industry executives who appeared as government witnesses.

In 160 pages of written testimony, Paul Maritz, a group vice president at Microsoft, described the software industry as one of fierce competition and relentless change, creating wealth and benefiting consumers. And he warned of the danger of government meddling.

It would set a "very bad precedent," he wrote, "if a rule were established, ostensibly with the objective of promoting competition, that actually impeded efforts to compete through product improvement."

But Maritz reserved his most forceful and detailed testimony for trying to discredit the courtroom accounts of executives from Netscape Communications Corp., Intel Corp. and Apple Computer Inc.

These executives testified for the government earlier in the trial, alleging that Microsoft used its market power to bully partners and rivals. In these episodes, the government contends, Microsoft was pursuing an illegal campaign to shield its monopoly in operating-system software for personal computers from the challenge posed by Internet software.

As the executive in charge of most of Microsoft's software development and marketing, Maritz played a central role in creating and carrying out that corporate campaign. He is expected to take the stand Monday afternoon, the first of nine Microsoft executives scheduled to testify for the company.

In the case of Intel, Maritz described the relationship between the two companies as a highly productive partnership of equals, with occasional disputes that "become intense from time to time."

The intense disputes in the antitrust case involved mainly Intel's work on Internet and multimedia software and its support for Netscape, Microsoft's rival and the pioneer in software used to browse the World Wide Web. Intel's main business is producing microprocessors, the brains of PCs, but it also develops some software.

The Justice Department and 19 states say Microsoft bullied Intel into shelving software work that conflicted with Microsoft's plans and curbing its support for Netscape's technology.

To bend Intel to its will, the government charges, Microsoft threatened to withhold software support for a new generation of Intel microprocessors. Because more than 90 percent of PCs run Microsoft's Windows operating system, any threat to withhold Windows support for a microprocessor could severely damage Intel.

In his testimony, Maritz describes Intel's software work as second-rate development that "often falls below the high quality standards of Microsoft software." The temporary delay in support for Intel's MMX chip in 1995, Maritz says, was actually Intel's fault, resulting from what Microsoft regarded as the chip maker's overly zealous approach to intellectual-property claims.

Maritz also attacked the credibility of Steven McGeady, the Intel executive who appeared as a government witness. McGeady testified that in a private meeting in September 1995, Maritz described Microsoft's strategy toward Netscape as seeking to "cut off their air supply" -- by giving away free the Microsoft browser, while Netscape's business depended on selling its browser.

In his testimony, Maritz wrote, "I never said, in the presence of Intel personnel or otherwise, that Microsoft would 'cut off Netscape's air supply' or words to that effect."

Later, Maritz characterized McGeady as having a deep-seated bias against Microsoft -- a witness whose accusations "speak volumes about his attitude toward Microsoft and the credibility of his testimony."

The personal assault on McGeady's testimony could be risky, some legal experts say, by inviting the court to choose whom to believe -- the Intel executive or Maritz. If Maritz seems less convincing, the credibility of his own testimony is in doubt.

In one e-mail already in evidence, Maritz wrote that McGeady posed a problem in getting Intel to curb its support for a competing Internet technology, adding, "Unfortunately he has more IQ than most there."

Maritz strongly disputes the government's allegation that Microsoft forced Apple to make Microsoft's Internet Explorer its main browser by threatening to stop developing its Office productivity programs for Apple's Macintosh systems.

The reason for reluctance to continue developing word processing, spreadsheet and other programs for the Macintosh, Maritz wrote, was that in 1996 and 1997 Apple seemed on the verge of failure. Many within the company, including Maritz, believed that Microsoft's software developers could be better used writing programs that promised higher sales.

Maritz cites an e-mail written in November 1996 by the head of Office development to Bill Gates, the Microsoft chairman. The Macintosh "is perceived as in decay," the testimony quotes from the e-mail. "There is broad resistance within the ranks to doing this release," which was Mac Office 97.

Another source of friction between the two companies, Maritz wrote, was a long-running patent dispute. At the time, Apple's management claimed that Microsoft's Windows and other programs used intellectual property protected by Apple patents and sought $1.2 billion to settle the matter -- a claim Microsoft regarded as outlandish, Maritz wrote.

But soon after Steve Jobs took over as interim chief executive in July 1997, the patent claims, the Office development issue and others were settled. On Aug. 5, 1997, Microsoft announced a deal in which it invested $150 million in Apple, the patent issue was settled for an additional undisclosed payment, Microsoft agreed to develop Mac Office, and Apple agreed to make Internet Explorer its preferred browser.

Internet Explorer, Maritz testified, was not viewed as a key part of the Apple-Microsoft pact. The browser issue, he wrote, was not raised in the negotiations "until the primary deal terms were worked out."

Finally, Maritz denied the government's allegation that Microsoft had tried to persuade Netscape to divide the browser market, a violation of antitrust law. "I never instructed any Microsoft personnel to seek a 'division of the market,' nor do I believe that any such proposal was ever made," Maritz testified.