Gates to Intel: stop competing with Microsoft

"Microsoft was concerned that things would get out of its control," says exec

Microsoft had been a little reluctant to disclose what is arguably the third part of its embrace and extend strategy -- eliminate -- but this came out in court yesterday when Steven McGeady, VP of Intel's content group, testified as a result of a subpoena from the DoJ. It was possible that the DoJ would have asked Judge Jackson to regard McGeady as a hostile witness, but in the event, any hostility was from a starchy Intel spokesman who was clearly concerned that Intel should do as little as possible to upset Microsoft. The spokesman said that "if Intel had chosen to submit testimony in writing, it would have entailed working with the government... the company did not want to do that because it views itself as neutral in this dispute". This is presumptive of Intel, since it was McGeady who was subpoeaned, and unless McGeady sought advice from Intel, it was not Intel's business. McGeady gave evidence that Microsoft had forced Intel to scrap entire projects rather than incur the wrath of Gates, such as native signal processing. "Basically," said McGeady, "Microsoft was concerned that things would get out of its control." The Intel meetings were with a powerful partner, so Microsoft is unable to use its excuse about the whining of competitors. Gates also threatened in 1995 to stop supporting Intel's MMX project in which it had already invested around $500 million. An interesting sidelight here is that it would appear that Intel had no contract with Microsoft to deal with the possibility of Microsoft pulling out. To give credence to the threat, Microsoft announced that it was supporting Digital's Alpha. "The threat was both credible and fairly terrifying," McGeady said. Suddenly, Intel dropped the native signal processing development. So far as Java was concerned, Intel was happy that Java ran rather slowly, since Mceady thought that would bring business to Intel for faster processors. Paul Maritz of Microsoft told McGeady that he wanted to keep Sun's version of Java "from getting established" in the industry. A meeting including Gates, Maritz, Intel's Andy Grove, McGeady and other senior executives discussed Gates' concern that he had a "fundamental problem with 'free' software from IAL [Intel Architecture Labs], cross-subsidised by processor revenues. Gates would not agree to let processors/OS programs progress unencumbered by platform, communications issues". It turned out that Gates wanted Intel to shut down IAL, which had 750 engineers. A curious note was that "Unix: big flap -- Microsoft wants lots of UNIXes". Could that mean that Microsoft liked to point at the rich variety and, he hoped, incompatibility of Unix? Would he be concerned if Unix were really one specification? The note of the meeting records Gates as saying: "On the 30/70 use of 3rd party technologies, Intel using Netscape in a Windows environment is not a problem provided we do not set up the 'positive feedback loop' for Netscape that allows it to grow [to be the] de facto standard." This was a revelation. When the question as to what Intel should do with its Internet resources [meaning the staff at Intel], Gates was recorded as saying: "Go do a high-end Web server. This could be tied to their Tiger program." Ron Whittier, who wrote the notes, added: "Or we could go climb a mountain." Gates also said that the "Internet will be deeply integrated into the OS over time, just like messaging, conferencing, etc." Another note records: "Start treating each other with more respect..." So much for the lovey duo. In a miscellaneous comment, Whittier notes that "Gates only trusts Maritz and Neukom, not Stork! (This explains some of our problems)". Carl Stork was Microsoft's official liaison with Intel. Whittier did not record how enraged Gates became at the meeting, but McGeady did. He told the court that Gates was "very upset that we were making investments in software" and he became enraged that IAL was, in Gates' view, "competing with Microsoft". McGeady testified that Maritz had said during an October 1995 meeting that Microsoft wanted "to cut off Netscape's air supply". The remark was made to a number of Intel executives. Maritz also said that Microsoft was going to use its clout with Windows to dominate the browser market. This is illegal in the US (monopolisation), while in Europe it is an abuse of a dominant position. It looks as though the DoJ had gained some useful evidence. McGeady evidently has an uneasy relationship with Intel: he criticised the company for withdrawing NSP software development and giving in to Microsoft. ® Full Register trial coverage Click for more stories Click for story index

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