DoJ ‘expert’ in trouble as expertise exposed

Microsoft's attorney is exposing Warren-Boulton's sketchy knowledge of the industry

Potentially the most dangerous witness against Microsoft -- consultant economist Dr Frederick R Warren-Boulton - is being set up by Michael Lacovara, a counsel for Microsoft. W-B has now had three days of cross-examination, with the prospect of a full fourth day and then rebuttal testimony by Richard Schwartz for the DoJ when the court sits again after the Thanksgiving holiday (and that makes four days of holiday in the first six weeks of the trial, plus Fridays off). Judge Jackson twice became irritable at Lacovara's slow pace, but stopped short of giving him a formal deadline to conclude his cross-examination, or "cross" as it is called in the court. Close study of the very tedious testimony shows that W-B is in trouble. He is far from being knowledgeable about the industry, as he claimed, and is being tempted to make silly statements beyond his expertise as an economist. These are likely to have the cumulative effect of making him appear to be a less expert expert. Lacovara mildly knocked W-B for having no formal background in computing, and obtained an admission that he had no experience in the industry either. It also became very evident that W-B had a very poor memory for documents he had referenced in his written testimony. This was mitigated by possibly greater ignorance of the industry by Lacovara, apart from the questions he had prepared in advance with help from Microsoft of course. Lacovara kept firing questions asking for industry statistics and facts that W-B did not know. W-B thought that DR DOS and OS/2 were programming languages until corrected by Lacovara. W-B's written testimony was in serious need of editing, since it contains gaffes like: "Operating system software is software that can be part of the operating system". W-B was pleased to agree that "information management and retrieval" software was "an operating system function" and Lacovara was pleased at his response. W-B had only a very hazy notion of utilities, and said that a disk cleanup facility "was simply operating system software that was not part of the operating system product." Oh dear. It didn't help W-B when he said that "In fact [sic],I think about 14 per cent [or PCs] are shipped naked [with no operating system]". Equally bewildering was: "I define the operating system market as running on the PC operating system." The history of OS/2 was mis-remembered by both sides, making the discussion of no value. W-B volunteered that "When OS/2 first came out, it was the first 32-bit operating system" but he'd have been better advised not having volunteered this. It's a matter of semantics of course, but we can recall 32-bit (and 36-bit) hardware in the 1960s. W-B was unable to name "a competitive or successful software product produced by IBM for the PC in the last 15 years". [Er... VoiceType?] But the best was yet to come from W-B: "In fact [ominous words] I think IBM would now almost describe itself as a software company, in the sense that more than half its revenues probably come from software." We rest our case about W-B's industry knowledge. W-B was on firmer ground on economic issues, and made the important point that a P/E of more than 50 coupled with 38.5 per cent net profits (that's after tax) was astounding and greater than any other Fortune 500 company. Lacovara quickly moved on after W-B mentioned that there was speculation that Microsoft would change its accounting method to show a lower net profit in future. W-B distinguished between merger cases (where the question was 'What happens if prices go up?') and monopolisation cases (this one - where the question was 'What would behaviour be like if prices were lower?'). Monopolists raise prices, W-B said - and Microsoft OEM VP Joachim Kempin had convincingly confirmed in an email to Gates that Windows prices had gone up over the last ten years. It was W-B's opinion that the existence of fringe competitors did not mean that Microsoft did not have monopoly power. Lacovara played the card that poor little Microsoft was threatened left, right and centre. CNET had dared to say that the number one trend this year was "Move over Microsoft" (and what took CNET so long to work that out?). Linux, Omega and Be were reducing the applications barrier to entry with similar applications to those used on Windows, and so would be familiar to Windows users. Lacovara tried to use data from Zona Research to suggest to W-B that Netscape had 60 per cent of the browser market, and was gaining market share over Microsoft. W-B referred to IDC data that showed the opposite trend. A long discussion of run rate ensued, but it turned out they were not talking about cricket, but new Internet connections. Lacovara said that Zona predicted that four out of ten people (in the US) getting a new Internet connection in 2001 would not choose Microsoft. W-B pointed out that internal Microsoft documents indicated that Microsoft thought it had wrested control of the browser market from Netscape, and so won the browser war. W-B concluded that "people's incentive to use non cross-platform technologies is greatly increased [with Microsoft's dominance in the browser market]". So far as AOL was concerned, W-B revealed that the minimum of 85 per cent IE distribution was in fact 92 per cent. Lacovara tried to make the case for Hot Java being the third most popular browser, although W-B did manage to mention Opera. The players managed to keep the show going even when they couldn't remember their lines and had to ad lib. There were earnest discussions about whether Netscape could convince developers to write cross-platform applications in 2001, which was more futuristic than the movie: HAL would have been scornful. Then Lacovara had Mosaic being developed at Cornell University rather than at the University of Illinois (bad handwriting, we suspect). As we predicted, Microsoft began to question W-B's market definition of operating systems with Intel processors. Lacovara wanted to include Macs to make Microsoft's dominance seem less of course, but W-B would not have it: Microsoft was a monopolist with Windows he maintained. Microsoft's Java strategy is a "fight them on the beaches" and Microsoft's non-standard Java is a Trojan horse, W-B observed. As part of Microsoft's "everybody does it" defence to its business practices, Lacovara made the valid point that when Navigator was dominant, Netscape incorporated an email application. W-B was able to point out that Netscape subsequently made email an option in response to user comment. There was much discussion about switching costs (a legally important notion: how much it costs a user, reseller or OEM to change from, say, Wintel to Linux), but neither side won any points. The discussion got round to network effects [winner (with most apps) takes all, you might say], and W-B admitted that there could be strong consumer benefits as a result. Just before the holiday break, and playing to an almost deserted gallery, Lacovara asked W-B if a clock radio was one product or two. W-B did not hesitate: it was three, he claimed initially, but elaborated: "It is , if you like, a third product that's a combination of two separate products." Of course -- how silly of us not to see that earlier. There were flashes of truth disguised as possible abnormal situations: asked if he had experience of a browser with Windows 98, W-B said he had knowledge of "running Netscape on Windows 98 which may not be typical since I seem to crash a lot." W-B agreed that "Microsoft both bundles and ties the Windows 98 operating system . . . in Internet Explorer" and that this was anticompetitive. When the subject of the AOL-Netscape deal came up, Lacovara made a complete ass of himself by claiming that Sun was going "to acquire Netscape's software technology, or much of it, including its browsing technology." Even Judge Jackson was surprised by this one: "Sun is acquiring the Netscape browser technology?" Lacovara: "that was what was reported on - it was reported on MSNBC, a reliable news source, half-owned by Microsoft, your honour." ® Complete Register trial coverage

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