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MS' $500k sweethearts deal with UK ISP

But did it use it as a crowbar to help IE into the market?

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MS on Trial Microsoft VP Cameron Myhrvold found himself explaining a $500,000 'bung' to British ISP UUNET Pipex in court yesterday. He had referred to this and other European 'co-marketing' deals in his written testimony, replying to earlier allegation by Jim Barksdale, but was now confronted by one of his own smoking emails. Barksdale had claimed in his testimony that "Microsoft offered free client product and a marketing fund of $400,000 to four major European ISP’s (Planet Internet of Holland, Demon Internet of the UK, British Telecom of the UK, and Indigo/Dome of Ireland,.” and extended this offer "on the understanding that [they] would NOT purchase any [software] from Netscape." Myhrvold's testimony denies that any such offer was made. Myhrvold goes on to explain that "Perhaps Mr. Barksdale’s salesman was confused about the facts and had heard about an agreement that we entered into with an ISP in the United Kingdom known as UUNET Pipex. Microsoft did offer UUNET Pipex a fee of $500,000 as part of a complex transaction. One piece of that transaction was UUNET Pipex’s agreement to participate in the Windows 95 Referral Server. However, another piece of the transaction, which made it unlike any other ISP agreement, is that UUNET Pipex and we agreed that it would set up a separate Web hosting organisation. In exchange for UUNET Pipex setting up that Web hosting organization, we agreed to provide up to $500,000 for marketing, training and consulting relating to the Web hosting organisation." Got that? A sweet deal for UUNET Pipex, but perfectly legitimate. UUNET Pipex is to set up an organisation dedicated to NT support and web hosting, and according to the contract "will commit significant resources to marketing this new business venture." It purchases the training from MS, and the $500k is intended to help with this and the marketing expenses. It's nothing to do with IE, right? Well that's what Myhrvold's testimony says. Yesterday's email was a reply to subordinate Geoff Hughes, who'd suggested that Microsoft not pay UUNET Pipex the $500k because it hadn't started shipping IE to its customers yet. So now it does have linkage to IE, right? But it's only an over-enthusiastic Brit underling, right? Wrong. Myhrvold's reply says: "I actually think tying the payment to their shipping IE is a great idea, though I would not do this formally." Tricky to explain this one in court, isn't it? We have a contract which Myhrvold has already explained has nothing to do with IE, but we have a Microsoft manager trying to make it dependent on IE, and Myhrvold apparently agreeing, while urging caution. What on earth could he mean, if it wasn't 'take them up a dark alley and hint very heavily that shipping IE would expedite payment.'? Myhrvold somewhat lamely said that he felt it important to applaud initiative by overseas employees when he could, but that it was also important to tell them when their suggestions were not appropriate. Yes..? Then he fell off his bike. "My intention is not clear in this email." But it looks pretty clear to us. Complete Register trial coverage

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