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Trial documents reveal nature of MS-Pipex deal

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MS on Trial The trial transcript and some exhibits have thrown additional light on just what the UUNet Pipex and Microsoft sweethearts were up to in their dealings. At issue was not just a sweetener for Pipex to switch from Netscape to IE. It turns out that CEO Sidgmore had asked for $3.3 million, but agreed to accept $500,000 and money-off coupons for Windows NT training credits, as Pipex wished to start a new line of NT business, with some consultancy work by Microsoft. Pipex was also using the argument that it had a big Netscape distribution business and it would need some inducement to switch to IE. Pipex was put on the referral server. Meanwhile, Microsoft was also concerned that Demon had a significant web page hosting business in Europe but was highly resistant to using NT, so encouraging Pipex to go the NT route served to undermine Demon with an NT-based web hosting service. The deal therefore very much suited Microsoft, and possibly Pipex could have held out for a bigger bounty. Pipex's $500,000 invoice was for "IE training fund and startup expenses" and a 4 November 1996 internal email noted that Myhrvold had received the invoice and wanted to know "could this be associated with the Pipex IE deal?" On 12 December, Geoff Hughes, described by Myhrvold as a "remote employee" because he worked for Microsoft "in London", emailed Susan Norberg, Myhrvold's bean counter, to say that "there are no invoices" with Pipex and quoting the relevant part of the contract. The $500,000 was to be paid in two equal tranches, the first when Pipex had fulfilled some obligations (in Exhibits C and D, and not at present disclosed). The second tranche was due nine months after the payment of the first tranche, providing Pipex had stuck to its Exhibits C&D agreements. Unfortunately, the middle part of the email chain had been redacted (censored), but the context suggests it may refer to some plea by Pipex to pay the invoice. Hughes commented that "given their lack of response in shipping IE I am not in a hurry to give them anything right now!!! [the exhibit quality is poor, but there seems to be a "sad" face after the exclamation marks]. Myhrvold then emailed Norberg: "I actually think that tying the payment to their shipping IE is a great idea, though I would not do this formally." Before Boies produced this email, Myhrvold had denied the linkage. Myhrvold told Holley in redirect examination that: "I followed up with a phone call to Geoff Hughes to make it very clear that it would not be appropriate to tie the payment of the funds in the contract to Internet-to them shipping Internet explorer. My message to Geoff was if they had met the terms of the agreement for entering the NT-hosting business, then we should pay them the money that we agreed to. Boies seized on this in his recross examination and asked if there was any record of this telephone conversation, but of course there wasn't. ® Complete Register trial coverage

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