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Compaq exec downplays MS threat to pull its Windows licence

The huge 1996 fight wasn't, apparently. We had an understanding.

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MS on Trial Compaq exec John Rose says in testimony released yesterday that Windows makes computers easier to use, and that his company happily abandoned its own home-grown 'making PCs easier' software, Tabworks, "because it generated significant support costs and because we were satisfied that Windows 95 was more user-friendly". Rose's testimony for Microsoft's defence is intended to counter DoJ portrayals of PC OEMs groaning under an increasingly heavy Microsoft yoke, and to blunt the effect of the retelling of Compaq's big spat with MS over Internet Explorer in 1996. Then Compaq had removed the IE icon from the desktop, and had been told by MS that it was consequently in breach of its Windows licensing agreement. So put IE back now, or you don't licence Windows any more, Microsoft told Compaq. To get that properly in perspective just remember that Compaq is Microsoft's biggest customer for Windows, so if MS thought it could successfully threaten to pull the rug out, it must have been pretty sure of itself. Compaq folded immediately, and news of the argument emerged in late 1997 earlier in the current round of DoJ action against Microsoft. Compaq had actually been in breach of its agreement, but its actions in removing the icon showed that it did want greater flexibility. Internal documentation from Compaq, Gateway and Hewlett-Packard produced at the trial shows that this view was pretty general, despite what Rose says now. He says that the removal of the icon was contrary to "an understanding I had reached with Microsoft in August 1995." This "understanding" is of course a Microsoft OEM licensing agreement, stating what Microsoft required of Compaq on the desktop, so presumably Rose is talking about signing it. Compaq seems to have got into its trouble with MS by signing a deal with AOL that same year. The AOL deal required that AOL's icons be the only ones easily accessible to users. This would apparently seem to confirm that Microsoft's contracts did reduce Compaq's freedom of action, and that at least AOL was of the view that making access to its own products easy and rival products hard was important. Rose also suggests that Compaq ships only Windows computers because that's what consumers want, adding that it would licence alternatives if there were sufficient consumer demand. But Windows is of course cheap, as far as Compaq is concerned. Rose coyly says it costs Compaq less than 5 per cent of a $1,500 machine, but he's being too modest - if Compaq can't get $50, who can? Microsoft documentation on OEM pricing makes it clear that MS regards a Compaq-led revolt as one of it's biggest potential threats, so the company really ought to be getting the best deals. ® Complete Register trial coverage

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