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Compaq exec planned special MS deals to fox the Feds

To obscure the companies' closeness to rivals and the DoJ, apparently

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MS on Trial Compaq tried to arrange side agreements with Microsoft that would camouflage the closeness of its relationship with Microsoft, according to an email released yesterday. The message, sent by senior VP John Rose in November 1997 to CEO Eckhard Pfeiffer and other senior Compaq execs, proposes a series of additional agreements that would make Compaq's core Windows licence deal "defendable" to rival OEMs and the Department of Justice. One might speculate that Rose, who has been on the stand as a Microsoft defence witness this week, was suggesting Compaq and Microsoft hoodwink rival PC makers and the Feds. The timing of the email is exquisite. In late 97 Microsoft and the DoJ were locked in legal combat over the latter's application for a preliminary injunction. The judge then granted the injunction, ordering Microsoft to stop forcing OEMs to ship Internet Explorer, but the ruling was later overturned on appeal. Compaq witnesses had been pivotal in the case up to that point, one of the major revelations being that Compaq had been threatened with the withdrawal of its Windows licence if it didn't restore the IE icon on the desktop. Although the Compaq witnesses had been subpoenaed, it still rather looked as if relations between the company and MS were in poor shape. But not necessarily. Rose had been attempting to renew Compaq's Windows licence for five years, but Microsoft's earlier consent decree negotiated with the DoJ had limited the period of licences to two years. Rose therefore wrote: "Given Microsoft's concern that our agreement be 'defendable' to other OEMs and the Department of Justice, we recently proposed an alternative structure where we would use side agreements to complement the Client OS license and MDA [market development agreement]." It's not clear what these side agreements were, and what shape the deal(s) eventually took. Compaq and Microsoft signed a new licence in March of last year, but Compaq has successfully kept the papers under court seal. Meanwhile, Judge Penfield Jackson has expressed his own bafflement over Compaq's tortuous deal-making. Rose earlier this week argued that Microsoft's threat to withdraw Compaq's Windows licence in 1996 was made because Compaq was in breach of an agreement it had made with Microsoft. A deal with AOL that required that IE be difficult to access had been made, he implied, subsequently to that. So it had all been a mistake. But the judge pointed out that although the MS-Compaq deal had been dated August 1995, it wasn't signed and put into effect until June 1996. If this is the case, then Compaq had been perfectly free to sign its deal with AOL, and mightn't actually have been in breach of its agreement until it signed the document that made it so. Why would it have done this? As Rose's email of the following year makes clear, Compaq was coming to the end of what had been a five year licensing deal with MS, and in 1996 MS was tightening its OEM agreements (no change there then). Rose had probably come to an 'arrangement' with Microsoft in August 95, but may have been holding back on signing it off in order to wring concessions out of Redmond. The "side agreements" mooted later may have been of a similar stamp. ® Complete Register trial coverage

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