20th > November > 1998 Archive

Microsoft's plan to levy annual rental fee for Windows

Microsoft has considered charging an annual fee for Windows use, according to a memo to Bill Gates produced in court yesterday. The document, from December last year, came from senior VP sales Joachim Kempin, and was headed: "Licence for limited time and create annuity business." Kempin suggested the scheme could start in 2001, apparently because in order to do this in the consumer market, the move would have to be made from the launch of a new rev of the operating system. He points out to Gates that he's made the suggestion before, and that it now needed serious consideration. Awkwardly for Microsoft, which was yesterday denying accusations of putting its prices up over the last two years, the memo shows that Kempin was a year ago anticipating PCs down at the $500 level by Christmas 1998, and saying "our royalties could be as high as 10 per cent of total system price…" Nevertheless Microsoft should resist royalty price decreases firmly, he said - i.e., Microsoft's pricing should not fall in line with PC pricing, and Microsoft's percentage share of a growing market should therefore rise. Oops… And oops some more: "We have increased our prices over the last ten years… other component prices have come down and continue to come down." Nevertheless Microsoft's goal was to get the "highest amount of dollars" it could from its OEM customers. Triple oops… As for the 'annuity' scheme, Microsoft spokesman Mark Murray said afterwards that it was just an idea, no way was it a firm plan. But has Kempin by his own admission has raised it with Gates before, and there's a growing audit trail that indicates that Microsoft is at least putting itself in the position where it could switch over to a rental model. In the business market it has abolished concurrent licensing, and switched to charging for the total number of users rather than just those connected and/or using the software at the time. This apparently even applies to semi-mobile users who can no longer operate on a single licence for both a desktop and a mobile computer. Having cleared the ground in this way, Microsoft is setting up contracts that give discounts for bulk purchase and that encourage corporate customers to sign up for upgrade programmes. You commit to regular upgrades over, say, a three year period and you get more discounts, but you can then find yourself paying for regular upgrades for everybody in the organisation, rather than just upgrading some of your people. Effectively, it's starting to look more like a rental model. How do you do this in the consumer market? In order to make this work, Microsoft would have to implement a rigorous registration process. As Kempin says: "This is the best thing long term but it might disrupt end user operations and could require end user registration." People who've been looking at recent Microsoft betas may have noticed that (no doubt coincidentally) Microsoft software registration has been getting a lot less optional. From the tone of Kempin's memo, it seems pretty clear that, pace Mark Murray, this is an idea that Microsoft wants to implement, but that the company thinks there are still a lot of hurdles to overcome before it can do it. He raises the possibility of Compaq rounding up a group of PC companies in order to fund "a competing effort (say in India)," but reckons this would be difficult to get off the ground, and could be resisted. He wasn't significantly worried about Sun and Netscape getting together, because of the "compatibility barrier," but intriguingly, considering what's happened in the intervening year, seems to think Intel could make a go of it. ® If Intel get into operating systems, "it will get ugly." Well folks, Intel is getting into operating systems, isn't it? Complete Register trial coverage
John Lettice, 20 Nov 1998

Judge damns Gates as ‘unresponsive witness’

Microsoft chairman Bill Gates was yesterday characterised as a lousy witness by Judge Thomas Penfield Jackson, who damned the world's richest man as he rejected a Microsoft motion intended to put a stop to the DoJ's 'Gates TV' series (Earlier Story). The DoJ has been showing excerpts from Gates' videotaped deposition, and these have rapidly been achieving cult comedy status, as Gates squirms, forgets, and apparently find it difficult to understand the English language. Microsoft claims the government lawyers are attempting to blacken Gates' character, and using "snippets" out of context. Gates himself told the press yesterday: "I answered every question, completely, truthfully through many, many long days. The fact that they're taking snippets out of that and holding them up without having me there because they chose not to call me as a witness, I think, is quite novel." Register factoid: the transcript of the latest session which we published earlier this week (Stupidly vast transcript) in nigh-on 5,000 words long. Snippet? Microsoft claimed in its motion that the DoJ has been spacing out the Gates videos so it can hit the headlines over and over again, and although this is true (Come on, it's got to be true, hasn't it? But it's fun.), the judge rejected the argument, saying: "I think your problem is with your witness… I think it's evident to every spectator that, for whatever reasons, in many respects Mr Gates has not been particularly responsive to his deposition interrogation. ... Everybody at your table has reflected scepticism as the testimony is presented." So not only does the judge think Gates is a liability as a witness - he also thinks the defence lawyers think this too. Oh dear. The good judge was sniggering openly during the last show, so probably doesn't want to miss his weekly fix either. ® Complete Register trial coverage
John Lettice, 20 Nov 1998

Japan's FTC decides not to bust Microsoft

Microsoft general counsel Brad Smith has hailed the end of a Japanese investigation of the company as a victory, and in a piece of spinmeistering above and beyond the call, has claimed that as antitrust laws are tougher in Japan than in the US, Microsoft is particularly pleased by the decision. No doubt it's good news for Microsoft whenever somebody decides not to sue it, but the truth of the Japanese matter is that Japan's Fair Trade Commission found against Microsoft on two counts, but decided not to pursue a third matter, allegations that Microsoft was competing unfairly with Netscape. The FTC issued a warning to Microsoft about the wording of some of its ISP contracts. Microsoft says these are no longer in effect - they were modified when Microsoft started to blunt its ISP contracts world-wide at the beginning of this year. Microsoft was also warned about Excel licensing, and says it has accepted this. Smith, heroically, seems to see this as the tide turning, saying the Koreans have backed off as well, and that now questions from the European Commission and Israel are also close to resolution. One of the Brussels issues (because there are actually several) relates to those pesky ISP contracts - even the changed wording is a source of some contention. ® Complete Register trial coverage
John Lettice, 20 Nov 1998

Ingram deal takes Red Hat Linux into Best Buy

Red Hat Linux is going retail, with the announcement of a Red Hat authorised reseller programme and a deal with distribution giant Ingram Micro that will take Red Hat Linux 5.2 into major retail chains, including Best Buy and Electronics Boutique. Wider retail availability for Linux should cause furrowed brows in Redmond, and perhaps generate some embarrassing sales charts. Despite regular happy noises from Microsoft about the sales levels of whatever the current version of Windows happens to be, Microsoft operating systems have never been great performers at retail, so look for the first 'Linux outsells Windows 98' headlines next spring. The product Red Hat will be offering through retail will Red Hat 5.2 with bundled 90 days of Red Hat installation support. That'll make it easier for a wider customer base to get to grips with Linux, and sould also help Red Hat build up a useful customer database. The Ingram deal is intended to be long-term, and covers subsequent versions of the product as well. ®
John Lettice, 20 Nov 1998

DoJ deploys antitrust expert to prove Microsoft misuse of monopoly

Yesterday the DoJ reached its central allegation: that Microsoft is a monopolist (not illegal in itself, but denied by Microsoft), and that Microsoft monopolises markets by exploiting its operating systems dominance. Its witness was Dr Frederick Warren-Boulton, a consultant economist and scholar with an impressive twelve-page CV [and it's "vitae" not "vita",W-B (Pedant - Ed)] that includes a stint as a deputy assistant attorney general for antitrust during the Reagan days. His cross-examination started yesterday and is likely to continue for several days. W-B has played a role in most important antitrust actions since the AT&T case in 1981. His 88-page written testimony, which includes 142 references, has been meticulously prepared, unlike previous written testimony which is frequently emotive, rambling and repetitive. He is a very dangerous witness against Microsoft because he really understands monopolies, and how to win such cases in the courts. W-B's expert opinion is that according to the methodology used for defining markets in Sherman antitrust cases, Microsoft does have a monopoly in the relevant market - operating systems compatible with Intel x86/Pentium architecture - in excess of 90 per cent. Furthermore, the market share is protected by "substantial" barriers to entry, and reinforced by "network effects", which could be described as "everybody loves a winner". All of this is perfectly apparent to those at the coal face, but it does require rigorous legal proof, based on economics. W-B's second broad conclusion is that Microsoft has engaged in a number of practices that make it difficult for other browser developers. This is particularly important because Microsoft is more vulnerable to cross-platform technologies like browsers being used to launch applications, rather than a direct rival to Windows. Gates confirmed this when he wrote in an email: "[Netscape] are pursuing a multi-platform strategy where they move the key API into the client [browser] to commoditise the underlying operating system." This is of course the reason for Microsoft's relentless demands that OEMs, ISPs, online services and content providers should be locked into using IE. Such practices are exclusionary and impede commercial opportunities for rivals [which is illegal], W-B notes, and limit user choice. W-B excludes the only possible let-out clause in antitrust legislation by giving as his expert opinion that Microsoft's practices are not justifiable on efficiency grounds. Tying IE to Windows is unjustified, he says, but here W-B steps a little too far, taking on himself the role of operating system designer. Although few are in doubt that Microsoft deliberately made it as hard as possible to separate IE and Windows, and that it was done to defeat Netscape, Microsoft does have the right to do this, just as the court has the right to undo the effectiveness of the tying by some means not yet defined, if it finds that the tying was done with the objective of monopolising the market. It is likely that Judge Jackson will read W-B's testimony very carefully, since it is written in language that is directly relevant to the case that the DoJ has brought. ® Complete Register trial coverage
Graham Lea, 20 Nov 1998

Apple ponders cross-platform future for MacOS

Apple appears to be seriously considering taking the MacOS down a platform-independent path. Sources close to Apple's senior executives say they are exploring plans to extend the next major version of the Mac operating system, MacOS X, to a wide range of platforms, according to Mac-oriented Web site MacOS Rumors. Linux, Solaris and other varieties of Unix, plus Windows are all being viewed as bases for the OS. This actually isn't that new an idea. When Apple first outlined its plans for Rhapsody, its next-generation OS based on NeXT's OpenStep, it said the operating system would be provided in PowerPC and Intel versions. The Intel release would comprise both a native x86 version of Rhapsody and a version of its Yellow Box API (the bit that came from NeXT) that would run on top of Win32. In the process of Rhapsody morphing into MacOS X, and the company's more aggressive promotion of its PowerPC-based hardware, the cross-platform side to the story has rather faded into the background. But Apple has never publicly said it would not bring the Yellow Box and later Carbon APIs (essentially the old Mac Toolbox tarted up to operate alongside Yellow Box, to make it easier to port old apps to the MacOS X) to Win32. The whole OS has always had a high degree of separation from the hardware, so producing versions of Yellow Box and Carbon to run on even more platforms is relatively straightforward, allowing, say, Linux users to run the Mac GUI and apps out of the box. Users get a consistent interface but one that takes advantage of whatever hardware is sitting underneath it. At first glance, it sounds a slightly daft strategy. Windows users might like the better GUI, but they've got plenty of apps already -- do they really need Mac ones too? Ditto Linux buffs, Alpha fans and so on. However, if Apple were to allow developers to ship the appropriate versions of Yellow Box and Carbon with their apps, plus versions of their apps that are based upon them -- so, say, Adobe's Photoshop for Windows CD contains a Win32 release and the MacOS X version with APIs to run it and provide the Mac look and feel -- sufficient numbers of users might be tempted to try it, especially since it works alongside the host OS rather than requiring it to be booted separately. They could then -- perhaps -- be persuaded to buy Apple hardware, which will always provide the best MacOS experience, next time. It has to be a hardware gig since users will otherwise ask why they should pay for an OS when your hardware has already shipped with one, and alternatives, like Linux, are free? The downside is the risk that users stay where they are with the free software Apple has provided, but since the company would be leveraging development effort that has already been paid for by Mac users upgrading their system software, the financial risk is minimal. Gain users and you're laughing, but if you don't win more support, you're no worse off than you were before. ®
Tony Smith, 20 Nov 1998

Column: It's a con

Well, we have been saying it for ages, but now, the reality of the situation has hit the memory market. There is a shortage of memory, especially older technology products. In these lean times the "wide boys" hit the market with a passion. Normally most buyers would not touch their products with a barge pole, but market forces ensure that those hunting a bargain will always fall for a bit of product on the cheap. If most respectable memory distributors are charging x for a product, its not because they think they can inflate the price, its purely because genuine first rate product costs that amount of money, granted they might put a few more points on the price, but what you order is what you get. Some of the products that we are expected to quote against as a legitimate memory distributor are laughable, the fact they work in the first place is not far short of a miracle, the fact that they won’t work in a few weeks' time is often a reality. All semiconductor manufacturers produce their product on silicon wafers, they are not always perfect and there is a fallout of product that does not meet the rigid specifications expected. This product should not be confused with partial DRAM, there are several companies that buy partial product legitimately, as they incorporate intricate asic devices that enable the module to function as a full spec device, they may have a few extra chips on them, but they are guaranteed to work by the manufacturers, and warranty replacement is not too much of a problem. They are not full spec modules, but then again they are not sold as such, they are sold as a cheaper alternative to full spec product. The people that do buy it are happy with their lot. The cowboys, will use DRAM that has fallen out of specification, normally through bad timing, or other non conformant parts that do not meet the rigorous demands of the JEDEC standard. These chips in times of old used to be called game chips. They were good enough for your $5.00 games machine, but you would not want one operating your life support machine. Let's equate it to the designer shirt that a friend brings you back from Hong Kong. It looks the business, it's fully wrapped in the correct bag, the label says it's real, but when you wash it, you would be lucky if it fitted your two year old son. It’s bogus, and it's a complete and utter waste of money. Yet there are plenty of people out there that still insist on buying this rubbish! I’m not saying that all UK memory distributors are charging the going rate and all imports are rip offs, but if you have never heard of the DRAM manufacturer's name on the chip and you cannot find their web site with less than 10 clicks you are in trouble. A full spec DRAM looks like a full spec DRAM, however some proportion of the game chips do as well. To alert you as a buyer, here are a few tips; Any DRAM that has a very matt light grey appearance, or has had its surface etched, then probably a new and false identification has been given to the chip. The contents have to be suspect, because there is no reason on this earth to justify this process. Why would somebody want to scrub a name out? Yet people still buy it, or expect distributors with genuine product to match the price. The latest scam is to use 3v product for EDO and Fast Page modules, since there are very few manufacturers concentrating on this product. You will get what looks like a normal module but with some gaily coloured voltage regulators attached. Fortunately for us mere memory distributors, voltage regulators are about the only devices that don’t come in black. These are trendy fluorescent pink, orange and green, you have to be blind to miss them, yet people still buy them. There is only one thing that annoys me more than some joker telling me he can get Fast Page Mode product from the Far East for $5 less than my ex stock price, and that’s when he tries to return it to me one week later for an RMA. By all means import what you like but don’t come running to me when your Granny’s triple bypass goes wrong because you sold the hospital some "Wormtech Corporation International Global Computer" memory chips, when you could have had the real thing for a few dollars more. ® Alan Stanley is general manager of Dane-elec in the UK.
Alan Stanley, 20 Nov 1998

A year ago: Comdex – Golden Egg Goose in steroid scare

There is no truth in the rumour that Softbank, Japanese owner of Comdex, Ziff Davis and Kingston, among others, is so worried about the reputation of the Japanese banking industry that it's changing its name to Safebank. But it looks like it's changing the name of Comdex, and although it claimed more visitors than ever to Vegas, there are signs that the golden goose has been fattened beyond fois gras status. More visitors, but we'd guess less exhibitors, albeit with bigger stands. Hotel charges had gone up 10 per cent, but a lot more people pulled out of Vegas on Thursday rather than Friday, so 10 per cent doesn't cover a four day trip being cut to three. Meanwhile the convention authorities continue to pile on more exhibition space, and the casino operators build more hotels. We think this one is starting to look fit to overheat horribly. ®
John Lettice, 20 Nov 1998

Sega six-month sales, profits plummet

Sega's irritation over the delay it has experienced in shipping its next-generation Dreamcast games console became clearly understandable when the company announced it latest half-year results, yesterday. The figures were not inspiring. Net profits fell from Y5.03 billion for the same period last year to Y1.21 billion, a fall of 75.9 per cent. Sales dropped 20.4 per cent to Y100.93 billion from Y126.75 billion. Sega is hoping Dreamcast will turn that downward spiral around, and MD Shunichi Nakamura reiterated the company's prediction that it will sell one million Dreamcasts by the end of March 1999. That target was orginally set for the end of 1998, but difficulties encountered by chip manufacturer NEC integrating its PowerVR 2 graphics accelerator, co-developed with Britsh graphics specialist VideoLogic, forced Sega to move the deadline back three months. Now the calendar year-end target is just 500,000 machines. The company predicted rosy results for the current fiscal year, ending 31 March 1999. It believes it will make Y1.6 billion up from last year's Y35.64 billion loss. ®
Tony Smith, 20 Nov 1998

Pseudo-spook sues Qualcomm

Wireless phone company Qualcomm is being sued by one of its employees after he was arrested for spying in Russia last year. Qualcomm said it is resisting the charges. It has already rejected a demand for $1 million from lawyers acting on behalf the technician, Richard Bliss. Bliss, who still works for Qualcomm (though perhaps not for much longer) says that he was picked up by the Russian spycatchers because his permits weren't in order. They accused him of gathering secret information while performing surveillance work using GPS equipment without a permit. Presumably, that means if he did have a permit he'd have been allowed to spy legally. ®
Tim Richardson, 20 Nov 1998

TI to shut Portuguese fab

Portugal is the latest country to suffer from the worldwide slump in DRAM after Texas Instruments said it would shut a fab plant there. The fab, jointly developed with Samsung Electronics, will close in March next year with over 700 jobs lost and TI will move production to Malaysia, a report in the Financial Times said. The factory only opened in 1993 and the Portuguese government is understood to be seeking reimbursement for investment it and the European Union made in the fab. The move is blamed on devaluation of Asian currencies and much lower labour costs in the Far East. Earlier this year, Siemens shut a plant in the North East of England but has not yet repaid £50 million it owes to the UK government. ®
A staffer, 20 Nov 1998

Lycos revenues up, loss narrows

Lycos has reported revenues of $24.8 million -- a 166 per cent jump on the same period last year -- but still posted a loss of $2.4 million for latest results, for Q1 1999. The loss, 6c per share before amortisation, one-time merger-related expenses and a gain on sale of equity securities, narrowly beat the 7c per share loss expected by Wall Street. On the same day that its shares hit a 52-week high, Lycos announced that 44.5 per cent of Net users now used its services, making it the second most-visited portal on the Web. "Once again, Lycos far exceeded Wall Street's estimates of every key metric," claimed Edward M Philip, Lycos' COO and CFO. In October, Lycos said it was going to buy Wired Digital for $83 million in stock and also signed a $22.5 million promotional deal with Fleet Bank. ®
Tim Richardson, 20 Nov 1998

Palm readies PalmOS for new markets

3Com subsidiary Palm Computing is lining up tailored versions of the Palm OS for different devices and applications, an acquisition programme, and a licensing drive for 1999. Janice Roberts, Palm's acting general manager, quoted on CNet, said the company is preparing not only an upgraded version of the Palm handheld organiser, but a programme to extend it into new markets where the company feels there is a need for a mobile information appliance. Modifications to PalmOS include the ability to work with a much wider array of screen sizes and support for wireless communications, including Bluetooth, she said. Palm is following a path first trodden by Apple with its Newton technology. Palm is moving from its initial personal digital assistant focus into wider roles and other devices, just as Apple started with the MessagePad and ended up with kit like the eMate sub-notebook. Palm, given who its parent is, is likely to fix its sights on portable networking products. Less synergistic markets, such as education, entertainment and vertical markets, will be left to the new licensees the company is hoping to sign up. Current licensees include IBM, Qualcomm and Symbol Technologies. "We're trying to drive certain markets," said Palm's VP for strategic alliances an platform development, Mark Bercow. "But what we won't do is offer everything from toasters to space shuttles." ®
Tony Smith, 20 Nov 1998

Corporate IT spending to slow down through 1999

Corporate IT spending is expected to slow next year, according to a survey by Morgan Stanley Dean Witter. Although hardware purchases will increase by between four and six per cent, this is less than the seven to nine per cent growth rates the industry has witnessed during recent years. However, of the Fortune 500 companies polled, 75 per cent said they haven't changed their technology budgets because of economic conditions or market turmoil. In particular, the uncertainties in the Far East, Russia and South America seem to be having little affect on IT spending plans, the survey said. But the report underlined the widely held notion that spending to rectify the Year 2000 computer bug has diverted cash away from other IT projects. Around three quarters of those companies which said that spending on computers would slow next year blamed it on trying to solve the millennium bug. The report also highlighted some interesting purchasing trends. For example, IBM, Compaq and Hewlett-Packard have been singled out by respondents to receive the bulk of next year's IT hardware spend. And Microsoft, IBM and Oracle topped the list for projected spending for software vendors. Cisco should maintain its hold on networking expenditure, the survey maintains, with Bay Networks and IBM following behind. ®
Tim Richardson, 20 Nov 1998

Samsung to show off 4Gb DRAMs

South Korean DRAM giant Samsung is expected to announce early December that it is close to achieving the ability to manufacture 4Gb memories. And yesterday the company said that it had successfully created a .18µ (micron) process technology for 256Mb and 1Gb parts. Samsung is not expected to be able to produce 4Gb memories for two or three more years, but the breakthrough will displace former technologies by the middle of the next decade. The .18µ technology is, however, close to completion and Samsung will produce 256Mb DRAMs early next year. ®
Mike Magee, 20 Nov 1998

Brussels to build single cybermarket

The European Commission wants to establish a single market on the Internet to help develop e-commerce within the EU. If accepted, the proposals would eliminate national restrictions on the use of electronic media, enabling people to trade freely. Online businesses would be allowed to offer their services anywhere in the EU as long as they complied with the laws in the country in which they were based. "The Single Market's legal framework, combined with the single currency, provide the EU with a unique opportunity to facilitate the development of electronic commerce," said Mario Monte, single market commissioner. "This proposal should ensure that the Union reaps the full benefits of electronic commerce by boosting consumer confidence and giving operators legal certainty, without excessive red tape." But the proposals have been attacked by consumer groups claiming that far from simplifying matters, they will make them worse. The European consumers' association (Beuc) argues that shoppers will have to understand the laws of all the member countries if they want to buy anything. When people discover that the consumer protection rules they're used to in their own country don't apply in the country they're dealing with, Beuc argues this would undermine consumer confidence and dent the development of e-commerce in Europe. ®
Tim Richardson, 20 Nov 1998

Intel says there is shortage of Pentium IIs

Intel has confirmed there is a shortage of Pentium II processors, particularly of the 350MHz flavour. That transpired after Intel's chief technology officer Andy Bryant briefed Wall Street analysts yesterday and told them his company had "sold out of chips" for the fourth quarter. An Intel representative said: "There is a shortage of 350MHz Pentium IIs, particularly in Europe." He said that the shortfall was due to increased demand. "We'll catch up on the backlog in the next three weeks," he said. However, the increased demand for processors means Intel's results, as it predicted last week, are likely to be better than it or the markets thought. Mark Davison, processor product manager at UK distributor Datrontech, said: "There is a shortage of both 350MHz and 333MHz parts. A lot of shipments haven't arrived and we're not expecting some to do so until December." He said: "The 350MHz Pentium II hits the sweet spot for both performance and price." Demand for Intel chips was strong, said Davison, even at the expensive 450MHz Pentium II level. ®
Mike Magee, 20 Nov 1998

Microsoft attacks ‘ivory tower’ expert

Microsoft yesterday produced a long press release attacking Frederick Warren-Boulton's testimony. But it was notable that there was no attempt to defend the company against the charge of monopolisation, beyond a blanket denial and a vague gesture towards the need to innovate to stay alive. Microsoft instead described W-B as an "ivory tower consultant" with no direct experience in the day-to-day business and competitiveness of the US software industry. It is rather like questioning why Bill Neukom should be chief lawyer at Microsoft if he is not an ace C++ programmer. Microsoft tries to make an argument that "market entry costs are very low and profit opportunities vast in software platform technology" but conveniently forgets to explain why, if this were true, Microsoft has no serious competitor. Microsoft pointed to Netscape and Linux as examples of real threats, which was naive, and at a range of operating systems that are mainly part of history thanks to Microsoft's success. Curiously, the list of 17 OSes excluded Symbian EPOC and Geos, which suggests that at least the former is a real threat (hence Microsoft's Qualcomm deal) and that Microsoft's PR does not wish to give it credibility. The story that Microsoft tells about Netscape's ability to compete are far-fetched: is it really a level playing field if one browser is distributed essentially by default with new PCs and Navigator has to be downloaded and set up? Microsoft claims that Netscape has defaulted on delivering a componentized browser, but in fact AOL agreed that in the then circumstances of AOL abandoning Netscape, there was no requirement for this (although who knows what will transpire from the current talks between AOL and Netscape, which may result in one of a number of realignments as the case progresses). Microsoft makes an interesting claim in its defence, not backed up by a reference to the source, that of 11 US ISP's, only 44 percent used "IE technologies" (as Microsoft is calling its browser). Microsoft also claimed that the ISPs could distribute another browser, but this claim does not tally with the evidence that AOL presented. W-B is castigated for not realising that Microsoft was withdrawing the Channel Bar feature "because customers generally have not preferred it". Microsoft claims, without any convincing evidence, that the Windows "first screen" benefits consumers signing on for the first time by creating "a consistent user experience" - but this could only have relevance if these consumers went from new PC to new PC all the time. So far as the tying issue is concerned, Microsoft is saying that it "has not" tied IE to Windows - they are integrated. The use of the past tense will be its downfall here - because clearly there were two products until Windows 98. A strange letter to the DoJ from Netscape's counsel, and quoted by Microsoft, says (in response to a request from the DoJ for examples of files that could be deleted from Windows 98) that "it is our understanding that it is simply impossible to delete any portion of IE... from Windows 98". If this is really true, it is good evidence that Microsoft has very deliberately and unnecessarily made this the case, to frustrate attempts to delete unnecessary files, if another browser is preferred. ® Complete Register trial coverage
Graham Lea, 20 Nov 1998

Consumers' Association calls for investigation into Dixons

The Consumers' Association was yesterday calling for a government investigation into an alleged Dixons monopoly on PCs. (Earlier story: Dixons claims Intel losing budget PC market share) The association claims British customers suffer from Dixons grip over half the high street PC business, with the electrical retailer keeping prices artificially high. It is demanding the group is investigated by the Office of Fair Trading. The accusations echo those made by Intel's CEO Craig Barrett earlier this week, when the chip vendor said Dixons’ inflated prices were holding back UK PC sales. However, some feel the cries to force the retailer to explain its pricing policy are rich, coming from Intel. Peter Crane, marketing manager at Midlands-based reseller PSM Micro Computers, slammed the accusations: “Intel has the cheek to say Dixons are making too much profit. But who are they to talk?” Crane said that if Dixons was forced to reduce its prices, others in the channel could be forced to follow. He said he was worried about price cuts forcing down reseller prices across the board, on already low margins. Prices of PC are cheaper abroad due to the strong pound, but Crane said: “Prices may be cheaper abroad, but they don’t have the skills base we do.” Dixons, which owns PC World, Currys and Byte chains, denies controlling such a large sector of the UK PC market. While some rivals claim the group dominates about 45 per cent of home PC sales through high street stores, Dixons puts the figure at around 15 per cent. ®
Linda Harrison, 20 Nov 1998

Qwest goes Dutch over European fibre IP network

US telecommunications company Qwest is to extend its high-capacity fibre-optic IP-based network to Europe through a joint venture with Dutch telco KPN. The two companies are investing $700 million in existing assets in the JV, which will be ownded equally and called KPNQwest. KPN will be providing its Europe-wide fibre backbone, EuroRings Trans European; Qwest will be folding EUNet, the London-based European ISP it acquired in April, into the new company. A transatlantic link will bring the two partners' own networks together. KPNQwest will employ 700 staff, and begin its service next January. Its parents expect the business to generate revenue of $400 million in its first year of operation and to grow on average 40 per cent annually. The JV's first customers will comprise KPN and EUNet clients (84,000 of them). It will initially sell carrier services, including dark fibre, and add IP-based services next Spring. Eventually, it will also offer voice, frame relay and ATM-based services. Qwest shot to fame in the US with its plan to build its own nationwide fibre-optic network based on Internet protocols, a move that put it way ahead of rival telcos, who are bring their own networks up to date bit by bit. The company's gameplan has always called for expansion across the Atlantic, hence the purchase of EUNet. However, said president and CEO Joseph Nacchio, Qwest plans were limited by EUNet's own bandwidth limitations. The KPN deal provides Qwest with the bandwidth it it needs, he said. ®
Tony Smith, 20 Nov 1998

Shiva locked with Shiva shareholders in class action

Shiva today named its directors as defendants in an action that threatens to wreck its proposed acquisition by Intel. The class action claim, brought by Shiva’s shareholders, alleges breach of fiduciary duties in connection with the chip maker’s planned buyout. It seeks injunctive relief and unspecified damages. The action against the US remote access provider was filed in state court in Massachusetts on November 13. The Intel stock transaction to buy Shiva is valued at around $185 million and gives Intel access to Virtual Private Network (VPN) technology Mark Christensen, Intel Network Products Division general manager, formerly said the company had engaged Shiva because for its “talented people.” Maybe they could prove a bit too “talented” for the Great Stan of chips. ®
A staffer, 20 Nov 1998

Online retail making breakthrough, says report

Forrester Research says that online retail sales are moving into an upward spiral that will take them to $108 billion in the US by 2003, when 40 million US households will be shopping online. The prediction is based on improving consumer acceptance of online shopping and on this year's data, which suggests that breakthrough point is finally arriving. By the end of this year Forrester says almost 9 million US households will have shopped online for travel services and retail goods other than vehicles, spending $7.8 billion. As consumers get over worries about security and privacy (Forrester may be discounting the probability of massively embarrassing and highly publicised screw-ups here) retailers will need to start addressing the growing pool of consumers. "On-line retailing has left the experimental phase and is accelerating into the mainstream," says James McQuivey, analyst in Forrester's On-line Retail Strategies service. "Merchants are reporting dramatic growth in both sales and site traffic over the past 12 months. This pattern will become a self-perpetuating cycle -- as more consumers come on-line to shop, retailers will compete more aggressively for sales, in turn drawing still more consumers and merchants to the Web." Forrester splits online retail into three broad categories, and predicts the numbers for 2003 as follows. Convenience items such as books, music, clothes and flowers, and they'll be worth $32 billion. Researched purchases (airline tickets, computers etc) will be $56 billion, with travel alone achieving $30 billion. Replenishment goods such as groceries and "personal care" (is this big in the US? What is it?) will be slower in taking off, "hampered by the lack of a feasible distribution model," so it'll only account for $19 billion. We're not sure we can figure that last one out. You order the goods, somebody up at the store puts them in a van, then brings them round. Why isn't this a distribution model? And The Register is pretty sure that we'll have spent over $19 billion on Tesco Internet shopping on our own by 2003. Mind you, that includes beer and cigarettes. ®
John Lettice, 20 Nov 1998

Toshiba's balance sheet carmine colour

Electronics giant Toshiba yesterday went into the red on a consolidated basis for the first time in 23 years. The Japanese vendor said it lost ¥23.6 billion ($197 million) in the six months ended September 30, against last year’s ¥9.6 billion profit. Toshiba was another company to blame the Asian crisis for the poor results, saying it had also been hurt by plummeting memory-chip prices. Kiyoaki Shimagami said that the company’s overall PC business would post an operating profit of ¥70 billion yen ($583 million) for the year ending March 1999. However, he admitted the semiconductor and consumer electronics businesses would stay in the red. ®
A staffer, 20 Nov 1998

Gates' memory problems causing concern

The Gates deposition is a cause for concern in the Microsoft camp, and very interestingly, to Judge Jackson as well. Microsoft lawyers had asked for a conference in the judge's chambers, to complain about the repeated playing of short extracts rather than one long extract. Jackson said he "found it very effective to have Mr Gates' testimony on the subject as to which the next witness is going to testify before me immediately in advance of that testimony". John Warden, Microsoft's lead lawyer in the case, said the DoJ was using the video "for the purpose of an audience outside the courtroom and for the purpose of creating news stories day after day after day". [This is exactly what we said yesterday: naughty DoJ.] "Your objection is overruled," the judge said. "If anything, I think the problem is with your witness, not with the way in which his testimony is being presented. I think its evident to every spectator that, for whatever reasons, in many respects Mr Gates has not been particularly responsive to his deposition interrogation." Another yellow card for the Microsoft legal team from their employers was likely after Judge Jackson noted: "Everybody at your table [ie the defence lawyers] has reflected scepticism as the testimony is presented." Ouch. Mindful of the court of appeals one floor above his courtroom, Jackson added that he was "making no judgement" in his remark about the significance of Gates' testimony. But Jackson's head shaking and body language generally when Gates has said he couldn't remember receiving or writing key emails would appear to be a reliable indicator of how he will judge Gates' deposition. Davis Boies, the DoJ's ace lawyer, tried to help: "I think my good friend John Warden is carrying his company's PR water on this" and pressed the argument that Gates' "astonishing lack of recall" was limited to "issues of critical relevance" - a memory of convenience, it would appear. The particular interest in the fourth extract (below) of Gates' deposition was the repetition of Gates' replies, such as "I don't remember", which occurred half a dozen times in a ten minute clip played just before John Soyring gave his evidence. It certainly appeared as though Gates had been given advised by Microsoft's legal team, for he used the strange (for him) phrase "in terms of specifics, I wasn't sure" or a variant using "specifically" to diminish the precision of his response. The clip was one segment only, which frustrated the Microsoft legal team's arguments about clever editing of the extracts. Microsoft's concern was not confined to actions by the lawyers. The Microsoft PR team was also on the field, it would appear, and arranged a late-night interview with Associated Press for Gates to attempt some fence repairs. Gates deposition extract: Boies: Let me ask you to look at a document previously marked as government exhibit 400. The second item here is a message from you to Steve Ballmer, Paul Maritz, Jim Allchin, Christine Turner, on the subject of IBM, dated October 30, 1997; is that correct? Gates: It appears to be. Boies: Did you send this message, sir? Gates: Let me look at it. (Witness reviews document.) Gates: I don't remember specifically, but this kind of topic was being discussed, so I have no reason to doubt this is a piece of e-mail that I wrote. Boies: This relates to a conversation you had with Gary Stimac; is that correct? Gates: Not strictly. Boies: Does it relate, in part, to that? Gates: Yes. Gates: And did Mr Stimac tell you that he was thinking about taking a job with IBM? Gates: I think he did. Boies: And did he tell you that one of his concerns was whether IBM's relationship with Microsoft would be a problem? Gates: I see that in the e-mail. I don't remember it specifically. Boies: Do you remember people at IBM being concerned about IBM's relationship with Microsoft being a problem? Gates: No. Boies: Do you remember Mr. Stimac telling you that he was concerned about whether IBM's relationship with Microsoft would be a problem, either here or --or at any other time? Gates: No, I don't remember that. Boies: In response to that, you say that you told him that the Java religion coming out of the software group is a big problem. Do you see that? Gates: Umm-hmm. Boies: Did you tell Mr Stimac that? Gates: I don't remember telling him that. Boies: Now, when you talk about the Java religion coming out of the software group, you're talking about the IBM's software group; correct, sir? Gates: I'm not sure. Boies: Well, this sentence immediately follows Mr Stimac purporting to be concerned about whether IBM's relationship with Microsoft would be a problem and immediately precedes a sentence in which you say that you told him that IBM refused to buy anything related to BackOffice. Gates: Yeah, that doesn't relate to the IBM software group. Boies: But it relates to IBM; correct, sir? Gates: Yes. Boies: This whole paragraph relates to IBM; correct, sir? Gates: Primarily. Boies: So, when you say that you told Mr Stimac that the Java religion coming out of the software group is a big problem, do you really have any doubt that you were talking about IBM's software group? Gates: well, there was a lot of joint work between IBM people and Sun's people and other companies, and so it's very hard to draw a line between the IBM software groups and other people's software groups. Boies: Does that mean that it is your testimony here under oath that when you refer to the software group in this sentence, you don't know whether you were talking about the IBM software group? Gates: I'm certainly talking about software groups that IBM is, at least, a part of. Boies: You go on to say that they continue to use their PC's to distribute things against us. Is the 'they' that you are referring to there IBM? Gates: I think so. Boies: And is the 'us' there Microsoft? Gates: I think so. Boies: And you then in the next sentence say that you told Mr Stimac that they are dabbing in NCs in a way we don't like. Is the 'they' there, again, IBM? Gates: Apparently. I don't know what 'Dabbing' is. Boies: I was going to ask you that. The next paragraph you say, quote, overall, we will never have the same relationship with IBM that we have with Compaq, Dell, and even HP because of their software ambitions. I could deal with this just fine if they weren't such rabid Java backers. Now, when you refer in that sentence to 'they' as in I could deal with this just fine if they weren't such rabid Java backers, you're again talking about IBM; correct? Gates: Parts of IBM. It's important to distinguish different groups in IBM. Boies: And the different groups in IBM would include, perhaps among others, the software group as one and the PC group as another; correct? Gates: That's right. Boies: At the end of that you say that you are willing to take some risk in improving the relationship, and you think that steps ought to be taken to approach them, and you end by saying, quote, we should position it as let's do some things that are good for both of us but which require some of the rhetoric to be lowered on both sides. On their side, I mean Java and NC and 'their side,' you're talking about IBM side? Gates: I think so. Boies: And what you're saying is that you want a message conveyed to IBM that in order to improve the relationship, you want some of their rhetoric lowered on Java and NC? Gates: No. Boies: No? Did you want IBM to lower their rhetoric on Java? Gates: I actually explain in this message that I thought the rhetoric was actually hurting IBM itself, independent of Microsoft. Boies: Did you think it was hurting Microsoft? Gates: I wasn't sure. In terms of specifics, I wasn't sure. Boies: when you say that you could deal with IBM's relationship just fine if IBM wasn't such rabid Java backers, weren't you saying that you thought that IBM's rabid backing of Java was bad for Microsoft? Gates: I know at this time we thought some of the claims around Java were just plain false and weren't doing customers any favors by leading them down a belief that certain things were solved that were not solved. Boies: My question, Mr. Gates, is: in October of 1997, did you believe that what you refer to here as IBM's rabid backing of Java was something that was hurting Microsoft? Gates: I can't point to any particular hurting that it was doing. We didn't think it was accurate in terms of what technically could be achieved with Java. Boies: Let me put the question this way: in or about October of 1997, did you want to stop IBM from being what you refer to here as a rabid Java backer? Gates: we thought some of the rabidness was hurting IBM as well as the industry as a whole. Boies: Did you believe it was hurting Microsoft, or were you just doing this as sort of a public-spirited company to try to help IBM from hurting itself? Gates: I can't point to any particular damage, but we certainly would have preferred if the more extreme statements we didn't think were true, if they weren't pushing those forward. Boies: Mr. Gates, let me put it this way: in October of 1997, were you trying to get IBM to reduce its public support for Java? Gates: I say in here that under some circumstance the rhetoric should be lowered on both sides, but I think that's--you know, that makes sense in certain circumstances. Boies: I don't think you actually say 'In certain circumstances,' do you, sir? You may have meant that. I'm not saying you didn't mean it. I'm just saying, those words don't appear here, do they? Gates: No. It's all about I'm willing to take some risk in improving the relationship and think you should approach them on steps for improvement. It's in that vein that I talk about rhetoric being lowered on both sides. Boies: And then you go on to say that on IBM's side, you mean they lowered the rhetoric on Java and NC; correct? Gates: The rhetoric. Boies: And by 'rhetoric,' you're talking about public rhetoric, were you not? Gates: Definitely public rhetoric. Boies: And is it fair to say that in October of 1997, you were trying to get IBM to reduce its public rhetoric in support of Java? Gates: I don't know what you mean by 'trying.' I talk about a circumstance in which both sides would lower your rhetoric. Boies: And you are offering to lower your rhetoric if they would lower their rhetoric; is that fair? Isn't that what you say right here? Gates: In the context--this is about improving the overall relationship which is not focused on the rhetoric. It says that in the context of that improved relationship, I think that both of us should lower our rhetoric. Boies: Indeed, you say that the improved relationship will, quote, require some of the rhetoric to be lowered on both sides. Gates: That's a statement about human dealing that if our rhetoric is so high, it will be hard for them to do their side of improving the relationship and vice versa." ® Complete Register trial coverage
Graham Lea, 20 Nov 1998

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