1st February 1999 Archive
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Penalties will be severe in the extreme
A meeting of European justice ministers led by our own frightful home secretary, Jack Straw, agreed last week to consider allowing police to eavesdrop on Internet traffic. Unsurprisingly the ministers agreed that police should be given new powers, but they don't seem to have come up with any suggestions as to how the plod will actually be able to do it. If this one runs, then we reckon the US government could find itself with some useful European backing for encryption controls. "We are using 19th century procedures to pursue 21st century criminals," says Straw. By which we presume he means the penalties for Netcrime are going to include transportation and public floggings ® From The Register Number 66
Business 01 08:45
Cosmetics giant refuses to kiss and make-up
Estee Lauder, the cosmetics and fragrance giant, has filed a lawsuit against the search engine Excite and online cosmetics dealer The Fragrance Counter (TFC), alleging infringement of its trademarks over the purchase of certain keywords. A number of Estee Lauder subsidiaries have also filed similar suits in France and Germany complaining of Excite's and TFC's conduct under the laws of those countries, the company said. The Estee Lauder company claims that Excite -- and TFC, which purchased the keywords -- are responsible for trademark infringement, false advertising and unfair competition. TFC, which operates fragancecounter.com and cosmeticscounter.com, bought the words 'Estee Lauder' and 'Origins' (an Estee Lauder brand name) so that anyone entering these into Excite's search engine would be faced automatically with a banner ad from the online cosmetics retailer. Estee Lauder alleges that since the ad is displayed prominently, it may mislead consumers into thinking that TFC is related to, or associated with, the world famous cosmetics company, when in fact it isn't. What's more, Estee Lauder maintains that it does not sell its products to TFC and that the online retailer is not an authorised retailer or distributor of Estee Lauder products. Fred Langhammer, president of Estee Lauder, said: "Each year, Estee Lauder devotes significant resources to build and protect the value of our brands and trademarks to maintain the veracity and quality of our products for consumers." "We have filed this lawsuit to protect both our trademarks and our customers who may be misled by TFC's advertising efforts on Excite and [its subsidiary] Webcrawler," he said. Selling keywords is commonplace among search engines and Estee Lauder is the believed to be the first company to challenge the practice. While it is widely perceived to be part of the rough and tumble of online competition, Estee Lauder's litigious reaction caught many people by surprise. If the US District Court for the Southern District of New York -- as well as the courts in France and Germany -– should find in favour of Estee Lauder, it could trigger a landslide of similar lawsuits. No one from Excite or The Fragrance Counter was available for comment when this story went to press. ®
Business 01 10:31
'Couple of thousand -- I guess'
Microsoft has two mastiffs: president Steve Ballmer and group VP Paul Maritz, who looks after platforms and applications. Mastiff Ballmer will not appear at the trial, mostly because he doesn't have any significant technical knowledge, but mastiff Maritz was the first Microsoft employee to face cross-examination in court. Whether Maritz spent sometime at witness school, or only had time for a briefing from Microsoft lawyers is not at present known, but there is some evidence of some common responses by Bill Gates, Richard Schmalensee (Microsoft's expert witness on encomonics) and Maritz to lines of questioning by the DoJ's chief trial lawyer, David Boies. Slight variants of the phrase 'I don't recall specific receipt of it, but I have no reason to believe I did not receive it' are familiar from the Gates' deposition. There were echoes of the days when IBM was under antitrust examination, since Maritz admitted that certain meetings took place with a lawyer present. Boies had his approach well thought out. He first worked without a document, to get some kind of statement in response to a line of questioning, and then produced any document that controverted the response. He managed to expose a number of significant differences between what Maritz had said when he was deposed, in his written testimony, and in his cross-examination. Most noticeable is Maritz' hardening of attitude, and a memory that manages to lapse at convenient moments. There are several instances where the differences between Maritz' responses on oath and other evidence are in direct conflict. Maritz' approach to Boies' questions was not to answer them, but to make some neutral remarks. Many times he was admonished by Boies. Maritz was questioned about Windows 9x revenues, and put them at about $3 billion, but declined to provide a profit figure although he claimed about $1 billion per year for R&D and marketing. Microsoft still has these funny accounting practices, it seems: not much in the way of accounting books, but perhaps this is better than two sets. Boies posed many unproductive questions about the threat posed by other platforms. It was uphill work nearly all the way. There is every reason to suppose that Microsoft was paranoid about the competitive threat of Netscape and Java, since the executive worriers knew the truth about the quality of Microsoft software. Maritz proved himself able to turn any question about Microsoft's anticompetitive practices into a Microsoft perspective of working only on its own products, and not deliberately harming anybody. Maritz denied that the corrected version of his written testimony had changed the paragraph numbering, but sure enough, Microsoft Word had triumphed again and the paragraph numbering was out-of-step in the court room. It is clear that Maritz did not write his written testimony. It is lawyer talk, and covers areas about which Maritz is not informed. Maritz admitted at various stages that people had helped him in preparing for his appearance. Maritz said he had been given "a whole stack of documents, hundreds of pages -- maybe over a thousand pages of stuff to read". The man in charge of Windows said he did not know how many APIs Windows had. His guess was a couple of thousand. How modest. Maritz sparred with Boies over the legal definitions of market and market share, but little was given away. He was smart enough to avoid the chasm between browser and browser technology. At one point, Boies asked Maritz about market shares. For Unix on PCs, Maritz thought it was between one and five per cent. For Microsoft's share, he suggested a modest 70-80 per cent, with Apple having five to six per cent. The number two competitor, Maritz suggested, was piracy. Maritz couldn't (or wouldn't) come up with a figure for Microsoft's market share excluding piracy. Microsoft attorney John Warden objected from time to time, and was systematically overruled. His witness did not answer the question many times. When the questioning turned to Microsoft policies or practices concerning competition conduct or antitrust compliance guidelines, Maritz confessed that Microsoft had none. Judge Jackson said, after an objection by Warden, that "the witness is awfully difficult to get an answer to a question from". Indeed it was, even though a preposition is a bad word to end a sentence with. It emerged that Microsoft is actively considering adding speech processing to the operating system. Since Microsoft is so far behind in this field, it is probably the only way that it could gain some market share. The end of Boies cross-examination was feeble: Maritz was again trying to press the idea that Windows ran on only around 80 per cent of the world's PCs, and Boies had no evidence to shoot this down. Warden's redirect examination was fluent for the main part, but often concentrated on the wrong things, such as trying to prove Microsoft was working on Internet Explorer early in 1994. He was rather pompous, at one point asking Maritz to look at "the second placement and first in the chronological order" of two emails. It turned out that he meant a third of the way down the first page. Warden is technologically challenged by the case, and it appears that Judge Jackson has a firmer grasp of the technology than he does. The main thrust of his questioning was to press the rewind button, revisit history, make a few changes, and then fast forward. Judge Jackson became increasingly interested in the open source movement, and asked Maritz if the people involved were hobbyists. Maritz saw them as village blacksmiths competing with General Motors, but since the Japanese had done that successfully anyway, perhaps it wasn't a very good example. Warden worked his way through the list of questions he had likely been told to feed to Maritz. "Are there any current developments that bear on the ability of companies to distribute software?" he enquired. Maritz was ready with a one-two. There was, at least for the US, going to be Internet access at ten times the current speed so that software downloading becomes a non-issue. In addition, DSL (digital subscriber line) was going to make permanent connections a reality. The result was that "the OEM channel might become eclipsed" so that future PCs would not have a lot of software. A blissful thought, but beware of the flying pig. Warden finished his redirect rather well, with an advanced copy of Fortune for 15 February 1999 that said that "Microsoft [is] waning. Microsoft has gotten used to being the baddest geek in the room and now is becoming the old-timer in the kids game". Maritz lightened up and said that his son considered him and Microsoft to be old timers. Boies' second cross-examination regained some of the high ground he yielded at the end of his first session. It was in his power to find he was unable to finish his questions that afternoon, which would mean Maritz returning again on Monday. For once, Maritz answered concisely, sensing perhaps that this was the way to escape that evening. An email on 10 June 1994 from Microsoft's Steven Sinovsky revealed that said "we do not currently plan on any other client software especially something like Mosaic..." showed that Microsoft did not have plans for a browser in 1993 or in early 1994, as had been claimed by Schmalensee and Maritz. Microsoft licensed Mosaic in January 1995. In April 1995, there was still discussion as to whether Microsoft's modified Mosaic, to be called IE1, should be included in the Windows box or not. As the clock ticked, Maritz increasingly gave the answers Boies wanted. Maritz admitted that the browser was not integrated initially, but it was an objective. Even when IE3 was released, the browser was standalone, Boies suggested, to which Maritz replied that there were "elements of integration... but the whole tenure here is that we had trouble getting it done in time". Finally, an email from Microsoft's Brad Silverberg dated 14 December 1995 described IE3 as a standalone Web browser that runs on Windows 95. It was a satisfactory conclusion. ® Complete Register trial coverage
Business 01 10:47
"Number of Linux developers vastly exceeds the number of NT developers"
The cross examination of Microsoft group VP Paul Maritz showed Microsoft showing some real concern about Linux. Maritz probably didn't intend to announce under the DoJ spotlight that the number of applications that can run on Caldera's Linux was "probably several thousand". He was most reticent to produce a figure for Windows lest it proved to be embarrassingly large. Maritz portrayed Linux as a significant competitor to Windows in his direct testimony, and claimed that "Linux is an operating system that consists of several million lines of code comparable in size, capability and complexity to Microsoft's Windows 98 and Windows NT operating systems". He did not properly distinguish the components of what he was calling Linux, nor introduce the term 'distribution'. Microsoft likes Linux in some ways, since it gives just a little street cred to the claim that Microsoft is potentially threatened. Maritz -- or the committee apparently writing his direct testimony -- thought that Linux was "'cool' (a significant factor among 'early adopters')". Robert Young, Red Hat's CEO, had stated an objective of decimating the value of the operating systems market, Maritz complained. Young didn't think Red Hat would realistically be a viable competitor to Microsoft for 20 years, but Maritz would not agree. Maritz did shoot down Microsoft's previous witness, economist Richard Schmalensee, for suggesting that Linux was mostly used to run servers. An interesting observation by Steve Lambright of Informix was that the Linux market is poised like the Web was two to three years ago. But the remark in the testimony that is likely to reverberate is that "today the number of developers working on improving Linux vastly exceeds the number of Microsoft developers working on Windows NT". Warden fed Maritz a Wall Street Journal article on Linux in which it was announced that HP and Silicon Graphics would be offering Linux with Intel processors on servers, with HP noting that it may offer Linux on the desktop if it were Windows friendly and simplified. Maritz thought that "Linux is a product that Microsoft and other system publishers ignore at their peril". We shall see. ®
Business 01 11:03
Microsoft feared "patent terrorism" if Apple collapsed
Paul Maritz' testimony does give some useful information not previously disclosed about Microsoft's relationship with Apple, and in particular more details about litigation issues. It turns out that Microsoft's use of Apple code in Microsoft Video for Windows did indeed violate Apple's intellectual property rights, and that the case was settled out of court. Although Microsoft officially denies any liability -- and, for once, its hands were clean because its chum Intel passed Microsoft the duplicated code -- the legal wording used is a well-known shorthand for Microsoft having paid Apple a sufficient sum of money for it to be allowed to proclaim its innocence. The Apple claim for $1.255 billion evidently caused Microsoft a great deal of anguish, and there must have been good reason for this. Apple says that 24 of its patents were infringed, and possibly 12 more. Apple lost the intellectual property case it launched in 1988 after the Supreme Court said in 1995 that it would not hear the appeal. Microsoft crows that it received attorney's fees. Apple was unaware at the time of some key evidence that might well have changed the result of this case: it shows that Microsoft did copy the Apple GUI, since a mistake in the Apple GUI was copied into Windows and still exists. There is also a witness to Microsoft having received the source code listing from Apple, but he was never deposed. Microsoft's particular concern was that if Apple went to the wall, as it was close to doing in 1996/97, it might fight a mighty patent battle and win. Maritz' testimony says in its defence that "patent liability can be found even when the product in question was developed wholly independently" but that is unconvincing. A side issue is that a so-called "patent terrorism" fight, as Maritz described it, doesn't put Microsoft in a strong position, because the opponent isn't going to be a customer. The real problem is that patents are an unsuitable means for protecting intellectual property. Apple software VP Avie Tevanian, who gave evidence at the trial, was one of those who advocated suing Microsoft. In any event, if Apple went ahead, Microsoft was planning a counteraction, as it always does, however absurd it may be. Two days after Gates called Amelio to try to persuade him to make Internet Explorer the preferred browser, Apple board member Edgar Woolard called Amelio to suggest he resign. Maritz, however, says: "Apple dismissed Amelio as CEO". With the arrival of Steve Jobs as acting CEO on 9 July 1997, it only took until 5 August to agree the cross-licensing of patents. Jobs had an interesting encounter with Microsoft treasurer Greg Maffei in San Jose on 20 July, Maritz said in cross-examination. Jobs was wearing no shoes and was standing under a tree. The message that Maritz was anxious to get across was that Apple's use of IE was not even being discussed at the time. This is hard to swallow. Maffei distinctly recalls that he raised the subject of Internet Explorer with Jobs while standing under a tree in Palo Alto on 20 July, only after they had already settled the broad terms of the patent licence and Microsoft's commitment regarding Office for the Mac. Microsoft is a master at reconstructing a version of history to meet new requirements. The evidence that Microsoft was very concerned about the threat of serious litigation from Apple is not wholly convincing, and it seems more probable that Gates' desire for Apple to use IE as the default browser was much more important. In a 27 April 1997 proposal from Maffei to Apple, the cross-patent licence proposal by Microsoft is at 10th position in a list of 12 items and Apple offering IE as the default browser is at 5th position, which shows that these were issues before the bare-footed Palo Alto meeting. This new exhibit evidently caught Maritz unawares. A Microsoft document was produced by Maritz to lend support to the importance of the barefoot encounter, but it had not been produced to the DoJ as it should have been. This raised grave doubts about what other documents Microsoft might not have produced in discovery. Judge Jackson appeared to be getting cynical about the storyline, and asked Maritz a pointed question as to why the patent dispute was not mentioned prominently in an email from Maffei to Gates on 21 July 1997. Maritz said: "The words 'cross licence' don't occur, but it's taken for granted," and settling the dispute was taken for granted, which sounded rather unlikely. Maritz defended there being three documents for the August 1997 legal agreements with Apple, but the same argument could be used for keeping IE and Windows separate: different people are concerned with each component, and keeping them separate is more convenient. On 1 July 1997, Gates called Amelio because Maffei said he was getting nowhere. Gates was very unhappy at the OS, applications and patents situation. Amelio was on vacation. Gates threatened him: "I asked how we should announce the cancellation of Mac Office. Did he want to sue for patents first or should we announce with other ISVs that we are reducing out Mac support?" Amelio tried to be accommodating, but indicated that the Apple Board was split, but he agreed to draft a proposal that week. There is a most remarkable statement by Gates at the end of the email (which summarises the call and was sent to Maritz and relevant execs): "Gil did sound more concerned about Apple than I have heard him before. I don't envy him being in his job." It's hard to think of a single instance where Gates has previously expressed concern for anybody in business, apart from in PR stunts, and it was unexpected. It would seem to make it less likely that Microsoft was instrumental in Amelio's departure, and that as he suggests in his book, 500 Days in the Firing Line, he was in effect pushed by the Apple Board. Microsoft's head of Mac development, Ben Waldman, emailed Gates the same day asking if finishing Office was contingent on a deal with Apple. He needed to know because of a pending interview with the Washington Post. "WagEd feels that delaying again will cause suspicion and potentially a negative speculative story. MacWorld [Expo] is in four weeks and we need to do some sort of communication (under NDA) with press, or else also arouse suspicion," wrote Waldman. ® Complete Register trial coverage
Business 01 11:21
Did MS see Intel's NSP as a potential platform competitor?
David Boies for the DoJ roughed Microsoft VP Paul Maritz up about Intel's abortive multimedia system software, NSP, suggesting that Microsoft wanted it squashed because it was a potential platform competitor. Microsoft's Paul Osborne had said in an email dated 15 May 1995 that "Microsoft doesn't want Intel in the system software business because Microsoft doesn't want the operating system to become a commodity". Judge Jackson asked what was meant by "commodity", to which Maritz replied: "In the software business, when you have lots of competitors, each with roughly the same product, then the value of your software is diminished. So by "commodity", we mean here where the operating system wouldn't have the same value because--" The judge finished his sentence: "--there are reasonable alternatives." Microsoft clearly tried hard to discourage Intel from developing NSP, using arguments like: NSP was insufficiently tested; it only worked with Windows 3.1; and migration to Win32 would be difficult. But Bill Gates had another problem, according to notes of a meeting taken by Ron Whittier, who was running Intel's Architecture Labs (and whom Maritz confirmed as "a person of competence and integrity"): "Gates' issue: Fundamental problem with 'free' software from IAL, cross-subsidised by processor revenues." It emerged that Microsoft's real concern was that it was readying Windows 95 and did not want Intel developing 16-bit software, or indeed any software at all. Intel VP Steven McGeady had testified earlier that it was far from clear when Microsoft would be shipping Windows 95, and that the industry expected a further delay, hence the 16-bit development. Microsoft also saw it discouraging some users from migrating to Windows 95 until Intel had a 32-bit version of NSP. Maritz said he was concerned that Intel did not appreciate how much work Microsoft was doing on Internet technologies, but presumably Microsoft had not thought to keep its Wintel partner informed. Relations became very cool, with Gates emailing Maritz on 18 October 1995 that "Intel feels we have all the OEMs on hold with or NSP chill [Microsoft allegedly suggesting to OEMs that they do not take Intel's NSP]. For example, Intel feels Hewlett-Packard is unwilling to do anything relative to MMX exploitation or the new audio software Intel is doing, using Windows 95, unless we say it's okay". Boies went on a fishing expedition about a remark by Gates that Andy Grove "believes Intel is living up to its part of the bargain" but he failed to find any evidence of a bargain in any formal sense. It turned out to be that Intel would drop NSP if Microsoft would support MMX. This was unpopular at Intel so that Intel's software groups wanted to hide what they were doing from Microsoft, according to Grove. Maritz, conveniently, could not remember if Microsoft had attempted to get Intel to agree not to endorse Netscape's browser, despite Gates having told Grove "NOT" ever to say that Intel was standardising on Netscape's browser. In his recross-examination, Boies put it to Maritz that on 20 February 1997, Gates wrote in an email that if Intel had a problem supporting a collaboration between AMD and Microsoft over 24 new op codes, Intel would have to give up supporting Java Multimedia. ® Complete Register trial coverage
Business 01 11:34
"It has the potential to compete across the board with our product line"
Microsoft VP Paul Maritz gave a cracking endorsement of Lotus Notes, saying that it competed with several Microsoft products, including Windows as a platform, and Exchnage as an email and groupware system, and that many things can be done in Notes that require Microsoft Office. "It's one of those products that has the potential to compete across the board with our product line," he said. Maritz volunteered that Jim Barksdale, Netscape's CEO, had told him that he regarded Notes as the most competitive product, and added that at the time that Lotus had articulated that it was intended that Notes would be a platform. Microsoft had found it hard to track the sales of Notes, partly because of the problem of market definition. Competing with Notes was difficult for Microsoft, Maritz naively said, because it didn't fit neatly into an Microsoft product strategy. Notes was used by Maritz as an example of how a small company (Iris Associates) could develop a program with around 30 people, and eventually sell it for around £3 billion to Lotus and then to IBM. Still, Maritz argument that it was inexpensive to develop software was contradicted by what Microsoft spent on its own development. ® Complete Register trial coverage
Business 01 11:44
BeOS competes with Windows in all circumstances
Microsoft VP Paul Maritz doesn't know much about BeOS -- for example, whether it could run without Windows. Judge Jackson was interested to find out from the Maritz that "you can dual boot any operating system alongside Windows". Hitachi was installing BeOS and Windows, although Maritz did not know if Windows was present or not, but he adopted an extreme view that in all circumstances BeOS was competitive with Windows, even if Windows was present (which it was). However, Hitachi was being very cautious, probably to ensure it paid a reasonable price for Windows, by not showing the BeOS icon on the start-up screen, or setting up a dual boot. Instructions are provided, but users have to do the work themselves. Maritz was shown a statement by John-Louis Gassee to the effect that Be did not want to compete directly with Microsoft, but would be complementary. Maritz was not impressed and thought that on the Be Web site, Be was soliciting ISVs to write applications for the Be platform. Gassee noted that OS/2 tried to be a DOS/Windows competitor, but failed because "Windows in the office automation marketplace is too entrenched". In DoJ attorney David Boies' cross-examination, Maritz refused to yield to the idea that a successful alternate to Windows would need a wide variety of applications. Yet, in April 1998, Maritz had said in a deposition that real competitors would need "a wide range of applications". ® Complete Register trial coverage
Business 01 11:48
Yes, but didn't the bank and trading difficulties have something to do with it?
London Apple reseller CJ Graphics is blaming its chief supplier Apple for the “forced disposal” of the company to rival dealership Rapid Group. CJ Graphics owner Floral Street PLC sold the assets of the company for “up to £500,000” on Friday, January 29, after its bank suspended all the company’s financing facilities. AIM-listed Floral Street has ceased trading and is setting insolvency procedures in train."The directors expect there to be a deficiency of net assets". Aziz Punja, chief executive of CJ Graphics, said: “It is perhaps no secret that we experienced a downturn in business during the latter part of 1998. This combined with mounting orders due to Apple’s lack of product and the recent changes imposed by Apple has really forced our hand”. CJ Graphics was at its peak a £12 million t/o company. Steve Rush, Rapid marketing director, said the group is confident of restoring CJ sales to peak levels. CJ Graphics trades out of five outlets – in Brighton, Bournemouth, Birmingham and two branches in London. The company also sells graphics arts materials and office furniture as well as Apple kit. It will run as an autonomous unit of Rapid, according to Rush, who says no redundancies are envisaged. With combined group turnover of £30 million, Rapid is now one of the UK’s biggest Apple resellers. The group has climbed up the league table largely through acquisition -- notching up Thames Valley Systems, AppleCentre Cambridge and Macline -- among others. It currently trades out of Godstone, Surrey, Reading and Cambridge. Apple UK last week announced its intention to tighten accreditation policies for its 130-strong reseller channel. The company has struggled to keep up with UK demand for the iMac, the most popular launch in its history, with many models on allocation throughout Q4 last year.®
Business 01 12:04
"We did conclude marketing arrangements whereby gave preference to our product over competing browsers"
Microsoft VP Paul Maritz' said in direst testimony: "I never said, in the presence of Intel personnel or otherwise, that Microsoft would 'cut off Netscape's air supply', or words to that effect." Maritz slagged off Intel VP Steven McGeady: "I believe that Mr McGeady's accusation in this regard [that Microsoft would 'kill HTML'] speaks volumes about his attitude toward Microsoft and the credibility of his testimony," and "these examples demonstrate that Microsoft cannot alter Intel's business goals, and undermine Mr McGeady's assertion that Intel buckles under to pressure from Microsoft." But when McGeady's opinion supposedly helped the Microsoft case, it was therefore silly for Maritz (or an over-tired Microsoft lawyer) to include: "Intel's Steve McGeady [not "Mr McGeady", you'll note] testified in this case that others at Netscape had told him the same thing [that Netscape was focused on selling server software]." This from a witness that Microsoft was saying was not credible. Maritz' protestation about air supply were less pronounced when he was deposed on 2 October 1998, as this extract shows: Question: In the course of any of your meetings with Intel, did you tell any of their executives that Microsoft would cut off Netscape's air supply by giving away for free everything that Netscape was selling? Maritz: I have no recollection of saying that. Q: Is it possible you said that and you just don't remember? M: It's possible, but I just don't recall it. I don't believe it's something that I would likely have said. The DoJ's David Boies was relentless in his harassment, asking if Maritz had said he was going to smother Netscape. Having ascertained that Rob Sullivan was competent, had integrity, and that Maritz held him in high regard, Boies produced Sullivan's deposition in which he had said that he remembered Maritz using the phrase 'embrace and smother' with reference to Netscape. Maritz' reply was that the phrase was used by Microsoft's competitors as a parody of Microsoft's declared policy of "embrace and extend". Another deposition from Russell Barck said: "There was, in relation to Netscape, a conversation with Paul Maritz, where he had said the term 'embrace and smother' with respect to a strategy with respect to Netscape." It has become increasingly clear, except to the DoJ, that the important issue with Netscape is not when Microsoft started 'integrating' Internet Explorer with Windows, but the manner in which it was done, and Microsoft's motives for making it difficult to remove. Microsoft's Jim Allchin made an error in an email on 17 February 1998 by saying: "I am very concerned over how IE is presented in Windows 98 (and NT 5). Even the simple things, like the About box, make it appear separate. I think it is critical that somebody does a thorough walkthrough, looking for places in the UI that can be corrected (hopefully just text) easily before Win98 ships. Furthermore, our IE Web site needs a sweep (I mentioned this to Brad) where we ensure it is clear the IE is just a capability of windows (and that it is available cross-platform also)." The recipient, Yusuf Mehdi, said in response: "Agreed. Brad [Chase] set up a review of Windows 98 with me, BillV and someone from legal staff, and we will ensure ie is properly presented. On the web site I am making good progress reviewing the language of IE as a feature of Windows with the Web team. (We don't refer to it as a product or even a browser; it is browsing software.)" Maritz said he was unaware that this was being done in February 1998. In his 3 April 1998 deposition Maritz said: "We have been told on various occasions over the last couple of years by our counsel that we have to be very careful... not 'very careful'; we have to be 'aware' of the fact that certain terms have specific meanings in the context of the law and, you know, we might naively use a word and not realize that it could be completely misinterpreted if taken out of context." Maritz tried to wriggle out of this by saying the context of the statement was with respect to "leverage" so far as he could remember. A less convincing wriggle was when Maritz was unable to explain Nathan Myhrvold's 15 February 1998 memo that said: "'Putting the browser in the OS' is already a statement prejudicial to us. The name browser suggests a separate thing." All wriggle credibility was lost, however, when Maritz tried to claim that Gates' observation that "winning Internet browser share is a very, very important goal for us", meant users in total. He avoided completely the word 'share' and it seemed that witness training school had caused an alarm bell to ring. Boies then produced a document where Maritz had written a lengthy analysis, one section of which dealt with "the problem: browser market share". All wriggling ceased for a time, but resumed when Boies asked about Microsoft's efforts to get companies to agree not to promote Netscape's browser: "In certain specific situations, I believe that we did conclude marketing arrangements whereby the partners in question gave preference to our product over competing browsers or competing software, depending upon the particular deals." Bingo! It was interesting to see how Maritz came to Gates' defence when he was confronted with Gates' remark that Microsoft's business model works even if all IE software is free. Apparently "Mr. Gates was reacting to a tremendous amount of industry hype to the [idea] that Netscape was going to basically take over the world, and what he's pointing out here is that Microsoft has a business model that works, which is selling operating systems. And if Internet features are built into those operating systems, then our business model continues to work." Asked if this meant that Netscape's business model does not work, Maritz said: "No." Maritz was unconvincing when Boies confronted him with a New York Times article in which the phrase "cutting off Netscape's air supply" was attributed to him. He said: "I don't recall whether I read it or not." This may be a good witness training school response, but it is most unlikely that he does not recall this. He also denied saying that "everything they're selling, we're giving away for free". Boies was very patient in trying to get Maritz to answer questions. He frequently asked the same question two or three times (even four times when Maritz was being particularly evasive in responding to the question about what Gates said to a Financial Times reporter. Maritz was quizzed as to whether Microsoft's desire was to drive down Netscape's stock price in December 1995. A report in the Seattle Times that day had noted that Greg Maffei, then Microsoft's treasurer, saying that Netscape was down, and Maritz replying that was good. Maritz was unhelpful with Boies' line of questioning about financial matters, giving conflicting answers in his deposition and cross-examination as to whether Microsoft kept records of how much it spent on developing browsers. Boies wanted to know if such records had been produced. To everybody's amazement, Judge Jackson instantly showed he was thoroughly on top of the facts: "I think that was the testimony that he [John Warden, Microsoft's counsel] gave after he looked at his deposition excerpt here. I have here in my notes that prior to looking at his deposition, he said that the development of browser costs were tracked by Microsoft from 94 on, and then he became aware of it sometime in fiscal 96. But now, from that I inferred that he knew that there was some specific accounting of the investment in the browser. And then after he looked as his deposition, he seemed to think that the figures that he had were only bits of information which related generally to the development of windows, I guess." Maritz was instructed to produce the next day any documents pertaining to ball park figures for IE development cost. An interesting Microsoft email in July 1997 from Joe Belfiore had discussed the splitting of IE4 into two parts and charging for part of it. The idea was rejected by Mehdi because of the potential "terrible PR and customer backlash". The next sentence in Mehdi's 10 July email was noteworthy: "We screw NT 4.0 users." That's blunt, but it doesn't seem to have been brought up by the DoJ. His last paragraph provided some good copy for Netscape: "Netscape has shipped a good product far ahead of us and is still very savvy," and Microsoft's intentions were reflected in the observation that Netscape was "very interested in keeping their stock price up." Judge Jackson enquired how splitting up IE might be done. The witness replied "it would have been essentially a packaging question here". Apparently IE was not welded to Windows after all. A few minutes later, the judge asked a series of questions about charging for part of IE and how this was compatible with IE being an integrated product. His questioning had become sharper than Boies'. To make matters worse, Maritz had made admitted in his 3 April 1998 deposition: Question: when you wrote this and described the proposal by Mr Belfiore and Mr Dunie as tempting, do I understand from that you thought it was a proposal with merit, but that it was outweighed by the desire to increase browser share? Is that a fair interpretation of what you're writing here? Maritz: Yes. The Windows PlusPack, previously called "Frosting" was not a successful product, it was admitted -- Maritz said that only one or two million copies were sold at a street price of $49, giving Microsoft only $50-100 million. Consideration had been given to shipping IE in Frosting, simultaneously with Windows 95. Boies again returned to the Microsoft-Netscape meetings, asking if Microsoft's purpose was to get Netscape to change the focus of its business so that it did not compete with Microsoft. Maritz avoided responding about Microsoft's intentions. It was also silly of Maritz to claim that he did not know what Dan Rosen meant when he wrote: "We should try to strike a close relationship with Netscape. In this relationship, our goal should be to wrest leadership of the client evolution from them." Thomas Reardon emailed Maritz on 1 June 1995 saying that a working goal was to "move Netscape out of the Win32 Internet client arena". When Maritz was taxed with this, he suggested, with little conviction, that Microsoft hoped Netscape would give up working on browsers and move to "invest in Java technologies or invest in value-added technology". Reardon's next point was: "Avoid hot or cold war with Netscape. Keep them from sabotaging our platform evolution." Again, Maritz had no suitable response to questions about this. At the same time, Boies was either getting tired or he lacked sufficient knowledge to challenge Maritz on some of his replies. Boies hit Maritz with the suggestion that Netscape's browser ran more slowly and less efficiently on Windows 98 than on Windows 95, to which he replied: "I do believe that in certain circumstances, applications in general, not just Netscape's browser, can run slower on Windows 98 versus windows 95 in memory-constrained situations; in other words, running a machine with smaller amounts of memory." Maritz had admitted in his April 1998 deposition that Netscape's browser ran 10-15 per cent slower on Windows 98. It was naughty of Warden to feed outdated information to Maritz concerning the AOL/Netscape intention with respect to Windows. Warden used just the original announcement in which it was said that they would compete with Windows, but a more recent, more considered statement from AOL CEO Steve Case said that this would not, in fact, be the case. Maritz gave what appeared to be a rehearsed speech on the subject of Microsoft's innovation and the integrity of the platform. This was the reason, Maritz proclaimed, "why we are so passionate about defending the case". Perhaps he thought this potted sentiment was insufficient, so he embarked on some pragmatic management speak, except that it sounded absurd: "[Without the innovation and integrity] we would not be able to maintain the same kind of value proposition that we have for users going forward. And I believe that would be detrimental to the whole PC industry as well." But what about the users? Maritz had nothing to say on that subject. Complete Register trial coverage
Business 01 12:08
Sony Music demands delay -- and gets it
Creation Records, one of the UK's largest independent records labels, has postponed plans to sell and distribute music via the Internet thanks to pressure from Sony Music. According to today's Financial Times, Sony, which owns 49 per cent of Creation, asked the indie label to delay the release of music tracks online until it had sorted out its own system for digital distribution. Creation's band list includes Oasis, Primal Scream, Bob Mould, the Jesus and Mary Chain, and Ronnie Spector. This is the second time Sony has scotched Creation's plans to sell music and CDs via the Internet. Last summer, Creation announced plans to sell albums via its Web site, but soon after limited those sales solely to domestic buyers under pressure from Sony, which has exclusive rights to sell Creation titles overseas. Creation's plans to distribute music digitally emerged last November (see Oasis' record label plans pay-per-download music sales). Late last year, the company also said it would begin offering singles in MP3 format a month ahead of their release on disc (see Creation to distribute MP3 singles free via Web). The programme was due to begin early this year, but as yet the site only offers 30-second RealAudio excerpts. Another sign of Sony's interference? ®
Business 01 12:41
Every little helps
Supermarket supremo Tesco has joined Dixons and Toys R Us to become the latest retailer to offer its customers free Internet access. Anyone with a Tesco's loyalty card will be able to access the service for free, although calls to the help line will cost 50 pence a minute. The move is designed to drive more people to Tesco's Web site as the supermarket steps up its online retail activity. It has confirmed that it will soon be marketing a range of children's clothes from the mail order company Grattans on its site and other "lifestyle" goods will be available in the near future. Plans to develop online banking services through its personal finance division are also well advanced, a spokesperson for the company said. Tim Mason, Tesco marketing director, stressed the growing importance of the Internet to the supermarket group. "We already have an e-commerce business, half of our home shopping order comes from customers who choose to use the Net, but we want to do more on the Tesco site by making more products available to more Net users. Free access is an important next step in doing this," he said. Tesco has been selling groceries over the Net since 1995. Last year it became the first retailer in the UK to provide Internet access. ®
Business 01 12:45
Trebles PC assembly capacity
Datrontech is beefing up its PC assembly through a 45 per cent stake in Laser Computer Holdings. DTG is paying just NLG90,000 (£29,000) for its 45 per cent stake in Laser, a £32 million t/o Dutch computer assembler. The deal will look even sweeter, if Laser switches component sourcing to Datrontech. Datrontech is funnelling the acquisition through its wholly owned Dutch subsidiary International Computer Products (ICP). The remaining 55 per cent will be owned by a group of investors and will include the management of ICP. Laser has a PC build capacity of 40,000 units per year and apparently has strong brand recognition in the Netherlands. On its own, ICP can churn out up to 20,000 units per year. Datrontech says it may extend the Laser brand name to other Datrontech products Unusually, the pricing of the deal is constructed on a net asset basis -- seen usually in underperforming investment trusts and property companies. The price suggests that Laser’s previous owner MicroMundo was very keen to get shot of the company. Laser Computer Holdings is a new holding company with net assets of NLG 0.3 million (100k) and a credit facility courtesy of NLG Bank. This vehicle replaces Laser Computer Europe, which had net assets of NLG 6.6million (£2.1 million) at the end of its last financial year, on 31 March 1998. Sales for the year were NLG 99.5 million (£32 million) and pre-tax losses were £0.7 million. ®
Business 01 13:07
But its more to do with PR than inflated IPOs
Bill Gates this weekend claimed that Microsoft's share price is "surprisingly high" and investing in the company was a gamble. But while many observers chose to see Gates' comments as a response to recent concern voiced by the likes of Federal Reserve chairman Alan Greenspan over the massively inflated value of Internet stocks, in fact they're further evidence of Microsoft's new, more humble PR line. Speaking at the World Economics Forum at Davos, Switzerland, Gates said anyone buying Microsoft shares at 60-70 times annual earnings, typically the multiple at which the company's stock trades, were taking a very long-term risk, today's Times reported. "Statistically our chances of still being one of the top 25 companies in America 25 years from now are not very high," Gates went on to say. "I certainly hope we will still be there, but that will take at least three or four miracles." That's remarkably similar to the line trotted out by Microsoft VP Nathan Myrvold, speaking a few weeks ago on BBC Radio 4's In Business programme. While his statement that the successor to Windows would emerge within the next five years raised no eyebrows, what he said after did: "In the next five years the successor to Windows will come about... something may already exist. Maybe it's Linux, maybe it's Netscape Navigator -- they've had a plan to turn that into an operating system -- maybe its the Java operating system. We, of course, at Microsoft hope we're behind [the successor to Windows]. But if we don't work very hard, someone else will be." So, first we get Myrvold suggesting that the world's biggest software company, whose OS runs on over 80 per cent of the world's personal computers, might just miss the ball over the next five years. Then we get his boss, saying the company's long term survival will take "miracles". Not quite the bullish language we've come to expect from Redmond, but one that very clearly de-emphasises Microsoft's role as industry dominator and suggests the company might just end up the underdog -- 'Hey, guys, we're really fallible, you know.' That's always been a possibility (albeit a slim one) in an industry as swiftly moving as the IT business, but it is telling that Microsoft's senior executives are choosing to point it out. Windows 2000 might be delayed a bit, but that's hardly likely to hit Microsoft too hard. Linux may nab a lot of server OS market share, but it's unlikely to make it too big in the personal computer space. Or perhaps Gates and co. are more concerned about Apple's revival continuing to the point where everyone's using a Mac? No, we're really talking a strategy that's about making people come to believe Microsoft isn't as bad as a lot of folk seem to think it is. Gates pushes it to the business community; Myrvold to the techies. And, as soon as the DoJ trial is out of the way, presumably Microsoft will return to its old self. ®
Business 01 13:56
Who says cheap ain't chic?
A French supermarket is selling Internet-ready PCs for the knockdown price of £200. Géant -- which has 120 stores throughout France –- told Le Register it has sold more than 3000 PCs in just five days as shoppers rush to take up the offer before it runs out next month. The deal is being run in conjunction with French Internet Service Provider (ISP) Infonie, which charges around £15 a month for Net access. The only condition linked with the offer is that consumers have to use Infonie as their ISP for a minimum of two years. The Power Net 300 PC comes with Cyrix MII 300 processor, 32MB SDRAM, 36x CD-ROM and a 56kbps modem. ®
Business 01 15:19
Compaq forecasts end of Sun SPARC and MIPS
A press conference in central London today demonstrated the confusion Compaq is suffering after its takeover of Tandem and Digital. Richard George, Alpha Server product manager for Compaq in the UK, said: "There will be two chips in the next millennium. One will be made by Intel and other will be the Alpha chip." George said that the PA-RISC chip, the MIPS chip (from SGI) and any other iterations of 64-bit architecture will disappear and very soon. He said: "If we look at [Sun] SPARC, they're trying to get out of that market. I would say, 'Forget Intel vs Alpha. Think of it as one RISC architecture versus another.'" George was asked whether he thought that IA-64 was a RISC architecture and he said: "AMD will be able to produce a plug compatible chip with the Alpha." He added: "Samsung will produce $1.6 billion of Alpha chips this year." ®
Business 01 15:21
It's all out war on the high street
Dixons has halved the cost of calls to Freeserve's technical support lines to mark the opening of the ISP's one-millionth account. The news comes -– coincidentally -- on the very day Tesco announced it was launching a rival subscription-free service for all ten million loyalty card holders. A spokeswoman for Tesco refused to take all the credit for Dixons' U-turn on its pricing policy but agreed that Tesco's entry into the free ISP market may have contributed to the decision. Dixons has vigorously defended the cost of its technical support line -- £1 a minute until now -- since Freeserve was launched last year. Critics of the service argued that users could run up huge phone bills if they encountered problems but Mark Danby, the head of Freeserve, told The Register that most problems were solved in less than five minutes. "If we still can't solve a problem after 20 minutes we call them back," said Danby. ®
Business 01 15:32
Is it Tru64, NT 64-bit, or what?
A press conference held at breakfast time this morning has demonstrated that the combined might of Compaq, DEC and Tandem is taking a while to settle down. The argument is still raging internally over what exactly a 64-bit operating system is, it has emerged. A team of 12 product marketing managers from Compaq debated a Gartner Group report, as to whether Tru64 Unix or NT 64-bit will dominate the enterprise next century. Opinions varied widely. Iain Stephen, software product manager of Compaq's Enterprise Computer Group, said: "Tru64 was chosen because of its independence of the company." He said: "We want to be number two in Unix by the year 2002." He claimed Gartner's report that all corporations should think about a migration to Merced was incomplete. Said Stephen: "We all know the Gartner analysis that says three Unix flavours will win." Without mentioning clone Unix flavour Linux, Stephen said: "Unix and NT integrated applications can work on both but you need to be able to manage it." His view got a separate twist from Rhys Austin, product marketing manager of ProLiant and ProSignia servers. Austin said that both Alpha and Intel platforms were industry standard platforms. Tandem stood aloof from the proceedings. Its announcement today was that its .99999 offerings were widely accepted by the banking and telco players. The debate continues. ®
Business 01 15:33
It wants to be a utility, like gas, water or electricity
A giant PC company has spelt out its vision of the future for IT managers, in which they have to plug their servers, for storage, into a utility company called Compaq. Speaking at a press conference in central London this morning, Donal Madden, head of product marketing of storage at Compaq UK, outlined his company's vision of the future. According to Madden: "We are now the largest storage vendor on the planet. We can no longer hold onto the coat tails of our ProLiant range on storage." He said that Eckhard Pfeiffer, CEO of Compaq, had realised in 1997 that while it shipped lots of storage products with its servers, that amounted to more than the value of its Proliants. Madden said: "We're moving to storage as a utility like electricity, phones or water." He said: "We want to get to a stage where you can just plug a server into a wall and get unlimited storage." But asked whether storage was safe in Compaq's hands, James Stevenson, director of the enterprise server group at Compaq UK, admitted there was a problem with the metaphor. Stevenson said: "We're not exactly saying that Compaq will hold all the storage within its data banks." Stevenson admitted that most IT managers would prefer to keep their storage in-house and buy solutions from a number of vendors. Madden had said: "We're not bull-shitting like our competitors. We are not being God. People like EMC will say: 'You have sinned but you can repent.'" According to Stevenson, Compaq's slide which showed a lightbulb, a faucet and a three-pin power socket was not what the company was trying to say. Meanwhile, Madden insisted that his company's Enterprise Network Storage Architecture (ENSA), which includes deals with putative IBM mainframe players would allow Compaq to deliver results from the smallest PC server to the greatest. Madden said that by 2002, people would be able to get storage just by plugging their servers into a wall. ®
Business 01 15:50
MIPS gone, according to Eckhard, but where does that leave the rest?
There is no definitive answer as to where Compaq stands on whether Merced or the Alpha is a better chip platform. That emerged today during a heated debate in central London. Posed questions whether a 64-bit Intel platform, supposedly due next year, is better than a cheap Alpha 64-bit platform today, a jury of product marketing execs appeared dumbfounded. A number of people got up to speak but they only seemed to compound the situation, with Nicky Spiers, Compaq's workstation product group manager, contrasting the price of Tru64 Unix (£8,000 plus) with Intel 32-bit NT systems costing around £6,000. All seemed to agree that Alpha systems, available now, are far faster than Merced systems, maybe available next year, but no one seemed to be able to figure out why Compaq was still supporting Merced. ®
Business 01 16:17
It solves one problem but prompts another
A US legislator last week said that one answer to the January 1 problem next year was to call January 1st January 2nd. This, of course, ignores the soli-lunar calendars upon which much of our civilisation depends. However, the legislator did not try, at least, to go to the Gregorian calendar, which celebrates Christmas a full two weeks after the calendar instituted in the West in the 18th Century. At that time, people complained of a lack of 11 days pay, a bit like the old geezers who complained that there were only five pence, rather than 12 pence to a shilling, when the Brits went decimal. Nevertheless, it is a fact that the shilling, former silver, soon turned into a cupro-nickel coin and is now so small that people drop it without seeing it and never pick it up. ®
Business 01 16:51
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