4th > June > 1999 Archive

The Register breaking news

MP3 big in Taipei

Computex Several manufacturers are rolling out MP3 players at the Computex show in Taiwan. Pine introduced its D'music player, which can also be used as an FM radio and a voice recorder, and includes 32Mb of memory. Additional 32Mb cards fit in the machine. RFC Distribution is showing a JazPiper, which is a similar type of device and uses a SmartMedia card. These devices will give around an hour's worth of music. Meanwhile, Alpintex has launched its MP-Rom, which is an MP3 player which integrates a CD-Rom rather than memory. ®
Mike Magee, 04 Jun 1999
The Register breaking news

FIC, Asus confirm K7 mobo support

Computex Motherboard manufacturers FIC and Asus have officially confirmed they have pinned their flags to the K7 mast and have motherboards for the microprocessor. Although AMD has insisted that no-one publicly shows the K7 at Computex, representatives at both companies confirmed they were showing their motherboards in suites at the Grand Hyatt. FIC's motherboard uses the AMD/DEC Irongate chipset, while Asus's board is using the Via chipset, representatives from the two companies said. Asus said that chipset support for the K7 was quite limited at present but would increase as the year draws on. ® See also K7 to get PC-133 support from Via K7 mobile to arrive next year K7 mobos start to appear
Mike Magee, 04 Jun 1999
The Register breaking news

MS, DoJ lawyers out in force for IBM witness

MS on Trial Detailed analysis of some 300 transcript pages and associated documents from the deposition of Garry Norris of IBM, one of the rebuttal witnesses for the DoJ, has provided a veritable cornucopia about negotiations between IBM and Microsoft from 1995 to 1997. The deposition disclosed many secrets, with some suspected ones being confirmed, but others were unexpected and had not previously been in the public domain at all. The size of the legal teams showed just how seriously his evidence was being taken: there were eight lawyers for the plaintiffs (the USA and the 19 states plus DC) and IBM, and three from Sullivan & Cromwell for Microsoft - but surprisingly, none from Microsoft itself. The deposition was taken by Richard Pepperman, for Microsoft, and was mostly free of legal histrionics. There was six hours of questioning over an eight hour period. Pepperman was probing to find out what Norris would say when he gives his evidence, but in the event, he disclosed much of the interesting new information in his unsuccessful effort to open up Norris. When Norris is examined, it is believed that he will produce a diary that he kept at the time of events, and that this will reinforce his evidence. The court rules for the deposition prevented Microsoft from gaining access to the documents that the DoJ will introduce when he is directly examined. As we suggested earlier, it looks as though Norris' evidence will indeed be the most interesting of the rebuttal witnesses, and highly damaging to Microsoft. Norris was only approached though an IBM counsel about the possibility of being a rebuttal witness in February. He was served with a subpoena to give evidence in a personal capacity, although he was legally supported by IBM through external counsel Howard Weber of Davis Weber & Edwards of New York. There is no evidence that he was been pressured by IBM to keep any matters confidential, although IBM lawyers were adamant that attorney-client discussions remained privileged. Around 1995, Norris was questioned by the DoJ about Microsoft's threats to PC makers who were loading OS/2 and PC-DOS, when he was OEM manager. He told them that on several occasions various PC manufacturers had wanted to license OS/2 but when Microsoft found out, they were threatened. Compaq was one of these OEMs, and Norris was informed of Microsoft's intimidation by Compaq VP Mike Clark. As a consequence, Compaq did not license OS/2, but did one-off deals when a Compaq customer specifically wanted OS/2. It is likely that Norris will find himself under personal attack from the Microsoft legal team during cross-examination. Although he departed to IBM's networking hardware division in 1997, there was no evidence in the deposition that he had been pushed there because of IBM's dissatisfaction. Pepperman established that Norris was regarded at IBM as a "hipo", meaning that he was attributed with having a high potential for promotion. It was revealed that in late 1996, Norris was interviewed for a job at Dell as a result of having been head-hunted, but did not get it. Norris is an old-IBM hand, having started in 1982 as a salesman. After graduation, he spent a year at law school, which appears to have done him no harm as it turns out, although his only previous court experience was defending himself in a traffic violation case. From 1982 to 1992, he held various sales and marketing positions. Norris was not always fully informed about the history of IBM-Microsoft relations: for example, he said in his deposition that he had not heard of the IBM-Microsoft divorce. In January 1993 he was appointed worldwide group OEM manager, selling OS/2 to major OEMs (and reporting to John Soyring, who gave rather low-key evidence earlier). Around this time, HP wanted to load OS/2 on half the PCs at a trade show, but when Microsoft found out, it threatened to "make things difficult" for HP, so in the face of the threats, HP did not load OS/2. This will be telling evidence in court. Then from 1994-1995, he marketed OS/2 internally to the IBM PC company, finding that in the case of each PC brand, there was fear of retaliation from Microsoft. In January 1995, Norris was director of Project Dual Boot to install OS/2 and Windows 3.1 on IBM PCs, so customers could have a choice of operating system. The first dual boot system was shipped around April/May 1995, but the project was curtailed before it was fully ramped. Then for two years, from March 1995, Norris was appointed Program Director, software strategy and strategic relations, IBM PC Company, with responsibility mainly for Microsoft and Lotus relations, and for the strategy for software and preloads for the PC Company. This was the period when he had maximum contact with Microsoft, which is the focus for the trial. In April 1997, Norris left the PC Company to go to the networking hardware division, where he is director of brand marketing for the access business segment, marketing routers and the remote access service. Norris uses a ThinkPad with Windows 98, and not OS/2. Complete Register trial coverage
Graham Lea, 04 Jun 1999
The Register breaking news

IBM witness – MS probes for conflict within IBM

MS on Trial Microsoft counsel Richard Pepperman, during the deposition of Garry Norris of IBM, revealed a document from Brian Conners, VP of IBM's consumer division, that said: "I would like to feature IE only and remove Netscape. This is contingent upon Microsoft supporting IGN [IBM Global Network] as an ISP. Also with IE 4.0 we will have a channel (1 or 2 of 10) to personalise." Norris said he did not previously know of this. Microsoft is clearly seeking to show that there was some dissent within IBM, and that the browser market was competitive (except that Microsoft does not like to recognise the existence of a browser market, of course). The purpose of Pepperman revealing these details appeared to be so that Microsoft could be seen to be a fair player in the negotiations, and to detract from the absolute power that Microsoft had over OEMs. It became clearer as questioning proceeded that Pepperman wanted to establish that Microsoft was essential to IBM and that it accommodated at least some of IBM's particular contractual needs, even though IBM was Microsoft's most vigorous competitor at the time. Pepperman was interested in having on record an extract from an internal IBM memorandum (about a request for bonuses) that said: "During these negotiations, Microsoft provided IBM with concessions such as selective recovery, recovery CD distribution, open bay, EIAA, and the team negotiated more agreeable terms over onerous terms such as new OPK implementation and GUI restrictions." Occasionally Norris showed some spark. When asked: "It was IBM's first priority, though, wasn't it, to sell and promote IBM solutions on IBM platforms?" he replied: "That's what companies normally do that make products for a profit, yes." Microsoft's greatest fear must be in Norris' direct examination, and the documents that are produced at the time. It begins to look as though IBM is gaining confidence about its contractual relationship with Microsoft. Perhaps revenge will also be sweet, at least for those with a long-enough memory about the OS/2 saga. ® Complete Register trial coverage
Graham Lea, 04 Jun 1999
The Register breaking news

IBM witness reveals MS OEM price threats and deals

MS on Trial According to a deposition by Garry Norris of IBM, Microsoft proposed a Windows Desktop Family Agreement in March/April 1996, and wanted IBM to give up the right to have Windows 3.11 for $9 (the agreement at this price lasted until September 1997), as it wanted to discourage installation of the product. Microsoft wanted $62 for Windows 3.x in the agreement. IBM was concerned to obtain a good price for NT 4.0, which was offered for $127, or a 40 per cent discount on the per-copy price of $195, as a result of signing the Family Agreement, probably in August 1996. In the end, IBM agreed to $40 for Windows 3.11, which reduced to $25.50 after MDA discounts, which was believed to be only marginally more than Compaq paid. IBM was to receive a discount of $6 if the percentage of Windows 3.x was below a certain threshold. A further incentive for the deal was that IBM would be able to recover $5 million being held in an escrow fund that was established as part of the settlement of the audit (see separate story). Norris detailed in his deposition how Microsoft dealt with IBM: "We were offered on several occasions, from time to time, offerings from Microsoft, financial offerings, financial incentives, to stop shipping products from time to time, or reduce or eliminate them. They began with what I told you earlier about the MDA, by offering us $8 in MDA royalty reductions to stop shipping or eliminate OS/2. Navigator was around the fall of '96/winter of '97 time frame. We had similar offerings that gave us - that would give us financial incentives if we stopped shipping Navigator and start shipping IE. In return, we would get favourable price, MDA reductions, et cetera. We rejected these deals from time to time. And as a result of the rejection of the deals, we were told repeatedly that we would suffer in the marketplace with higher prices. And we were. We would suffer below-par support in their support programs. And we did. We would not be allowed to anticipate in the any of the enabling programs, the Solution Provider program, the Authorized Technical Education program and the Authorized Support Center program. We were told that we would not be allowed to certain events and other things that our competitors got that I can't recall at this time." IBM's Consulting Practice for Microsoft Technologies became a Microsoft Certified Solution Provider, but the membership was not renewed (by Microsoft apparently). IBM was verbally offered a financial incentive ("below $10", for IE and several other applications) to ship IE and not Navigator, providing what Microsoft called "no objectionable applications" (Lotus, Netscape) were included. This occurred in March 1997, after IBM had stopped shipping OS/2 with PCs. IBM was allowed to add icons to the start menu and the desktop, but was not allowed to have an icon that made it possible for a user always to boot to an alternative interface if an icon was clicked once: the user had to click the icon each time. Pepperman teased away at Norris, trying to find out any additional information as to why Lotus decided to drop Navigator. It appeared that Lotus felt threatened by Netscape Communicator, a potential rival to Notes. Norris established a Microsoft project office consisting of 18 team members. Norris said that he rejected a chart prepared by Dubinsky, dated 21 May 1996 (although this could well be a production date for legal discovery) and which contained a remark "Turned the tables on Kempin". Reading between the lines, Dubinsky may have been moved sideways in 1995, since some time after Norris' appointment, Dubinsky began to report to Norris. Dubinsky was probably also particularly disliked by Kempin for being instrumental in the sting that Kempin had received in November 1994, at a meeting involving Gates, when he thought he had succeeded in getting IBM to suppress OS/2, only to find IBM making war cries about it. Gates was clearly annoyed at Kempin about this. In a document concerning bonuses, produced by Microsoft lawyer Richard Pepperman, a suggestion that Dubinsky received a $5,000 bonus is crossed out. Norris said he thought that Dubinsky had created the document requesting a bonus. Pepperman was interested in other content that reflected well on Microsoft, but he was most curious about the award to Dubinsky: "Well, this has been killing me to ask this. The last sentence of this says: 'I would like to give an award to Dean of $5,000. It's crossed out. Did Dr Dubinsky get an award here?' " Norris confirmed that he did, as did several other team members. ® Complete Register trial coverage
Graham Lea, 04 Jun 1999
The Register breaking news

MS OEM VP to IBM: dump Lotus and we'll cut a deal

MS on Trial During a struggle over underpayment of royalties by IBM to Microsoft, MS OEM VP Joachin Kempin offered a deal if IBM would stop shipping Lotus SmartSuite for six months, according to trial testimony by Garry Norris of IBM. By bringing in SmartSuite Kempin was increasing the level of linkage, as the royalty issue was already entangled in IBM's attempts to secure a Windows 95 licence. In questioning Norris revealed that Kempin made the offer in August 1995, just three weeks before the launch of Windows 95: NORRIS: But during the audit period, Joachim Kempin did say, as a measure of something: We would agree to settle the audit if you don't ship SmartSuite for six months. PEPPERMAN[Microsoft attorney]: And IBM flatly rejected that proposal? NORRIS: Yes, we did. The settlement of the audit and the Windows 95 licence agreement were both signed on the same day: Windows 95 launch day - 15 minutes before the launch. Norris' deposition has brought to light some fascinating evidence about Windows royalty under-payment by IBM. In the Fall of 1994, Microsoft told IBM it wanted to conduct an audit of Windows sales. IBM had been saying publicly it had very good sales of OS/2 containing Windows licences, but Microsoft said it was not seeing this in the data that IBM reported. At the time there was also a certain amount of carpet bombing free copies of OS/2 going on. Microsoft claimed that IBM might have been under-reporting royalties for a couple of years. From Norris' perspective, there was no relationship between this allegation and his effort to negotiate a good price for a Windows 95 licence. Microsoft had decided to link settling the issue of the audit to IBM's Windows 95 licence negotiations, but Rick Thoman, an IBM VP, tried to get the audit issue de-linked. He wrote to Gates on 20 July and followed this with a conference call with Gates on 24 July 1995. Microsoft knew it was putting IBM under great pressure. Norris said: "A series of letters transpired back and forth, the net of which simply said: there's no reason to withhold the Windows 95 beta code, which you have begun to do because of the audit. The audit is unrelated to the Windows 95 license agreement. Please release the code." Pepperman asked Norris if he was aware that IBM ended up paying Microsoft $30 million to compensate Microsoft for under-reported royalties. Norris said he knew that IBM had offered $10 million in a settlement agreement, $5 million of which was to be held in escrow, as part of a move to speed up getting the beta code of Windows 95, and the licence. The escrow account was set up to give a measure of comfort against any under-reporting of Windows 95 sales, with interest and penalty payments being agreed in the contract should this happen. Pepperman said that Microsoft had ended up taking $30 million for what was claimed to be $50 million of under-reported royalties. Norris said he was unaware of this. Pepperman then asked Norris if he knew that an internal IBM audit had found that royalties were under-reported. Again, Norris said he was unaware of this. Pepperman indicated that the audit had taken ten months, and that a great deal of time had been taken up by IBM in negotiating a non-disclosure agreement with the auditors. Perhaps the most unexpected information was that, according to Pepperman, it was IBM procurement contracts manager Jim Miller who threatened in July 1995 to suspend negotiations of the Windows 95 licence until the audit was resolved. Norris confirmed that he had heard this too. Microsoft claimed to be upset at the discovery of the under-payment, but it could well be that it was pleased to have an excuse for making life difficult for its competitor. Pepperman asked "What was Jerome York's position at IBM at the time?" It was a question to which he clearly knew the answer, which was that he was CFO. Pepperman's follow up was to ask if Norris had heard in the Summer of 1995 that York admitted to Michael Brown, then CFO of Microsoft, that IBM's reporting system was outdated. York left IBM around this time, and Pepperman seemed to wish to float the suggestion that this was related. Pepperman did not know all the details, it seemed, since he asked Norris: "Did IBM fire the person who was determined to be responsible for the underpayments?" which suggested that it was an individual who had orchestrated the underpayments, rather than it being a deliberate policy by IBM. Norris said that he did not know. The details of this under-payment of royalties could have accounted in part for the presence of the large IBM legal team at the deposition. ® Complete Register trial coverage
Graham Lea, 04 Jun 1999
The Register breaking news

Survey: 20 per cent of key MS customers consider Linux

A survey carried out by Microsoft of Exchange users reports that 20 per cent of them are considering Linux as an alternative OS. The fact that the question "Are you considering Linux as a possible alternate OS in the future?" even made it into a Microsoft survey is an indication of the level of angst the company is currently experiencing. Whatever, it's a humorous own-goal for our friends at Microsoft UK. The survey was carried out at the inaugural meeting of the Microsoft Exchange Forum at MS' Reading UK HQ in March - i.e., these are Microsoft's friends who're thinking of committing apostasy. You can get that 20 per cent into context if you look at a couple of other numbers. First of all, 52 per cent said they weren't (phew) but 28 per cent were uncertain. Microsoft doesn't like don't knows, it likes convinced supporters, so it will be worried about this. Actually, we're a bit worried about people who say they're not sure whether or not they're considering something. The survey population's principle OS was NT for about 70 per cent, Novell for 20 per cent, while Unix and "other" barely register. So it's a pretty MS-committed mob, apparently. But only 29 per cent of them say they intend to migrate to Win2k within the first 12 months of launch. Considering something and definitely being committed to it are of course two separate things, but the numbers are close. ®
John Lettice, 04 Jun 1999
The Register breaking news

Linux is outselling Windows 98, says Microsoft

MS on Trial Desperate stuff? Yesterday Microsoft produced one of its own internal emails as evidence -- if it's to be believed, Linux is outselling Windows 98 in key retail channels. The email, sent to MS executives on 25 May, could possibly be just a big fiddle. The judge accepted it as evidence, but commented that it was self-serving. Microsoft is currently absolutely desperate to prove that it really has competition, or it will really have competition real soon now, so yes, it is self-serving. But even if it is a put-up job, there's possibly a grain of truth to it. "Recently in CompUSA, Microcenter and Fry's, Linux is outselling Windows 98," the email claims. It also notes that one of the problems might be that the retailers are making more profit on Linux than on Windows 98, and that's the bit that makes it sound truer than we might initially be inclined to believe. Microsoft (like, to be fair, most outfits) is normally shifty about its margins, so a minion delegated to cook up a Linux scare story email would be unlikely to include reference to them. We can also therefore conclude that retailers do make more money out of selling Linux. ® Complete Register trial coverage
John Lettice, 04 Jun 1999
The Register breaking news

Chipzilla staff lose control of mouths in pub shocker

Walls have ears, Careless talk costs lives etcetera Intel is terribly, terribly keen on training its insiders in the pros and cons of dealing with the media (see Intel media guide story here). But it would appear that one area is sadly missing from Chipzilla’s grand plan -- how to spot a journalist in the wild. Seated in the comfort (?) of some dodgy London boarding house’s conference facilities at some interminable briefing on Constant Computing or some such waffle, it’s easy to spot the hacks – they’re the ones without ties. But in the more anonymous surroundings of a pub (not much chance of meeting a Register staffer there, methinks) spotting the journo who could spill the beans on the cancellation of Merced, the impending takeover of AMD or the latest price increases at Craig Barrett’s dude ranch is not such an easy task. Now, all UK Intellers are forced to live in Swindon and must therefore travel from Paddington to get there from London. The Sherriff, living in the wilds of Wales, must also catch his train here. The British public transport system being what it is, travellers frequently have to while away an idle hour or three in the bar whilst awaiting the latest inexplicable excuse for delays. Imagine then the scene: at Paddington station’s ritzy Reef watering hole, this reporter found himself standing next to two besuited dudes with ties and tongues casually loosened after a hard day’s graft. Normally, British good taste would preclude listening in on fellow drinker’s ramblings, but our well-trained ears could not fail but to hear a generous sprinkling of Intel’s fabled TLAs (Three Letter Acronyms). When we hear of FAEs, SSTMs or FSAEs (yes, I know the last two are FLAs, just put it down to overclocking) our little ears prick up, bigtime. What shocking revelations would these two imbibers imbue? Well, dear reader, unfortunately little of import. Other than to regale the assembled company with their latest paintballing exploits, nothing of any interest was revealed other than precisely what employee X did to employee Y and with what and from where the JPEGs could be downloaded. But the message is clear: if you are a disaffected Intel employee with an axe to grind, what better place to grind it than Paddington station at around 1815? We’ll be there, rely on it.
Pete Sherriff, 04 Jun 1999
The Register breaking news

BT Boss gets £725,000 bonus for failing to buy MCI

BT chief exec Peter Bonfield has seen his pay rise by just eight per cent over last year, but when you’re getting the kind of wedge he’s on, that means quite a few extra greenbacks. With bonuses included, PB trousered a whopping £2.5 million – that’s eight pence a second -- in the last 12 months. But somewhat perversely, £725,000 of that was a bonus paid for Bonfield’s embarrassing failure to buy out US rival MCI last year when relative minnow Worldcom snaffled MCI out from under telecom behemoth BT’s nose. Now look here chaps, it may have escaped your notice, but we here at Team Register also failed to buy MCI last year, so can we please have a large bonus too? With BT profits up 30 per cent to £4.3 billion, we know you can afford it. ®
Administrator, 04 Jun 1999
The Register breaking news

BT boss gets £725,000 bonus for failing to buy MCI

BT chief exec Peter Bonfield has seen his pay rise by just eight per cent over last year, but when you're getting the kind of wedge he's on, that means quite a few extra greenbacks. With bonuses included, PB trousered a whopping £2.5 million -– that's eight pence a second -– in the last 12 months. But somewhat perversely, £725,000 of that was a bonus paid for Bonfield's embarrassing failure to buy out US rival MCI last year when relative minnow Worldcom snaffled MCI out from under telecomm behemoth BT's nose. Now look here, chaps, it may have escaped your notice, but we here at Team Register also failed to buy MCI last year, so can we please have a large bonus too? With BT profits up 30 per cent to £4.3 billion, we know you can afford it. ®
Pete Sherriff, 04 Jun 1999
The Register breaking news

Careless talk costs lives

Intel is terribly, terribly keen on training its insiders in the pros and cons of dealing with the media. But it would appear that one area is sadly missing from Chipzilla's grand plan – how to spot a journalist in the wild. Seated in the comfort (?) of some dodgy London boarding house’s conference facilities at some interminable briefing on Constant Computing or some such waffle, it's easy to spot the hacks – they're the ones without ties. But in the more anonymous surroundings of a pub (not much chance of meeting a Register staffer there, methinks) spotting the journo who could spill the beans on the cancellation of Merced, the impending takeover of AMD or the latest price increases at Craig Barrett's dude ranch is not such an easy task. Now, all UK Intellers are forced to live in Swindon and must therefore travel from Paddington to get there from London. The Sherriff, living in the wilds of Wales, must also catch his train here. The British public transport system being what it is, travellers frequently have to while away an idle hour or three in the bar whilst awaiting the latest inexplicable excuse for delays. Imagine then the scene: at Paddington station's ritzy Reef watering hole, this reporter found himself standing next to two besuited dudes with ties and tongues casually loosened after a hard day's graft. Normally, British good taste would preclude listening in on fellow drinker's ramblings, but our well-trained ears could not fail but to hear a generous sprinkling of Intel's fabled TLAs (Three Letter Acronyms). When we hear of FAEs, SSTMs or FSAEs (yes, I know the last two are FLAs, just put it down to overclocking) our little ears prick up, big time. What shocking revelations would these two imbibers imbue? Well, dear reader, unfortunately little of import. Other than to regale the assembled company with their latest paintballing exploits, nothing of any interest was revealed other than precisely what employee X did to employee Y and with what and from where the JPEGs could be downloaded. But the message is clear: if you are a disaffected Intel employee with an axe to grind, what better place to grind it than Paddington station at around 18:15? We'll be there, rely on it. ®
Pete Sherriff, 04 Jun 1999
The Register breaking news

Tiananmen protesters fight on the Web

The Chinese authorities may have been able to close off Tiananmen Square for "street repairs" on the tenth anniversary of the bloody massacre in Beijing, but they have been unable to stifle support for the pro-democracy movement in cyberspace. Wang Dan, a student leader of the Tiananmen Square protests in 1989, said his Global Petition Campaign has received over 100,000 signatures. Some 20,000 of these from 120 countries have been gathered by the campaign's Web site. The June4 petition has also received 1000 signatures from mainland China, providing confirmation that news of the human rights campaign has broken through the Chinese information blockade. For in its bid to sweep the memory of the event under the carpet, the Chinese authorities have closed down chat room and Net connections. They have even barred CNN from hotels and apartment buildings. According to a Reuters report, this has been done to allow "maintenance" work to be carried out. "From Andorra to Zimbabwe, we are encouraged by the overwhelming support for the campaign," said Wang in New York where he is attending commemorative events for the 10th anniversary of Tiananmen. "By October 1, we hope to collect enough signatures to send a strong message to the Chinese Government -- that it must take responsibility for the Beijing massacre." Many people who have tried to gather signatures within China were harassed, detained and arrested, said Wang. ®
Tim Richardson, 04 Jun 1999
The Register breaking news

Hackers drive us crackers, says FBI

The FBI said it is "a little bit frustrated" that its Web site is still down more than a week after they pulled the plug following an orchestrated attack by hackers. At a conference yesterday officials revealed they too were at a loss as to why the IBM-powered FBI site was still down. Although the hackers didn't actually breach the site's security or tamper with any files, they were able to bring it to its knees forcing the FBI to close it down. According to CNET, which attended the FBI briefing in Washington DC yesterday, Big Blur was busy constructing a more secure Web site complete with much thicker walls, a moat and a drawbridge. Deputy attorney general Eric Holder described the attacks on government Web sites as "serious" and urged people not to regard hackers as "little cherubs". It seems teenage geeks are to blame for the FBI's absence from the Web for the last week or so. Holder appears worried that public opinion may judge hacking by juveniles as part of growing up -- the modern-day equivalent of scrumping*. "We tend to think of these hackers as little cherubs, these little 15 and 16-year olds, going around fooling around with these computers," he said. "The reality is, regardless of their age, what they're doing has a very serious impact on the ability of these various agencies to get information out to the public," he said. He said those responsible for the outrage would be "vigorously prosecuted" when caught. ® *The Register dictionary: scrumping -- stealing apples from orchards in autumn** generally undertaken by young boys in the good old days. If caught, these petty juvenile offenders would often receive a clip round the ear by the village bobby. ** autumn -- fall. *** bobby -- colloquial term for a policeman.
Tim Richardson, 04 Jun 1999
The Register breaking news

NatWest, Intertrust launch e-commerce currency

Analysis British High Street bank NatWest yesterday unveiled Magex, its bid to become the Barclaycard of e-commerce. The company's pitch is that providers of digital content need a secure yet flexible method of selling their wares, and buyers need a (you've guessed it) secure yet flexible of paying for it. And, wouldn't you believe it, that's what it claims it offers. Magex -- daft name or what -- the company is a subsidiary of NatWest's credit and debit card operation, and essentially spoofs credit card transactions into digital currency. Punters register with the service, download the wallet application, and fill it with virtual Magex dollars and cents (paid for by credit card) which they can spend on goods and services. Magex then uses NatWest's credit card transaction engine to ensure manufacturers, merchants and Magex itself all take their cut. All of which, for all Magex bosses' claims, isn't remotely new. CyberCash tried this a couple of years back, as have a handful of other companies, many of them, like Magex, backed by major national banks. They couldn't make a real go of it -- CyberCash makes its money selling back-end transaction software. Hardly a positive prognosis for Magex. There's a difference, however, and that's the involvement of content management and protection software vendor Intertrust. Magex focusing its efforts on the sale and distribution of digital data, rather than the more 'traditional' role of e-commerce as a online alternative to mail order. As MIT's Nicholas Negroponte might put it, Magex is about selling bits, while Amazon is about selling atoms. Previous digital currencies were simply an alternative to Visa and Mastercard transactions, essentially ways of combining lots of small payments into a credit card transaction that's financially viable. At the same time they promoted themselves as a safe alternative to transmitting credit card details across the Net. The trouble was, customers were persuaded by the likes of Amazon that credit cards are safe, and digital content providers couldn't get into a microtransaction -- 20c to view a page of data, $1 to print it, that kind of thing -- frame of mind. Magex is gambling that the can at last be persuaded to do so because the Intertrust software ensures they can protect their digital wares from piracy. It reckons that the ability to easily copy digital data is what made microtransactions impossible in the past, and it points to the evolution of the online music business as case in point. Technically, then, Magex has the right components to make it work. The difficulty remains in persuading people to use it. That can only happen if content providers and merchants use the system as a payment method, and given the ubiquity of credit cards, it will be us against some stiff competition. Customers are notoriously conservative about payment methods -- it's taken over ten years of major advertising to persuade British buyers to use debit cards instead of cash and cheques, and even now there are plenty of them who don't trust plastic cards -- and they may prefer to stick with what they know, ie. Visa and Mastercard. The other option is for content providers to force buyers to register with Magex. Again, there may well be consumer resistance to this 'use Magex or fornicate off' approach. Interestingly, Intertrust doesn't appear to have an exclusive relationship with Magex, so if, say, Visa were to offer the same service but with its own branding, it's public profile might well be enough to attract both content companies and buyers far more quickly than Magex, an unknown commodity, can. To match Visa and Mastercard -- and these are the guys to beat -- Magex will have to allow other banks and organisations to join the network. Unfortunately, at yesterday's launch, Magex wasn't able to say that it's getting that support, or even much from content providers. It wheeled out Reuters, whose business model fits Magex's approach very well, but where were the major music companies and the major software vendors? Preparing to talk to Intertrust about setting up their own schemes, maybe. And Magex needs Intertrust far more than Intertrust needs Magex. Magex is a clever new take on the old 'digital currency for micropayments' concept, one that could, as the company hopes, create the basis for new modes of online business. The trouble is, it may well be rather better known financial institutions that ultimately profit from the idea. ®
Tony Smith, 04 Jun 1999
The Register breaking news

Intel Swindon burgled shock

Details are only now emerging of a sneak attack on everyone's favourite chip behemoth late last year. Intel Towers in sunny downtown Swindon contains many a top secret part that the competition would love to get its hands on. Chipzilla played the whole affair down, but the reason for this wasn't down to any concern over the loss of Intel secrets. Of all the hundreds of systems, both current and future available to the thieves, only two were removed in the dead of night. And when we discovered what they were we understood Chipzilla's reluctance to give details -– they were two Sun SPARC boxes used to drive the big colour copiers in the print room –- the only non-Intel processors in the entire building. ®
Pete Sherriff, 04 Jun 1999
The Register breaking news

Yahoo! is top of the Web 100

PC Data has published its listing for the top 100 Web properties and sites for May 1999 and Yahoo! tops both categories. The Virginia-based company tracks the number of "unique visitors" who either go to a Web site or a Web property -- defined as a network of related sites. Every visitor is counted only once, regardless of how many times the individual visits a site. Here, The Register prints the top 10 in each category. May 1999 Top 10 Web Properties (a network of related sites) Web Property Unique Users (000) Yahoo 27,578 AOL Sites 26,599 Microsoft 23,801 Lycos 20,582 Go Network 14,956 NBC Internet 14,010 Excite Network 13,210 Time Warner Online 9,801 CNET 8,656 Real Networks 8,158 May 1999 Top 10 Web Sites Web site Unique users (000) yahoo.com 21,750 geocities.com 16,014 aol.com 15,018 netscape.com 14,791 msn.com 14,352 microsoft.com 12,183 lycos.com 11,383 excite.com 11,240 hotmail.com 10,784 tripod.com 10,448 ®
Tim Richardson, 04 Jun 1999
The Register breaking news

PowerPC G4 delayed to 2000

Motorola's next revision of the PowerPC architecture, the G4, also codenamed 'Max' and known officially as the PowerPC 7400, has fallen behind schedule, and the company may not now begin volume production until next year. That's way beyond the original "middle of 1999" production schedule Motorola outlined last October. According to unnamed sources cited by the AppleInsider Web site, Motorola is having real problems getting sample G4 silicon to developers, including Apple, and has "missed deadline after deadline". The sources claim that the second and third revisions of the G4 silicon -- Apple alone already has first revision silicon -- are now already six to eight months late. They also suggest Motorola has not yet issued an updated release schedule -- not a postive sign -- and reckon that it will have a real job getting production chips to market before Q1 2000. Reasons for Motorola's delay are unclear. One suggestion has it that the company is having a problem implementing copper interconnect technology, but this seems unlikely given IBM's success with the technique. And the two companies are now, of course, the best of friends. More likely, Motorola is having a tougher time integrating the AltiVec vector processing module onto the same silicon as the main CPU core. The AltiVec unit isn't too complex in its own right (as these things go), but connecting it to the CPU core might well prove trickier than Motorola imagined. AltiVec is designed to operate in parallel with the processor and is rather more complex that the PIII's Streaming SIMD Extensions. Whatever the cause, it still leaves Apple in a very sticky position. It had intended to use Max to give its next Power Mac release, the Power Mac G4, a major speed hike. The Power Mac G4 is set to contain an updated motherboard that implements Intel's 4x Advanced Graphics Port (AGP) spec. AGP provides graphics cards with a dedicated channel to the processor and direct access to the computer's main memory. The slower 2x AGP spec. is now a standard in Wintel boxes. The Power Mac G4 was due to ship in the Q2/Q3 timeframe, but clearly Apple will now have to delay it for over six months or ship the machine with a PowerPC 750 (aka G3) processor. With the G3 being increasingly outpaced by the Pentium III, that's not good news for Apple, though faster G3 clock speeds will help, suggesting a release sooner rather than later. Still, Apple will be preparing Q1 2000 for its major new operating system (MacOS X) roll-out, so promoting a major new processor architecture (G4) at the same time may not be such a bad idea, and could be just the filip Apple needs to attract buyers to MacOS X. ®
Tony Smith, 04 Jun 1999
The Register breaking news

ZD hacks advised to RTFM before filing stories

Shock horror revelations on the increasingly-out-of-touch ZDNet are bemoaning an alleged compatibility problem between the Katmai instructions in the Pentium III and Intel's new cheap'n'cheerful 810 chipset. This shouldn't come as too much of a surprise, however, because the 810 was never supposed to support Katmai in the first place -– being entry-level, the 810 was designed for the Celeron processor which won't be equipped with Screaming Cindy's Extensions until the next Millennium. However, the real question is why on earth anyone would want to use the cheapo 810 with the expensive PIII –- until the appearance of the 810E and 820 (aka Camino) chipsets alongside the 600MHz PIII in September, OEMs with any sense will stick with the venerable BX chipset. ®
Pete Sherriff, 04 Jun 1999
The Register breaking news

Compel sings Irish lullaby for IP Dublin

Compel has sold off the Dublin-based subsidiary of Info'Products UK, the company it bought late last for one whole pound. The Irish company, IPI (Info'Products Ireland) has been sold for IR£1.4 million to Decision Support Systems. The disposal was decided upon as IPI was deemed to be a "non-core" operation, according to a statement issued by Compel today. "Compel's strategy is to focus its activities exclusively on major corporate end users in the UK and it meets the international needs of these customers through global alliance. Within this context, and as IPI is small and non-core, Compel concluded that it should dispose of this Irish business," the statement said. This reflects Compel's desire to pare the Info'Products business back to those areas where it can compete more effectively. IPI came into being in July 1997 and unaudited results for the year ending 31 December, indicated a IR£200,000 profit from turnover of IR£10.3 million. The company had net assets of IR£600,000 for the same period. When the Compel/Info'Products deal went through last year, Compel was effectively paid £18 million to take the Info'Products UK off the hand of the IP Group. It was a deal soon surrounded by controversy, with around 50 ex-IP sales staff joining forces to sue both Compel and IP for unpaid commission. In the week following the Christmas and New Year holiday 150 staff were laid off from IP in one fell swoop. Today's Compel statement also says that the integration of IP into the Compel business is going according to plan: "Compel is pleased to confirm that this process is proceeding according to plan. Trading across the remainder of the Group is in line with management's expectations and accordingly the Board looks forward to another successful year." ®
Sean Fleming, 04 Jun 1999
The Register breaking news

Online shoppers get ripped off

An international study into online shopping has revealed that consumers are getting a raw deal from e-commerce. The study by Consumers International -- a group of 245 consumer watchdogs -- calls for new laws to be introduced to protect unwary e-shoppers. Funded by the European Union, the study appears to confirm that consumers are just as likely to be ripped off as they are from buying things from shops, markets, or from an odd-looking chap in the pub selling video recorders on the cheap. According to the 11-country survey -- which involved buying things, including a dictionary, a doll, jeans, a hairdryer, computer software and hardware, chocolates and champagne -- some items never arrived at all. Others, it seem, were damaged. "This study shows that, although buying items over the Internet can benefit the consumer by offering convenience and choice, there are still many obstacles that need to be overcome before consumers can shop in cyberspace with complete trust," said Louise Sylvan, vice-president of Consumers International. "This shows the very real need for some cyber rules of commerce." The key findings of Consumers@shopping: An international comparative study of electronic commerce were: * Eight of the items ordered took over a month to reach their destination and at least 11 (eight per cent) never arrived. * Many sites didn't give clear information about delivery charges -- and when buying from abroad, this could make a big difference to the total cost. * A minority of sites disclosed whether the laws of the seller's country or the buyer's country would apply in the event of a dispute. * Only about 13 per cent of sites promised that they would not sell customers' personal information on to a third party. * Only 53 per cent of the companies had a policy on returning goods; and only 32 per cent of sites provided information about how to complain if something went wrong. * In some cases, the name of the retailer or Web address would change halfway through a transaction, leaving consumers in the dark about whom they were dealing with. * Only 65 per cent of the sites provided confirmation of the order and only 13 per cent told customers when their goods had been despatched. * In two cases, customers are still waiting for their money back more than four months after returning their goods. ®
Tim Richardson, 04 Jun 1999
The Register breaking news

Headless Web site haunts Kona president

Hawaiian-based Kona Systems has declared that its introduction of the world's first Web site with a live person on the home page was "an instant success". Employing its proprietary WebHeads product, the Kona Systems home page displays a real time, low demand video of a company representative. This allows visitors to interact directly with a person at Kona just as they would if they were meeting face-to-face. "It very much exceeded our expectations," said CJ Villa, president of Kona Systems. "I would definitely call it an instant success," he said adding that the company's operators were kept busy "virtually non-stop" providing information for visitors to their site. With no plug-in or lengthy download required such a system could revolutionise the way Net users interact with Web sites. "This proves what we have been saying all along -- that an ecommerce site without live people is like a store without a sales staff," said Villa. "When you go into a real store, you don't mail your questions to the store personnel -- you ask them right then and there." Quite right, CJ. Snag is, when The Register tried out this little hi-tech head-to-head, nothing happened. The lights of the store were but no one was at home. The Web site was... erm... headless. You don't think the head honcho got a bit head strong and sent a head-hunter after his WebHeads shouting "orf with his 'ead", do you? Answers on a postcard, please -- to the usual address. ®
Tim Richardson, 04 Jun 1999
The Register breaking news

It's girls on top on the Web

There is further proof today that women are making the Web a more feminine place to be -- the student dorm equivalent of girls buying air-freshener for communal toilets. It appears that the days when the Net was a landscape dominated by technology-oriented men are well and truly over. At the end of last year 38 per cent of US women used the Web closing the gap on their male counterparts to just eight per cent. In mid 1997, women trailed men by 21 per cent. But the study by the Strategis Group shows that, while the gender imbalance is disappearing, major differences remain in how the Internet is used. "The surge in female Internet use largely explains why clothing, for example, is the fastest-growing category of ecommerce, as female online purchasers buy clothing at a 4:1 ratio compared to males," said Jeff Moore, Internet consultant with the Strategis Group. Nothing to do with the fact that men dislike shopping for clothes and prefer buy their apparel online, then. "Alternatively, men buy software at a 3:1 ratio and electronics at a ratio exceeding 5:1," he said. Last week it was reported that more than 96 million women would be online by 2001 accounting for 45 per cent of worldwide Web users. ®
Tim Richardson, 04 Jun 1999
The Register breaking news

Germany liberates crypto usage

The German government has leapt ahead of the UK's administration to improve the country's viability as a base for e-commerce. Yesterday, the Federal German Government stated it has no intention of limiting the availability of strong encryption among its citizens. All Germans have a right to privacy, and that includes online communications, the government said. Indeed, the ruling party even said it will encourage the use of encryption technology to help raise citizens' awareness of security and privacy issues. Addressing the concerns of law enforcement agencies, the government said that the situation would be closely monitored over the next two years to determine if the widespread availability of strong encryption software really does have an impact on criminal behaviour and national security. That's in contrast to the UK's more cautious approach. Last week, the government admitted it was dropping key escrow requirements from its own crypto policy and that Police requesting access to online data would need a more senior say-so before appropriate warrants were issued. But for all that, it was clear that there were still real concerns over whether this kind of technology should be widely available. Certainly the UK's approach takes a rather more patrician 'do our subjects really need this' attitude, compared to the German 'our citizens have a right to it' stance. The German approach also takes the radical stance of actually attempting to find out whether law enforcement agencies' concerns are justified. In the UK, it's not hard to take the view that government has assumed they are. As civil liberties groups have pointed out, criminals will, if necessary, use strong encryption whether it's legally available or not. That arguably makes a mockery of any legal framework, so why bother tearing your hair out trying to devise a 'one size fits all' crypto policy? That's presumably the thinking behind Germany's move, and a similar approach being taken by the French government. ® See also UK crypto law cover for industrial spookery Encryption is not a loaded gun, UK gov't told UK unveils proposed crypto law
Tony Smith, 04 Jun 1999
The Register breaking news

Memory Corp decides to forget everything

Memory Corp has decided that a name change is in order, but hasn’t quite got round to choosing a new moniker. The developer of MP3 widgets and pioneer of mending dodgy DRAMs has just placed 428,000 Global Depository Receipts on the European equivalent of Nasdaq, Easdaq, with the aim of raising £5 million, following a not terribly successful similar bid around six months back. The Company Formerly Known As Memory Corp is about to launch an MP3-based portable stereo capable of storing 100 albums in a unit the size of a matchbox and is now working with ailing Chipzilla wannabe AMD in producing fast flash memory chips for digital cameras. All TCFKAMC needs now is a new name. Register readers are invited to suggest a new name in our exciting, all-new prize competition. We have yet to decide what the prize will be called, or, indeed, if it will be worth having. ®
Pete Sherriff, 04 Jun 1999
The Register breaking news

Sequent slags off Sun Microsystems

You know a company is worried when it takes out full-page ads in magazines slagging off the competition. To whom do we refer? Step forward, please, Sequent, whose placement of the accompanying ad in UK business rag The Economist points a rather firm finger at the door marked 'Last Chance Saloon'. Any ad whose headline contains the word 'Sun', twice, looks rather like an ad for Sun rather than Sequent. Of course, Sequent won't be terribly worried about the cost of the ad, because it carries the magical mantra 'Intel Inside', which means Chipzilla will be picking up a sizeable chunk of the not-inconsiderable tab. And, we wonder, just who is the forceful yet caring dude pictured? The ad copy fails to throw any light on the matter. But, hey, when you've been the "recognised pioneer of Intel processor-based data centres since 1983 with robust, highly-scalable server solutions", everyone knows your name. That's right: Compaq. ®
Pete Sherriff, 04 Jun 1999
The Register breaking news

Startup paves MS way to make DirectX Web standard

Updated Now here's an interesting snippet; software developer WildTangent has gone to beta 2 with a piece of software that will allow Web designers to incorporate games-style DirectX special effects into their sites. This is of course good news for Microsoft, which wants to get the Windows-only DirectX established as a general standard - so far it's been pretty successful in getting it into the games market, but clearly further leverage would be helpful. WildTangent's Web Driver for Streaming Interactive 2D/3D Media allows designers to stream hardware-accelerated graphics and sound to Web pages using basic scripting, taking advantage of DirectX APIs. Says WildTangent: "With the current beta release, web designers can create web pages incorporating nearly all of the effects found in the most popular PC video games." These effects won't just be used for games sites, of course. The company envisages them enhancing a whole range of applications, including maps, weather, stocks and e-commerce. The Web driver supports Win95, 98, NT 4.0 and Win2k. "The WildTangent web driver takes a very pragmatic approach to Internet graphics and interactivity by letting DirectX do all of the heavy lifting," said Jeremy Kenyon, chief technology officer at WildTangent. Cool or what? But exactly where did WildTangent spring from? Well, it's based in Redmond (ahem...) and was founded in July 1998 "by former Microsoft Evangelist and DirectX creator Alex St. John and his partner Cambridge Mathematican, Jeremy Kenyon." DirectX author and evangelist forms startup to broaden uptake of DirectX technology on the Web? WildTangent is currently privately-held, but relations with former colleagues at Microsoft are presumably good, and the company looks suspiciously like one of those investments Microsoft might find curiously compelling at some point in the future. AdditionalRegular Register readers will at this point be wondering about the market similarity between WildTangent's 'DirectX for the Web' concept and... er... Microsoft's ill-fated 'DirectX for the Web' project, Chromeffects. Chromeffects was launched in July 1998 (the same month WildTangent was formed, you'll note) but canned the following November. It was an Extensible Markup Language (XML) based system that allowed Web site to access client PC's DirectX software through HTML-style coding. Basically, you get whizzo graphics sans the bandwidth drain. Chromeffects was originally part of the DirectX development programme but was ultimately moved over to Microsoft's streaming media division. That ream recently release Windows Media Technologies 4.0, Microsoft's bid to dominate online music and beat RealNetworks at its own game. Whether some vestige of Chromeffects remains is unclear -- probably not, since XML has yet to become the standard Microsoft hoped that by now it would have become. WildTangent's software is based on scripting rather than XML (though they're not that dissimilar) -- Webmaster just code up pages to pass data to WT objects which access DirectX through a plug in. ®
The Register breaking news

Quantum profits take leap backwards

Disk-drive manufacturer Quantum has issued a profit warning for its first quarter. For the quarter ending 27 June, Quantum said it expects profit to be less than half the figure analysts had been anticipating. Falling prices were blamed by the company for turning the expected 31 cents per share earnings into a figure now thought to be somewhere between five and 15 cents. Turnover for the quarter is expected to fall short of the $1.31 billion seen in the fourth quarter of last year. Much of the pain felt by Quantum is being felt by other disk-drive makers as PC vendors continue to exert pressure for suppliers to cut prices. The cut-price war in the desktop market has been the main catalyst of change here, causing a knock-opn effect right the way down the supply chain. ®
Sean Fleming, 04 Jun 1999
The Register breaking news

IBM witness: the inside poop on MS and IBM killing OS/2

MS on Trial The DoJ has had considerable difficulty finding the right person and company to give hard evidence on how Microsoft deals with OEMs, because of the fear of retaliation by Microsoft. IBMer John Soyring was the wrong person, as it turned out (we've been saying that about him for five years - Ed), but at its second attempt, the DoJ seems to have struck gold with Garry Norris. As far as possible, we have chronologically restructured Microsoft counsel Richard Pepperman's arachnoidally-conducted examination, but there are some areas where it is not possible to be sure of what happened because of ambiguity in the transcript record that was insufficiently probed by Pepperman. We have indicated these areas, and sometimes suggested an explanation. The cross-examination is likely to provide more illumination. In 1994 Microsoft proposed to IBM a frontline partnership, along the lines of the one it had with Compaq. IBM had proposed development projects with Microsoft, but in each case Microsoft declined on the grounds that IBM was a competitor, with the result that IBM found itself at a disadvantage in the marketplace. IBM would receive a lower price for Microsoft products, with better technical, marketing and development support - but providing IBM agreed to drop OS/2. A meeting between IBM and Microsoft was held in Chicago in July 1994, when IBM VP Tony Santelli met Joachim Kempin, the Microsoft VP in charge of OEM sales. The subject was the improvement of relations between IBM and Microsoft. It seems that Dean Dubinsky (previously IBM's relationship manager, and based in Seattle) for IBM, and Mark Beber for Microsoft, were then charged with the preparation of a framework document entitled "Alliance Proposal - IBM-Microsoft relationship overview". IBM considers dropping OS/2 Pepperman introduced what was apparently a later draft of this as a confidential exhibit (dated 5 April 1996, but it is more likely that this is a production date for legal document discovery). The document was subsequently reviewed by the IBM Corporate Executive Committee (CEC), which today is composed of the 13 most senior IBM executives. What was decided is something of a conundrum, since Norris' evidence is ambiguous on the point, and Pepperman did not clarify it. The best interpretation of the evidence available at the moment is that the CEC may have changed its mind as to whether to drop OS/2, which Microsoft was of course pushing for, in order to get a better price for Windows 95. Alternatively, the PC Company may have acted alone, or with PSP (IBM personal software products). Dubinsky drafted a letter that Thoman sent to IBM CEO Lou Gerstner, produced as an exhibit by Pepperman, that stated that the CEC had not approved what Thoman called the "Alliance". This letter also says: "IBM PC company to reload [sic] OS/2 Warp on all systems." It is the word "reload" that suggests that the CEC may have reversed a previous policy. It is also worth recalling that Microsoft's original problem with the FTC in 1989, before the DoJ took over, was over a collaboration between IBM and Microsoft whereby OS/2 was designated for the business market, and Windows for the consumer market, this being suspected as being anti-competitive market splitting. This may have been one reason why the CEC decided to compete with Microsoft, if that was in fact what happened. When Norris took over, the relationship between IBM and Microsoft was poor "with little trust", according to a document produced by Pepperman but not identified precisely. Microsoft's principal reason for its attitude was fear of OS/2. At a briefing around March 1995 when he took over his new job, Norris was told that Microsoft had been told that IBM would not stop shipping OS/2, and that IBM would not promote Microsoft products exclusively or jointly. Norris confirmed that when he took over the Microsoft relations job, IBM paid no royalty on MS-DOS (or of course on PC-DOS), that the royalty on MS-DOS tools was $2, and on Windows 3.x it was $9 (believed to be the lowest in the industry, and valid until September 1997). Gates loses face There then appears to have been another meeting involving Rick Thoman, Tony Santelli, and Bruce Claflin for IBM, and Gates and Kempin for Microsoft, at Comdex in November 1994. IBM apparently informed Microsoft that it would be loading OS/2 on every capable PC (i.e. with at least 8MB), with Windows 3.11 also loaded as a dual boot alternative. Microsoft was also told that IBM would follow an 'IBM First' policy, whereby sales reps would first try to sell IBM products. If the potential customer wanted Windows, IBM would support the product to ensure that the customer enjoyed "a good end-user experience". The events at this meeting (which will not be considered by the court, since it is hearsay evidence) were described by Norris in his deposition, although he learnt about them second hand during a briefing four or five months later, when he was being briefed on his new appointment: "I was told that Gates was surprised; that Kempin was expecting agreement for us to jointly and exclusively promote Microsoft products, reduce shipments of OS/2; that he was embarrassed because he didn't expect that to happen. I was then told that over the ensuing months, up until the time I got there, that Microsoft had taken a number of retaliatory actions against IBM, reducing coverage of the IBM account from three people to one. They notified us that we would be treated like any other OEM. They became non-responsive to phone calls, slow in getting beta code. "We would ship products up for capability testing. The test took 60 to 90 days and should have taken one to two weeks. We were missing systems on the compatibility lists, when our competitors' same systems, similar-configured systems, were on those compatibility lists. We were cut off and uninvited to several OEM events. And some other things that I don't recall at this time." It appears likely that many of these retaliatory actions were initiated by Kempin, who had clearly lost face before Gates at the Compaq meeting. Microsoft was particularly worried by OS/2 at this time, because IBM was marketing it very hard, and sales were picking up. Norris saw his first job as being to renegotiate the market development agreement (MDA) that had been signed in February with Microsoft, to obtain additional better terms. Norris achieved this later in 1995. Microsoft wanted $75 from IBM for Windows 95 - a very high price - but was willing to offer some discounts in an MDA. Microsoft offered an $8 reduction if IBM agreed to "restrict, limit or delay shipping OS/2". MS puts the screws on Additional reductions were offered if IBM ramped-up Windows 95 shipments to 50 per cent of PC shipments in 60 days, but IBM was unable to meet the requirements and thought they were over-optimistic on Microsoft's part. Close analysis of the Norris' deposition transcript shows uncertainty as to whether a decision was in fact made and implemented to squash OS/2, in order to take advantage of an $8 discount for Windows 95. No doubt there will be further evidence about this when Norris is examined and cross-examined. Many OS/2 developers and users have felt betrayed at the sudden change in IBM policy towards OS/2. Many feel that it was a moment of infamy: but we now know that eight pieces of silver were offered, and probably taken. Norris negotiated the agreement for a Windows 95 licence, with a further $7 of discounts agreed in mid-1995. The first draft of a Windows 95 licensing agreement was received by IBM around the time Norris took up his new appointment. IBM did not commit wholeheartedly to Windows 95 at the time - probably as a negotiating tactic, although some IBMers might have thought that OS/2 could compete with Windows 95. The agreement was finally signed 15 minutes before Windows 95 was launched, on 24 August 1995. Four people from IBM attended the Windows 95 launch event in Redmond. Microsoft's reason for wanting a high price for Windows 95 was that IBM competed with Microsoft, whereas Compaq did not (and is believed to pay $25 for Windows 9x as part of its frontline partnership). IBM's concern was that in 1995 it had paid $40 million in Windows royalties, whereas in 1996 the anticipated royalty level would be $220 million, with the price of Windows having increased from $9 to $45.90. This should provide strong evidence of monopoly leverage, and negate evidence from Microsoft's economist Richard Schmalensee. A key Microsoft negotiator was Mark Beber, who previously had worked for IBM, as did his sister, and his grandfather and father. He called Norris around 19/20 July 1995 and said that he had been instructed to cut off negotiations about a Windows 95 licence until the audit of IBM's Windows 3.x sales had been settled. Norris consulted Tony Santelli, who was two levels senior to him in the IBM hierarchy. It appears that Microsoft wanted to negotiate at a higher level in IBM, probably because Norris was proving to be tough. An original list of 38 contentious issues had been reduced to less than 10 by Norris before Santelli became involved in the negotiations. Norris did the briefing of IBM's management, and drafted communications. Chairman Bill demands respect Rick Thoman subsequently wrote to the IBM CEC: "A general point is their perception of IBM's non-respect for Microsoft. Gates was irate because of the lack of respect he feels IBM has for Microsoft. He cited Lou Gerstner's quote in Business Week that Microsoft was 'a great marketing company, but not a great technology company' as an example. ... He [Gates] also cited 'smear campaigns' planned by Dan Lautenbach and others against the Windows 95 product." Pepperman also revealed in his questions that IBM alone was granted permission for third-party installers to load Windows 3.11, but at first this was not included in the Windows 95 agreement, although it was later allowed again. It was also revealed that IBM negotiated the period between the release of a bug fix (OSR) and the beginning of IBM installing this to be increased from 90 days to 120 days, since IBM said it needed the time for testing. Other OEMs had only 90 days. Norris said that an IBM concern was that Microsoft might make ten releases a year, and that frequent quick releases would be burdensome. (The provision was included in the Windows Family Desktop Agreement, which was signed in 1996.) IBM was pressed by Microsoft to agree to installing 300,000 copies/month of Windows 95 in the first five months after release, failing which IBM would be liable to pay an additional 20 per cent. IBM was sure this was impossible, but signed in desperation to get the code, it seems. In the event, IBM shipped less than 100,000 copies/month, but perhaps because of its earlier protests, Microsoft did not seek the 20 per cent uplift, although IBM did agree to an increase from $45.90 to $46.60 per copy, with an agreement for 5 million copies a year. We now know that Microsoft was engaged in momentum marketing, and did not wish it to leak out that real sales were running at less than a third of what Microsoft hoped. This also accounts for the unbelievably large sales that Microsoft was claiming shortly after the release on Windows 95. The same pattern has been seen for claims about NT sales, although these have been mainly confined to percentage increases rather than hard numbers. Pepperman probed to find out whether retailers were saying that they did not want OS/2, but Norris said there were dual boot OS/2-Windows 95 PCs being sold. From September 1995, IBM introduced the 'IBM First' policy. In a document Pepperman produced dated September 1995, and also used in a presentation prepared by Norris for the IBM CEC, a bullet point read, "'IBM Only' solutions have caused client/server customers to lose confidence." Norris said that at the time, IBM-Microsoft relations were still poor. Breakup hits IBM sales Because of the delay with the licensing, IBM had missed market opportunities and was late shipping PCs with Windows 95. The document also said that "PC Company needs to repair its Microsoft relationship in order to respond to customer needs and avoid market share erosion". Norris said that: "As a result of that license agreement discussion and missing those advantages that our competitors had, we attempted to get in some of Microsoft's enabling program, the solution programs, the authorised technical centre program, the authorised support center program, and the education centre programs. But Microsoft rejected us on every attempt. Our competitors were a part of those program. So we were selling IBM Solutions. In some cases we were leading with OS/2 by selling IBM Only Solutions. And what the chart was meant to convey was just that -- that without the Microsoft solutions, without the Microsoft certifications, without the Microsoft assistance, that we would begin to see market share erosion. And in fact, Compaq and Microsoft and others had begun telling our customers this." Norris added that there were customers who said that they were losing confidence in IBM, and that as a consequence IBM decided to repair its relationship with Microsoft in the fall of 1995. Norris claimed a loss of $175 million at the time because of its inability to support customers. IBM proposed co-marketing to Microsoft, but it was always rejected while IBM was "shipping those competitive products". IBM tried to license Microsoft Office, but Kempin said in a conference call that Microsoft wanted $250 for it, the same price as for OEMs that ship their machines through retail channels. As a consequence, IBM continued to ship SmartSuite. It is going to be fascinating to see what happens in court when Norris is examined and cross-examined. Since there will be no written direct testimony, the Microsoft legal team will find itself at a disadvantage of not being able to spend days researching matters disclosed in Norris' primary examination. The information in this chronology has been derived from the Norris deposition, but there are gaps and inconsistencies that cannot be resolved based on what Norris said. Microsoft provided a substantial part of the new information in documents it produced during the deposition, and in leads it provided in questioning the witness. We welcome comments and information from readers to clarify issues in The Register's Bulletin Board (see right-hand column), where we shall post clarifications and extensions, or to Graham_Lea@compuserve.com ® Complete Register trial coverage
Graham Lea, 04 Jun 1999