IBM Executive Says Microsoft Tried to Stifle Some Products
An IBM Corp. official on Monday accused Microsoft Corp. of pressuring IBM to abandon its office productivity software and personal computer operating system in favor of Microsoft products, a charge that goes to the heart of the government’s antitrust case.
In a day of compelling testimony in the Microsoft trial, IBM executive Garry Norris said the software giant canceled its negotiations with IBM for a new Windows 95 license agreement only days after Norris’ company purchased Lotus Development and announced it would offer Lotus SmartSuite productivity software on some IBM personal computers.
Norris, a 17-year IBM veteran who negotiated key software licensing agreements with Microsoft in 1995 and 1996, also said Microsoft offered IBM millions of dollars in financial incentives not to market SmartSuite on IBM PCs with Windows, but that IBM declined. “They repeatedly used their relationship [as the dominant software developer] to apply pressure,” Norris said.
Norris’ testimony is considered crucial to the government’s case because he is the first representative of a major computer maker to say that his company was harmed by Microsoft’s tactics. Also, government lawyers argue that Microsoft’s attempt to keep IBM from competing in the software business is a clear example of illegal monopolistic practices.
As a result of the dispute, Norris said, Microsoft delayed consummating a Windows 95 licensing agreement until just 15 minutes before the product was released to the public Aug. 24, 1995. The delay, Norris said, cost IBM tens of millions of dollars because the company was not able to offer PCs with Windows 95 until the lucrative back-to-school PC-buying season was well underway.
In the ensuing years, Norris said, IBM continued to endure Microsoft’s wrath as the company saw the total software licensing fees it paid to Microsoft jump more than tenfold--from $40 million in 1995 to $440 million last year. The increase was due, in part, to increased sales of Windows but stemmed mostly from a huge boost in fees Microsoft charged IBM, Norris said.
Norris, now a program director with IBM’s networking hardware division, is the second IBM official and the 14th government witness to testify in the 7-month-old antitrust trial. But in contrast to many other witnesses, government lawyers said Norris provided compelling new details on the way Microsoft allegedly used its dominant Windows PC operating system software to stifle competition. His testimony was accompanied by several internal company memos and letters that offered insights into Microsoft’s business tactics.
Besides detailing how Microsoft allegedly pressured IBM to drop OS/2 and SmartSuite, for instance, Norris said Microsoft charged favored PC makers less for Windows 95 licenses than those that competed against it.
Lead government lawyer David Boies said Norris’ testimony about Microsoft seeking pledges from IBM not to compete in the PC operating system and office productivity markets were especially damning. “Agreements not to compete are fundamentally inconsistent with our antitrust laws and are a violation of Section 2 of the [U.S.] Sherman Antitrust Act,” Boies said outside federal district court.
Microsoft officials, however, appeared unimpressed by Norris’ testimony.
Company lawyers alluded to their own internal documents they said contradicted Norris’ claims of coercion. They also disputed any notion that IBM, a company nearly six times the size of Microsoft in terms of revenue, could be pressured by Microsoft.
They said Norris’ allegation that Microsoft offered financial inducements to IBM to drop SmartSuite was not only untrue but also irrelevant because the office productivity software business is not a part of the antitrust case.
