Intel/Micro$oft News...

[Bruce Smith <bruce@xxxxxxxxxxx>]

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Government reportedly investigating Microsoft/Intel relationship


August 28, 1998


InfoWorld Electric via NewsEdge Corporation : Microsoft's
business practices are coming under even harsher scrutiny in the
wake of a report that the U.S. Department of Justice is
investigating whether the software giant bullied close ally Intel
into abandoning software development that could have
potentially weakened Microsoft. 

Meanwhile, the Justice Department also has collected several
memos from top Microsoft officials who, in brazen terms,
discussed ways to hamper competitors' products with Windows,
according to the author of a book detailing the software giant's
antitrust case. 

At the center of the latest allegations is an August 1995 meeting
between Intel Chairman Andy Grove and Microsoft Chairman Bill
Gates, during which Gates made "vague threats" to work more
closely with Intel's competitors unless Intel shelved its plans to
invest in Internet-related technologies and businesses,
according to a report in <i>The New York Times</i> on
Wednesday. 

The alleged pressure could be used to bolster the government's
antitrust case against Microsoft in which the government alleges
a pattern of anti-competitive behavior by the software giant.
That case goes to court on Sept. 23. 

The notion that Microsoft would exert this kind of pressure on
one of its closest partners -- the other half of the "Wintel"
powerhouse -- could be particularly damaging to its defense. 

Intel documents detailing the conversations have been
subpoenaed by government lawyers in the antitrust case, and
Intel executives have given depositions on the matter, <i>The
New York Times</i> reported. 

The Justice Department and states contend that Microsoft has
demonstrated a pattern of illegal business practices by using its
Windows operating system monopoly to squelch competition for
Internet browsing software. Intel's account of the meeting could
lend credence to the arguments that Microsoft bullied Netscape
to divide the browser market to avoid competing. 

For the <i>New York Times</i> story, a Microsoft representative
neither expressly denied nor confirmed the allegations. The
Justice Department did not comment and neither did Intel, the
paper reported. 

It is unknown how closely Intel is cooperating with the
government it its newest investigations into Microsoft's
activities. The government is also pursuing claims against Intel
for alleged antitrust violations. 

During the August 1995 meeting between Gates and Grove,
Gates reportedly called for Intel to stop development of native
signal processing software for multimedia applications. Microsoft
executives were concerned about Intel's interest in including
Internet features, and in particular, support for Java, which can
run on any operating system. That support was seen by
Microsoft as a threat to the continued dominance of Wintel, and
a boon to Sun Microsystems' Java. 

Meanwhile, a book set for publication by Random House on
Sept. 8 -- ironically, the original date the Microsoft-Justice
Department antitrust trial originally was scheduled to begin --
likely will further sully Microsoft's reputation. 

According to industry journalist Wendy Goldman Rohm, author
of "The Microsoft File: The Secret Case Against Bill Gates,"
Microsoft executives plotted to ensure that Windows 3.1 fail if it
detected DR-DOS, which was made by Digital Research. They
discussed blaming Digital for the crashes, Goldman Rohm said. 

"Maybe there are several very sophisticated checks so
competitors get put on a treadmill," Microsoft Vice President
David Cole wrote in 1991 to Senior Vice President Brad
Silverberg and other officials, according to a memo cited in
Rohm's book. 

Goldman Rohm also cited a memo from Silverberg apparently
suggesting that Microsoft create a bond between its own
version of DOS, MS-DOS, and Windows that would not exist
with competing versions of DOS. 

"The most sensible thing from the development standpoint is to
continue to build dependencies on MS-DOS into Windows,"
Silverberg wrote in a February 1992 memo. 

"When they're asked specifically about deliberately sabotaging
[competitors' software] through sneaky code, they say they
never engaged in anything but creating great products,"
Goldman Rohm said. "These memos show what they were really
up to." 

Microsoft dismissed the idea that it considered "sabotaging"
DR-DOS. 

"Microsoft's goal was to reduce support costs by informing
consumers when they were running Windows 3.1 on a version of
DOS that hadn't been tested, " said company spokesman Mark
Murray. 

"Every one of these allegations was investigated fully by the
Federal Trade Commission and the [Department of Justice] in the
early 1990s and were found to be groundless," Murray said. 

Microsoft Corp., in Redmond, Wash., is at
http://www.microsoft.com. Intel Corp., in Santa Clara, Calif., is
at http://www.intel.com. The U.S. Department of Justice, in
Washington, is at http://www.usdoj.gov. 

<i>Bob Trott is a senior editor for InfoWorld. <A HREF="
mailto:jana_sanchez-klein@idg.com">Jana Sanchez-Klein </A>
is London bureau chief for the IDG News Service, an InfoWorld
affiliate.</i> 

<b>Related articles:</b> 

"Microsoft Under Fire: A roundup of InfoWorld's coverage of
government antitrust actions against a computer industry titan" 

"Justice Department, states lower antitrust boom on Microsoft" 

"Judge delays Microsoft trial; appeals court stays Gates' public
deposition" 

<<InfoWorld Electric -- 08-26-98>> 


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