Microsoft and Netscape

WASHINGTON (AP) — Microsoft Corp. sought on Wednesday to deflect government claims that it initiated an offer to invest in a chief rival as part of an illegal plan to divide up a key market. Instead, the software giant suggested, its approach was merely a response to Netscape’s own invitation.
Microsoft’s lawyers cited a prior e-mail from a Netscape co-founder inviting, “You might take an equity position in Netscape.”
During a dramatic second day of cross-examination of the government’s most important witness in its antitrust case against Microsoft, lawyers asked Netscape’s chief executive officer, James Barksdale, about the e-mail, sent in late 1994 by Netscape co-founder and board chairman James Clark.
In the message, sent Dec. 29 at 3:01 a.m., Clark expressed regret the two companies couldn’t agree on a deal for Microsoft to adopt Netscape’s browser software, which lets people view information on the Internet.
During that period, when both the Internet and Netscape were in their infancy, Microsoft didn’t offer a browser software, and Netscape’s was the industry leader.
“We want to make this company a success, but not at Microsoft’s expense,” wrote Clark, Netscape’s then-temporary CEO until Barksdale took over days later. “We’d like to work with you. … Depending on the interest level, you might take an equity position in Netscape.”
Clark ended his e-mail by offering “to quietly share some of my thinking with you. No one in my organization knows about this message.”
The testimony is significant because the government contends Microsoft illegally offered to divide the market for Internet software with Netscape during a June 1995 meeting. The government charges that, as further incentive, Microsoft offered to invest in Netscape.
Microsoft sought to use Clark’s 1994 invitation to suggest that any overture it made six months later was merely a response. The government says it will show that Microsoft quickly rejected Clark’s proposal and did not refer to it during the 1995 meeting.
“This has nothing to do with the case,” Justice Department lawyer David Boies said outside court. “It’s another attempt by Microsoft to change the subject.”
Barksdale testified Wednesday that in November 1994 Microsoft offered for Netscape’s browser “a flat fee of a couple million dollars to take us out of the picture,” which Netscape rejected.
“Netscape was burning through money and not making much cash,” Barksdale recalled, “and I think Mr. Clark was looking to get Microsoft to make an investment.”
Microsoft also sought to portray its own business strategies against Netscape — including giving away its browser and encouraging Internet providers and computer makers to distribute its browser over Netscape’s — as legal but aggressive.
For example, Microsoft suggested that Netscape essentially never charged for its browser because the company never sought the $39 payment from customers who downloaded the browser and failed to pay. Within the technology industry, Netscape’s browser has been described as “free, but not free.”
Repeatedly asked about the policy during cross-examination, Barksdale replied testily: “I have never heard this term, `free but not free.'”
Earlier, Barksdale acknowledged it would cost the company too much to collect payments from customers who had used up their trial run with the downloaded browser. He said Netscape earned tens of millions of dollars, however, from customers who voluntarily paid.
Barksdale denied his company could benefit economically by giving away its browser. “You could go flat broke doing that,” he snapped.
In response to Microsoft’s tactics, Netscape began in January officially giving away its browser, and the company now makes money on business computer software, called servers, and on advertising on its Web site, called Netcenter.