.
----------------------------------------------------------------------
Doc: 00459994 DB: research_d_97_3_4 Date: Thu Oct 23 03:43:08 1997
Alert Categories: hit
Ticker Symbols: CPQ MSFT MUEI
Industry Groups: CPR SOF
Profiler Categories: Business HiTech

*** Version history. (* = this story, F = final version) ***

aD6H7G0300 10-23-1997 03:43:08*F PM-Microsoft-Compaq:Justice Department say

Copyright 1997 By The Associated Press. All Rights Reserved.
---------------------------------------------------------------------------
a0467-----
r wbx
^PM-Microsoft-Compaq,710<
^Justice Department says Microsoft threatens computer makers<
^By CASSANDRA BURRELL=
^Associated Press Writer=

WASHINGTON (AP) _ Compaq Computer Corp. had a plan to make it easier for buyers of its new computers to use Netscape Navigator to explore the Internet instead of using Microsoft Corp.'s Internet browser.

But, according to court documents, Compaq had a change of heart when Microsoft threatened to deny its ultra-popular Windows 95 computer operating system to Compaq unless the computer maker used Microsoft's Internet Explorer.

Compaq had an established relationship with Netscape Navigator's manufacturer, Netscape Communications Inc., and had removed the icon of Internet Explorer from the computer "desktop" screen that confronts users when they turn on their computers. Clicking twice on the desktop icon quickly takes the user to the browser and the Internet.

But Microsoft Corp. moved aggressively to stop that in May 1996, according to Justice Department documents filed in federal court.

The Justice Department is citing details of that incident to support its allegations that Microsoft is using its powerful position in the software market to muscle customers into using its browser.

After seeing that Compaq had removed Internet Explorer's icon from computer desktops, Microsoft threatened to revoke the company's license to copy and distribute Windows 95, Stephen Decker, Compaq's director of software procurement, told Justice Department lawyers.

Since Microsoft's Windows 95 is pre-installed on all of the Compaq computers sold to consumers, Compaq had a problem, Decker said in an Oct. 17 deposition.

"When they found out about it, they sent a letter to us telling us that, you know, they would terminate our agreement for doing so," Decker said.

The Windows system is used on more than 80 percent of the nation's personal computers. But Netscape Navigator is the leading Internet browser, with 62 percent of the market share.

The government objects to Microsoft's requiring that personal computer manufacturers that install Windows 95 on their products also spotlight its browser, Internet Explorer.

But Microsoft said it simply was enforcing the terms of its licensing agreement and promoting consistency.

"Internet Explorer, which is the Web browser that's part of Windows 95, is part of the functionality of Windows 95," Microsoft spokesman Greg Shaw said Wednesday. "So when we license Windows 95 to PC manufacturers, part of the license of that operating system is the requirement that all of the functionality of Windows 95 be provided to customers.

"Customers really expect that Internet Explorer is part of Windows when they go to buy a PC."

Once customers take a computer home, they can change the software any way they want, Shaw said.

Decker's sworn interview was included in more than 250 pages of documents filed in U.S. District court in Washington as exhibits. They included a follow-up letter in which Microsoft said it would back off its threat if Compaq restored the Internet Explorer icon within 60 days.

"Specifically, we are asking that these icons be put back on the Windows 95 desktop so they look and function exactly the same as how they were originally provided by Microsoft and-or authorized replicators," Microsoft manager Don Hardwick said in a letter dated June 6, 1996.

Compaq decided to retreat and restore the Internet Explorer icon, Decker said.

Another computer maker, Micron Electronics Inc., said it ran into trouble in 1996 after entering into an agreement with SpryNet, an Internet service provider that planned to offer its customers a choice of using Netscape Navigator or Internet Explorer.

As a result of its relationship with SpryNet and concerns that customers would be confused by the presence of two browsers, Micron considered removing Internet Explorer from the package of software pre-installed on its computers, Eric Browning, Micron's department manager for product enhancement, said in an Oct. 14 deposition.

Micron dropped that idea after Microsoft said no, Browning said.

"The Microsoft representative informed me that deleting the icons would not be allowed," Browning said.