[Note that I've borrowed Matt's citation scheme where 9PM11 refers to testimony on p.11 from the Nov. 9 P.M. session.]

DOJ MCGEADY NOTES: ADVANCEMENT OF THE DOJ CASE BY MCGEADY'S TESTIMONY

1. Steven McGeady testified that MS leveraged its monopoly power in Windows to restrict Intel's ability to compete with MS:

a) McGeady testified that MS feared competition from Intel's software development. (9PM11, 12PM37) Consequently, at an August 2, 1995 meeting Bill Gates allegedly threatened to terminate Windows support for Intel's new microprocessors unless they were able to "get alignment" between Intel and MS on Intel's internet and communications software programs. (9PM14-6) At the same meeting Gates allegedly told Andy Grove to shut down the Intel Architecture Labs, which drove Intel's internet software engineering. (9PM29) It seems that alignment on internet software programs meant wholesale termination of the programs. Gates allegedly suggested that, instead of software, Intel should put its internet resources into a high-end web server tied to MS's Tiger program. (9PM12-3) According to McGeady, this web server presumably would generate "very small sales," have "very little impact on the marketplace," (9PM13) and bind Intel to MS's web server technology. (12PM24) (Note that McGeady's testimony undermines Gates's claim that he knows of no internet software work done by Intel. (9PM7))

b) McGeady testified that MS was upset that Intel was in MS's "OS space" (9PM22) and was "shifting the software boundary" without MS's permission (9PM26). This concern grew out of Intel's development of Native Signal Processing (NSP) technology. NSP was a layer of software that interfaced with both the Windows OS and the hardware in order to support realtime audio, realtime video, and 3D graphics. (9PM18-9) NSP specifically aimed to provide consumers with an audio-visual experience that was as good as television, and NSP generally promised greater innovation in the hardware and software arenas. (9PM46) According to McGeady, NSP threatened MS because it was software at the level of the OS that MS considered to be theirs. (9PM26) MS believed that they "owned software to the metal," or all the software above the hardware. (10AM17, 12PM13) Thus, McGeady testified, MS wanted Intel to stop NSP (9PM31-2) and so "chilled" OEM support for NSP, (9PM33, 12PM36) support that was necessary for the adoption of NSP. (9PM20) Ultimately, according to an Andy Grove statement about NSP, Intel "caved" in "introducing a Windows-based software initiative that Microsoft doesnt support." (12PM46-8)

c) Gates allegedly said regarding Intel Architecture Labs: "Having 700 software engineers running around in the industry is an okay thing as long as Microsoft knows what theyre doing first." (9PM34) According to McGeady, MS did not want to relinquish control over APIs (Application Programmer Interfaces) (9PM35) and so wanted Intel to obtain MS permission prior to any software development. (9PM34) To take advantage of hardware devices that offer multimedia capabilities, Intel was writing DDIs (Device Driver Interfaces), which allow OS and application developers to use the device. (9PM36-7) MS was threatened by Intel's DDIs which allowed application programmers to circumvent the Windows OS and write directly to the DDIs. This meant that applications would have stopped depending so much on the OS APIs and would have begun depending on the DDIs. (9PM38) As Gates allegedly said, "todays API is tomorrows DDI." (9PM35) To prevent this loss of control, McGeady testified, MS threatened to continue bad-mouthing Intels software and also to not support Intels MMX microprocessor. (9PM42-4) According to McGeady, this failed support would slow the chips adoption by PC manufacturers and ultimately kill it. (9PM44)

2. Steven McGeady testified that MS leveraged its monopoly power in Windows to restrict Intels support for Netscape and Java. McGeady also testified to MS's plans to compete with Netscape through predatory pricing, through the leveraging of their Windows OS monopoly, and through the creation of incompatible HTML standards:

a) McGeady testified that MS generally discouraged Intel from working with Netscape and from fostering a Netscape standard. (9PM57) Gates allegedly urged Groves to push Intels internal information technology group away from its Netscape standard towards an IE standard and then stressed that its "very important" to MS that Intel "NOT ever publicly say they are standardizing on Netscape browsers." (9PM49) Paul Maritz (MS Sr VP) allegedly insisted that Netscape was a common enemy of Intel and MS because Netscapes cross-platform capabilities undermined PC, and hence WINTEL, dominance. (9PM56) Gates allegedly specified that Intel should commit its resources "30/70," where 30% could be devoted to third-party technologies and 70% would be devoted to MS technologies. The 30/70 split would ensure that Intel did not "set up the positive feedback loop for Netscape that allows it to grow to the de facto standard." (9PM59, 12PM20) According to McGeady, if Netscape became the standard, software engineers would develop browser applications using Netscape APIs in lieu of developing Windows applications using Windows APIs. (9PM57) MS wanted to prevent the standardization of Netscape because it threatened MS control over software development and the pace of software innovation. (9PM61) McGeady testified that MS pressure probably influenced Intel's last-minute decision not to ship its "Internet In A Box" product with Netscape's web server product, but to instead reengineer the product around MS's server product despite studies that indicated that Netscape's server was substantially faster on Intel hardware. (12PM25-7)

b) McGeady testified to MS's three prong strategy to defeat Netscape. (9PM55) MS allegedly stated that it would "cut off Netscapes air supply" by giving away IE for free. This would prevent Netscape from deriving any revenue from its browser and would make it impossible for Netscape to pay its developers to build new products. (9PM53-5, 12PM42-5) McGeady testified that MS asserted it would "fight with the OS and the apps arm." MS meant that it would create various levels of dependencies between the Windows OS and the IE browser that would differentially advantage their browser over Netscape's. (9PM54-5) McGeady also testified to MS's professed strategy of "embrace, extend, extinguish." MS planned to "extend" the HTML standard to the point where it would be incompatible with the Netscape browser and then to encourage developers to use the MS HTML such that web pages couldnt be read with Netscapes browser. (9PM55)

c) McGeady testified that MS made it clear to Intel that Intel support for Java would be a "show stopper in the relationship." (9PM67) According to McGeady, this was a threat to terminate the MS cooperation that Intel required for its new microprocessors. (9PM68) MS allegedly proposed that Intel and MS prevent the Java component model, or the Java model for how Java class libraries should work and be interfaced to, from becoming established as the de facto standard. (9PM70-1) To do this, MS suggested a MS Java that would be incompatible with Sun Java, would defeat Javas "write once, run anywhere" capabilities, and would tie Java to the Windows OS. (9PM71-2, 10AM10-1) MS would distribute its Java Virtual Machine (VM) as part of its free IE distribution. (9PM80-1) McGeady testified that this was a different variant of MSs "embrace, extend, extinguish" strategy, here targeted at Java which threatened MS because it presented a competitive platform. (9PM68,71-2) When MS learned that Intel had implemented its own Java VM that ran very fast on the Intel architecture, MS allegedly became very upset that Intel was working in Java. McGeady testified that MS did not want the Intel VM to become part of the Netscape Navigator, and that MS wanted Intel to use MS code that would be MS's architecture for Intels VM implementation. (10AM6-7, 12PM22-3) According to McGeady, MS was also very upset that Intel was creating multimedia class libraries to work within Sun's Java environment, and MS wanted Intel to stop because MS viewed this work as competitive. (10AM13)

-- Anonymous, November 22, 1998