Microsoft Threats Strengthen Government’s Case Documents Show Software Giant Pressured Compaq To Feature Microsoft’s Browser

Microsoft Corp. threatened to pull Compaq Computer Corp.’s license to use the Windows 95 operating system unless Compaq featured Microsoft’s Internet browser on its computers, Justice Department documents show.

Two other major computer makers - Gateway 2000 Inc. and Micron Electronics Inc. - sought permission from Microsoft to change the way the Internet Explorer program was installed on their computers, but were turned down, according to documents supporting the government’s latest antitrust complaint against Microsoft.

The documents provide details in the suit filed in federal court Monday in which the Justice Department charges that Microsoft violated a 1995 antitrust settlement by abusing its near-monopoly on computer operating systems to gain advantage in the “browser war” against rival Netscape Communications Corp.

The government charges that the world’s biggest personal computer software industry leader illegally requires computer makers to install its Internet Explorer browser software if they want access to Microsoft’s dominant Windows 95 operating system.

Microsoft officials say their marketing practices for Internet Explorer are legal because the browser is part of the Windows 95 system, and not a separate, free-standing program.

“Customers expect Windows to run the same regardless of which PC they buy,” Microsoft spokesman Greg Shaw said. “We can’t have different distributors offering different flavors of Windows.”

The government says licensing restrictions that require installation of Internet Explorer violate settlement terms that prohibit Microsoft from forcing manufacturers to take separate Microsoft programs as a condition for getting the Windows system.

Compaq spokesman Jim Finlaw wouldn’t comment about disclosures in the Justice Department’s case, except to say “we were subpoenaed and we testified.” Compaq, he said, has “a very significant strategic alliance with Microsoft.”

A Micron spokeswoman said the company has no complaints about its relationship with Microsoft. “We have a great Microsoft partnership,” said spokeswoman Denise Smith.

Micron was “very surprised” that its licensing talks with Microsoft had become an issue in the case, and said any questions about installation of Internet Explorer were raised by “low-level” employees and aren’t “even on the radar screen of our senior executives.”

Gateway officials couldn’t be reached for comment.

In Monday’s lawsuit, the government said part of its case would hinge on evidence that three unnamed computer manufacturers were turned down when they asked Microsoft for permission to either remove the Internet Explorer program from their products altogether or to remove an “icon” that lets users access the program from the Windows 95 desktop.

A memorandum filed in federal court, and supporting depositions, affidavits, and corporate documents, identified Compaq, Gateway and Micron as the three companies.

The materials show that Houston-based Compaq, one of the world’s top PC manufacturers, tried to remove the Internet Explorer and Microsoft Network icons to give rival Netscape’s browser a spot on the desktop of Compaq’s Presario PC.

“Well, when they found out about it, they sent a letter to us telling us … they would terminate our agreement for doing so,” Stephen Decker, Compaq’s director of software procurement, said in a statement released by the government.

The Compaq executive said the company was no longer considering Netscape’s product as an alternative because “the category of browser is now fulfilled with the Internet Explorer product.” Compaq wants to avoid the added fees and wasted hard-drive space that adding a second browser would require, he said.

In another statement given to antitrust investigators, Eric Browning, department manager for product enhancement at Micron Electronics Inc., said he asked “whether Microsoft would permit Micron to remove Internet Explorer from Windows 95. Through telephone conversations, Microsoft denied this request.”

Gateway sought permission to remove the icon “on several occasions,” according to a company statement. Each time, Microsoft refused.

Microsoft spokesman Mark Murray said the company doesn’t object to computer manufacturers putting other browsers in their machines. Microsoft, however, expects licensees to ship Windows as it was designed by Microsoft, he said.

Compaq “didn’t have to do anything except install the program the way it was manufactured,” Murray said. “Computer manufacturers can’t rip out parts of our product and ship some portion of our product.”