In the final day of testimony at the Microsoft Corp. antitrust trial, government lawyers turned their focus back on the one person they allege masterminded the software giant's illegal business behavior: the company's billionaire chairman, Bill Gates.
The government's lead attorney displayed a page of handwritten notes from Microsoft's files that quote Gates as saying America Online Inc.'s $10 billion acquisition of Netscape Communications Corp. will have little impact on Microsoft's core business of selling the Windows operating system.
The notes quote Gates -- referred to as "billg," his e-mail address -- as saying in an internal meeting that "AOL doesn't have it in their genes to attack us in the platform space," referring to the operating system market.
For the past two weeks, Microsoft attorneys have strenuously argued in court that Microsoft faces stiff new competition from the AOL-Netscape alliance. The attorneys and the company's economic expert, Massachusetts Institute of Technology economist Richard L. Schmalensee, have asserted that AOL is planning to develop a variety of Internet-based software applications and Internet-connected electronic appliances that will supplant the personal computer.
Government attorney David Boies sought to undercut not just Microsoft's legal arguments but the credibility of Schmalensee, who said he had seen the Gates quote but had concluded that it was not relevant to his conclusion that AOL poses a serious threat to Microsoft.
"You didn't think it was useful to follow up on this purported statement by Mr. Gates?" Boies asked Schmalensee during a day of tense cross examination.
Schmalensee said he dismissed Gates's assessment because the Microsoft chairman had not viewed internal AOL documents that Schmalensee had seen. Those documents, turned over by AOL under a subpoena, were shown to Schmalensee because he is an expert witness, but they were withheld from Microsoft employees. "This is a judgment from someone who hasn't seen these documents," Schmalensee said. Gates's comment "seemed clearly outweighed by AOL's internal discussions."
Schmalensee contended that the competitive threat posed by AOL undercuts the government's contention that Microsoft has a monopoly with Windows. The government -- and AOL -- argue that AOL does not plan to develop any products that will compete directly with Windows.
Late in the day, however, Microsoft returned to the AOL issue, introducing as evidence an article posted on MSNBC's Internet site less than two hours earlier reporting that AOL is in talks to acquire a Microworkz Inc., a small computer manufacturer.
Microworkz announced Monday that it will sell a $200 Internet-connection appliance called an iToaster that will not use the Windows operating system.
Microsoft attorney Michael Lacovara argued that the report contradicts the testimony of AOL executive David M. Colburn, who said on the witness stand last week that AOL's plans to enter the PC business "are largely dead." An AOL spokesman refused to comment on the report other than to say Colburn's testimony "was truthful."
Rick Latman, Microworkz's chief executive, said in an interview yesterday that his firm is in talks with AOL to put its software on Microworkz's computers, but he refused to comment about the reported acquisition negotiations. He said, however, that AOL executives visited his Lynnwood, Wash., office yesterday.
A source close to the talks last night cast doubt on an outright purchase and said the deal likely would be similar to arrangements AOL has with PC makers such as Dell Computer Corp. and Gateway 2000 Inc. to include AOL software on machines they sell.
Staff writer Shannon Henry contributed to this report.